**Exhibit
        99.8**
  
 
 
 ***FAIRWAYS
        FRISCO, L.P.***
 
 **Index
        to Audited Financial Statements**
 **For
        the Years Ended December 31, 2006 and 2005**
 
 
 
 **Report
                  of Independent Registered Public Accounting Firm**
              **93****Consolidated
                  Balance Sheets as of December 31, 2006
                  and 2005**
              **94****Consolidated
                  Statements of Operations for the Years Ended December 31, 2006
                  and
                  2005**
              **95****Consolidated
                  Statements of Changes in Partnership
                  Capital for the Year Ended December 31, 2006 and
                  2005**
              **96****Consolidated
                  Statements of Cash Flows for the Years Ended December 31, 2006
                  and
                  2005**
              **97****Notes
                  to Consolidated Financial Statements**
              **98**
 
  **-92-**
 Table
            of Contents
  
 
 **REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
        FIRM**
 
 
 
 To
        the
        Partners of Fairways Frisco, L.P.
 Dallas,
        Texas
 
 We
        have
        audited the accompanying consolidated balance sheets of Fairways Frisco,
        L.P.
        and subsidiaries as of December 31, 2006 and 2005, and the related consolidated
        statements of operations, changes in partnership capital and cash flows for
        the
        years then ended. These financial statements are the responsibility of the
        Partnership’s management. Our responsibility is to express an opinion on these
        financial statements based on our audits.
 
 We
        conducted our audits in accordance with standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit includes examining,
        on a
        test basis, evidence supporting the amounts and disclosures in the financial
        statements. An audit also includes assessing the accounting principles used
        and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. We believe that our audits provide a
        reasonable basis for our opinion.
 
 The
        accompanying financial statements have been prepared assuming that the
        Partnership will continue as a going concern. As discussed in Note 1 to the
        financial statements, the Partnership has suffered recurring losses from
        operations and has failed to make required debt payments. This raises
        substantial doubt about the Partnership's ability to continue as a going
        concern. The Partnership’s plans in regard to these matters are also described
        in Note 1. The financial statements do not include any adjustments that might
        result from the outcome of this uncertainty.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the financial position of Fairways Frisco, L.P. and
        subsidiaries at December 31, 2006 and 2005, and the results of their operations
        and their cash flows for the years then ended, in conformity with accounting
        principles generally accepted in the United States of America.
 
 
 
 
 ***HEIN*** *&
        ASSOCIATES LLP* ******
 
 Dallas,
        Texas
 April
        12,
        2007
 
 **-93-**
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            of Contents
 
 ***FAIRWAYS
        FRISCO,
        L.P.***
  **CONSOLIDATED
        BALANCE SHEETS**
 
 December
        31, 2006 and 2005
 
 **ASSETS**
 **2006**
              
              **2005****CURRENT
                  ASSETS:**Cash
                  and cash equivalents
              
              $
              128,633
              
              $
              460,856Restricted
                  cash
              
              
              517,778
              
              
              -Accounts
                  receivable, net
              
              
              43,490
              
              
              254,827Prepaid
                  expenses and other current assets
              
              
              85,559
              
              
              -Total
                  current assets
              
              
              775,460
              
              
              715,683**REAL
                  ESTATE ASSETS**,
                  net
              
              
              56,214,468
              
              
              52,733,185**FURNITURE
                  AND EQUIPMENT**,
                  net
              
              
              93,921
              
              
              90,444**OTHER
                  ASSETS**
              
              
              976,668
              
              
              1,012,153**Total
                  assets**
              
              **$**
              **58,060,517**
              
              **$**
              **54,551,465****LIABILITIES
                  AND PARTNERSHIP CAPITAL****CURRENT
                  LIABILITIES:**Notes
                  payable, current portion
              
              $
              36,792,521
              
              $
              25,858,302Accounts
                  payable and accrued expenses
              
              
              2,846,269
              
              
              1,710,962Other
                  liabilities - related party
              
              
              1,410,121
              
              
              1,225,641Total
                  current liabilities
              
              
              41,048,911
              
              
              28,794,905**NOTES
                  PAYABLE, LONG-TERM**
              
              
              17,975,822
              
              
              25,445,625**NOTES
                  PAYABLE, AFFILIATE**
              
              
              800,000
              
              
              400,000**OTHER
                  LIABILITIES**
              
              
              317,430
              
              
              312,703**Total
                  liabilities**
              
              
              **60,142,163**
              
              
              **54,953,233****MINORITY
                  INTEREST**
              
              
              (3,776,573
              )
              
              (1,802,698
              )**COMMITMENTS
                  AND CONTINGENCIES**(Notes 11 and 13)**PARTNERS’
                  CAPITAL**
              
              
              **1,694,927**
              
              
              **1,400,930****Total
                  liabilities, minority interest and partnership
                  capital**
              
              **$**
              **58,060,517**
              
              **$**
              **54,551,465**
  ***The
              accompanying notes are an integral part of these financial
              statements.***
 **-94-**
 Table
            of Contents
  ***FAIRWAYS
        FRISCO, L.P.***
  **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 
 
 **For
                  the Years Ended December 31,****2006**
              
              **2005****REVENUE**Rental
                  revenue
              
              $
              2,181,301
              
              $
              1,411,201Other
                  revenue
              
              
              308,554
              
              
              223,293Total
                  revenue
              
              
              2,489,855
              
              
              1,634,494**OPERATING
                  EXPENSES:**Property
                  operating and maintenance
              
              
              3,547,150
              
              
              2,734,057Depreciation
                  and amortization
              
              
              1,766,460
              
              
              996,848Property
                  taxes
              
              
              624,958
              
              
              525,255Total
                  operating expenses
              
              
              5,938,568
              
              
              4,256,160**OPERATING
                  LOSS**
              
              
              3,448,713
              
              
              2,621,666**EQUITY
                  IN LOSSES OF EQUITY METHOD INVESTEES**
              
              
              -
              
              
              620,927**OTHER
                  EXPENSE**
              
              
              433,877
              
              
              1,024,638**INTEREST
                  EXPENSE,**net
              
              
              2,511,566
              
              
              1,612,596**LOSS
                  BEFORE MINORITY INTEREST**
              
              
              6,394,156
              
              
              5,879,827**MINORITY
                  INTEREST**
              
              
              (1,973,875
              )
              
              (1,802,698
              )**NET
                  LOSS**
              
              **$**
              **4,420,281**
              
              **$**
              **4,077,129**
 
 ***The
              accompanying notes are an integral part of these financial
              statements.***
 **-95-**
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            of Contents
 ***FAIRWAYS
        FRISCO, L.P.***
  **CONSOLIDATED
        STATEMENTS OF CHANGES IN PARTNERSHIP CAPITAL**
 
 For
        the
        Years Ended December 31, 2006 and 2005
 
 
 **General**
                **Partners**
              
              **Limited**
                **Partners**
              
              **Total
                  Partners’**
                **Capital****BALANCE**,
                  December 31, 2004
              
              $
              155
              
              $
              154,447
              
              $
              154,602Cash
                  contributions
              
              
              8,732
              
              
              8,723,561
              
              
              8,732,293Reallocation
                  of capital accounts upon change in control (Note 4)
              
              
              (3,409
              )
              
              (3,405,427
              )
              
              (3,408,836
              )Net
                  loss
              
              
              (4,077
              )
              
              (4,073,052
              )
              
