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                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

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

    For the Year Ended December 31, 2000

[ ] 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)


2901 East Camelback Road, Phoenix, Arizona                 85016
 (Address of principal executive offices)                (Zip Code)


         Issuer's telephone number, including area code: (602) 954-0600


           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)

Check  whether  the issuer  (1) has filed all  reports  required  to be filed by
Section 13 or 15(d) of the Securities  Exchange Act of 1934 during the preceding
12 months (or for such shorter  period that the  registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No [ ]

Indicate by check mark if there is no disclosure of delinquent  filers  pursuant
to Item 405 of Regulation  S-K is not contained in this form,  and no disclosure
will be contained, to the best of registrant's knowledge, in definitive proxy or
information  statements  incorporated  by  reference  in Part  III of this  Form
10-KSB, or any amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year. $36,898,320.

On March 15,  2001,  the  aggregate  market  value of the voting and  non-voting
common equity held by  non-affiliates  of the registrant was  $16,874,680.  This
figure was estimated  based the on March 15, 2001 closing price of the Company's
common stock. The number of shares of Common Stock outstanding on March 15, 2001
was 16,968,401.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the  Registrant's  Proxy  Statement  for the 2001 Annual  Meeting of
Stockholders to be held on May 30, 2001 are  incorporated by reference into Part
III.
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<PAGE>
                                     PART I
ITEM 1. BUSINESS

COMPANY HISTORY AND OVERVIEW

     Capital Title Group,  Inc. (the "Company") is a Delaware  corporation which
acts as the parent holding company of the following subsidiaries:

     Capital  Title Agency,  Inc.  ("Capital  Title") is an Arizona  corporation
     which has  operated  under the  authority of the State  Banking  Commission
     since November 1, 1981.  Capital Title is an independent  title agency that
     provides  escrow  services  and,  as  an  agent  for  six  title  insurance
     companies,  issues title insurance  policies to the real estate industry in
     Maricopa,  Yavapai and Mohave  Counties in Arizona.  As of March 15,  2001,
     Capital Title operated 32 offices located throughout Maricopa,  Yavapai and
     Mohave Counties in Arizona.

     New Century Title Company ("New Century"), a California corporation,  is an
     independent  title agency that  provides  escrow and title  services to the
     real estate  industry in selected  California  counties.  New Century began
     operations  in July 1998 with the  purchase  of a dormant  escrow and title
     agency in San Diego, California. New Century currently has three offices in
     San  Diego  County,  three  offices  in  Orange  County  and one  office in
     Riverside County.  New Century also has operations in northern  California,
     which it obtained by acquisition  in November  1998. New Century  currently
     has 13 offices in Sonoma,  Contra Costa and Alameda Counties in California.
     In addition, New Century is licensed to conduct business in San Bernardino,
     Los Angeles, Santa Barbara and Ventura Counties.

     The Company plans to continue its growth in Arizona and California,  and as
conditions  merit, to expand into other southern and  southwestern  states.  The
Company  intends  to  accomplish  this  planned   expansion   primarily  through
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 commissions based
on revenue generated and stock options.

     The  principal  executive  offices of the  Company are located at 2901 East
Camelback Road,  Phoenix,  Arizona 85016 and the Company's  telephone  number is
(602) 954-0600.

COMPANY OPERATIONS

     The Company is an independent  title agency  providing escrow services and,
as  an  agent  for  First  American  Title  Insurance  Company,   Chicago  Title
Corporation,  Stewart Information Services Corporation, United General Insurance
Company,  Old Republic  Insurance  Company and American  Pioneer Title Insurance
Company, issues title insurance policies to service the real estate industry. As
a title insurance agent, the Company derives revenue from providing title search
services and issuing title insurance policies on behalf of the underwriter.

     Capital  Title's  operations  commenced in 1981 in Prescott,  Arizona.  The
Company is  licensed  to conduct  business  in three  counties in Arizona and 10
counties in  California.  During late 1996 the Company  began its  expansion  in
Maricopa County,  Arizona and in 1998 expanded into Mohave County, Arizona along
with entering the California market.

     The Company's  operations have been impacted by the geographic locations in
which it  operates.  Arizona  and  California  rank  among the top states in the
nation in the rate of new job creation,  population growth and gains in personal
income.  Additionally,  these  states  have some of the  largest  single  family
housing  markets in the nation with San Diego and Phoenix  currently the 6th and
9th  largest  cities in the United  States  according  to the 1990 U. S.  Census
Bureau report.

                                       2
<PAGE>
INDUSTRY OVERVIEW

     Title  insurance  has  become  accepted  as the  most  efficient  means  of
determining  ownership  of, 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.

     The major expense of a title agency  company is the search and  examination
function in preparing preliminary title reports, commitments and title policies.
Companies have focused on advancing technology in order to reduce costs, improve
accuracy and respond to the continuing pressures within the real estate industry
for faster and more cost effective processing of transactions.

     The Company  possesses  advanced  title report  generation  and  processing
technology that combines title  information from multiple sources via electronic
data exchange. This technology facilitates expansion of the Company's operations
in existing  markets,  and  management  believes it provides a competitive  edge
compared to the technology of competing title companies.

     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
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.

     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
policies 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.  The Company  competes against both
title underwriters and other independent agents.

                                       3
<PAGE>
     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) 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.

    (iii) 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.

     (iv) 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 issued by a title  insurance  underwriter  is usually the face
amount of the policy plus the cost of defending the  insurer'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. Because the
Company operates an independent agency, it provides title insurance on behalf of
third party  underwriters.  As such, the Company's  losses and reserves are less
than   those   carried   by  a  title   insurance   underwriter   (see   Company
Operations-Claims and Underwriting).

     ECONOMIC FACTORS AFFECTING INDUSTRY.  Title insurance revenue is related to
the level of  activity  in the real  estate  market and the 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.

     During 2000, there was a significant  decrease in the refinance market from
1999 levels as a result of increased  mortgage interest rates.  During the first
two months of 2001, the volume of refinance transactions increased significantly
as a result of decreased mortgage interest rates.

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.  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,
mortgage  lenders and  developers  as this business has  historically  been more
consistent  and less prone to  fluctuation  than  commercial,  new home sales or

                                       4
<PAGE>
refinancing  segments of the market.  To set itself apart as a service  company,
the Company  continues to enhance industry  specific  information  technology to
better serve its clients.

     MANAGEMENT.  The Company  recognizes that its aggressive  growth plan calls
for executive  management  with  extensive  industry  operational  and expansion
experience.  The Company was  co-founded by Donald R. Head, and he has served as
Chairman of the Board and Chief Executive Officer since inception.  Mr. Head has
extensive  experience  as a developer  and  entrepreneur  within the real estate
industry and has 20 years of experience in the title insurance industry.

     Milt Ferrantelli, President and CEO of Capital Title Agency, joined Capital
in 1997. Prior to joining the Company,  Mr.  Ferrantelli  purchased United Title
Insurance  Agency in 1986 with two active  partners and served as its  President
and Chief Executive  Officer,  prior to its acquisition by Norwest  Financial in
1994.  Mr.  Ferrantelli  has over 20 years of experience in the title and escrow
industry in the Arizona marketplace.

     Mervyn L.  Morris,  President  of New  Century  Title  Company,  joined New
Century in September  1999.  Mr.  Morris has over 28 years of  experience in the
title and  escrow  industry.  Prior to  joining  New  Century,  Mr.  Morris  was
Executive  Vice  President,  Southern  Division  Manager for Old Republic  Title
Company, covering 25 branch offices and approximately 600 employees.

     In addition,  the Company employs managers to run the day-to-day operations
in the  counties  the Company  operates  in and to support  the above  mentioned
executives.  These  managers  average over 20 years  experience in the title and
escrow industry.

     EQUITY  PARTICIPATION  BY ESCROW  OFFICERS.  Escrow  officers are the major
revenue  producers  for  title  insurance   companies.   It  is  their  business
relationships with real estate brokers,  lenders and other industry participants
that are primarily  responsible  for the direction of escrow and title business.
The Company will seek to attract the most  successful  escrow  officers  through
employment packages that include commissions based on revenue produced and stock
options 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.

COMPANY OPERATIONS

     The Company  reported  revenue of $36.9 million for the year ended December
31, 2000  compared to $34.0 million for the year ended  December 31, 1999.  (See
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations).

     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 and developers.  In addition to the referral market,
the Company markets its services directly to larger brokerages and real property
lenders.  Marketing  activities  are  performed  by the escrow  officers  of the
Company and marketing representatives whose sole function is the solicitation of
business from major real estate brokers, developers, owners and lenders.

