<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10 - KSB
                                 Amendment No. 2

                 This amendment is being made to adjust the carrying value
           of certain property of the registrant to comport with the appraisal
            of the property which was less than the contract purchase price.

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

                      FOR THE YEAR ENDED DECEMBER 31, 2001

                          SENIOR CARE INDUSTRIES, INC.

          Nevada                                               68-0221599
          -------                                              -----------
(STATE OR OTHER JURISDICTION OF                              (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)                              IDENTIFICATION NO.)

                410 Broadway, 2nd Floor, Laguna Beach, CA 92651
                -----------------------------------------------
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)

                        (949) 376-3125 (949) 376-9117 FAX
                      -----------------------------------
                          (ISSUER'S TELEPHONE NUMBER)

             SECURITIES REGISTERED UNDER SECTION 12(b) OF THE ACT:

TITLE OF EACH CLASS            NAME OF EACH EXCHANGE ON WHICH
                               REGISTERED
---------------------------    ------------------------------

             SECURITIES REGISTERED UNDER SECTION 12 (g) OF THE ACT:

                          Common Stock - .001 Par Value
                         ------------------------------
                                (TITLE OF CLASS)

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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B 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]






<PAGE>

State the issuer's revenues for its most recent fiscal year. $9,676,000

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity

was sold, or the average bid and asked price of such common equity, as of a
specified date within the last 60 days.

Bid price as of March 27, 2002:   $.38
Ask price as of March 27, 2002:   $.42

State the number of shares outstanding of each of the issuer's classes of common
equity, as of March 27, 2002:

Common Shares 24,092,793
Preferred Shares 1,703,163

                           INCORPORATION BY REFERENCE

     If the following documents are incorporated by reference, briefly describe
them and identify the part of the form 10-KSB (e.g., Part I, Part II, etc.) into
which the document is incorporated: (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"). The listed
documents should be clearly described for identification purposes (e.g., annual
report to security holders for fiscal year ended December 24, 1990).

The following documents are incorporated by reference:

1. Annual Report on Form 10-KSB, Amendment No. 1, filed on April 19, 2002, Parts
I, II and III excepting therefrom Item 13.

2. Amended Definitive Proxy Statement filed on Form DEFR14A filed on February 1,
2001 announcing the annual meeting of shareholders set for March 12, 2001 and
setting forth the items which will be voted upon at that meeting.

3. Amended report on Form 8-K reporting dismissal of independent accountant as
of February 10, 2001 and engagement of new independent accountant for the
company which amended report was filed on March 13, 2001 together with all
exhibits attached thereto;

4. Report on Form 8-K filed July 5, 2001 regarding the purchase of assets by
Senior Care International, S.A. de C.V. together with all exhibits attached
thereto;

5. Report on Form 8-K clarifying the purchase of assets by Senior Care
International, S.A. de C.V. filed on November 5, 2001 together with all exhibits
attached thereto;

6. Report on Form 8-K reporting the dismissal of independent accountant as of
January 2, 2002 and engagement of new independent accountant for the company
which report was filed on January 10, 2002 together with all exhibits attached
thereto;

7. Definitive Information Statement on Form 14c filed on February 12, 2002
regarding certain actions of the shareholders together with all exhibits
attached thereto.

Transitional Small Business Disclosure Format (Check one): Yes [ ]; No [X

                                        2



<PAGE>

                 INFORMATION REQUIRED IN REGISTRATION STATEMENT

                                TABLE OF CONTENTS

Part I                     Incorporated by reference in Annual Report filed
                           on Form 10-KSB filed on April 19, 2002

Part II                    Incorporated by reference in Annual Report filed
                           on Form 10-KSB filed on April 19, 2002

Part III                   Incorporated by reference in Annual Report filed
                           on Form 10-KSB filed on April 19, 2002

Item 13                    Exhibits and Reports on Form 8-K

Signatures                                                                 5

                                        3





<PAGE>

ITEM 13: EXHIBITS & REPORTS ON FORM 8-K

The following exhibits are attached to this annual report:

Exhibit 3(i)a: Articles of Incorporation [incorporated by reference filed
               on Form 10-SB on December 27, 2000]

Exhibit 3(i)b: Agreement and Plan of Merger [incorporated by reference filed
               On Form 10K-SB on April 16, 2002]

Exhibit 3(i)c: Amendment to Articles of Incorporation increasing share
               authorization [incorporated by reference filed in Definitive
               Information Statement on Form 14c on
               February 12, 2002]

Exhibit 3(ii): Bylaws [incorporated by reference filed on Form 10-KSB on
               April 16, 2002]

Exhibit 4a: Certificate of Powers, Designations, Preferences & Rights of
            Series F Preferred stock [incorporated by reference filed on Form
            10-KSB on April 16, 2002]

Exhibit 4b: Certificate of Powers, Designations, Preferences & Rights of
            Series G Preferred stock [incorporated by reference filed on Form
            10-KSB on April 16, 2002]

Exhibit 4c: Certificate of Powers, Designations, Preferences & Rights of
            Series J Preferred stock [incorporated by reference filed on Form
            10-KSB on April 16, 2002]

Exhibit 4d: Certificate of Powers, Designations, Preferences & Rights of
            Series K Preferred stock [incorporated by reference filed on Form
            10-KSB on April 16, 2002]

Exhibit 10a: Audit Committee Charter [incorporated by reference filed in
             Definitive Information Statement on Form 14c on February 12, 2002]

Exhibit 10b: 2001 Stock Option Plan [incorporated by reference filed
             on Form 10-KSB on April 16, 2002]

Exhibit 10c: Employment Agreement with Mervyn A. Phelan, Sr. [incorporated
             by reference filed on Form 10-KSB on April 16, 2002]

Exhibit 10d: Acquisition Agreement for Oasis PUD & related documents
             [incorporated By reference filed on Form 10-KSB on April 19, 2002]

Exhibit 13:  Consolidated Financial Statements as restated

The following reports were made on Form 8-K during the year 2001 and from the
beginning of the year 2002 to the date of the filing of this amendment and
are incorporated herein by reference:

1.  Amended report reporting dismissal of independent accountant as of
February 10, 2001 and engagement of new independent accountant for the
company which amended report was filed on March 13, 2001;

2. Report filed July 5, 2001 regarding the purchase of assets by Senior Care
International, S.A. de C.V.;

3. Report clarifying the purchase of assets by Senior Care International, S.A.
de C.V. filed on November 5, 2001;

4. Report reporting the dismissal of independent accountant as of January 2,
2002 and engagement of new independent accountant for the company which report
was filed on January 10, 2002.

5. Report reporting sale of P/R Business, Inc. and Friendly Bear Plaza, Inc.
filed on May 2, 2002.

6. Report reporting the sale of stock in Senior Care International, S.A. de C.V.
filed on July 2, 2002.

7. Report reporting adjustment to the carrying value of Plaza Rosarito filed on
October 24, 2002.

                                           4





<PAGE>

     SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form 10K-SB and has duly caused this annual report to be signed on
its behalf by the undersigned, there unto duly authorized, in the City of Laguna
Beach, State of California, on this 25th day of November, 2002.

          SENIOR CARE INDUSTRIES, INC.