              (4,077,129
              )**BALANCE**,
                  December 31, 2005
              
              
              1,401
              
              
              1,399,529
              
              
              1,400,930Cash
                  contributions
              
              
              4,714
              
              
              4,709,564
              
              
              4,714,278Net
                  loss
              
              
              (4,420
              )
              
              (4,415,861
              )
              
              (4,420,281
              )**BALANCE**,
                  December 31, 2006
              
              $
              1,695
              
              $
              1,693,232
              
              $
              1,694,927
 
 
  
 
 
 
 
 
 
 
 
 
  ***The
              accompanying notes are an integral part of these financial
              statements.***
 **-96-**
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            of Contents
  ***FAIRWAYS
        FRISCO, L.P.***
  **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **For
                  the Years Ended December 31,****2006**
              
              **2005****OPERATING
                  ACTIVITIES:**Net
                  loss
              
              $
              (4,420,281
              )
              $
              (4,077,129
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Depreciation
                  and amortization
              
              
              1,766,460
              
              
              996,848Non-cash
                  equity in losses of equity method investees
              
              
              -
              
              
              620,927Minority
                  interest
              
              
              (1,973,875
              )
              
              (1,802,698
              )Changes
                  in operating assets and liabilitiesAccounts
                  receivable
              
              
              211,348
              
              
              (78,988
              )Prepaid
                  and other current assets
              
              
              (411,446
              )
              
              (375,120
              )Accounts
                  payable and accrued expenses
              
              
              1,050,617
              
              
              56,287Other
                  liabilities
              
              
              89,417
              
              
              1,570,834Net
                  cash used in operating activities
              
              
              (3,687,760
              )
              
              (3,089,039
              )**INVESTING
                  ACTIVITIES:**Development
                  of real estate assets
              
              
              (4,865,623
              )
              
              (1,187,802
              )Net
                  assets, net of cash acquired and liabilities assumed in change
                  of
                  control
              
              
              -
              
              
              (1,644,142
              )Purchases
                  of property and equipment
              
              
              (24,236
              )
              
              (92,301
              )Repayment
                  of affiliated partnership obligations
              
              
              -
              
              
              (2,224,539
              )Net
                  cash used in investing activities
              
              
              (4,889,859
              )
              
              (5,148,784
              )**FINANCING
                  ACTIVITIES:**Proceeds
                  from affiliate loans
              
              
              584,480
              
              
              -Capital
                  contributions
              
              
              4,714,278
              
              
              8,732,293Payments
                  on notes payable
              
              
              (1,545,345
              )
              
              (574,820
              )Proceeds
                  from notes payable
              
              
              5,009,761
              
              
              541,206Net
                  cash provided by financing activities
              
              
              8,763,174
              
              
              8,698,679**NET
                  INCREASE IN CASH AND CASH EQUIVALENTS**
              
              
              185,555
              
              
              460,856**CASH
                  AND CASH EQUIVALENTS,**beginning
                  of year
              
              
              460,856
              
              
              -**CASH
                  AND CASH EQUIVALENTS,**end
                  of year
              
              $
              646,411
              
              $
              460,856**SUPPLEMENTAL
                  CASH FLOW INFORMATION:**Cash
                  paid for income taxes
              
              $
              -
              
              $
              -Cash
                  paid for interest
              
              $
              1,953,340
              
              $
              1,287,654**NON-CASH
                  TRANSACTIONS:**Assets
                  acquired for refinanced debt
              
              $
              -
              
              $
              22,135,810Assets
                  acquired upon change of control
              
              $
              -
              
              $
              31,120,671Liabilities
                  assumed upon change of control
              
              $
              -
              
              $
              31,742,320
  ***The
              accompanying notes are an integral part of these financial
              statements.***
 **-97-**
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            of Contents
 ***FAIRWAYS
              FRISCO, L.P.***
  NOTES
              TO CONSOLIDATED FINANCIAL
              STATEMENTS
   **1.**
            **Going
                Concern Considerations** 
 The
        accompanying consolidated financial statements have been presented in accordance
        with accounting principles generally accepted in the United States of America,
        which assumes the continuity of the Partnership as a going concern. During
        the
        year ended December 31, 2006, the Partnership has experienced, and continues
        to
        experience, certain issues related to cash flow and profitability. These
        factors
        raise doubt about the Partnership’s ability to continue as a going concern.
        Currently, the Partnership consists of 37 limited partners, and is dependent
        on
        capital calls from those partners to fund operations and investments. The
        General Partner monitors the Partnership’s cash position carefully and evaluates
        its future operating cash requirements with respect to its strategy, business
        objectives and performance. In February 2007, the Partnership requested the
        issuance of a new class of partnership interests to raise up to $8 million
        to
        fund the buyout of minority interests, acquire rights to parking lots, and
        begin
        construction on a new building. See footnote 15, Subsequent Events, for further
        discussion of this capital call.
 
 In
        conjunction with the refinancing of the property, the Partnership has engaged
        Holliday Fegnolio Fowler to solicit interests from institutional and other
        investors for the recapitalization of the project. In addition, the Partnership
        is in continued discussions with lenders to restructure the current portion
        of
        long term debt and extend the terms until such time as a recapitalization
        commitment can be secured.
 
 The
        General Partner believes that it will acquire additional working capital
        through
        the current equity interests offering and recapitalization, sufficient to
        fund
        operations to meet its funding needs through 2007. There can be no assurance
        that such additional financing will be available or if available, that such
        financing can be obtained on terms satisfactory to the Partnership. If the
        Partnership is not able to raise additional funds, it may be required to
        significantly curtail its operations which would have an adverse effect on
        it
        financial position, results of operations and cash flow. The financial
        statements do not contain any adjustments that might result from the outcome
        of
        this uncertainty.
 
 **2.**
            **Organization** 
 *Description
        of Business*
 Fairways
        Frisco, L.P. (“Fairways” or the “Partnership”) is a Texas limited partnership
        formed in December 2004. On December 31, 2004, the Partnership acquired certain
        indirect interests pursuant to a Master Agreement Regarding Frisco Square
        Partnership, dated December 31, 2004 (the “Master Agreement”) in various
        partnerships (the “Frisco Square Partnerships”) that own properties (the
“Properties”) in a 150 acre mixed use real estate development in Frisco, Texas.
        Frisco Square is planned to include approximately 4 million developed square
        feet, including retail, offices, multi-family, single-family and municipal
        space
        (some of which is owned by the City of Frisco and other non affiliated entities,
        the results of which are not included in these consolidated financial
        statements). The Partnership and its subsidiaries will own, develop and manage
        the Properties owned by the Partnership.
 
 The
        parties to the Master Agreement were the Fairways Frisco, L.P., the Frisco
        Square Partnerships, Cole and Mary Pat McDowell, and the remainder of the
        Five
        Star Group which is Five Star Development Co, Inc. (“Five Star”), a Texas
        corporation, CMP Management, LLC, a Texas limited liability Partnership,
        and SMP
        Family Limited Partnership, a Texas limited partnership. “Frisco Square
        Partnerships” is a group of entities comprised of Frisco Square, Ltd. (“FSLTD”),
        Frisco Square B1-6 F1-11, Ltd., a Texas limited partnership, Frisco Square
        B1-7,
        F1-10, Ltd., a Texas limited partnership, and Frisco Square Properties, Ltd.,
        a
        Texas limited partnership. “Fairways Group” is a group of entities comprised of
        Fairways Frisco, Fairways B1-6 F1-11, LLC, a Texas limited liability
  **-98-**
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            of Contents
 ***FAIRWAYS
            FRISCO, L.P.***
 
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
  Partnership,
        Fairways B1-7 F1-10, LLC, a Texas limited liability partnership, and Fairways
        FS
        Properties, LLC, a Texas limited liability partnership. Fairways Equities,
        LLC
        (“Fairways Equities”) is the general partner of the Partnership.
 