     ESCROW  SERVICE.  The Company's  escrow  departments  are  responsible  for
handling the consummation of real estate transactions.

     The escrow  officers and  assistants  typically  prepare  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.  The  escrow  officers  then  receipt  in funds and  disburse  them
pursuant to the escrow instructions.

                                       5
<PAGE>
     The escrow agents are held accountable by state  governmental  agencies for
strict compliance with their fiduciary  responsibilities  outlined by the escrow
instructions.  The officers 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.

     The  accumulation  of title data from public  records  which  provides  the
history of each parcel of real estate in a particular county is referred to as a
"title plant." The Company has entered into  multi-year  service  agreements for
title plant access in the counties it operates. In certain counties, the Company
may be a partial owner in a title plant or own a title plant which contains data
prior to the time period  covered by a third party  title  plant  provider.  The
Company  believes it will be able to obtain title plants on terms and conditions
that are acceptable to it as the Company  expands in to other markets;  however,
there can be no assurance in this regard.

     CLAIMS AND  UNDERWRITING.  The Company provides title insurance as an agent
of six title  insurance  companies.  These  services  are  provided  pursuant to
Underwriting  Agreements  with  each  of  these  underwriters  which  state  the
conditions on which the Company is authorized to issue a title insurance  policy
on behalf of the  underwriter  and prescribe the  circumstances  under which the
Company may be liable to the  underwriter  if a policy loss is  attributable  to
errors made by the Company.

     Claims against title insurance  policies normally arise out of human error.
During the process of  accumulation  and analysis of the public record,  certain
inaccuracies  and  inconsistencies  are encountered  that sometimes  result in a
situation in which  interpretation of these documents could lead to a claim. The
Company's  exposure is typically limited to $5,000 for any loss resulting from a
title insurance claim. The Company assumes the entire risk of losses incurred in
errors  made  during the  escrow  process;  however,  it has  secured  insurance
coverage up to $1 million with a $10,000  deductible,  to limit any  significant
losses.

CUSTOMERS

     The Company 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 slows down 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 title
and escrow revenues.

                                       6
<PAGE>
COMPETITION

     The  title  insurance  business  is  highly  competitive.   Companies  with
significant  market  share in Arizona and  California  include  First  American,
Chicago Title,  Old Republic,  Stewart Title,  Fidelity Title and Lawyers 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  other  independent  agencies  and  major  national
insurance underwriters, many of which have financial and other resources greater
than those of 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

     The Company  conducts  its  business  under  licenses  granted by the State
Banking and Insurance  Departments of the State of Arizona and the Department of
Insurance in California. The title insurance and escrow businesses generally are
subject to  extensive  regulation  under  applicable  state laws,  including  in
California,  a requirement to maintain a minimum net worth. 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 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, 2000, the Company had a total of 493 employees, of which
295 were located in Arizona and 198 in California. The Company believes that its
relations with its employees are excellent.

ITEM 2. PROPERTIES

     The Company  conducts its business  operations  primarily in leased  office
space. The Company currently leases offices at 46 locations with remaining lease
periods ranging from one to sixty months.  The Company's monthly rental payments
at the foregoing locations are approximately $286,296. The Company owns a 24,000
square  foot  building  in  Phoenix,   Arizona,  which  includes  its  corporate
headquarters  and its Maricopa County  operations.  In January 2001, the Company
entered into a sale-lease back transaction in which it sold a 14,250 square foot
building in Santa Rosa, California.

ITEM 3. LEGAL PROCEEDINGS

     The Company is involved in certain legal actions, which arise in the normal
course of its title business. The Company believes, based on the advise of legal
counsel,  that none of these claims are material,  either individually or in the
aggregate,  and the final outcome will not have a material adverse affect on the
Company's financial position, results of operations or liquidity.

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

     No matters were  submitted to a vote of security  holders during the fourth
quarter of the fiscal year ended December 31, 2000.

                                       7
<PAGE>
                                     PART II

ITEM 5. MARKET FOR REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERS

     The Company's  Common Stock has been quoted on The Nasdaq  SmallCap  Market
under the symbol  "CTGI"  since  September  21,  1998 and on the OTC  Electronic
Bulletin Board from May 15, 1997 to September 20, 1998.

     The  following  table sets  forth high and low bid prices of the  Company's
Common Stock for the periods  indicated.  Bid quotations  represent  interdealer
prices,  without retail mark-up,  mark-down or commissions and may not represent
actual transactions.

                Date                                High/Bid       Low/Bid
                ----                                --------       -------
     1999  First Quarter                            $  3.94        $  3.00
           Second Quarter                              3.56           2.50
           Third Quarter                               2.88           2.13
           Fourth Quarter                              2.30           1.50

     2000  First Quarter                               2.00           1.31
           Second Quarter                              1.68           1.12
           Third Quarter                               1.50            .81
           Fourth Quarter                              1.06            .50

     2001  First Quarter (through March 15)            1.50            .94

     As of December 31, 2000, the Company had issued and outstanding  17,392,849
shares of common stock. In addition,  3,900,000 shares are reserved for issuance
under the Company's  1996 Stock Option Plan and 600,000  shares are reserved for
issuance under the Company's  Non-Employee Directors Plan. At December 31, 2000,
there were 834 holders of the Company's Common Stock.

     In March 1998, the Company issued  463,500  warrants in conjunction  with a
private placement. Each warrant entitles the holder to purchase one share of the
Company's  common stock at $2.50 until  September 30, 2001.  In April 1998,  the
Company  issued  308,642  warrants to an  investment  banking firm that acted as
placement  agent in  connection  with another  private  placement.  Each warrant
entitles the holder to purchase one share of the Company's common stock at $1.62
until May 1, 2001.

     The Company has never paid a dividend on its Common Stock. The Company does
not  anticipate  paying any  dividends  on its Common  Stock in the  foreseeable
future.  Rather,  the Company  anticipates  that its  earnings,  if any, will be
retained to fund the Company's  working capital needs and the planned  expansion
of its  business.  The  payment  of any  dividends  will be  dependent  upon the
discretion of the Board of Directors. Furthermore, under Delaware corporate law,
in the absence of current or retained  earnings,  the Company may be  prohibited
from paying dividends (whether in cash or otherwise).

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
report.  Historical results and percentage  relationships among accounts are not
necessarily an indication of trends in operating results for any future period.

OVERVIEW

     Capital Title Group,  Inc.  reported a net operating loss of $2,252,287 for
the year ended  December 31, 2000 compared to a loss of $1,969,027  for the year
ended  December  31,  1999.  This loss  resulted  from a loss in its  California
operations  due to a downturn in refinance  business  resulting  from  increased
interest rates and costs associated with expansion.  The California  operations,

                                       8
<PAGE>
which  were  heavily  dependent  on the  refinance  market,  lost  approximately
$4,204,000 for the year ended December 31, 2000.  Contributing  to the loss were
increased  operating  costs  associated  with the  Company's  commitment  to its
California  operations as it invested in expanding its infrastructure and branch
operations. During late 1999, the Company had a change in four senior management
positions in California  and is focusing on increasing  its  residential  resale
business, which has historically been more stable and profitable.  The Company's
profitable Arizona operations serve as a model for the Company's expansion plans
in California.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the components of the
Company's  revenue and  expenses  along with the  percentage  they bear to total
revenue:

<TABLE>
<CAPTION>
                                                       For The Years Ended December 31,
                             -----------------------------------------------------------------------------------
                                 2000            %             1999            %            1998             %
                             -----------       -----       -----------       -----       -----------       -----
<S>                          <C>                <C>        <C>                <C>        <C>                <C>
Title insurance fees, net    $22,628,088        61.3%      $20,808,128        61.3%      $13,174,990        60.6%
Escrow and related fees       11,446,792        31.0        11,087,910        32.6         7,030,248        32.3
Interest and other income      2,823,440         7.7         2,080,470         6.1         1,541,535         7.1
                             -----------       -----       -----------       -----       -----------       -----
                             $36,898,320       100.0%      $33,976,508       100.0%      $21,746,773       100.0%
                             ===========       =====       ===========       =====       ===========       =====

Personnel cost               $22,224,246        60.2%      $20,819,793        61.3%      $11,186,564        51.4%
Escrow commissions             3,243,248         8.8         2,781,947         8.2         2,249,468        10.3
Rent                           3,297,689         8.9         2,459,120         7.2         1,254,010         5.8
Other operating expenses      10,083,323        27.4         9,598,155        28.3         5,121,998        23.6
Interest expense                 334,756         0.9           286,520         0.8            99,257         0.5
                             -----------       -----       -----------       -----       -----------       -----
                             $39,183,262       106.2%      $35,945,535       105.8%      $19,911,297        91.6%
                             ===========       =====       ===========       =====       ===========       =====
</TABLE>

FISCAL 2000 COMPARED TO FISCAL 1999

     The Company's  revenues  increased by $2,921,812 or 8.6% for the year ended
December 31, 2000 as compared to the year ended  December 31, 1999. The increase
is primarily attributable to the Company's expansion and increased market share.