/s/ Mervyn A. Phelan, Sr.
-------------------------
Chairman of the Board of
Directors and Chief
Executive Officer


/s/ Craig Brown
-------------------------
President & Director


/s/ John Semmens
-------------------------
Chief Financial Officer



                                              5


<PAGE>

                          SENIOR CARE INDUSTRIES, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




INDEPENDENT AUDITORS' REPORT                                    F-2

BALANCE SHEETS                                                  F-3 to F-4
    December 31, 2000, as restated and  December 31, 2001
    as restated

STATEMENTS OF OPERATIONS                                        F-5
    For the Years Ended December 31, 2000,
    as restated, and 2001 as restated

STATEMENTS OF STOCKHOLDERS'                                     F-6 to F-9
    For the Year Ended December 31, 2000
    as restated, and 2001 as restated

STATEMENTS OF CASH FLOWS                                        F-10
    For the Years Ended December 31, 2000,
    as restated, and 2001 as restated

NOTES TO FINANCIAL STATEMENTS                                   F-11


                                       F-1




<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS



The Board of Directors
Senior Care Industries, Inc.


We have audited the accompanying consolidated balance sheet of Senior Care
Industries, Inc. and subsidiaries (the "Company"), as of December 31, 2000, as
restated, and December 31, 2001, as restated, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each the
years 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 audits.

We conducted our audits in accordance with auditing standards generally accepted
in the 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.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Senior
Care Industries, Inc. and subsidiaries, as of December 31, 2000, as restated,
and 2001, as restated, and the results of their operations and their cash flows
for the years then ended, in conformity with accounting principles generally
accepted in the Unites States.

As discussed in Note 2, the Company restated its consolidated financial
statements for the year ended December 31, 2000 and 2001 for the correction of
certain errors in the application of accounting standards generally accepted in
the United States.




                                             /s/ McKennon, Wilson & Morgan LLP
                                             ----------------------------------


Irvine, California
April 15, 2002

                                       F-2



<PAGE>

                           SENIOR CARE INDUSTRIES, INC.
                           CONSOLIDATED BALANCE SHEETS


                                     ASSETS

                                                           December 31
                                                   ----------------------------
                                                      2000              2001
                                                   -----------      -----------
                                                 (as restated)     (as restated)
Manufacturing Assets:
 Current assets:
  Cash                                            $     74,000     $    132,000
  Accounts receivable, net of allowance for
   doubtful accounts of $112,000, as restated
   and $58,000, respectively                           574,000          425,000
  Inventory (Note 11)                                  553,000          484,000
  Other current assets                                  66,000           96,000
                                                  ------------     ------------
    Total current assets                             1,267,000        1,137,000

 Property and equipment, net of
  accumulated depreciation of $95,000 and
  $259,000, respectively (Note 11)                     937,000          795,000

 Intangible assets, net of
  accumulated amortization of $77,000 and
  $209,000, respectively (Notes 3 and 12)            1,050,000          917,000

 Capital leases                                         21,000                -
                                                  ------------     ------------
Total manufacturing assets                           3,275,000        2,849,000
                                                  ------------     ------------
Real Estate Assets:
 Equity investment held
 for liquidation (Notes 2 and 3)                     2,000,000        2,000,000

 Real estate:
  Real estate inventory (Note 4)                     7,582,000        3,576,000
  Commercial rental property, net
   of accumulated depreciation of $224,000
   and $432,514, respectively (Note 4)               4,776,000        9,595,000
  Held for development (Note 4)                      7,275,000       30,318,000
  Contracts for deed (Note 4)                                -       32,309,000

 Other assets                                          101,000           19,000
                                                  ------------     ------------
Total Real Estate Assets                            21,734,000       77,817,000
                                                  ------------     ------------

TOTAL ASSETS                                      $ 25,009,000     $ 80,666,000
                                                  ============     ============

continued

                                       F-3



<PAGE>


                          SENIOR CARE INDUSTRIES, INC.
                    CONSOLIDATED BALANCE SHEETS, continued


                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                           December 31
                                                 -------------------------------
                                                     2000               2001
                                                 ------------      -------------
                                                (as restated)      (as restated)
Manufacturing Liabilities:
 Current liabilities:
  Accounts payable                              $     463,000     $     425,000
  Accrued liabilities                                  24,000            10,000
  Unearned revenue                                          -            88,000
  Notes payable (Note 6)                              585,000           384,000
  Other current liabilities                            31,000           464,000
                                                -------------     -------------
Total manufacturing liabilities                     1,103,000         1,371,000
                                                -------------     -------------
Real Estate Liabilities:
 Accounts payable and accrued liabilities             742,000           174,000
 Accrued interest                                     446,000           304,000
 Note  payable to related parties (Note 7)          1,270,000         1,786,000
 Mortgage notes payable (Note 5)                   13,627,000        18,874,000
 Note payable (Note 6)                                700,000           700,000
                                                -------------     -------------
Total Real Estate Liabilities                      16,785,000        21,838,000
                                                -------------     -------------

TOTAL LIABILITIES                                  17,888,000        23,209,000
                                                -------------     -------------

COMMITMENTS AND CONTINGENCIES (Note 8)                      -                 -

STOCKHOLDERS' EQUITY (Note 9):
All classes - shares authorized, 110,000,000;
 $.001 par value per share:
 Series A preferred stock, none issued
  and outstanding                                            -                -
 Series B preferred stock,
  none issued and outstanding                                -                -
 Series D preferred stock,
  none issued and outstanding                                -                -
 Series F convertible, redeemable preferred
  Stock, 1,050,000 shares issued and
  outstanding at December 31, 2001                           -            1,000
 Series G convertible preferred stock
  3,163 shares issued and outstanding in 2001                -               -
 Series J convertible preferred stock,
  600,000 shares issued and outstanding in 2001              -            1,000
 Series K convertible preferred stock
  50,000 shares issued and outstanding in 2001               -               -
 Common stock, 446,633 and 20,447,269 shares
  issued and outstanding, respectively                   1,000           20,000
 Additional paid-in capital                         16,356,000       87,088,000
 Accumulated deficit                                (9,236,000)     (29,652,000)
                                                 -------------   --------------
Total stockholders' equity                           7,121,000       57,458,000
                                                 -------------   --------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY       $  25,009,000   $   80,667,000
                                                 =============   ==============

See Notes to Consolidated Financial Statements

                                          F-4



<PAGE>


                               SENIOR CARE INDUSTRIES, INC.
                          CONSOLIDATED STATEMENTS OF OPERATIONS

                                                     For The Years Ended
                                                         December 31,
                                                     2000            2001
                                                --------------   --------------
                                                (as restated)     (as restated)
Revenues:
 Commercial rents                               $      644,000   $      875,000
 Real estate sales                                           -        4,101,000
 Furniture sales                                     3,587,000        4,700,000
                                                --------------   --------------
Total revenues                                       4,231,000        9,676,000
                                                --------------   --------------
Cost of revenues:
 Commercial rents, excluding
  interest                                             228,000          619,000
 Real estate sales                                           -        4,006,000
 Furniture sales                                     3,352,000        3,878,000
                                                --------------   --------------
Total cost of revenues                               3,580,000        8,503,000
                                                --------------   --------------
Gross Profit                                           651,000        1,173,000
                                                --------------   --------------
Operating expenses:
 Sales and marketing                                   197,000          269,000
 General and administrative                            969,000        1,749,000
 Stock-based compensation (Note 9)                   2,633,000       15,312,000
 Impairment of real estate held for sale               143,000                -
                                                --------------   --------------
Total operating expenses                             3,942,000       17,330,000
                                                --------------   --------------
Loss from operations                                (3,291,000)     (16,157,000)