 **3.**
            **Significant
                Accounting Policies** 
 *Basis
        of Presentation*
 The
        consolidated financial statements include the accounts of the Partnership
        and
        all subsidiaries for which the Partnership is the general partner, owns greater
        than 50% of the voting equity interests or has significant influence over
        operations. The subsidiaries of the partnership include Frisco Square B1-6
        F1-11, Ltd., a Texas limited partnership, Frisco Square B1-7 F1-10, Ltd.,
        a
        Texas limited partnership, Frisco Square Properties, Ltd., and its wholly
        owned
        subsidiary, Frisco Square F1-1, Ltd., both Texas limited partnerships, Frisco
        Square Land, Ltd., a Texas limited partnership, Frisco Square Development,
        Ltd.,
        and its wholly owned subsidiary, Frisco Square Construction, Ltd., each Texas
        limited partnerships, and the Fairways Group. All intercompany accounts and
        transactions have been eliminated. The limited partnership interests for
        the
        consolidated subsidiaries and related minority interests are included on
        the
        balance sheets as Minority Interests.
 
 The
        Partnership accounted for the investment in the Frisco Square Partnerships
        using
        the equity method from January 1, 2005 through April 14, 2005 as they owned
        50%
        of the voting equity interests, were not the general partner, and had no
        control
        over the operations. On April 15, 2005 the Partnership became the general
        partner and took over control of all operations. As a result, the Partnership
        consolidated the financial statements of the New Frisco Square Partnerships
        beginning April 15, 2005.
 
 *Use
        of Estimates*
 The
        preparation of the 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 accompanying notes.
        Actual
        results could differ from those estimates.
 
 *Cash
        and Cash Equivalents*
 The
        Partnership classifies all highly liquid investments with original maturities
        of
        three months or less as cash equivalents. Cash equivalents are stated at
        cost,
        which approximates fair value.
 
 Restricted
        cash consists of amounts held in escrow by banks to pay for taxes and
        insurance.
 
 *Concentration
        of Credit Risk*
 The
        Partnership’s credit risk relates primarily to its trade accounts receivable and
        its receivables from affiliates, along with cash deposits maintained at
        financial institutions in excess of federally insured limits. Management
        performs continuing evaluations of debtors’ financial condition and provides an
        allowance for uncollectible accounts as determined necessary. See Note 5
        for
        additional information regarding the Partnership’s trade accounts receivable,
        allowance for doubtful accounts and significant customer
        relationships.
 
 *Deferred
        Financing Costs and Leasing Commissions*
 Deferred
        financing costs are amortized using the straight-line method, which approximates
        the interest method, over the terms of the related debt. Costs incurred to
        obtain initial leases are amortized using the straight-line method over the
        terms of the respective leases. ******
  **-99-**
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            of Contents
 ***FAIRWAYS
            FRISCO, L.P.***
 
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
  
 *Guarantees*
 The
        Partnership accounts for its guarantees of the obligations of others in
        accordance with FASB Interpretation No. 45, *Guarantor’s
        Accounting and Disclosure Requirements for Guarantees, Including Direct
        Guarantees of Indebtedness of Others* (“FIN
        45”). FIN 45 requires that guarantors recognize a liability for certain
        guarantees at the fair value of the guaranteed obligation at the inception
        of
        the guarantee, even if the likelihood of performance under the guarantee
        is
        remote. The initial recognition and measurement provisions of FIN 45 are
        applicable on a prospective basis to guarantees issued or modified after
        December 31, 2002. See Note 14 for disclosures related to the Partnership’s
        guarantees in accordance with FIN 45.
 
 *Real
        Estate Assets, Depreciation and Impairment*
 Real
        estate assets are stated at the lower of depreciated cost or fair value,
        if
        deemed impaired. Major replacements and betterments are capitalized and
        depreciated over their estimated useful lives. Depreciation is calculated
        on a
        straight-line basis over the useful lives of the properties (generally three
        to
        thirty-five years). Tenant improvements are capitalized and depreciated over
        the
        life of the related lease. Expenditures for maintenance and repairs are charged
        to operations as incurred.
 
 The
        Partnership continually evaluates the recoverability of the carrying value
        of
        its real estate assets using the methodology prescribed in Statement of
        Financial Accounting Standards (“SFAS”) No. 144, *Accounting
        for the Impairment or Disposal of Long-Lived Assets* .
        Factors
        considered by management in evaluating impairment of its existing real estate
        assets held for investment include significant declines in property operating
        profits, recurring property operating losses and other significant adverse
        changes in general market conditions that are considered permanent in nature.
        Under SFAS No. 144, a real estate asset held for investment is not considered
        impaired if the undiscounted, estimated future cash flows of an asset (both
        the
        annual estimated cash flow from future operations and the estimated cash
        flow
        from the disposition of the asset) over its estimated holding period are
        in
        excess of the asset’s net book value at the balance sheet date. If any real
        estate asset held for investment is considered impaired, a loss is provided
        to
        reduce the carrying value of the asset to its estimated fair value. No
        impairment was recorded in 2006 or 2005.
 
 *Furniture
        and Equipment*
 Furniture
        and equipment is carried at cost, less accumulated depreciation. Depreciation
        and amortization are provided over the estimated useful lives of the assets
        (generally three to seven years) using the straight-line method. Leasehold
        and
        tenant improvements are amortized on a straight-line basis over the lesser
        of
        the respective lease term or estimated useful life of the asset.
 
 The
        Partnership evaluates the carrying value of its long-lived assets by comparing
        the undiscounted cash flows over the remaining useful life of the long-lived
        assets with the assets’ carrying value. If this comparison indicates that the
        carrying value will not be recoverable, the carrying value of the long-lived
        assets will be reduced accordingly based on a discounted cash flow analysis.
        No
        impairment was recorded in 2006 or 2005.
 
 *Equity
        Method Investment*
 Equity
        method investments represent investments in limited partnerships and are
        accounted for using the equity method of accounting for investments and none
        represent investments in publicly traded companies. The equity method was
        used
        prior to April 15, 2005, as the Partnership was not the general partner,
        did not
        have a majority interest and did not have significant influence over the
        operations of the Frisco Square Partnerships. Accordingly, the Partnership
        recorded its proportionate share of the income or losses generated by equity
        method investees in the consolidated statements of operations from January
        1,
        2005 to April 15, 2005.
  **-100-**
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            of Contents
 ***FAIRWAYS
            FRISCO, L.P.***
 
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
  
 Subsequent
        to April 15, 2005, the Partnership consolidated all activities of the New
        Frisco
        Square Partnerships, as the Partnership and its affiliates became the sole
        general partner and had obtained a majority interest in those partnerships.
        See
        Note 4 for a discussion of the April 15, 2005 transaction.
 
 *Revenue
        Recognition*
 Rental
        revenue includes the base rent each tenant is required to pay in accordance
        with
        the terms of the respective lease and is reported on a straight-line basis
        over
        the noncancelable lease term. Certain lease agreements contain provisions
        that
        provide for the reimbursement of real estate taxes, insurance and certain
        other
        operating costs above their base-year costs. These reimbursements totaled
        approximately $306,000 and $214,000 in 2006 and 2005, respectively, and are
        included in other revenues in the statement of operations.
 