     The  Company's  revenue from title  insurance  and escrow fees is primarily
from three sources:  residential resale,  lender/refinance  and commercial.  The
largest  revenue source is from  residential  resales.  The current  residential
resale  marketing  projections  for the  counties in which the Company  operates
predict  that the resale  market  should  continue to be strong.  The  Company's
marketing  plan is to have the vast majority of the  Company's  title and escrow
revenue be derived from the resale business.  Historically,  the resale business
has been more consistent and less subject to fluctuations  than commercial,  new
homes sales, or refinancing  segments of the market.  The  commercial,  new home
sales and refinancing  segments tend to be more influenced by interest rates and
other economic conditions.

                                       9
<PAGE>
     Title  insurance  fees are net of title  remittance  fees paid  pursuant to
title insurance underwriting  agreements the Company has with six national title
companies. Title remittance fees were $2,518,608,  $2,170,919 and $1,459,452 for
the years ended December 31, 2000, 1999 and 1998, respectively.

     Personnel costs, including commissions,  are the most significant component
of the  Company's  operating  expenses.  The  number of people  employed  by the
Company increased from 468 on December 31, 1999 to 493 on December 31, 2000. For
the year ended December 31, 2000,  personnel  costs including  commissions  were
69.0% of total  revenue  compared  to 69.5% of total  revenue for the year ended
December 31, 1999.  This  decrease was a result of higher  productivity  coupled
with the increase in revenue.

     Rent  expense  increased  as a  percentage  of  revenue  in the year  ended
December  31, 2000 to 8.9% from 7.2% in 1999.  This  increase  was the result of
adding new offices and scheduled increases in existing leases.

     The significant  components of other operating  expenses include  supplies,
utilities, insurance,  depreciation, title plant maintenance and access, postage
and  professional  fees. Other operating  expenses  decreased as a percentage of
total revenue to 27.4% in 2000 from 28.3% in 1999.  This decrease was the result
of cost  containment  efforts and the  relatively  fixed nature of many of these
expenses in relation to the overall increase in revenues.

     No income tax provision was recorded for the years ended  December 31, 2000
and 1999 as a result of the net loss  reported in each year.  As of December 31,
2000,  the  Company  has a net  operating  loss  carryforward  of  approximately
$3,861,000.

FISCAL 1999 COMPARED TO FISCAL 1998

     The Company's revenues increased by $12,229,735 or 56.2% for the year ended
December 31, 1999 as compared to the year ended December 31, 1998. Approximately
$9,300,000  of this  increase  resulted  from 1999  being the first full year of
operations for companies  acquired or opened in 1998. The remaining  increase is
attributable to the Company's expansion and increased market share, primarily in
Arizona, and a favorable real estate market.

     Personnel costs, including commissions,  are the most significant component
of the  Company's  operating  expenses.  The  number of people  employed  by the
Company decreased from 477 on December 31, 1998 to 468 on December 31, 1999. For
the year ended December 31, 1999,  personnel  costs including  commissions  were
69.5% of total  revenue  compared  to 61.7% of total  revenue for the year ended
December 31, 1998. This increase was the result of lower  productivity given the
decline in refinance  business and higher costs  associated  with the  Company's
California operations.

     Rent  expense  increased  as a  percentage  of  revenue  in the year  ended
December  31,  1999 to 7.2% from  5.8% in 1998.  This  increase  was a result of
adding new offices and the fixed nature of these costs in relation to revenue.

     The significant  components of other operating  expenses include  supplies,
utilities, insurance,  depreciation, title plant maintenance and access, postage
and  professional  fees. Other operating  expenses  increased as a percentage of
total revenue to 28.3% in 1999 from 23.6% in 1998.  This increase was the result
of increased costs related to the Company's  expansion and the relatively  fixed
nature  of many of these  expenses  in  relation  to the  decline  in  refinance
business.

                                       10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

     Capital  Title  Group  requires  capital to expand its  geographical  base,
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 December 31, 2000, the Company financed
its operating and business  development  activities  through operating  revenue,
through the use of cash on hand, and through additional borrowings.

     The Company has a $1,500,000 revolving line of credit, which bears interest
on any  outstanding  balance at the prime rate (9.5% at December 31,  2000).  At
December 31, 2000, $900,000 had been drawn against this credit facility compared
to $500,000 outstanding at December 31, 1999. In addition, $150,000 is committed
against the credit facility for a standby letter of credit pursuant to an office
lease.  This credit  facility  matures in May 2001, but the Company  anticipates
renewing this line of credit for an additional one-year term.

     In  January  2001,  the  Company  sold an office  building  in Santa  Rosa,
California which provided approximately $785,000 in cash and retired $963,600 in
debt related to the building.  Additionally, the remaining net cash received was
used to pay down the Company's revolving line of credit.

     At December 31, 2000,  the Company had current assets  totaling  $1,763,344
compared to current liabilities,  which totaled $3,306,072.  Cash flows provided
by  operating  activities  were  $121,007  for the year ended  December 31, 2000
compared to cash flows used in operating  activities of $2,074,783 in 1999.  The
increase in 2000 was primarily the result of an increase in accrued group health
insurance and underwriting  fees. The cash used in operating  activities  during
1999 was primarily attributed to the final payments of approximately  $1,111,000
for   acquisition   related  costs   carried  over  from  1998.   The  principal
non-operating  uses of cash for the year ended December 31, 2000 were $1,417,660
expended for the purchase of property and equipment  along with $274,428 in debt
service payments.

     Management  believes that cash on hand, future cash receipts and borrowings
available under its credit facility and the return to profitability in 2001 will
be sufficient to meet the Company's  expansion  plans and to pay all obligations
as they become due for the next twelve months.

NEW ACCOUNTING PRONOUNCEMENTS

     In December  1999,  the  Securities  and Exchange  Commission  issued Staff
Accounting Bulletin No. 101 - "REVENUE RECOGNITION IN FINANCIAL STATEMENTS" (SAB
No.  101) which was  subsequently  amended by SAB No. 101A and 101B in March and
June 2000, respectively. These amendments delayed the implementation date of SAB
No. 101 until no later than the fourth fiscal quarter of fiscal years  beginning
after  December  15, 1999.  SAB No. 101  provides the staff's  views in applying
generally accepted accounting principles to selected revenue recognition issues.
With the implementation of SAB No. 101, the Company reports title insurance fees
net of title  remittance  fees paid pursuant to agreements  the Company has with
underwriters.  Title  remittance  fees for the years ended December 31, 2000 and
1999 were $2,518,608 and $2,170,919, respectively.

                                       11
<PAGE>
     In  March  2000,   the   Financial   Accounting   Standards   Board  issued
Interpretation  No. 44,  "ACCOUNTING  FOR CERTAIN  TRANSACTIONS  INVOLVING STOCK
COMPENSATION  - AN  INTERPRETATION  OF APB OPINION  NO. 25." The  Interpretation
clarifies  the  application  of APB  Opinion  No. 25 in certain  situations,  as
defined. The Interpretation was effective July 1, 2000 but covers certain events
having  occurred  after  December 15, 1998. To the extent that events covered by
this  Interpretation  occur during the period after December 15, 1998 but before
the issuance of the Interpretation,  the effects of applying this Interpretation
would be  recognized  for any  additional  compensation  cost  measured  that is
attributable  to periods before the effective date. The Company has adopted this
Interpretation  and  the  adoption  did  not  have  a  material  impact  on  our
consolidated financial statements.

     In June 1998, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standards No. 133 "ACCOUNTING FOR DERIVATIVE  INSTRUMENTS
AND HEDGING  ACTIVITIES"  ("SFAS No. 133"),  which  established  accounting  and
reporting standards for all derivative  instruments and hedging  activities.  It
requires  that  an  entity   recognize  all  derivatives  as  either  assets  or
liabilities  in the balance sheet and measure those  instruments  at fair value.
This new standard, as amended by SFAS No. 137 and No. 138, will be effective for
the year ending  December 31, 2001. It is not expected to have a material impact
on the Company's consolidated financial statements.