Other expense (income):
 Interest expense                                      921,000        1,638,000
 Interest income                                        (7,000)          (2,000)
 Impairment of equity investment (Note 2)            1,234,000                -
 Loss on settlements (Notes 6 and 9)                   491,000        2,231,000
 Loss on sale of rental
  property to related party (Note 4)                         -          678,000
 Other (income) expense                                (10,000)         390,000
                                                --------------   --------------
Total other (income) expense                        (2,630,000)      (4,935,000)
                                                --------------   --------------

Loss before extraordinary gain                      (5,920,000)     (21,092,000)

Extraordinary item, gain from settlement
 of debt (Note 9)                                           -           676,000
                                                --------------   --------------
Net Loss                                        $   (5,920,000)  $  (20,416,000)
                                                ==============   ==============
Basic and diluted loss per share:

Loss before extraordinary gain                  $       (18.28)  $       (1.72)
Extraordinary gain from settlement of debt                   -             .06
                                                --------------   --------------
Net loss                                        $       (18.28)  $       (1.66)
                                                ==============   ==============

Basic and diluted weighted average number of
 common shares outstanding                             323,862       12,290,862
                                                ==============   ==============

See Notes to Consolidated Financial Statements

                                          F-5



<PAGE>
<TABLE>
                                                       SENIOR CARE INDUSTRIES, INC.
                                            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                    For the Years Ended December 31, 2000 (as restated) and 2001
<CAPTION>

                                 Series A         Series B         Series F         Series G        Series J         Series K
                             Preferred Stock  Preferred Stock  Preferred Stock   Preferred Stock  Preferred Stock  Preferred Stock
                            Shares   Amount   Shares   Amount   Shares   Amount  Shares   Amount  Shares   Amount  Shares   Amount
---------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>      <C>     <C>     <C>        <C>      <C>     <C>      <C>     <C>      <C>     <C>     <C>
Balances as of
 December 31, 1999
 as reported                         $       400,000 $                   $                $                $               $

Adjustments:
 Valuation of bulk
  acquisition of
  real estate assets for
  Series B Preferred
  common stock issued
                              --------      --------  --------- --------  -------  -------  ------  --------   ------- -------
Balances as of
 December 31, 1999,
 as restated                                 400,000

Stock issued for
 services rendered

Conversion of
 Series B Preferred                         (400,000)

Stock issued pursuant to
 settlement agreement

Stock issued for the
 acquisition of Noble

10% stock dividend

Stock for cash of $51,000,
 net of expense recognized from
 the sale of stock at less than
 fair market value

Net loss (as restated)
                           ---------  ------ --------   -------- ----  -------  -------  ----  --------   ------  ------
Balances as of
 December 31, 2000

Stock issued for professional
 services rendered

(continued)                                                       F-6





<PAGE>

                                                     SENIOR CARE INDUSTRIES, INC.

                                         CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                        For the Years Ended December 31, 2000 (as restated) and 2001 (as restated), continued

                             Series A          Series B         Series F          Series G           Series J           Series K
                         Preferred Stock  Preferred Stock   Preferred Stock   Preferred Stock    Preferred Stock    Preferred Stock
                         Shares   Amount  Shares    Amount  Shares    Amount  Shares    Amount   Shares    Amount   Shares    Amount
------------------------------------------------------------------------------------------------------------------------------------

Stock issued pursuant
 to settlement agreement

Stock issued for cash of $8,000,
 net of expense recognized from
 the sale of stock at less than
 fair market value

Stock issued to acquire
 real property

Stock issued in
 settlement of debt

Stock F Preferred issued to acquire
 real property                                             1,050,000   1,000

Stock issued for settlement                                                     3,163

Stock issued pursuant to
 settlement agreement                                                                                             50,000

Sale of rental property for
 cancellation of stock issued

Stock issued to acquire
 real property                                                                                 600,000   1,000

Net loss
                      --------------------------------------------------------------------------------------------------------------
Balances as of
 December 31, 2001           -     $ -       -     $ -   1,050,000    $1,000    3,163  $  -    600,000  $1,000    50,000    $   -
                      ==============================================================================================================
</TABLE>


(continued)

                                                                  F-7





<PAGE>
<TABLE>

                          SENIOR CARE INDUSTRIES, INC.

                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
       For the Years Ended December 31, 2000 (as restated) and 2001 continued
<CAPTION>

                                                             Additional                           Total
                                       Common  Stock           paid-in         Accumulated      Stockholder's
                                     Shares      Amount        capital          Deficit           Equity
-------------------------------------------------------------------------------------------------------------
<S>                                 <C>           <C>        <C>               <C>                 <C>
Balances as of
 December 31, 1999,
 as reported                        222,072       1,000      11,034,000        (2,073,000)         8,962,000

Adjustments:
 Valuation of bulk
  acquisition of
  real estate assets for
  Series B Preferred and
  common stock issued                                        (1,657,000)                          (1,657,000)
  Other                                                          36,000                               36,000
                                   --------     -------      -----------       -----------        -----------
Balances as of
 December 31, 1999,
 as restated                        222,072       1,000       9,413,000        (2,073,000)         7,341,000

Stock issued for
 services rendered                   91,482                   2,633,000                            2,633,000

Conversion of
 Series B Preferred                  66,667

Stock issued for settlement
 of property acquisition              5,000                     491,000                              491,000

Stock issued for acquisition of
 Nobel                               25,000                   2,453,000                            2,453,000

10% Stock dividend                   33,111                   1,243,000        (1,243,000)

Stock issued for cash of $51,000,
 net of expense recognized from
 the sale of stock at less than
 fair market value                    3,301                     123,000                              123,000

Net loss (as restated)                                                         (5,920,000)        (5,920,000)
                              -------------------------------------------------------------------------------
Balances as of
 December 31, 2000,
 as restated                        446,633       1,000      16,356,000        (9,236,000)         7,121,000

(continued)                                       F-8





<PAGE>

                          SENIOR CARE INDUSTRIES, INC.