 One
        tenant is required to pay rent as a percentage of their gross sales volume
        to
        the extent such percentage rents exceed their base rents. There were no
        significant revenues from percentage rents in 2006 or 2005.
 
 *Income
        Taxes*
 Under
        present income tax laws, the Partnership is not subject to federal or state
        income taxes; therefore, no taxes have been provided for in the accompanying
        consolidated financial statements. The partners are to include their respective
        share of the Partnership’s net loss in their income tax returns.
 
 In
        May
        2006, the State of Texas replaced the current franchise tax system with a
        new
        Texas Margin Tax (“TMT”). The TMT is a 1% gross receipts tax based on the
        Partnership’s taxable margin, as defined by the new law. At December 31, 2006,
        there were no deferred income taxes related to this new law.
 
 *Leasing
        Arrangements*
 The
        Partnership enters into leasing arrangements with tenants of the building(s),
        which are generally non-cancelable except for cause, which is defined in
        the
        agreements. Residential leases range in term from three months to one year.
        Commercial leases are generally executed for a term of anywhere from five
        to
        fifteen years, and include a base amount per square foot that the Partnership
        will pay to the tenant for improvements to the space. These improvements
        are
        capitalized and amortized over the life of the lease.
 
 *Fair
        Value of Financial Instruments*
 The
        Partnership’s financial instruments include cash, accounts receivable and
        accounts payable that are carried at cost, which approximates fair value
        because
        of the short-term nature of these instruments. The fair value of notes payable
        approximates carrying value as interest rates approximate market rates.
 
 *Reclassification*
 Certain
        2005 balances have been reclassed to conform to the 2006 basis of
        presentation.
 
 **4.**
            **Change
                in Control Transaction** 
 On
        April
        15, 2005, the parties to the Master Agreement agreed to terminate the Master
        Agreement effective April 15, 2005. In connection with the termination of
        the
        Master Agreement, some of the Frisco Square Partnerships were amended such
        that
        the Partnership owned, at April 15, 2005, either directly or indirectly,
        60% of
        some of the Frisco Square Partnerships. The remaining 40% continued to be
        controlled by CMP Family Limited Partnership, (“CMP”), which is controlled by
        Cole McDowell. Under the terms of the amended Frisco Square Partnerships,
        the
        Partnership also has a
  **-101-**
 Table
            of Contents
 ***FAIRWAYS
            FRISCO, L.P.***
 
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
  first
        priority distribution preference of $5.5 million, and will receive its pro-rata
        partnership interest of the next $9.5 million of distributions from the Frisco
        Square Partnerships. After $15 million of distributions have been made, the
        Fairways interest in the Frisco Square Partnerships will become 80% and CMP’s
        interest will become 20%, subject to certain dilution privileges of the partners
        of the Frisco Square Partnership.
 
 Furthermore,
        Fairways’ partnership interest in the Frisco Square Partnerships may have been
        increased up to 90% if certain capital call and limited partner capital loan
        provisions were not met by CMP. During the year ended December 31, 2005,
        CMP met
        the first capital loan provision by providing a $400,000 cash loan as required
        under the partnership agreements. In March 2006, CMP met the second capital
        loan
        provision by providing an additional $400,000 cash loan as required under
        the
        partnership agreements. No further capital loan provisions are provided in
        the
        partnerships agreements.
 
 Under
        the
        terms of the amended Frisco Square Partnership agreements, Fairways Equities
        is
        now the sole general partner of the Frisco Square Partnerships and controls
        all
        operating activities, financing activities, and development activities for
        the
        Frisco Square Partnerships.
 
 Also
        on
        April 15, 2005, the Partnership, through Frisco Square Land, Ltd., a newly
        created partnership, closed a financing transaction, the proceeds which were
        used to repay the outstanding bank debt of Frisco Square, Ltd. And to provide
        additional working capital for the Partnership. Under the terms of the now
        terminated Master Agreement, the Partnership held an option to acquire 50%
        of
        the partnership interests of Frisco Square, Ltd. Concurrently with the
        financing, all of the land and related development held by Frisco Square,
        Ltd.
        was contributed to Frisco Square Land, Ltd. In the amount of $19.5 million
        in
        exchange for repayment of the bank debt, and the option to acquire 50% of
        the
        partnership interests of Frisco Square, Ltd. Was cancelled. As a result of
        these
        changes, the Partnership has never had an interest in Frisco Square, Ltd.
        Fairways owns 60% of Frisco Square Land, Ltd. The carrying value of the land
        held by Frisco Square Land, Ltd. Is equal to the bank debt repaid plus
        capitalized interest and other costs subsequently incurred to develop the
        land
        for building sites.
 
 Also
        on
        April 15, 2005, the Partnership formed and began operations for Frisco Square
        Development, Ltd., and its wholly-owned subsidiary, Frisco Square Construction,
        Ltd. These entities operate the development and construction activities for
        the
        Frisco Square Partnerships. The Partnership owns 75% of Frisco Square
        Development, Ltd., and the remaining 25% is owned by CMP.
 
 As
        a
        result, at April 15, 2005, the “New Frisco Square Partnerships” consisted of
        Frisco Square Land, Ltd., Frisco Square B1-6 F1-11, Ltd., Frisco Square B1-7
        F1-11, Ltd., Frisco Square Properties, Ltd., and Frisco Square Development,
        Ltd.
 
 During
        the year ended December 31, 2006, Frisco Square Development, Ltd. And Frisco
        Square Construction, Ltd. Were merged and the surviving entity, Frisco Square
        Development, Ltd. And ownership provisions remained as mentioned above.
 
 Also
        see
        footnotes 13, Commitments and Contingencies, and 15, Subsequent
        Events.
 
 **5.**
            **Accounts
                Receivable, Net** 
 The
        Partnership grants credit to tenants of various sizes and provides an allowance
        for doubtful accounts equal to the estimated uncollectible amounts based
        on
        historical collection experience and a review
        of
        the current status of tenant accounts receivable. The Partnership determines
        the
        amount of the allowance for doubtful accounts based on a number of variables,
        including lease terms and length of time outstanding. There is no allowance
        for
        doubtful accounts at December 31, 2006 or 2005.
  **-102-**
 Table
            of Contents
 ***FAIRWAYS
            FRISCO, L.P.***
 
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 For
        the
        year ended December 31, 2006 and 2005, the Partnership derived revenues in
        excess of ten percent from one tenant totaling approximately $351,000 or
        14% of
        total revenue, and $323,000 or 20% of total revenue, respectively. Accounts
        receivable from the same customer was $95,165, or 37% of total accounts
        receivable, at December 31, 2005. No customer had a receivable balance in
        excess
        of 10% of total receivables at December 31, 2006.
 **6.**
              **Other
                  Assets** 
 Other
          assets consist of the following:
 
 December
                    31, 2006
                
                
                
                **Accumulated****Cost**
                
                **Amortization**
                
                **Net**Deferred
                    leasing commissions
                
                $
                747,593
                
                $
                (112,550
                )
                $
                635,043Deferred
                    financing costs
                
                
                923,238
                
                
                (594,641
                )
                
                328,597Other
                    assets
                
                
                13,028
                
                
                -
                
                
                13,028$
                1,683,859
                
                $
                (707,191
                )
                $
                976,668
 