FORWARD-LOOKING STATEMENTS

     This  Annual  Report  on  Form  10-KSB  contains  certain   forward-looking
statements. The forward-looking statements contained herein are based on current
expectations  that involve a number of risks and  uncertainties.  Among  others,
these  forward-looking  statements are based on  assumptions  that (a) volume of
real estate transactions in the Company's market areas will remain at sufficient
levels to  support  the  Company's  business,  (b) the  Company  will be able to
successfully  integrate  acquired  businesses  and  the  results  of  operations
therefrom will support the  acquisition  price,  (c) the Company will be able to
retain,  and when needed,  add key personnel,  (d) the Company's  forecasts will
accurately  anticipate  market  demand,  (e) there will be no  material  adverse
changes in the Company's existing operations and (f) the Company will be able to
obtain  sufficient  equity or debt funding to increase its capital  resources by
the amount needed for new business acquisitions,  if any. Assumptions related to
the foregoing  involve  judgments  with respect to, among other  things,  future
economic,  competitive and market conditions, and future business decisions, all
of which are beyond the control of the Company.  Although  the Company  believes
that the assumptions  underlying the forward-looking  statements are reasonable,
any of the assumptions  could prove inaccurate and,  therefore,  there can be no
assurance that the results  contemplated in  forward-looking  statements will be
realized. In addition, the business and operations of the Company are subject to
substantial   risks,   which   increase   the   uncertainty   inherent  in  such
forward-looking  statements.  In light of the significant uncertainties inherent
in the  forward-looking  information  included  herein,  the  inclusion  of such
information  should not be regarded as a representation  by the Company,  or any
other person, that the Company's plans or objectives will be achieved.

                                       12
<PAGE>
ITEM 7. FINANCIAL STATEMENTS

                         Report of Independent Auditors

Stockholders and Board of Directors
Capital Title Group, Inc.:

     We have  audited the  accompanying  consolidated  balance  sheet of Capital
Title Group,  Inc. and  Subsidiaries  (the Company) as of December 31, 2000, and
the related  consolidated  statements of operations,  stockholders'  equity, and
cash flows for the year then ended. These consolidated  financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.

     We conducted our audit in  accordance  with  auditing  standards  generally
accepted in the United States of America.  Those standards  require that we plan
and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the
consolidated  financial statements are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the  consolidated  financial  statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall consolidated  financial statement
presentation.  We believe  that our audit  provides a  reasonable  basis for our
opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects,  the financial position of the Company
as of December  31,  2000,  and the results of their  operations  and their cash
flows  for the  year  then  ended,  in  conformity  with  accounting  principles
generally accepted in the United States of America.


/s/ KPMG LLP

Phoenix, Arizona
March 12, 2001

                                       13
<PAGE>
                         Report of Independent Auditors

Stockholders and Board of Directors
Capital Title Group, Inc.:

     We have  audited the  accompanying  consolidated  balance  sheet of Capital
Title Group,  Inc. and  Subsidiaries  (the Company) as of December 31, 1999, and
the related  consolidated  statements of operations,  stockholders'  equity, and
cash flows for the year then ended. These consolidated  financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.

     We conducted our audit in  accordance  with  auditing  standards  generally
accepted in the United States.  Those standards require that we plan and perform
the  audits  to obtain  reasonable  assurance  about  whether  the  consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  consolidated  financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall  consolidated  financial  statement  presentation.  We
believe that our audit provides a reasonable basis for our opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects, the consolidated financial position of
the Company as of  December  31,  1999,  and the  consolidated  results of their
operations  and their cash flows for the year then  ended,  in  conformity  with
accounting principles generally accepted in the United States.


/s/ Ernst & Young, LLP

Phoenix, Arizona
March 3, 2000

                                       14
<PAGE>
                   CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                December 31,
                                                                      -------------------------------
                                                                          2000               1999
                                                                      ------------       ------------
<S>                                                                   <C>                <C>
ASSETS
Current Assets:
  Cash and cash equivalents                                           $    775,586       $  1,884,059
  Accounts receivable, net                                                 360,331            110,796
  Notes and other receivables                                              359,129            291,262
  Other current assets                                                     268,298            410,711
                                                                      ------------       ------------
       Total Current Assets                                              1,763,344          2,696,828

Property and Equipment, net                                             11,011,305         11,259,054

Other Assets:
  Notes receivable                                                          47,929             72,608
  Investment in title plant                                                521,278            521,278
  Deposits and other assets                                                723,408            403,224
  Goodwill                                                                 233,242            246,399
                                                                      ------------       ------------
       Total Assets                                                   $ 14,300,506       $ 15,199,391
                                                                      ============       ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Current portion of long-term debt                                   $  1,006,152       $    717,507
  Accounts payable                                                         594,844            362,786
  Accrued expenses                                                       1,705,076          1,018,974
                                                                      ------------       ------------
       Total Current Liabilities                                         3,306,072          2,099,267

Long-Term Debt, less current portion                                     4,009,959          4,173,032
Other Liabilities                                                          254,202            383,236

Commitments, Contingencies and Subsequent Events

Stockholders' Equity:
  Common stock, $.001 par value, 50,000,000 shares authorized,
   17,392,849 and 16,947,901 shares issued and outstanding in
   2000 and 1999, respectively                                              17,393             16,948
  Additional paid-in capital                                            11,105,436         10,667,177
  Accumulated deficit                                                   (4,392,556)        (2,140,269)
                                                                      ------------       ------------
       Total Stockholders' Equity                                        6,730,273          8,543,856
                                                                      ------------       ------------
       Total Liabilities and Stockholders' Equity                     $ 14,300,506       $ 15,199,391
                                                                      ============       ============
</TABLE>
                  The accompanying notes are an integral part
                    of the consolidated financial statements

                                       15
<PAGE>
                   CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS


                                                  Years ended December 31,
                                              --------------------------------
                                                  2000                1999
                                              ------------        ------------
REVENUE:
  Title insurance fees, net                   $ 22,628,088        $ 20,808,128
  Escrow and related fees                       11,446,792          11,087,910
  Interest and other income                      2,823,440           2,080,470
                                              ------------        ------------
       Total Revenue                            36,898,320          33,976,508
                                              ------------        ------------
EXPENSES:
  Personnel costs                               22,224,246          20,819,793
  Escrow commissions                             3,243,248           2,781,947
  Rent                                           3,297,689           2,459,120
  Other operating expenses                      10,083,323           9,598,155
  Interest expense                                 334,756             286,520
                                              ------------        ------------
       Total Expenses                           39,183,262          35,945,535
                                              ------------        ------------

  Loss before income taxes                      (2,284,942)         (1,969,027)

  Income tax provision (benefit)                   (32,655)                 --
                                              ------------        ------------

  Net Loss                                    $ (2,252,287)       $ (1,969,027)
                                              ============        ============
Net loss per common share:
  Basic                                       $      (0.13)       $      (0.12)
                                              ============        ============
  Diluted                                     $      (0.13)       $      (0.12)
                                              ============        ============
Weighted average shares outstanding:
  Basic                                         17,158,414          16,868,292
                                              ============        ============
  Diluted                                       17,158,414          16,868,292
                                              ============        ============

                  The accompanying notes are an integral part
                    of the consolidated financial statements

                                       16
<PAGE>
                   CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                            Common Stock
                                      ------------------------      Additional
                                                         Par         Paid-in        Accumulated
                                         Shares         Value        Capital          Deficit          Total
                                      -----------     --------     ------------     -----------     ------------
<S>                                   <C>            <C>          <C>              <C>             <C>
Balance at December 31, 1998           16,926,791     $ 16,927     $ 10,944,294     $  (171,242)    $ 10,789,979

Shares issued in connection with
options exercised                         127,900          128          127,772              --          127,900

Escrowed shares to Northwestern's
stockholders returned to Company         (146,790)        (147)        (453,998)             --         (454,145)

Shares issued to retire debt               15,000           15           29,985              --           30,000

Shares issued for building                 25,000           25           19,124              --           19,149

Net loss                                       --           --               --      (1,969,027)      (1,969,027)
                                      -----------     --------     ------------     -----------     ------------

Balance at December 31, 1999           16,947,901       16,948       10,667,177      (2,140,269)       8,543,856

Shares issued in connection with
options exercised                          20,500           21           18,480              --           18,501

Shares issued in connection with
a cost basis investment, net              424,448          424          419,779              --          420,203

Net loss                                       --           --               --      (2,252,287)      (2,252,287)
                                      -----------     --------     ------------     -----------     ------------

Balance at December 31, 2000           17,392,849     $ 17,393     $ 11,105,436     $(4,392,556)    $  6,730,273
                                      ===========     ========     ============     ===========     ============
</TABLE>

                  The accompanying notes are an integral part
                    of the consolidated financial statements