                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
       For the Years Ended December 31, 2000 (as restated) and 2001 continued


                                                                  Additional                                 Total
                                         Common Stock              paid-in         Accumulated            Stockholder's
                                       Shares     Amount           capital           Deficit                 Equity
------------------------------------------------------------------------------------------------------------------------


Stock issued for services          14,036,882      14,000        15,298,000                                 15,312,000

Stock issued pursuant to
 settlement agreement                  2,800                         41,000                                     41,000

Stock issued for cash of $8,000,
 net of expense recognized from
 the sale of stock at less than
 fair market value                    24,793                         96,000                                     96,000

Stock issued acquire
 real property                     1,565,000        1,000         1,660,000                                  1,661,000

Stock issued in
 settlement of debt                2,873,495        3,000         2,079,000                                  2,082,000

F Preferred issued to acquire real
 property, as restated                                           32,308,000                                 32,309,000

Stock issued for settlement                                         190,000                                    190,000

Stock issued pursuant to
 settlement agreement                                             2,000,000                                  2,000,000

Sale of rental property for
 cancellation of stock issued         (2,334)                        (9,000)                                    (9,000)

J Preferred issued to acquire
  real property                    1,500,000        1,000        17,069,000                                 17,071,000

Net Loss                                                                           (20,416,000)            (20,416,000)
                              --------------------------------------------------------------------------------------------
Balances as of
 December 31, 2001, as restated   20,447,269      $20,000       $87,088,000       $(29,652,000)            $57,458,000
                              ============================================================================================
</TABLE>

See Notes to Consolidated Financial Statements

                                                      F-9




<PAGE>

<TABLE>

                            SENIOR CARE INDUSTRIES, INC.
                        CONSOLIDATED STATEMENTS OF CASH FLOWS

<CAPTION>

                                                               For The Year Ended
                                                                   December 31,
                                                               2000              2001
                                                         ---------------    ---------------
                                                          (as restated)      (as restated)
<S>                                                      <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss                                                 $   (5,920,000)    $ (20,416,000)
Adjustments to reconcile net loss to
 net cash used in operating activities:
  Depreciation and amortization                                 354,000           296,000
  Impairment of real estate held for investment                 143,000                 -
  Impairment of investment held for liquidation               1,234,000                 -
  Issuance of common stock for services                       2,633,000        15,326,000
  Issuance of common stock for settlement                       491,000           231,000
  Issuance of common stock for expenses                          72,000            88,000
  Loss on sale of rental property to related party                    -           678,000
  Issuance of K preferred for settlements                             -         2,000,000
  Extraordinary gain                                                  -          (676,000)
 Changes in operating assets and liabilities:
    Accounts Receivable                                         (28,000)          148,000
    Inventory                                                   306,000            70,000
    Other current assets                                        (39,000)          (74,000)
    Real estate inventories                                  (5,311,000)        2,931,000
    Accounts payable                                            810,000          (780,000)
    Accrued interest                                            370,000           728,000
    Accrued liabilities                                          10,000           378,000
                                                         ---------------    ---------------
      Net cash provided by (used in) operating
            activities                                       (4,875,000)          928,000
                                                         ---------------    ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of Noble Concepts, net of cash                          89,000                 -
Increase in Other assets                                       (101,000)           82,000
                                                         ---------------    ---------------
      Net cash provided by (used in) investing
            activities                                          (12,000)           82,000
                                                         ---------------    ---------------
CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from sales of common stock                              51,000             8,000
Proceeds from mortgage loans                                  4,520,000         1,292,000
Proceeds from note payable to related parties                 1,010,000           516,000
Repayments of mortgage loans                                   (658,000)       (2,768,000)
                                                         ---------------    ---------------
      Net cash provided by financing activities               4,923,000          (952,000)
                                                         ---------------    ---------------
Net increase (decrease) in cash                                  36,000            58,000
Cash at beginning of year                                        38,000            74,000
                                                         ---------------    ---------------
Cash at end of year                                      $       74,000     $     132,000
                                                         ===============    ===============
Supplemental disclosure of cash flow information
  Cash paid during the year for
  Interest, net of amounts capitalized                   $      394,000     $     592,000
                                                         ===============    ===============
Supplemental disclosure of non-cash investing
 and financing activities:
 Real estate purchases:
  Series F Preferred issued for real estate contracts
   for deed                                              $           -      $  32,309,000
  Series J Preferred issued for real estate assets                   -         17,071,000
    and costs
  Common stock issued for real estate assets                         -          1,661,000
  Common stock issued in settlement of debt                          -          2,082,000
  Acquisition of Noble                                       2,453,000                  -
See notes to Consolidated Financial Statements

                                           F-10




<PAGE>


                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

NOTE 1 - ORGANIZATION AND BUSINESS

Senior Care Industries, Inc. ("Senior Care" or the "Company") was organized
February 26, 1968 under the laws of the State of Idaho as Golden Chest, Inc.
("Golden Chest"). During 1998 and through April 1999, the Company was inactive.

On April 2, 1999, the Company transferred its existing assets, which consisted
of patented mining claims to Paymaster Resources Incorporated ("Paymaster").
Paymaster had assets with a carrying value of approximately $21,000; there were
no liabilities. Paymaster was a company that was controlled by the directors of
Golden Chest who thereafter resigned and new directors were appointed. The
purpose of this transfer was to leave Golden Chest with no assets and no
liabilities. The Company then reduced the number of common shares outstanding to
approximately 180,000 shares by a one (1) for 100 stock split, increasing the
authorized common stock to 50,000,000 shares, $0.001 par value, and increasing
the authorized preferred stock to 5,000,000 shares, $0.001 par value. The assets
and liabilities were recorded at historical costs since the companies were under
common control.

On August 31, 1999, the Company completed the purchase of various assets, and
assumed related mortgage liabilities from various, then, unrelated parties.
East-West Community Developer, Inc. previously acquired rights to the properties
and assigned their rights to Senior Care. No one shareholder controlled the
corporation after the acquisition. Management acquired undeveloped land,
acquired partially-developed commercial real estate projects, and an equity
interest in certain land held for development in an effort to begin or complete
development, and ultimately, generate rents from leasing arrangements or sales
the assets for a profit. See Note 3 for discussion of the purchase and the net
assets acquired.

On August 26, 1999, Golden Chest changed its name to Senior Care Industries,
Inc. to better reflect its intended business of developing housing for senior
citizens. On August 26, 1999, the Company reincorporated in Nevada.

On May 1, 2000, the Company acquired all the common stock of Noble Concepts
Fidelity, Inc. ("Noble"), a manufacturer of wood furniture and cabinets in San
Diego, California (Note 3). Management acquired Noble to improve its operations
and generate cash flows, and to enable the Company to manufacture cabinets and
improvements for its senior housing and development projects.

During 2001, the Company acquired several in an effort to expand its real estate
development (see Note 3). Presently, the Company holds all of the voting capital
stock or 100% of the membership interest in corporations and limited liability
companies ("LLC"), which are controlled, and for financial reporting purposes,
consolidated in accompanying financial statements. Corporations and LLCs
consolidated, in addition to East-West and Noble described above, are as
follows:

Senior Care International S. A. de C. V. that holds contracts for deed to
certain undeveloped land and partially developed properties in Baja California.
See Note 4 for further discussion;

Flamingo 55, Inc. that owns a land tract and site entitlements to develop and
sell 55 senior town homes in Las Vegas, Nevada. To date no significant
development activities have started, because management requires construction
financing;

Friendly Bear Plaza, Inc. that owns commercial real estate consisting of 21,200
square feet of rentable space in a shopping mall (strip center) in Las Vegas,
Nevada. The Company generates rental income from its leasing operations;

P/R Business, Inc. that owns 24,000 square feet, commercial office building
known as Pecos Russell Business Center, in Las Vegas, Nevada. The project was
completed in June 2001; the property is currently approximately 90% leased. The
Company generates rental income from its operations;

S.R.I. SFR, Inc., the owner of the land tract and site improvements to build 223
homes in San Jacinto, California known as The Cottages at San Jacinto. No
development has started;

Evergreen Manor II, LLC, the owner, developer and seller of senior condominiums
in Los Angeles, California. Project development was completed in late 2000, with
sales of units in 2001, continuing in the first quarter of 2002;


                                      F-11




<PAGE>



                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

Signature Properties, Inc., the owner of the land tract and site entitlements to
build senior apartment units in Albuquerque, New Mexico. No development has
commenced;

Mantis Investments, Inc., formed in November 2001 to acquire a 750-acre, land
tract and a 48-pad mobile home park near Oasis, Nevada.