 December
                    31, 2005
                
                
                
                **Accumulated****Cost**
                
                **Amortization**
                
                **Net**Deferred
                    leasing commissions
                
                $
                649,688
                
                $
                (40,583
                )
                $
                609,105Deferred
                    financing costs
                
                
                688,802
                
                
                (302,265
                )
                
                386,537Other
                    assets
                
                
                16,511
                
                
                -
                
                
                16,511$
                1,355,001
                
                $
                (342,848
                )
                $
                1,012,153
 
 Amortization
          expense was $367,826
          and $257,807
          for the years ended December 31, 2006 and 2005, respectively. As of December
          31,
          2006, the future scheduled amortization expense is as follows:
 
 **Deferred
                    Leasing**
                  **Commissions**
                
                **Deferred
                    Financing Costs**2007
                
                $
                63,403
                
                $
                184,1582008
                
                
                73,026
                
                
                144,4392009
                
                
                71,550
                
                
                -2010
                
                
                68,928
                
                
                -2011
                
                
                58,911
                
                
                -Thereafter
                
                
                299,275
                
                
                -$
                635,093
                
                $
                328,597
 
  **-103-**
 Table
              of Contents
 ***FAIRWAYS
                FRISCO, L.P.***
 
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS**
   **7.**
              **Real****Estate****Assets, Net** 
 Real
          estate assets at December 31, 2006, consist of the following:
 **Description**
                
                **Property
                    Description**
                
                **Related
                    Encumbrances**
                
                **Initial
                    Costs**
                
                **Costs
                    Capitalized Subsequent to Acquisition**
                
                **Gross
                    Cost Basis**Land
                
                
                50.8
                    acres land
                
                $
                28,636,519
                
                $
                24,135,704
                
                $
                -
                
                $
                24,135,704Land
                    development costs
                
                
                
                
                
                -
                
                
                -
                
                
                4,629,877
                
                
                4,629,877BuildingsFS
                    B1-6 F1-11
                
                
                155,000
                    sf apartments/retail
                
                
                17,257,974
                
                
                10,338,268
                
                
                6,694,448
                
                
                17,032,716FS
                    B1-7 F1-10
                
                
                61,400
                    sf office/retail
                
                
                8,873,849
                
                
                8,392,185
                
                
                1,079,616
                
                
                9,471,801Capitalized
                    interest
                
                
                
                
                
                -
                
                
                -
                
                
                5,111,191
                
                
                5,111,191$
                54,768,342
                
                $
                42,866,157
                
                $
                17,515,132
                
                $
                60,381,289
 
 **Accumulated**
                
                **Date
                    of**
                
                **Date**
                
                **Depreciable****Description**
                
                **Depreciation**
                
                **Construction**
                
                **Acquired**
                
                **Life**Land
                
                $
                -
                
                
                
                
                
                2005Land
                    development costs
                
                
                -
                
                
                
                
                
                2005BuildingsFS
                    B1-6 F1-11
                
                
                (3,086,881
                )
                
                2004
                
                
                2005
                
                
                7-35
                    YearsFS
                    B1-7 F1-10
                
                
                (1,079,940
                )
                
                2004
                
                
                2005
                
                
                7-35
                    YearsCapitalized
                    interest
                
                
                -$
                (4,166,821
                )
 
 Real
          estate assets at December 31, 2005, consist of the following:
 **Description**
                
                **Property
                    Description**
                
                **Related
                    Encumbrances**
                
                **Initial
                    Costs**
                
                **Costs
                    Capitalized Subsequent to Acquisition**
                
                **Gross
                    Cost Basis**Land
                
                
                50.8
                    acres land
                
                $
                25,445,625
                
                $
                24,135,704
                
                $
                -
                
                $
                24,135,704Land
                    development costs
                
                
                
                
                
                -
                
                
                -
                
                
                2,719,178
                
                
                2,719,178BuildingsFS
                    B1-6 F1-11
                
                
                155,000
                    sf apartments/retail
                
                
                17,460,480
                
                
                10,338,268
                
                
                6,595,791
                
                
                16,934,059FS
                    B1-7 F1-10
                
                
                61,400
                    sf office/retail
                
                
                8,397,822
                
                
                8,392,185
                
                
                616,598
                
                
                9,008,783Capitalized
                    interest
                
                
                
                
                
                -
                
                
                -
                
                
                2,742,847
                
                
                2,742,847$
                51,303,927
                
                $
                42,866,157
                
                $
                12,674,414
                
                $
                55,540,571
 
  **-104-**
 Table
              of Contents
 ***FAIRWAYS
              FRISCO, L.P.***
 
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
  
 **Accumulated**
                
                **Date
                    of**
                
                **Date**
                
                **Depreciable****Description**
                
                **Depreciation**
                
                **Construction**
                
                **Acquired**
                
                **Life**Land
                
                $
                -
                
                
                
                
                
                2005Land
                    development costs
                
                
                -
                
                
                
                
                
                2005BuildingsFS
                    B1-6 F1-11
                
                
                (1,999,055
                )
                
                2004
                
                
                2005
                
                
                7-35
                    YearsFS
                    B1-7 F1-10
                
                
                (808,331
                )
                
                2004
                
                
                2005
                
                
                7-35
                    YearsCapitalized
                    interest
                
                
                -$
                (2,807,386
                )
 
 The
          following table shows the activity in real estate assets during 2006 and
          2005:
 
 Balance
                    at January 1, 2005
                
                $
                -Acquisitions
                    and development
                
                
                51,863,861Improvements
                
                
                933,863Capitalized
                    interest
                
                
                2,742,847Balance
                    at December 31, 2005
                
                
                55,540,571Acquisitions
                    and development
                
                
                1,891,958Improvements
                
                
                580,416Capitalized
                    interest
                
                
                2,368,344Balance
                    at December 31, 2006
                
                $
                60,381,289
 
 All
          of
          the real estate assets are located in the Frisco Square development which
          is in
          Frisco, Texas. Depreciation expense for buildings was $1,365,861 and $730,330
          for the years ended December 31, 2006 and 2005, respectively.
 
 **8.**
              **Furniture,
                  Fixtures And Equipment, net** 
 Furniture,
          fixtures and equipment, net consist of the following:
 
 **Estimated****Useful
                    Lives**
                
                **2006**
                
                **2005**Furniture,
                    fixtures and equipment
                
                
                3
                    to 7 years
                
                $
                91,705
                
                $
                84,541Leasehold
                    improvements
                
                
                5
                    to 7 years
                
                
                35,814
                
                
                18,743127,519
                
                
                103,284Less
                    accumulated depreciation
                
                
                
                
                
                (33,598
                )
                
                (12,840
                )Furniture,
                    fixtures and equipment, net
                
                
                
                
                $
                93,921
                
                $
                90,444
 
 Depreciation
          expense for furniture, fixture and equipment was $21,768 and $8,711 for
          the year
          ended December 31, 2006 and 2005.
 