                                       17
<PAGE>
                   CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                       Years Ended December 31,
                                                                   -------------------------------
                                                                       2000                1999
                                                                   -----------         -----------
<S>                                                                <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                         $(2,252,287)        $(1,969,027)
  Adjustments to reconcile net loss to net cash
   provided by (used in) operating activities:
    Depreciation and amortization                                    1,678,566           1,389,924

  Increase (decrease) in cash resulting from changes in:
    Accounts receivable                                               (249,535)            181,489
    Notes and other receivables                                        (62,014)             36,253
    Other current assets                                               142,413             163,842
    Deposits and other assets                                           74,738               1,258
    Accounts payable                                                   232,058            (253,345)
    Accrued expenses                                                   686,102          (1,637,598)
    Other liabilities                                                 (129,034)             12,421
                                                                   -----------         -----------
Net Cash Flows provided by (used in) Operating Activities              121,007          (2,074,783)
                                                                   -----------         -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Net additions to property and equipment                           (1,417,660)         (5,014,567)
  Cash received from sale of property and equipment                         --           1,156,982
  Purchase/sale of subsidiaries, net cash                                   --            (107,035)
  Collection of loans receivable                                        48,352             290,542
                                                                   -----------         -----------
Net Cash Flows used in Investing Activities                         (1,369,308)         (3,674,078)
                                                                   -----------         -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings                                                           400,000           4,630,000
  Debt service payments                                               (274,428)         (1,958,806)
  Proceeds from the issuance of stock, net                              14,256             127,900
                                                                   -----------         -----------
Net Cash Flows provided by Financing Activities                        139,828           2,799,094
                                                                   -----------         -----------

NET DECREASE IN CASH AND CASH EQUIVALENTS                           (1,108,473)         (2,949,767)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR               1,884,059           4,833,826
                                                                   -----------         -----------

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR                   $   775,586         $ 1,884,059
                                                                   ===========         ===========
</TABLE>

                  The accompanying notes are an integral part
                    of the consolidated financial statements

                                       18
<PAGE>
                   CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

NATURE OF OPERATIONS:

Capital Title Group, Inc. (the "Company") is a Delaware corporation,  which acts
as the parent holding company of the following subsidiaries:

Capital Title Agency,  Inc. ("Capital Title") is an Arizona  corporation,  which
has operated under the authority of the Arizona State Banking  Commission  since
November 1, 1981.  Capital Title is an independent title agency providing escrow
services  and,  as an agent  for six title  insurance  companies,  issues  title
insurance  policies to the real estate industry in Maricopa,  Yavapai and Mohave
Counties  in  Arizona.  As of March 1, 2001  Capital  Title  operated 32 offices
located throughout Maricopa, Yavapai and Mohave Counties in Arizona.

New Century Title  Company  ("New  Century"),  a California  corporation,  is an
independent  title agency that  provides  escrow and title  services to the real
estate industry in selected California counties. New Century began operations in
July 1998 with the  purchase of a dormant  escrow and title agency in San Diego,
California.  New Century also has  operations in northern  California,  which it
obtained by acquisition  in November 1998. New Century  currently has 19 offices
in San Diego,  Santa Bernardino,  Orange,  Riverside,  Sonoma,  Contra Costa and
Alameda Counties in California.

BASIS OF PRESENTATION AND USE OF ESTIMATES:

The accompanying  consolidated  financial statements include the accounts of the
Company and its wholly-owned  subsidiaries.  All material inter-company accounts
and transactions have been eliminated in consolidation.

The  preparation  of  consolidated   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 amounts
reported in the consolidated  financial  statements and the accompanying  notes.
Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS:

Cash and cash equivalents  include all highly liquid investments  purchased with
an initial maturity of three months or less.

ACCOUNTS RECEIVABLE:

The Company uses the allowance  method to account for  non-collectible  accounts
receivable.  The allowance is  established  based on a review of the  individual
accounts and the Company's prior collection history.

                                       19
<PAGE>
                   CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


REVENUE RECOGNITION:

Title insurance and escrow fees are recognized as revenue at the time of closing
the related real estate  transaction.  Revenue from account  servicing and other
fees is  recognized  when  the  service  is  performed.

NEW ACCOUNTING PRONOUNCEMENTS:

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 - "REVENUE  RECOGNITION IN FINANCIAL  STATEMENTS" (SAB No. 101)
which was subsequently  amended by SAB No. 101A and 101B in March and June 2000,
respectively.  These amendments delayed the  implementation  date of SAB No. 101
until no later than the fourth fiscal  quarter of fiscal years  beginning  after
December 15, 1999. SAB No. 101 provides the staff's views in applying  generally
accepted accounting  principles to selected revenue recognition issues. With the
implementation  of SAB No. 101, the Company  reports title insurance fees net of
title  remittance  fees  paid  pursuant  to  agreements  the  Company  has  with
underwriters.  Title  remittance  fees for the years ended December 31, 2000 and
1999 were $2,518,608 and $2,170,919, respectively.

In March 2000, the Financial  Accounting  Standards Board issued  Interpretation
No. 44, "ACCOUNTING FOR CERTAIN  TRANSACTIONS  INVOLVING STOCK COMPENSATION - AN
INTERPRETATION  OF  APB  OPINION  NO.  25."  The  Interpretation  clarifies  the
application  of APB  Opinion  No. 25 in  certain  situations,  as  defined.  The
Interpretation  was  effective  July 1, 2000 but covers  certain  events  having
occurred  after  December  15, 1998.  To the extent that events  covered by this
Interpretation  occur during the period  after  December 15, 1998 but before the
issuance of the  Interpretation,  the effects of  applying  this  Interpretation
would be  recognized  for any  additional  compensation  cost  measured  that is
attributable  to periods before the effective date. The Company has adopted this
Interpretation  and  the  adoption  did  not  have  a  material  impact  on  our
consolidated financial statements.

In June 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards No. 133 "ACCOUNTING FOR DERIVATIVE  INSTRUMENTS
AND HEDGING  ACTIVITIES"  ("SFAS No. 133"),  which  established  accounting  and
reporting standards for all derivative  instruments and hedging  activities.  It
requires  that  an  entity   recognize  all  derivatives  as  either  assets  or
liabilities  in the balance sheet and measure those  instruments  at fair value.
This new standard, as amended by SFAS No. 137 and No. 138, will be effective for
the year ending  December 31, 2001. It is not expected to have a material impact
on the Company's consolidated financial statements.

PROPERTY AND EQUIPMENT:

Property  and  equipment  are  stated  at cost and are  being  depreciated  on a
straight-line basis over the estimated useful lives of the related assets, which
range  from five to forty  years.  Leasehold  improvements  are  amortized  on a
straight-line  basis over the lesser of the lease term or the  estimated  useful
lives of such assets.

                                       20
<PAGE>
                   CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


CAPITAL LEASE OBLIGATIONS:

The Company is the lessee of office  equipment  under capital lease  agreements,
which expire  throughout  the year 2002.  The assets and  liabilities  under the
capital  leases are  recorded at the lower of the  present  value of the minimum
lease  payments or the fair market value of the asset.  The assets are amortized
over the lower of their related lease term or their estimated useful lives.

TITLE PLANT:

Title  plants are  recorded  at the cost  incurred  to  construct  and  organize
historical  title  information  to the  point  it can be used to  perform  title
searches.  Cost  incurred  to  maintain,  update and  operate  title  plants are
expensed as incurred.  Title plants are not amortized as they are  considered to
have an indefinite life if maintained.

GOODWILL:

The Company recorded  approximately $263,000 of goodwill in 1998 related to cost
in excess of net assets  acquired  pursuant to its purchase of a title agency in
San  Diego,  California.  Goodwill  is being  amortized  over  twenty  years and
accumulated amortization at December 31, 2000 was approximately $30,000.

SEGMENT REPORTING:

The Company  views its  operations as one operating  business  segment,  a title
agency providing escrow services in the Southwestern United States.

IMPAIRMENT OF LONG-LIVED ASSETS:

The Company records  impairment  losses on long-lived  assets used in operations
when events and circumstances indicate that the assets might be impaired and the
undiscounted  cash flows estimated to be generated by those assets are less than
the carrying  amounts of those assets.  This methodology  includes  goodwill and
intangible  assets  acquired.  As of  December  31,  2000,  management  has  not
identified  any  events or  circumstances  which  indicate  that any  assets are
impaired.