Senior Care also owns a 45% membership interest in Delran Associates, LLC
("Delran"). Delran owns 30 acres of an undeveloped, fully entitled, commercial
shopping center site, which is currently under contract for sale for $5,000,000.
Senior Care initiated litigation to immediately liquidate and distribute the
assets of Delran.

On January 23, 2002, the shareholders approved to increase the authorized shares
of all classes of stock to 110 million shares, $0.001 par value per share.

Subsequent to year end, the Company's board of the directors approved the
formation and has formed limited partnerships for the purpose of developing
Flamingo 55, The Cottages at San Jacinto and Plaza Rosarito whereby a wholly
owned subsidiary of Senior Care will become the general partner. It is
contemplated that the money raised from the limited partners will pay off the
land loans and will then commence development of those properties.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Restatement of Consolidated Financial Statements
--------------------------------------------------
The Company restated its consolidated financial statements as of and for the
year ended December 31, 2000, for the correction of certain errors resulting
from the misapplication of accounting standards generally accepted in the United
States. The effects of the Company's restatement on their consolidated results
of operations for 2000 are as follows:

                                                                      Net Loss
                                                     Net Loss         Per Share
                                                   -----------        ---------
Net loss, as previously reported                  $   (71,000)       $  (0.22)

Adjustments:
 Capitalized interest                                (181,000)          (0.56)
 Stock-based compensation                          (2,633,000)          (8.13)
 Impairment of equity interest in Delran           (1,234,000)          (3.81)
 Impairment of real estate held for sale             (143,000)          (0.44)
 Depreciation and amortization of
  intangible assets, and property
  and equipment acquired                              (65,000)          (0.20)
 Depreciation of rental properties                   (180,000)          (0.56)
 Accrued interest                                    (737,000)          (2.28)
 Allowance for doubtful accounts receivable           (62,000)          (0.19)
 Common stock issued for settlements                 (491,000)          (1.51)
 Common stock issued below fair value                (123,000)          (0.38)
                                                   -----------        ---------
Net loss, as restated                             $(5,920,000)       $ (18.28)
                                                   ===========        =========

Capitalized and accrued interest

During 2000, the Company capitalized interest totaling $839,951 after the
completion of certain development activities. Under Statement of Financial
Accounting Standards ("SFAS") No. 34, "Capitalization of Interest" companies are
required to cease capitalization when the project is completed and ready for its
intended use. The Company charged operations $181,000 relating to this error.
The Company charged an additional $446,000 in interest expense for accruals of
interest on its indebtedness.

                                    F-12






<PAGE>


                           SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

Stock-based compensation

As discussed in Note 9, the Company issued 91,482 shares to employees and
consultants under certain arrangements as compensation during the year ended
December 31, 2000 with an estimated fair value of $2,633,000. No compensation
expense was reported in previously issued financial statements. The Company's
restated its consolidated financial statements to reflect the fair value of its
common stock issued for services. See stock-based compensation below for further
discussion of the determination of fair value.

See Note 9 for discussion of common stock issued, not previously valued, for
settlements totaling $491,000. Also see Note 9 for discussion of common stock
issued resulting in a $123,000 charge to operations, not previously recorded.

Impairment

Delran

In August 1999, as part of a bulk purchase of assets, the Company acquired a 45%
interest in Delran. In 1999, management initiated legal action against Delran,
among other thing, to force a liquidation of Delran's assets. Management had
information available in 2000 that affected the carrying value of that interest.
Management believed, and continues to believe, its interest will be liquidated,
and the Company will receive proceeds in the range of $2 million to $2.5
million, net of legal fees and costs to sell the property, based on management's
estimate of the fair value of the underlying assets held by Delran. The Company
recorded an impairment totaling $1,234,000, as restated, during the year ended
December 31, 2000.

Depreciation and amortization

In connection with the acquisition of Noble, the Company restated its purchase
price to $2,453,000 from $3,187,000, based on the average value of 25,000 shares
of common stock issued near the date of issuance. In connection with the
allocation of the purchase price to the fair value of assets acquired, the
Company did not report property and equipment at fair value. In addition, the
Company did not allocate a portion of the purchase price to intangible assets,
other than goodwill. After reassessing the Company's accounting in accordance
with Accounting Principles Board ("APB") Opinion No. 16, Business Combinations,
management reported property and equipment at fair value, based on independent
appraisal prepared at the time of the acquisition, allocated amounts to customer
lists and the remaining amount in excess of the fair value of the assets was
allocated to goodwill (see Note 3). The impact on operations for the year ended
December 31, 2000, was to increase depreciation expense by $65,000. No increase
in amortization of intangible assets was acquired. The impact on stockholders'
equity was to reduce common stock and additional paid-in capital by $731,000 and
reduce non-current assets by the same amount. See Note 3 for further discussion
of the acquisition and allocation of the purchase price.

The Company did not record depreciation expense totaling $180,000 on its Pecos
Russell and Friendly Bear commercial rental property placed into service in
2000.

Other restatement items

Management did not record allowances for doubtful accounts receivable of Noble
totaling $62,000.

Restatement Items Affecting Shareholders' Equity
------------------------------------------------
Real estate acquisition

The Company previously valued its common stock and Series B Preferred stock in
the aggregate at $8,404,000 to acquire certain real estate assets on April 30,
1999. As discussed in Note 3, the acquisition purchase price was $6,747,000, a
reduction in shareholders' equity of $1,657,000 as of December 31, 1999.

                                     F-13






<PAGE>


                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

Rent USA, Inc. Rescission

On October 3, 2000, the Company entered into an agreement to acquire 5,000,000
shares of Rent USA, Inc. ("Rent USA"), which represented 44% of their voting
stock for $2,250,000. Management issued the D Preferred based on construction
equipment assets represented to be owned by Rent USA.

On May 15, 2001, the Company's Board of Directors rescinded the transaction
because of fraudulent actions by Rent USA management. Management of Rent USA
returned the D Preferred shares in return for the Rent USA shares held by the
Company. The Company's management believe that D Preferred held by Rent USA was
void and should not be included in the historical financial statements. The
effect of the rescission was to reduce the Company's equity investment of
$2,250,000 and reduce stockholders' equity by a like amount at December 31,
2000.