  **-105-**
 Table
              of Contents
 ***FAIRWAYS
                FRISCO, L.P.***
 
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS**
   **9.**
              **Accounts
                  Payable and Accrued Expenses** 
 Accounts
          payable and accrued liabilities consist of the following:
 
 **2006**
                
                **2005**Accounts
                    payable
                
                $
                1,125,313
                
                $
                513,016Accrued
                    property taxes
                
                
                625,678
                
                
                501,641Accrued
                    interest
                
                
                739,768
                
                
                324,941Accrued
                    real estate commissions
                
                
                -
                
                
                216,581Other
                    accrued expenses
                
                
                355,510
                
                
                123,013$
                2,846,269
                
                $
                1,679,192
 
 **10.**
              **Notes
                  Payable** 
 Notes
          payable consist of the following:
 
 **2006**
                
                **2005****Comerica
                    Bank term note payable (see Note 13)**Comerica
                    Bank term note in the principal amount of $26,664,000, interest
                    at 8.75%
                    and 8.50% at December 31, 2005 and 2006, respectively. Secured
                    by
                    approximately 50 acres of land in Frisco, Texas and personal
                    guarantees by
                    the four members of Fairways Equities. Term note matures on April
                    15,
                    2008, at which time all principal and accrued interest are due.
                    Loan
                    requires payment of $6,666,000 principal payment April 30,
                    2007.
                
                $
                24,641,821
                
                $
                22,214,537**Comerica
                    Bank line of credit (see Note 13)**Commitment
                    up to $2,000,000, interest payable monthly at Comerica. Bank
                    prime rate
                    plus .25% or Euro +3% at the borrower’s option (8.75% and 8.50% at
                    December 31, 2006 and 2005, respectively), secured by approximately
                    50
                    acres of land in Frisco, Texas and personal guarantees by the
                    four members
                    of Fairways Equities, matures March 10, 2007.
                
                
                2,000,000
                
                
                -**Citibank,
                    NA term note payable (A)**Term
                    note payable in the principal amount of $19,250,000, principal
                    and
                    interest payable monthly at Citibank NA prime rate (8.25% and
                    8.25% at
                    December 31, 2006 and 2005, respectively), with a floor rate
                    of 5.5%,
                    secured by two certain buildings (B1-6 and F1-11) in Frisco,
                    Texas and
                    personal guarantees by the four members of Fairways Equities
                    and a member
                    of CMP Family Limited Partnership. Note is cross-collateralized
                    by
                    collateral pledged under the Citibank term note (B) below, matures
                    May 1,
                    2007
                
                
                17,257,975
                
                
                17,460,480
 
  **-106-**
 Table
              of Contents
 ***FAIRWAYS
                FRISCO, L.P.***
 
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS**
   
 **Citibank,
                    NA term note payable (B)**Term
                    note payable in the principal amount of $3,000,000, interest
                    only payable
                    monthly at Citibank NA prime rate plus 1.00% (8.25% at December
                    31, 2006
                    and 2005), principal due on May 1, 2007, and secured by three
                    lots in
                    Frisco, Texas and personal guarantees by the four members of
                    Fairways
                    Equities and a member of CMP Family Limited Partnership. Note
                    is cross
                    collateralized by buildings listed in Citibank term note (A)
                    above.
                
                
                1,994,698
                
                
                2,700,000**First
                    National Bank of Omaha term note payable**Term
                    note payable in the principal amount of $8,600,000, principal
                    and interest
                    payable monthly at First National Bank prime rate plus 1.00%
                    (9.00% and
                    8.25% at December 31, 2006 and 2005, respectively), with a floor
                    of 6.5%
                    and a ceiling of 10%, remaining principal due on July 7, 2007,
                    secured by
                    a certain office building (F1-10) in Frisco, Texas, a certain
                    retail
                    center in Flower Mound, Texas, a $200,000 certificate of deposit
                    in the
                    name of CMP, and personal guarantees of $800,000 by the four
                    members of
                    Fairways Equities and a full guarantee by member of CMP Family
                    Limited
                    Partnership.
                
                
                8,342,761
                
                
                8,397,822**First
                    National Bank of Omaha term note payable**Term
                    note payable in the principal amount of $533,000, interest payable
                    monthly
                    at First National Bank of Omaha prime plus 1.00% (10% and 8.25%
                    at
                    December 31, 2006 and 2005, respectively), principal due on July 21,
                    2007, secured by certain land (Lot B1-7) in Frisco, Texas and
                    personal
                    guarantees of $800,000 by the four members of Fairways Equities,
                    LLC and a
                    member of CMP Family Limited Partnership.
                
                
                531,088
                
                
                531,08854,768,343
                
                
                51,303,927Less
                    current portion
                
                
                (36,792,521
                )
                
                (25,858,302
                )$
                17,975,822
                
                $
                25,445,625
 
 The
          aggregate maturities of notes payable for the five years after December
          31,
          2006, are as follows:
 
 2007
                
                $
                36,792,5212008
                
                
                17,975,8222009
                
                
                -2010
                
                
                -2011
                
                
                -Thereafter
                
                
                -$
                54,768,343
 
  **-107-**
 Table
              of Contents
 ***FAIRWAYS
              FRISCO, L.P.***
 
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
  
 The
          Comerica term note contains certain restrictive covenants with which the
          borrower must comply, including certain reporting requirements, limitations
          on
          guarantees of the four members of Fairways Equities for debt not related
          to
          Frisco Square, and liquidity requirements of the four members of Fairways
          Equities. As of December 31, 2006, the borrower was in compliance with
          the
          covenants listed in the Comerica term note.
 
 The
          Citibank term note (A) required various reserves and principal payments
          which
          were to be made in November, 2006, and again in February, 2007. As of the
          date
          of this report, the ratios had not been met, and the principal payments
          and
          reserves had not been made. The borrower and its general partner received
          notice
          of default on November 20, 2006, and discussions for modification and extension
          of the loan were in process with Citibank. As of the date of this report,
          the
          borrower has not received notice of acceleration of the principal of the
          debt,
          which is required by the terms of the term note.
 
 The
          First
          National Bank of Omaha term note does not contain any restrictive covenants
          with
          which the Partnership must comply.
 
 The
          balance of $800,000 and $400,000 in notes payable, affiliate at December
          31,
          2006 and 2005, respectively, represents loans from CMP, as required under
          the
          terms of the partnership agreements. The loan bears interest at the rate
          of 15%
          per annum, with principal to be paid out of cash flow, pro rata with other
          mezzanine loans of the Partnership.
 
 **11.**
              **Other
                  Current Liabilities** 
 In
          May
          2005, Citibank applied $1,225,641 of certificates of deposit held by CMP
          Family
          Limited Partnership (or affiliates) as collateral on the Citibank Note
          (A)
          toward the principal balance of that note. The pay down was made at the
          request
          of Citibank in order to extend the term of the existing Note. The amount
          remains
          an obligation of the Partnership to the affiliates; however, no agreements
          have
          been signed between the parties, and the amount is included in other current
          liabilities on the balance sheet as of December 31, 2006 and 2005. CMP
          Family Limited Partnership (and other affiliates) has initiated legal
          proceedings related to the recovery of this collateral from the Partnership
          and
          related borrower from Citibank. See Note 13 for further discussion of these
          legal proceedings.
 
 At
          December 31, 2006, there were also $184,500 of short-term advances from
          the
          general partners and its principal. These advances are expected to be repaid
          out
          of future capital calls to the Partnership. There were no such advances
          at
          December 31, 2005.
 