ESCROW AND TITLE POLICY LOSSES:

The Company  operates  under  agency  agreements  with various  title  insurance
companies.  In the  event of a title  insurance  policy  loss,  the  Company  is
responsible for the first $5,000 of loss. A provision for future title losses is
maintained  by  periodic  charges  to  the  statement  of  operations  based  on
historical title loss experience.  As of December 31, 2000 and 1999, the Company
had accrued  $237,000 and $155,000,  respectively,  for title and escrow losses,
which is included with accrued expenses on the accompanying consolidated balance
sheets.

INCOME TAXES:

The Company and its subsidiaries file consolidated  federal and state income tax
returns.  Deferred tax assets and  liabilities are recognized for the future tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
basis, and the utilization of the net operating loss ("NOL") carryforwards,  net
of valuation allowances.

                                       21
<PAGE>
                   CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Deferred  tax  assets and  liabilities  are  measured  using  enacted  tax rates
expected  to apply to  taxable  income  in the  years in which  those  temporary
differences are expected to be recovered or settled.

EARNINGS PER SHARE:

Basic earnings (loss) per share ("EPS") is computed by dividing  earnings (loss)
available to stockholders by the  weighted-average  number of shares outstanding
for the  period.  Diluted  earnings  (loss)  per share  reflects  the  potential
dilution  that could occur if securities or contracts to issue common stock were
exercised  or  converted to stock or resulted in the issuance of stock that then
shared in the earnings or loss of the Company.  Assumed  exercise of outstanding
stock options and warrants have been excluded from the  calculations  of diluted
net loss per share as their effect is antidilutive.

The following table sets forth the computation of basic and diluted EPS:

<TABLE>
<CAPTION>
                                                        2000                                  1999
                                        -----------------------------------     -----------------------------------
                                                                  Per share                               Per share
                                         Net loss       Shares      amount       Net loss       Shares      amount
                                         --------       ------      ------       --------       ------      ------
<S>                                    <C>            <C>          <C>         <C>            <C>           <C>
     Basic EPS                         $(2,252,287)   17,158,414    $(0.13)     $(1,969,027)   16,868,292   $(0.12)
                                                                    ======                                  ======
     Effect of Dilutive Securities:
       Stock options                                          --                                      --
       Warrants                                               --                                      --
                                       -----------    ----------                -----------    ----------
     Diluted EPS                       $(2,252,287)   17,158,414    $(0.13)     $(1,969,027)   16,868,292   $(0.12)
                                       ===========    ==========    ======      ===========    ==========   ======
</TABLE>

At December 31, 2000, the Company has options  outstanding to acquire  2,298,100
shares of common  stock at a  weighted  average  price of $1.42  per  share,  in
addition,  the Company had warrants  outstanding  to acquire  772,142  shares of
common stock at a weighted average price of $2.15 per share.

FAIR VALUE OF FINANCIAL INSTRUMENTS:

The Company discloses fair value  information about financial  instruments where
it is  practicable  to estimate  their  value.  The Company  estimates  that the
carrying  value  of  its  financial   instruments,   consisting  of  cash,  cash
equivalents,  certificates  of deposit,  notes  receivable and debt  obligations
approximate their fair values at December 31, 2000 and 1999.

RECLASSIFICATIONS:

Certain  reclassifications  have  been made to the 1999  consolidated  financial
statements to conform to the 2000 presentation.

2. CASH IN ESCROW:

The Company is the  custodian  of cash  deposited  by  customers  with  specific
instructions  as to its  disbursement  from  active  escrow,  trust and  account
servicing.  The  balances  in these  accounts  have not been  included  in these
consolidated  financial  statements.  As of  December  31,  2000 and  1999,  the
accounts  contain   balances  of   approximately   $98,275,000  and $49,860,000,
respectively.

                                       22
<PAGE>
                   CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


3. CONCENTRATION OF CREDIT RISK:

The  Company   maintains  cash  and  cash  equivalents  with  various  financial
institutions. Deposits not to exceed $100,000 at each institution are insured by
the Federal Deposit Insurance Corporation. At December 31, 2000, the Company had
uninsured cash and cash equivalents of approximately $364,192. Additionally, the
Company's  revenue is generated  solely from activities in the states of Arizona
and California, and accounts receivable are typically not collateralized.

4. PROPERTY AND EQUIPMENT:

Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                Useful Lives         2000              1999
                                                ------------     ------------      ------------
<S>                                            <C>             <C>               <C>
      Land and construction in progress                 N/A      $    888,756      $    656,577
      Buildings and leasehold improvements       3-40 years         6,802,782         6,759,648
      Office equipment                            3-7 years         6,526,908         6,016,139
      Furniture and fixtures                        7 years         1,231,116         3,006,607
      Vehicles                                      5 years            77,911            85,456
                                                                 ------------      ------------
                                                                   15,527,473        16,524,427
      Less: Accumulated depreciation and
             amortization                                          (4,516,168)       (5,265,373)
                                                                 ------------      ------------
                                                                 $ 11,011,305      $ 11,259,054
                                                                 ============      ============
</TABLE>

5. INCOME TAXES:

The income tax provision (benefit) consists of the following:

                                                      Years Ended December 31,
                                                   -----------------------------
                                                      2000                1999
                                                   ---------           ---------
      Current tax provision                        $  7,250            $      --
      Deferred tax benefit                          (39,905)                  --
                                                   ---------           ---------
                                                   $(32,655)           $      --
                                                   ========            =========

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the  Company's  deferred  tax  assets as of  December  31,  2000 and 1999 are as
follows:

                                                      2000               1999
                                                  -----------         ---------
      Accounts receivable                         $    12,972         $  60,000
      Property and equipment                          (43,703)         (156,251)
      Alternative minimum credit                       45,588            45,588
      Net operating loss carryforwards              1,721,260           850,071
      Reserve for losses                              164,016                --
      Other                                             3,420            10,000
                                                  -----------         ---------
      Net deferred tax asset                        1,903,553           809,408

      Less: valuation allowance                    (1,903,553)         (849,313)
                                                  -----------         ---------
      Net deferred tax liabilities                $        --         $ (39,905)
                                                  ===========         =========

                                       23
<PAGE>
                   CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


At December 31, 2000,  the Company has a net  operating  loss  carryforwards  of
approximately  $3,861,000 for federal and state income tax purposes.  Management
has determined that the tax benefits  associated with the recorded  deferred tax
assets are not likely to be realized  through  future  taxable income and future
reversals of existing taxable temporary differences.

The  reconciliation  of the provision for income taxes with the expected  income
taxes based on the statutory federal income tax rate is as follows:

<TABLE>
<CAPTION>
                                                                                        Years Ended December 31,
                                                                                  -----------------------------------
                                                                                     2000                     1999
                                                                                  -----------             -----------
<S>                                                                              <C>                     <C>
      Expected income tax benefit at the federal statutory rate                   $ (799,053)              $ (669,469)
      State income taxes net of federal benefit                                        4,713                 (154,481)
      Other                                                                          (38,845)                 (25,363)
      Increase to valuation reserve, net of state change in
      valuation reserve                                                              800,530                  849,313
                                                                                  ----------               ----------
                                                                                  $  (32,655)              $       --
                                                                                  ==========               ==========
</TABLE>

6. LONG TERM DEBT:

Long term debt consists of the following:

<TABLE>
<CAPTION>
                                                                                        Years Ended December 31,
                                                                                  -----------------------------------
                                                                                     2000                     1999
                                                                                  -----------             -----------
<S>                                                                              <C>                     <C>
      8.32%  term  loan  with  GMAC   Commercial   Mortgage,   with  monthly
      installments of $23,940 including  principal and interest,  due August
      2009; secured by a building                                                 $ 3,095,468             $ 3,120,223

      Note payable to Imperial Bank bearing interest at the prime rate, with
      monthly principal  payments of $2,800, due December 2002; secured by a
      building                                                                        963,600               1,000,000

      Credit line with  Imperial  Bank  bearing  interest at the prime rate,
      credit line matures May 2001; secured by furniture and equipment                900,000                 500,000

      Capital lease obligations,  with varying rates of 9% to 13% throughout
      the year 2002; secured by equipment                                              57,043                 231,181

      8% note payable to an individual,  with monthly  installments of $435,
      including principal and interest, due October 2011; secured by land                  --                  39,135
                                                                                  -----------             -----------
                                                                                    5,016,111               4,890,539
Less: current portion                                                              (1,006,152)               (717,507)
                                                                                  -----------             -----------
                                                                                  $ 4,009,959             $ 4,173,032
                                                                                  ===========             ===========
</TABLE>

The  Company  has a  $1,500,000  credit  line from  Imperial  Bank,  which bears
interest on any outstanding  balance at the prime rate. As of December 31, 2000,
$900,000  was  drawn  on the  credit  line in  addition  to  $150,000,  which is
committed for a standby letter of credit required pursuant to an office lease.