Restatement of valuation of Contracts for Deed and Series F Preferred Stock
---------------------------------------------------------------------------
The Company recorded certain real estate assets, and related in obligations, in
Mexico for an aggregate purchase price of $70,229,000; however, the appraisals,
on an "as is" basis, amounted to $62,450,000. Management reduced the carrying
value of these net assets acquired by $7,779,000, reducing stockholders' equity
by a corresponding amount. In addition, management recorded the real estate and
related obligations, although the transfer of title was not recorded because of
a current dispute. In lieu of recording the assets and liabilities, management
believes that the contracts for deed should be reported at the purchase price or
the "as is" appraisal amount, which ever is less. The amount to be recorded by
the Company should be reduced by the gross amount of the liabilities which
either represent a lien or required assumptions of debt. The gross amount of the
liabilities totaled approximately $30,141,000 versus liabilities of $18,168,000
as previously reported, net of discounts of $11,973,000. This restatement resulted
in a reduction in stockholders' equity of $11,973,000. Also see Note 4 for
further discussion. The adjustment caused the reversal of interest expense
from the notes previously discounted in error in the amount of $1,247,000 or
$0.10 per share.

Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include the accounts of the
Company, and its majority owned and controlled subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.

The Company's investments in unconsolidated subsidiaries in which it has the
ability to exercise significant influence over operating and financial policies,
but does not control, are accounted for by using the equity method. Accordingly,
the Company's share of the earnings of these equity basis companies is included
in consolidated net income. All other investments held on a long-term basis are
valued at cost less any permanent impairment in value.

Reclassifications
-----------------
Certain prior year items have been reclassified to conform to the current year
presentation.

Stock Split
-----------
Effective March 15, 2001, the Company's board of directors approved a one (1)
for 30 share stock split. All shares and per share information during the years
presented have been retroactively adjusted for the effects of the reverse stock
split.

Use of Estimates by Management
------------------------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Significant estimates and assumptions include those made surrounding inventory
valuation, real estate valuation, as well as allowances for doubtful accounts
and deferred income tax assets, losses for contingencies and certain accrued
liabilities.

                                      F-14






<PAGE>


                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

Risks and Uncertainties
-----------------------

Shareholder Dilution

The Company's management has relied on the issuance of its common stock to
provide working capital and provide compensation to officers, directors and
consultants. The trading price of the Company's common stock has declined over
time. If the Company continues to rely on the issuance of common stock to retain
key management and consultants, based on current per-share prices, the existing
shareholders may be significantly diluted in the future.


Concentrations and Credit Risk
------------------------------
Management provides credit terms to its customers, which purchase furniture from
Noble. Management provides an allowance for doubtful accounts based on current
and historical events. From time to time the Company grants returns of products,
discounts and credits in the normal course of business and are reflected as a
reduction of sales.

During the periods presented, no third-party vendors accounted for greater than
10% of total purchases, and no vendor of Nobel accounted for greater than 10% of
its total material purchases.

Inventory
---------
Inventories are stated at the lower of cost, as determined using the first-in,
first-out ("FIFO") method, or market. Inventories at Noble consist of raw
materials, consisting of cut lumber and leather, work-in process, consisting of
component parts and furniture, and finished goods furniture. Costs include
materials and direct labor and allocated overhead.

In connection with the acquisition of Noble on May 1, 2000, the Company was
required to record inventory at estimated fair value or selling price, less
costs to sell (Note 3). The effects of such amounts have been included in cost
of furniture sales through December 31, 2000, since substantially all
manufactured inventories acquired were sold.

Equity Investment Held for Liquidation
--------------------------------------
Senior Care acquired a 45% membership interest in Delran, an entity which holds
30 acres of an undeveloped, fully entitled, commercial shopping center site, and
cash. The Company has not reported its share of the income or loss from Delran
because management of Senior Care has not had access to financial information on
a periodic basis, and management has not had significant influence in the
day-to-day operations of Delran. Senior Care initiated litigation in late 1999,
which continues through the current date, to liquidate and distribute the assets
of Delran. Management had information available in 2000 that affected the
carrying value of that interest. Through litigation, management has discovered
approximately $2,000,000 in cash and property under contract to sell in the
amount of $5,000,000. Management believed, and continues to believe, its
interest will be liquidated, and the Company will receive proceeds in the range
of $2 million to $2.5 million, net of legal fees and costs to sell the property,
based on management's estimate of the fair value of the underlying assets held
by Delran. The Company recorded an impairment totaling $1,234,000 during the
year ended December 31, 2000 using the low end of the range of liquidation
estimate or $2,000,000. Management believes the current carrying value of
$2,000,000 at December 31, 2001 will be recovered since Delran will have
sufficient assets upon final liquidation of the properties.

Real Estate Held for Sale
-------------------------
The Company recognizes revenue from real estate sales in accordance with the
provisions of SFAS No. 66, "Accounting for Sales of Real Estate." Under SFAS No.
66, a sale shall not be considered consummated until (a) the parties are bound
by the terms of a contract, (b) all consideration has been exchanged, (c) any
permanent financing for which the seller is responsible has been arranged, and
(d) all conditions precedent to closing have been performed. At the time of
revenue recognition, cost of sales is charged with an allocation of direct costs
of development, estimated costs of land, land development, indirect
construction, other overhead costs, interest and property taxes. In general, the
relative value method is used to allocate costs to units sold.

Commercial Rental Property
--------------------------
The cost of buildings and improvements are depreciated over the estimated useful
life when they are placed in service. The Company utilizes the straight-line
method of depreciation over a period of 39 years. All equipment, which is deemed
fixed to the buildings, such as roof mounted air conditioning systems,
refrigeration units and the like are depreciated over the estimated useful life
of the assets, generally five (5) to 10 years. Tenant improvements other than
fixtures are generally depreciated over the term of the lease, generally three
(3) to 15 years.

                                       F-15




<PAGE>

                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

Real Estate Held for Development and Real Estate Under Development
------------------------------------------------------------------
All costs associated with acquiring properties, obtaining entitlements, legal,
architectural, engineering and other direct and incremental costs associated
with those projects are included in capitalized expenses. All interest incurred
on construction loans is capitalized during development activities. In the event
the Company encounters delays during the development, management expenses
interest costs until active development is resumed. Interest is expensed once a
project is substantially complete and ready for its intended use.

Property Equipment
------------------
Property and equipment, which is used in our furniture manufacturing business at
Nobel, are recorded at cost. Betterments are capitalized and maintenance is
expensed as incurred. Depreciation and amortization of property and equipment
are provided over the estimated useful lives of the assets using the
straight-line method. Estimated useful lives are as follows:

          Machinery and equipment                         3-7 years
          Furniture and fixtures                          3-7 years
          Leasehold improvements                  Lease term or asset life,
                                                      whichever is less.

Intangible Assets
--------------------
The Company allocates the excess of cost over the estimated fair value of the
tangible net assets are allocated to intangible assets, based on factual
information or independent appraisal. Amortization of intangible assets is
provided over the estimated periods to be benefited using the straight-line
method. Intangible assets acquired in connection with the acquisition of Noble
(Note 3) consisted of customer lists and goodwill in the amount of $429,000 and
$698,000, respectively. Amortization of customer lists and goodwill for the year
ended December 31, 2000, as restated, amounted to $50,000 and $27,000,
respectively. Amortization of customer lists and goodwill for the year ended
December 31, 2001 amounted to $86,000 and $47,000, respectively. See recent
accounting pronouncements below affecting intangible assets.