 **12.**
              **Minority
                  Interest** 
 During
          the year ended December 31, 2006, the Partnership made two capital calls
          to fund
          operations, investing, and financing activities. The first call, made in
          February, 2006, (the “February Call”) was used to fund capital requirements of
          the New Frisco Square Partnerships, which capital calls were to be shared
          by
          CMP. CMP did not fund its portion of the February Call, and as a result,
          CMP’s
          interest was diluted in May 2006, when the Partnership cured CMP’s default in
          certain of the New Frisco Square Partnerships. The minority interest activity
          reported on the income statement for the year ended December 31, 2006,
          therefore, includes CMP’s full limited partner interest as discussed above
          through May, 2006, and includes CMP’s reduced limited partner interest for the
          seven months ended December 31, 2006. CMP’s diluted interest ranges from 25% to
          40% of the New Frisco Square Partnerships.
  **-108-**
 Table
              of Contents
 ***FAIRWAYS
              FRISCO, L.P.***
 
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
  
 Also
          see
          footnotes 13, Commitments and Contingencies, and 15, Subsequent
          Events.
 
 **13.**
              **Commitments
                  and Contingencies** 
 *The
          Development Agreement*
 On
          April
          15, 2005, the Partnership was assigned the rights and assumed obligations
          under
          that certain Development Agreement (“Development Agreement”) dated July 28, 2000
          by and between Frisco Square, Ltd. (see Note 2 and 3) and the City of Frisco.
          The Development Agreement was created to define the building restrictions,
          site
          plan and obligations for funding the infrastructure for Frisco Square.
          On April
          15, 2005, the Development Agreement was assigned to Frisco Square Land,
          Ltd. As
          a result of the execution of the Development Agreement, the City of Frisco
          formed a Municipal Management District (“MMD”) to manage and finance certain
          activities which occur within the MMD boundaries. The Development Agreement
          effectively requires Frisco Square (as defined in the Development Agreement,
          but
          generally consists of the New Frisco Square Partnerships) to fund one half
          of
          the negative cash flow annually for the upkeep of the MMD, which includes
          payment of principal and interest on approximately $12.5 million of bonds
          issued
          by the City of Frisco (“Debt Service”). The Partnership’s obligations for the
          debt service may be reduced by the ad valorem taxes assessed by the City
          of
          Frisco on the property included in the MMD. To the extent that the cash
          flows of
          the MMD are insufficient to cover the payment of Debt Service of the bonds,
          the
          Partnership must pay 50% of the shortfall. The four members of Fairways
          Equities
          have personally guaranteed the Partnerships payment of this commitment
          for up to
          $100 million of assessed value of the MMD property, and the Partnership
          has
          indemnified them for the guaranty. In connection with this indemnification,
          the
          Partnership recorded an obligation of $118,750 which is included in Other
          Long
          Term Liabilities at 2006 and 2005. This amount represents the Partnership’s
          estimate of the fair value of the indemnification obligation.
 
 The
          Partnership paid $490,349 and $1,089,889 toward this commitment in 2006
          and
          2005, respectively. $598,274 of the 2005 amount relates to obligations
          of the
          prior developer, Frisco Square, Ltd. These payments are included in capitalized
          interest on the respective balance sheets.
 
 The
          MMD
          is governed by a five member Board of Directors, which is comprised of
          three
          members from the City of Frisco, and two members from the
          Partnership .
 
 See
          Note
          15, Subsequent Events.
 
 *Operating
          Leases*
 During
          2006 and 2005, the Partnership and its subsidiaries occupied space in two
          buildings owned by the Partnership; any rent charged and collected between
          the
          various partnerships has been eliminated in consolidation. The Partnership
          also
          leases certain equipment under noncancellable operating lease agreements.
          Certain leases contain renewal options and provide that the Partnership
          pay
          taxes, insurance, maintenance and other operating expenses. Total rent
          expense
          for operating leases was approximately $22,000 and $21,000 for the year
          ended
          December 31, 2006 and 2005, respectively. Minimum lease payments under
          all
          non-cancellable operating lease agreements for the years ended December
          31 are
          as follows:
  **-109-**
 Table
              of Contents
 ***FAIRWAYS
              FRISCO, L.P.***
 
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
  
 2007
                
                $
                18,0002008
                
                
                12,0002009
                
                
                3,0002010
                
                
                -2011
                
                
                -Thereafter
                
                
                -$
                33,000
 *Construction*
 In
          2006 a
          lease was executed between Frisco Square and a dinner cinema, which will
          require
          Frisco Square to construct a building for this tenant with a delivery date
          of
          September 2007. The tenant will have 150 days from the date of delivery
          to
          complete the Tenant Improvements and occupy the space. Design for the building
          is in progress, and the final cost is subject to permitting and design
          approvals
          by the City and tenant, respectively. The Partnership expects to finance
          the
          construction partially through bank debt. As of the date of this report,
          the
          budget for the building costs had not been finalized, and financing had
          not yet
          been obtained.
 
 Additionally,
          Frisco Square has executed leases pertaining to a new building on an undeveloped
          lot, for which construction began subsequent to December 31, 2006, which
          will
          cost approximately $11,100,000. See Note 15 for further discussion of this
          building and related commitments.
 
 *Legal
          Proceedings*
 In
          July
          2005, CMP Family Limited Partnership (“CMP”), The Kendrick Fund, Ltd., Frisco
          Square, Ltd. and Five Star Development Partnership filed suit against Fairways
          B1-6, F1-11 LLC and Fairways Frisco LP in Cause No. 05-0677-B, in the District
          Court of Dallas County, Texas, 44 th Judicial
          District (the “Collateral Lawsuit”). In the Collateral Lawsuit, Plaintiffs
          allege that Defendants failed to include certain agreed-upon language in
          a
          written agreement under which Defendants acquired certain assets from
          Plaintiffs. The allegedly agreed-upon language would have required Defendants
          to
          secure the release of Plaintiffs’ cash collateral from a financial institution
          that was involved in the transaction upon refinancing of a certain debt.
          Plaintiffs further contend that the financial institution seized their
          cash
          collateral and applied it to the debt because the allegedly agreed-upon
          language
          was not included in the written agreement. Plaintiffs purport to state
          claims
          for reformation, declaratory judgment, fraud in the inducement, fraud,
          misrepresentation, breach of fiduciary duty, civil conspiracy and predatory
          practices. Plaintiffs seek judgment reforming the written agreement to
          include
          the allegedly agreed upon language, actual damages in the amount of $1,225,621
          and unspecified exemplary damages. Defendants maintain that they did not
          agree
          to include the subject language in the written agreement. Trial date for
          the
          lawsuit has been set for February 27, 2007. See Note 11, Other Current
          Liabilities, Affiliate and Note 15, Subsequent Events for resolution of
          this
          lawsuit.
  **-110-**
 Table
              of Contents
 ***FAIRWAYS
              FRISCO, L.P.***
 