                                       24
<PAGE>
                   CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


The maturities of long-term Debt after December 31, 2000 were as follows:

                       2001                 $1,006,152
                       2002                    970,765
                       2003                     31,890
                       2004                     33,947
                       2005                     37,664
                    Thereafter               2,935,693
                                            ----------
                                            $5,016,111
                                            ==========

In January 2001, the Company sold an office  building in Santa Rosa,  California
under a sale-leaseback  arrangement,  which provided  approximately  $785,000 in
cash and retired  $963,600 in debt  related to the  building.  This  transaction
resulted in a gain of approximately  $604,000,  which will be amortized over the
10 year leaseback term.

7. OPERATING LEASE COMMITMENTS:

The Company leases offices and office  equipment at 59 locations.  The remaining
lease periods  range from one month to 59 months with renewal  options up to ten
years.  For the years  ended  December  31,  2000 and 1999  rental  expense  was
$3,297,689 and $2,459,120 respectively.

The Company's future minimum lease  commitments  after December 31, 2000 were as
follows:

                       2001                $ 2,859,115
                       2002                  2,491,451
                       2003                  1,948,247
                       2004                  1,381,775
                       2005                    483,832
                    Thereafter               4,466,062
                                           -----------
                                           $13,630,482
                                           ===========

8. CONTINGENCIES AND UNCERTAINTIES:

The  Company  is a  defendant  in  various  lawsuits  and  claims,  which  it is
vigorously defending.  It is management's contention that such matters arise out
of the  normal  course  of  business,  primarily  related  to title  and  escrow
disputes.  While the results of litigation  cannot be predicted with  certainty,
management  believes,  based on the  advice  of legal  counsel,  that the  final
outcome of such lawsuits and claims will not have a material  adverse  effect on
the Company's financial position, results of operations, or liquidity.

In addition,  as of December 31, 2000 and 1999, the Company had accrued $149,000
and  $318,000,  respectively,  for other  potential  claims.  During  1999,  the
California  State  Controller's  Office examined all title companies to identify
unclaimed property  escheatable to the State of California.  The majority of the
accrual at December 31, 1999 related to escheatable  funds owed by  subsidiaries
the Company  acquired,  of which  $183,000 was paid in early 2000 to fulfill the
Company's   obligations   identified  in  the   examination  of  its  California
operations.

                                       25
<PAGE>
                   CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


9. SUPPLEMENTAL CASH FLOW INFORMATION:

The following  supplemental  cash flow  information  is provided with respect to
interest and tax payments,  as well as certain non-cash  investing and financing
activities.
<TABLE>
<CAPTION>
                                                                        Years Ended December 31,
                                                                     -----------------------------
                                                                        2000                1999
                                                                     ---------           ---------
<S>                                                                 <C>                 <C>
      Cash paid (refunded) during the year:
        Interest                                                     $ 334,756           $ 286,520
        Income taxes                                                  (142,181)            228,604
      Non-cash investing and financing activities:
        Conversion of convertible debt                                      --              30,000
        Shares issued in connection with a building purchase                --              19,149
        Acquisition of Northwestern Consolidated Corporation                --            (454,140)
</TABLE>

10. EMPLOYEE BENEFIT PLAN:

PROFIT SHARING PLAN:

The Company maintains a profit sharing plan under Section 401(k) of the Internal
Revenue Code. Under this plan,  substantially all full-time  employees may elect
to defer up to 15% of their salary. The Company contributes $.33 for every $1.00
the  employee  contributes,  up to a maximum of four  percent of the  employee's
earnings.  Vesting  of  matching  contributions  is  based  on  certain  service
requirements. Employees are fully vested after six years of service.

Employer  contributions  for the years  ended  December  31,  2000 and 1999 were
approximately $134,000 and $72,600, respectively.

CAFETERIA PLAN:

The Company  maintains an Internal  Revenue Code Section 125 Cafeteria Plan as a
benefit to its employees.  The plan provides for employee and dependent coverage
to be paid from  before  tax  compensation.  As such,  there is no effect on the
consolidated financial statements.

11. STOCK OPTION PLANS:

The Company has elected to follow  Accounting  Principles  Board Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB 25") and related  Interpretations
in  accounting  for its 1996 Stock  Option Plan and the  Company's  Non-Employee
Directors  Stock Option Plan.  Under APB 25,  because the exercise  price of the
Company's  stock options equals the market price of the underlying  stock on the
date of grant, no compensation  expense is recognized in the Company's financial
statements.

The Company's  1996 Stock Option Plan ("The Plan") has  authorized  the grant of
common stock options to all the Company's employees. Currently, 3,900,000 shares
of Common Stock are authorized for issuance pursuant to the Plan. As of December
31, 2000, 1,768,100 shares have been granted under the Plan. All options granted
have 5-year  terms.  Fifty  percent of the options  can be  exercised  after two
years,  the  remaining  shares can be exercised  after three years  provided the
optionee remains employed with the Company at such vesting date. Options granted
under  the Plan are not  transferable  and the per  share  exercise  price of an
incentive  stock  option  granted  under  the Plan may not be less than the fair
market value of the common stock on the date of grant.

                                       26
<PAGE>
                   CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


The Company's  Non-Employee  Directors Stock Option Plan ("Directors  Plan") has
authorized  the  grant  of  options  to  non-employee  members  of the  Board of
Directors and advisory  boards.  Currently,  600,000  shares of Common Stock are
authorized for issuance pursuant to the Directors Plan. As of December 31, 2000,
530,000 shares have been granted under the Directors  Plan. All options  granted
have 5-year  terms.  Fifty  percent of the options  can be  exercised  after two
years;  the  remaining  shares can be exercised  after three years  provided the
optionee remains an eligible director at such vesting date. Upon election to the
Board of Directors  each board  member is granted the option to purchase  15,000
shares of 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 the Board  Committees  of which such  non-employee  director is a
member in the preceding fiscal year.

In December  2000,  the Company gave all employees the option to cancel  options
they  currently  held and enter into an agreement  that a like number of options
would be granted  on July 2, 2001  (more  than six months  after the date of the
cancellation) at the greater of $1.00 or the then-current  market price. A total
of  1,073,100  options  with a weighted  average  price of $2.24 were  cancelled
pursuant to this arrangement.

A summary of the Company's  stock option  activity  pursuant to its stock option
plans, and related information for the years ended December 31, 2000 and 1999 is
as follows:

<TABLE>
<CAPTION>
                                                   2000                       1999
                                          ---------------------      ----------------------
                                                       Weighted                    Weighted
                                                        Average                     Average
                                            Options      Price          Options      Price
                                            -------      -----          -------      -----
<S>                                       <C>           <C>           <C>           <C>
Outstanding - beginning of year            3,224,400    $ 1.84         2,778,150    $ 1.53
Granted                                      574,600      1.20           929,950      2.75
Exercised                                    (30,500)     1.00          (127,900)     1.00
Forfeited                                 (1,470,400)     2.19          (355,800)     2.05
                                          -----------                 ----------
Outstanding - end of year                  2,298,100      1.42         3,224,400      1.84
                                          ==========                  ==========

Exercisable at end of year                 1,494,300      1.23         1,271,100      1.06
                                          ==========                  ==========
Weighted - average fair value of
options granted during the year           $     0.51                  $     1.27
                                          ==========                  ==========
</TABLE>

                                       27
<PAGE>
                   CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


Stock options outstanding at December 31, 2000 were as follows:

<TABLE>
<CAPTION>
                                         Options Outstanding                  Options Exercisable
                         ----------------------------------------------     -------------------------
                                     Weighted average       Weighted                     Weighted
         Range of                       Remaining           Average                       Average
      Exercise Price      Options    Contractual life    Exercise price     Options    Exercise Price
      --------------      -------    ----------------    --------------     -------    --------------
<S>                      <C>               <C>               <C>           <C>             <C>
        $1.00-$1.50      1,618,900         1.6               $1.04         1,201,700       $1.00
        $1.62-$2.50        565,400         2.5                2.07           282,025        2.10
        $3.00-$4.00        113,800         3.1                3.60            10,575        3.97
                         ---------       -----               -----         ---------       -----
                         2,298,100        1.91               $1.42         1,494,300       $1.23
                         =========       =====               =====         =========       =====
</TABLE>

Pro forma information regarding net income and earnings per share is required by
Statement  123, and has been  determined as if the Company had accounted for its
employee stock options under the fair value method of that  statement.  The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions:  risk-free
interest rate 4.5%;  dividend yields of 0%;  volatility  factors of the expected
market  price of the  Company's  common  stock  for 2000 and 1999 of 49%;  and a
weighted-average expected life of the option for 2000 and 1999 of 4 years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options,  which have no vesting  restrictions and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective assumptions including the expected stock price volatility.