Impairments of Long-Lived Assets
--------------------------------------
The Company's long-lived assets, which include real estate and property and
equipment, as well as intangible assets are reviewed annually for impairment and
whenever events or changes in circumstances indicate that carrying amount of an
asset may not be recoverable in accordance with SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of". This
statement requires that long-lived assets and certain identifiable intangibles
be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to future cash flows expected to be generated. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount, or fair value less costs to sell. Management reviews for impairment when
information or an event comes to management's attention, which impacts the
carrying value its assets, or at least annually. See recent accounting
pronouncements affecting SFAS No. 121 described below.

                                    F-16






<PAGE>


                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

Revenue Recognition
-------------------
Furniture Sales and Commercial Rents

The Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin
(SAB) 101, Revenue Recognition in Financial Statements, in December 1999. The
SAB summarizes certain of the SEC staff's views in applying GAAP to revenue
recognition in financial statements. The Company recognizes revenue from
products once all of the following criteria for revenue recognition have been
met:

1) Pervasive evidence that an agreement exists; 2) the products have been
shipped, if applicable; 3) the prices are fixed and determinable and not subject
to refund or adjustment; and 4) collection of the amounts due is reasonably
assured.

Accounting for Stock-Based Compensation
---------------------------------------
The Company uses the intrinsic value-based approach APB No. 25 to account for
stock-based compensation issued to employees. The Company has not adopted a fair
value-based method of accounting for stock-based compensation plans for
employees under SFAS No. 123, as permitted. Stock-based compensation issued to
non-employees and consultants are measured at fair value. Common stock purchase
options and warrants issued to non-employees and consultants are measured at
fair value using the Black-Scholes valuation model. The Company has considered
the effects of Interpretation No. 44 of APB No. 25 issued by the FASB, Emerging
Issues Task Force ("EITF") No. 96-18 and No. 00-23, when accounting for stock
options issued to employees and non-employees. During the years presented, the
Company granted stock options with an exercise price of $0.001 per share, the
par value of its common stock. Since the exercise price is considered nominal,
the grants are effectively issuances of common stock and, accordingly,
compensation charges are computed based on the estimated fair value on the date
of grant as discussed in the next paragraph. Accordingly, pro forma presentation
in accordance with SFAS No. 123 is considered applicable for the years
presented.

Common stock issued for services is recorded at fair value based on market
quotations (closing ask price) on the date the board of directors authorizes the
issuance and when an agreement is executed. Common stock issued with
restrictions under Rule 144 of the Securities Act of 1933, are recorded at fair
value after reducing the quoted price by 10% for transferability restrictions.
Accounting standards generally accepted in the United States does not allow for
discounts greater than 10% of quoted market prices, although transactions
involving cash for common stock may substantially differ. See Note 9 for
significant transactions involving stock based compensation.

Fair Value of Financial Instruments
-----------------------------------
Senior Care is required to estimate the fair value of all financial instruments
included on its balance sheet at December 31, 2000 and 2001. The Company
considers the carrying value of such amounts in the financial statements
(accounts receivable, accounts, etc.) to approximate their fair value due to the
relatively short period of time between origination of the instruments and their
expected realization. Mortgage Notes contain interest rates, which approximate
current market rates. Related party notes have no readily ascertainable fair
value.

Income Taxes
------------
The Company accounts for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes," whereby deferred tax assets and liabilities are
recognized for the future tax consequences attributable to temporary differences
between bases used for financial reporting and income tax reporting purposes.
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. A valuation allowance is
provided for certain deferred tax assets if it is more likely than not that the
Company will not realize tax assets through future operations.

Per Share Information
---------------------
Basic earnings (loss) per share is computed by dividing net income (loss)
available to common shareholders by the weighted average common shares
outstanding. Diluted earnings (loss) per share is computed by dividing net
income (loss) available to common shareholders by the weighted

                                  F-17




<PAGE>


                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES, CONTINUED

average common shares outstanding plus the potential effect of dilutive
securities which are convertible to common shares such as options, warrants and
preferred stock. Due to the net loss incurred in 2000 and 2001, all common stock
equivalents outstanding were considered anti-dilutive and were excluded from the
calculations of diluted net loss per share. Potential common shares which would
have been included in diluted per share information consisting of the
incremental common shares issuable upon the conversion of preferred stock, using
the if-converted method and the exercise of stock options, using the treasury
stock method approximated 71,903,692 shares for the year ended December 31,
2001.

Reporting Comprehensive Income
------------------------------
SFAS No. 130, "Reporting Comprehensive Income" establishes standards for
reporting the components of comprehensive income and requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be included in a financial statement that is displayed with
the same prominence as other consolidated financial statements. Comprehensive
income includes net income (loss), as well as certain non-shareholder items that
are reported directly within a separate component of stockholders' equity and
bypass net income (loss). The provisions of this statement currently have no
impact on the accompanying consolidated financial statements.

Segment Information
-------------------
The Company reports information about operating segments as well as disclosures
about products and services, geographic areas and major customers (See Note 11).
Operating segments are defined as revenue-producing components of the
enterprise, which are generally used internally for evaluating segment
performance.

Accounting for Derivative Instruments and Hedging Activities
------------------------------------------------------------
The FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 establishes standards for the accounting and reporting
of derivative instruments and hedging activities, including certain derivative
instruments embedded in other contracts. Under SFAS No. 133, entities are
required to carry all derivative instruments at fair value on their balance
sheets. The accounting for changes in the fair value (i.e., gains or losses) of
a derivative instrument depends on whether it has been designated and qualifies
as part of a hedging activity and the underlying purpose for it. The adoption of
SFAS No. 133 did not have an impact on the Company's consolidated financial
statements or related disclosures.

Recently Issued Accounting Standards
------------------------------------
In June 2001, the Financial Accounting Standards Board finalized Statements of
Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," and
No. 142, "Goodwill and Other Intangible Assets." SFAS 141 requires the use of
the purchase method of accounting and prohibits the use of the
pooling-of-interests method of accounting for business combinations initiated
after June 30, 2001. SFAS 141 also requires that the Company recognize acquired
intangible assets apart from goodwill if the acquired intangible assets meet
certain criteria. SFAS 141 applies to all business combinations initiated after
June 30, 2001, and for purchase business combinations completed on or after July
1, 2001. It also requires, upon adoption of SFAS 142 that the Company reclassify
the carrying amounts of intangible assets and goodwill based on the criteria in
SFAS 141.

SFAS 142 requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. In
addition, SFAS 142 requires that the Company identify reporting units for the
purposes of assessing potential future impairments of goodwill, reassess the
useful lives of other existing recognized intangible assets, and cease
amortization of intangible assets with an indefinite useful life. An intangible
asset with an indefinite useful life should be tested for impairment in
accordance with the guidance in SFAS 121. SFAS 142 is required to be applied in
fiscal years beginning after December 15, 2001, to all goodwill and other
intangible assets recognized at that date, regardless of when those assets were
initially recognized. SFAS 142 requires the Company to complete a transitional
goodwill impairment test six months from the date of adoption. The Company is
also required to reassess the useful lives of

                                      F-18





<PAGE>

                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES, CONTINUED

other intangible assets within the first interim quarter after adoption of SFAS
142. The Company is assessing, but has not yet determined, how the adoption of
SFAS 141 and SFAS 142 will impact its financial statements and results of
operations.