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
  
 On
          April
          7, 2006, CMP, sued the Partnership, Fairways Equities and the New Frisco
          Square
          Partnerships and the related general partners, asserting multiple claims
          arising
          from or related to five limited partnership agreements. Plaintiffs’ claims stem
          from a letter dated April 6, 2006 in which CMP purportedly initiated an
          offer to
          the Partnership to purchase 100% of the Partnership’s interests in the New
          Frisco Square Partnerships, pursuant to the buy/sell provisions of the
          various
          partnership agreements. The Partnership responded within the required timeframe,
          electing to purchase CMP’s interest in the New Frisco Square Partnerships, which
          were valued in the aggregate by CMP at $79 million. A closing date was
          set for
          August 5, 2006, at which time the Partnership tendered funds to the court
          in the
          amount of $1,403,706 to execute the terms of the buy/sell agreement. CMP
          did not
          execute the closing documents, and as a result, the funds were returned
          to the
          Partnership or respective Frisco Square partnership. CMP amended its original
          petition, asserting that the general partners of the New Frisco Square
          Partnerships had not properly executed the capital call on February 7,
          2006;
          that CMP’s partnership interest should not be diluted; and that the amount
          tendered was not calculated in accordance with the respective partnership
          agreements. CMP further amended its petition to include a right of recission
          of
          the buy/sell agreement, and asked the court to grant CMP the right to declare
          itself as buyer under the same agreement.
  Subsequent
          to December 31, 2006, the Partnership and CMP entered into an agreement
          in
          principle to settle all outstanding claims pertaining to litigation between
          the
          parties for $7,100,000. The terms of the agreement include a cash payment
          of
          $2,600,000 to CMP, and a note payable of $4,000,000 million. The $7,100,000
          will
          be applied to the repayment of the $1,225,000 liability referred to in
          Note 11,
          with interest, as well as the $800,000 loans mentioned in Note 10, with
          interest. The note payable will be paid in equal quarterly installments
          over 4
          years, with interest payable quarterly at prime. The Partnership will also
          facilitate the release of CMP (or affiliate) guarantees on any of the bank
          debt
          reflected in Note 10, and to facilitate the release of the collateral on
          the
          First Bank of Omaha term loan, also mentioned in Note 10. The agreement
          is
          contingent on the Partnership raising the capital to make the $2,600,000
          cash
          payment.
 
 In
          exchange for these payments and release of obligations, the Partnership
          will
          receive an assignment of all of CMP or affiliates’ interests in the New Frisco
          Square Partnerships, as well as a release from CMP of current and future
          claims
          against the Partnership.
 
 **14.**
              **Related
                  Party Transactions** 
 The
          four
          members of Fairways Equities have personally guaranteed the Partnership’s
          obligations to Comerica Bank, First National Bank of Omaha, Citibank (see
          Note
          10) and the MMD (see Note 13). In connection with the guarantee of the
          Comerica
          Bank term note and line of credit, the partnership pays a guaranty fee
          of 2.5%
          of the balance of the Comerica debt annually to the guarantors. During
          the years
          ended December 31, 2006 and 2005, respectively, the Partnership paid guaranty
          fees of $433,877 and $253,751, respectively, and an additional $320,350
          and
          $270,887 is included in accounts payable at December 31, 2006 and 2005,
          respectively. Because these fees are accrued in advance a related amount
          of
          $186,871 is reflected in pre-paid assets at December 31, 2006. These fees
          are
          authorized by Frisco Square Land, Ltd. partnership agreement, as
          amended.
  **-111-**
 Table
              of Contents
 ***FAIRWAYS
              FRISCO, L.P.***
 
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
  
 The
          Partnership pays monthly management fees of approximately $25,000 to Fairways
          Equities as the general partner of the Partnership. During 2006 and 2005,
          respectively, the Partnership incurred total management fees of $256,535
          and
          $120,000, of which $25,000 and $60,000 is included in accounts payable
          as of
          December 31, 2006 and 2005, respectively. These fees are authorized by
          the
          partnership agreements.
 
 In
          2006,
          the Partnership incurred $94,500 in asset management fees to Fairways Equities.
          This fee is authorized by the partnership agreement, and is included in
          Other
          Expenses on the income statement. This was the first such asset management
          fee
          charged to the Partnership.
 
 The
          Partnership paid financing fees of .5% of the amount of the Comerica term
          loan
          commitments or $138,320 to Fairways Equities in connection with the Comerica
          term loan agreement that was entered into during 2005. No financing fees
          were
          paid to Fairways Equities in 2006.
 
 During
          2005, the Partnership paid a development fee, under the terms of the Master
          Agreement, of $500,000 to Five Star, which is controlled by Cole McDowell.
          An
          additional $1,005,000  was
          paid
          to an affiliate of Cole McDowell in 2005 under the terms of the original
          Master
          Agreement. This amount reflected past due affiliate loans to the Frisco
          Square
          Partnerships. No fees were paid in 2006 and the Partnership is not obligated
          to
          pay any further development fees to Five Star, Cole McDowell, or any affiliates
          of Cole McDowell, as of December 31, 2006.
 
 **15.**
              **Subsequent
                  Events** 
 *New
          Class of Partnership Interests*
 On
          March
          9, 2007, the Partnership made a $4,000,000 capital call and will issue
          a new
          class of partnership interests in the Partnership for those partners funding
          the
          call. The new class of partnership interests will be entitled to an additional
          profits interest above the new partnership interests pro rata share of
          contributions to the Partnership, in addition to certain preferred
          distributions. The exact amount of the additional profits interest will
          be
          determined based on the results of the issuance of the new partnership
          interests.
 
 *Development
          Agreement*
 In
          February, 2007, the Partnership entered into a Supplement to the Development
          Agreement with the City of Frisco. Included in the Supplement are incentives
          which, if met over a period of four to five years, will reduce, or eliminate,
          the Partnerships’ obligation for any future Debt Service payments to the MMD.
          Likewise, if these construction incentives are met, the Partnership will
          be
          released from a $1,250,000 payment to the City of Frisco for the construction
          of
          a park within the project. In addition, the Supplement requires the Partnership
          and the City of Frisco to enter into a land swap for certain acreage within
          the
          MMD, to occur prior to May 7, 2007. The Supplement also requires the
          Partnership, or an affiliate, to purchase two parking lots from the City
          for an
          amount, when netted with the proceeds from the land swap, equal to $1,567,405.
          Certain restrictions apply to the use of the parking lots until such time
          as a
          parking garage is constructed on the lots. The Partnership or affiliate
          is
          required to build and receive certificates of occupancy for two garages
          before
          February 11, 2012. In addition, the Supplement to the Development Agreement
          requires that the Partnership fund the cost of certain roads and that the
          Partnership is entitled to reimbursement from the North Central Texas Council
          of
          Governments, under a grant established in 2006. The Supplement requires
          that the
          guarantees from the principals of Fairways Equities be terminated once
          the value
          of the taxable property within the MMD reaches $100,000,000.
  **-112-**
 Table
              of Contents
 ***FAIRWAYS
              FRISCO, L.P.***
 
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
  
 *Construction
          Loan and New Construction*
 On
          March
          9, 2007, the Partnership entered into a new construction loan with Compass
          Bank
          for the construction of a 67,000 square foot building on Lot F1-1 within
          the
          Property. The bank’s commitment is for a maximum $8,889,000, which may be drawn
          over a period of 9 months and after the Partnership funds the required
          equity of
          $2,222,109. The terms of the new commitment include interest only payments,
          which may be accrued into the loan, for a period of 18 months, at a rate
          of
          the  greater
          of 7% or the 10 year Treasury rate plus 2%. The Partnership may extend
          the
          commitment for a period of twelve months, under certain conditions. The
          purpose
          of the loan is to construct the building.
 
 In
          connection with the construction of this new building, the Partnership
          entered
          into a construction contract with a national construction company to act
          as
          general contractor for the construction of the building. Under the terms
          of the
          contract, the contractor has guaranteed the price at which certain costs
          will be
          charged.
 
 *Line
          of Credit*
 The
          Comerica Bank line of credit matured on March 10, 2007. The Partnership
          is in
          the process of restructuring this debt agreement to extend the maturity
          date. As
          of April 12, 2007, the Partnership has not received notice of
          default.
 **-113-**