Because the Company's stock options have characteristics significantly different
from  those of traded  options,  and  because  changes in the  subjective  input
assumptions  can  materially  affect the fair value  estimate,  in  management's
opinion,  the  existing  models do not  necessarily  provide a  reliable  single
measure of the fair value of its stock options.

For purposes of pro forma  disclosures,  the estimated fair value of the options
is amortized to expense over the  options'  vesting  period.  If the Company had
accounted for its stock-based compensation plans using a fair value based method
of accounting the pro forma information would have been reported as follows:

<TABLE>
<CAPTION>
                                                                Year ended December 31,
                                                           --------------------------------
                                                               2000               1999
                                                           -----------        -----------
<S>                                                        <C>                <C>
      Pro forma net income (loss)                          $(2,938,274)       $(2,639,686)
      Pro forma net income (loss) per share-basic          $     (0.17)       $     (0.16)
      Pro forma net income (loss) per share-diluted        $     (0.17)       $     (0.16)
</TABLE>
                                       28
<PAGE>
                   CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


12. ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS RECEIVABLE

Changes in the allowance for  uncollectible  accounts  receivable  for the years
ended December 31, 1999 and 2000 are as follows:

      Balance as of December 31, 1998                                 $ 27,942
        Provision charged to operations                                     --
        Write-offs, net of recoveries                                  (14,192)
                                                                      --------
      Balance as of December 31, 1999                                   13,750
        Provision charged to operations                                 16,250
        Write-offs, net of recoveries                                       --
                                                                      --------
      Balance as of December 31, 2000                                 $ 30,000
                                                                      ========

13. EQUITY EXCHANGE AND SUBSEQUENT EVENT:

Pursuant to an agreement  dated June 6, 2000 between the Company and  9keys.com,
there was an  exchange  of common  stock on July 19,  2000  whereby  each of the
companies  received two and one-half  percent of the other company's  issued and
outstanding  common  stock.  9keys.com is a privately  held  financial  and real
estate organization providing a one-stop-realty shopping concept to the southern
California  real estate  market.  This  transaction  resulted in the issuance of
424,448  shares of  Capital  Title  Group,  Inc.  common  stock.  The  Company's
investment  in 9keys.com was recorded at $424,448 and is included in the Balance
Sheet classification of Deposits and Other Assets.

Subsequent  to December 31, 2000,  the  companies  agreed to rescind this equity
exchange and the 424,448 shares of Capital Title Group,  Inc.  common stock were
returned and cancelled.

                                       29
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     Not Applicable.

                                    PART III

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

     The  information  required by this Item is incorporated by reference to the
Company's Proxy Statement for its 2001 Annual Meeting of Stockholders.

ITEM 10. EXECUTIVE COMPENSATION

     The  information  required by this Item is incorporated by reference to the
Company's Proxy Statement for its 2001 Annual Meeting of Stockholders.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  information  required by this Item is incorporated by reference to the
Company's Proxy Statement for its 2001 Annual Meeting of Stockholders.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     No  transactions  with  related  parties  occurred  during the years  ended
December 31, 2000 or 1999.

                                       30
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Index to Exhibits

<TABLE>
<CAPTION>
 Exhibit                                                                                          Method
   No.                                   Description                                            of Filing
   ---                                   -----------                                            ---------
<S>      <C>                                                                                   <C>
     2    Share Exchange  Agreement  between Capital Title Agency,  Inc. and Norvex,  Inc.
          dated May 23, 1996                                                                        (1)
   3.1    Certificate of Incorporation                                                              (1)
   3.2    Amended and Restated Bylaws                                                               (1)
  10.1    Underwriting  Agreement  between  Capital  Title  Agency,  Inc. and Old Republic          (1)
          National Title Insurance Company dated March 1, 1996
  10.2    Underwriting  Agreement  between  Capital Title Agency,  Inc. and First American          (1)
          Title Insurance Company dated August 16, 1996
  10.3    Employment  Agreement  between Capital Title Agency,  Inc. and Milt  Ferrantelli          (2)
          dated June 17, 1997
  10.4    Underwriting  Agreement  between  Capital Title Agency,  Inc. and United General          (2)
          Insurance Company dated January 21, 1998.
  10.5    Credit Line Agreement  between  Registrant and Imperial Bank, dated November 17,          (2)
          1997
  10.6    Acquisition   Consulting   Agreement  between   Registrant  and  Miller  Capital          (2)
          Corporation, dated January 28, 1998.
  10.7    Issuing  Underwriting  Agreement between Capital Title Agency,  Inc. and Chicago          (3)
          Title Insurance Company dated April 1, 1998.
  10.8    Placement Agent Agreement between Registrant and Sanders Morris Mundy Inc. dated          (3)
          April 13, 1998.
  10.9    Title Plant  Agreement  between  Registrant and Security  Union Title  Insurance          (3)
          Company dated April 29, 1998
  10.10   Amendment to  Acquisition  Consulting  Agreement  between  Registrant and Miller          (3)
          Capital Corporation dated June 12, 1998.
  10.11   Financial Advisor Agreement  between  Registrant and Miller Capital  Corporation          (3)
          dated June 16, 1998.
  10.12   Purchase and Sale Agreement  between  Registrant  and KDC-AZ,  LLC dated July 1,          (3)
          1998
  10.13   Merger Agreement among  Registrant,  Northwestern  Consolidated  Corporation and          (4)
          related subsidiaries dated September 1, 1998.
  10.14   Credit Agreement between Registrant and Imperial Bank dated February 1, 1999.             (3)
  10.15   Access Agreement By and Between  Security Union Title Insurance  Company and New          (5)
          Century Title Company dated September 30, 1999.
  10.16   Title Plant  Lease and Service  Agreement  by and between  Security  Union Title          (5)
          Insurance Company and Capital Title Agency Inc. dated May 19, 1999.
  10.17   Promissory  Note  between  CTG  Building  Co.  and  GMAC   Commercial   Mortgage          (5)
          Corporation dated July 30, 1999.
  10.18   Amendment  to  Underwriting  Agreement  by and between  Stewart  Title  Guaranty          (5)
          Company and New Century
  21      Subsidiaries                                                                              (5)
  23.1    Consent of Ernst & Young, LLP                                                             (*)
  23.2    Consent of KPMG LLP                                                                       (*)
</TABLE>

----------
*    Filed herewith
(1)  Incorporated  by reference to the  Registrant's  Form 10-QSB filed with the
     Securities and Exchange Commission on September 20, 1996.
(2)  Incorporated  by  reference  to the  Registrant's  Form 10-KSB for the year
     ended December 31, 1997, filed with the Securities and Exchange  Commission
     on March 25, 1998.
(3)  Incorporated  by  reference  to the  Registrant's  Form 10-KSB for the year
     ended December 31, 1998, filed with the Securities and Exchange  Commission
     on March 23, 1999.
(4)  Incorporated  by  reference  to the  Registrant's  Form 8-K filed  with the
     Securities and Exchange Commission on December 10, 1998.
(5)  Incorporated  by  reference  to the  Registrant's  Form 10-KSB for the year
     ended December 31, 1999, filed with the Securities and Exchange  Commission
     on March 27, 2000.

     (b)  Reports on Form 8-K

     During the year ended  December 31, 2000,  the Company  filed the following
Current Reports on Form 8-K:

     Current Report on Form 8-K dated November 30, 2000-The  Company  reported a
change in independent  public  accountants  with the firm of Ernst & Young,  LLP
being replaced by KPMG LLP effective as of November 30, 2000.

                                       31
<PAGE>
                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the  Securities  Exchange Act of
1934,  the  Registrant  caused  this  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 26, 2001

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


/s/ Donald R. Head            Chairman of the Board and           March 26, 2001
------------------------      Chief Executive Officer
Donald R. Head                Vice President, Chief Financial


/s/ Mark C. Walker            Officer and Treasurer               March 26, 2001
------------------------
Mark C. Walker


/s/ David Dewar               Director                            March 26, 2001
------------------------
David Dewar


/s/ Theo F. Lamb              Director                            March 26, 2001
------------------------
Theo F. Lamb


/s/ Robert B. Liverant        Director                            March 26, 2001
------------------------
Robert B. Liverant


/s/ Stephen A McConnell       Director                            March 26, 2001
------------------------
Stephen A McConnell


/s/ Ben T. Morris             Director                            March 26, 2001
------------------------
Ben T. Morris

                                       32