The FASB issued Statement No. 143 "Accounting for Asset Retirement Obligations"
which establishes standards for the initial measurement and subsequent
accounting for obligations associated with the sale, abandonment, or other type
of disposal of long-lived tangible assets arising from the acquisition,
construction, or development and/or normal operation of such assets. SFAS No.
143 is effective for years beginning after June 15, 2002, with earlier
application encouraged. The Company is assessing, but has not yet determined,
how the adoption of SFAS 143 will impact its financial position and results of
operations.

The FASB also recently issued Statement No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." Statement No. 144 supersedes Statement No.
121 to supply a single accounting approach for measuring impairment of
long-lived assets, including segment of a business accounted for as a
discontinued operation or those to be sold or disposed of other than by sale.
The Company must adopt Statement No. 144 in 2002. The Company is assessing, but
has not yet determined, how the adoption of SFAS 144 will impact its financial
position and results of operations.

NOTE 3 - ACQUISITIONS

Bulk Acquisition of Assets
--------------------------
On April 30, 1999, the Company completed the purchase of various assets, and
assumed related mortgage liabilities from various unrelated parties to the
Company's then Chief Executive. East-West Community Developer, Inc. previously
acquired rights to the properties and assigned their rights to Senior Care. The
Company issued 49,337 shares of common stock for net assets acquired amounting
to $4,702,000, as restated, or $95 per share and 400,000 shares of Series B
preferred stock valued at $2,045,000, as restated. The purchase price of
$6,747,000, as restated, was based on the fair value of the assets received,
based on independent appraisals. The Company common stock was listed, but not
traded on a regular basis; therefore, management determined that the fair value
of the assets received was more clearly determinable. The Company allocated the
purchase price to assets and liabilities, at estimated fair value, on August 31,
1999, as follows:

         Real estate under development:
          Friendly Bear Plaza                       $3,200,000
          Pecos Russell Business Center              3,500,000
          Evergreen Manor                            2,600,000

         Real estate held for development-
          Signature Properties                         560,000

         Commercial rental property-
          Broadway Acacia                            1,800,000
          Equity investment in Delran                3,234,000
                                                    ----------
           Total assets                             14,894,000

         Mortgage notes payable                     (7,447,000)
         Acquisition note payable                     (700,000)
                                                   -----------
           Total liabilities                        (8,147,000)
                                                   -----------
           Total purchase price                    $ 6,747,000
                                                   ===========

The Delran equity investment was based on the fair market value of the
underlying net assets, which consisted of 30 acres of an undeveloped, fully
entitled, commercial shopping center site that had been recently appraised, and
residential home site.

                                      F-19






<PAGE>

                       SENIOR CARE INDUSTRIES, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
-------------------------------------------------------------------------------

NOTE 3 - ACQUISITIONS, CONTINUED

Noble
-----
On April 28, 2000, the Company purchased Noble for 25,000 shares of Company
common stock valued at $2,453,000, as restated. The acquisition has been
accounted for under the purchase method. Accordingly, the Company recorded
assets and liabilities acquired at their estimated fair values as follows:

           Current assets                            $1,518,000
           Property and equipment                     1,033,000
           Intangible assets:
            Customer lists                              429,000
            Goodwill                                    698,000
           Other
                                                     ----------
            Total assets                              3,678,000

           Current liabilities                         (482,000)
           Secured notes payable                       (743,000)
                                                     ----------
            Total liabilities                        (1,225,000)
                                                     ----------
            Total purchase price                     $2,453,000
                                                     ==========

See Note 2 for additional information regarding amortization of the Company's
intangible assets subsequent to the acquisition date.

The operations of Noble have been included in the Company's consolidated
financial statements from the date of acquisition. Pro forma consolidated
revenues, net loss and net loss per share for the year ended December 31, 2000,
assuming the Noble acquisition was made on January 1, 2000, are as follows:

           Revenues                                 $ 5,281,000
           Net loss                                 $   (27,000)
           Net loss per share                             (0.08)

Flamingo 55
-----------
On May 3, 2001, the Company acquired, through a newly formed corporation,
Flamingo 55, Inc., 54 fully entitled lots to build 54 town homes for seniors. In
connection therewith, the Company paid $994,000 in the form of $675,000 in cash,
a note payable for $53,000 and 265,000 shares of common stock valued at
$258,000, as well as paid certain costs of $8,000. The Company obtained an
independent appraisal of the value of property acquired.

The Cottages at San Jacinto
---------------------------
On or about July 19 2001, the Company acquired, through a newly formed
corporation S.R.I. SFR, Inc., a fully entitled, undeveloped 223-residential
property, senior restricted, housing development. In connection therewith, the
Company paid $3,129,000 in the form of $1,200,000 in cash, an unsecured note
totaling $525,000 and 1,300,000 shares of common stock valued at $1,404,000. The
Company obtained an independent appraisal of the value of property acquired.

The Company acquired the following properties from Tri-National Development

Plaza Rosarito
--------------
Senior Care International purchased contracts for deed for 15 acres of
undeveloped ocean-front land from Tri-National Holdings, S.A. de C.V. for
$13,000,000 and 9 acres of land, where a partially completed shopping center is
located, for $20,200,000. The payment was made by the issuance of 500,000 shares
of the Company's Series F Preferred stock. There is a recorded lien against the
property for $9,200,000. The Company obtained independent appraisals of the
value of properties. The purchase price exceeded the appraisal by $7,700,000 and
the lesser amount has been used to record the transaction less the amount of the
lien of $9,200,000.

                                      F-20






<PAGE>


                       SENIOR CARE INDUSTRIES, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

NOTE 3 - ACQUISITIONS, CONTINUED

The Hills of Bajamar
--------------------
Senior Care International purchased from Planification Desarolles de Jatay, S.A.
de C.V., contracts for deed for a total of 650 acres of unimproved land in Baja
California del Norte for 300,000 shares of Series F Preferred valued at
$14,950,000, based on an independent appraisal. The Company is obligated to pay
approximately a non-interest bearing, unsecured notes aggregating of $11,262,000
to note holders (Note 5) of Tri-National Development. The "as is" appraisal
amount was used to record the transaction less the required assumption of debt
of $11,262,000.

Plaza Resorts
-------------
Senior Care International purchased a contract for deed to purchase
approximately 16 acres of ocean front land within the Bajamar Golf and Country
Club in the municipality of Ensenada, with plans for 328 timeshare units from
Inmobilaria Plaza Baja California, S.A. de C.V. The Company issued 150,000
shares of Series F Preferred valued at $16,000,000. Senior Care agreed to assume
the outstanding mortgage on this property of $9,079,000. The Company obtained an
independent appraisal of the value of property acquired. The "as is" appraisal
amount was used to record the transaction less the required assumption of debt
$9,079,000.

Portal Del Mar condominiums
---------------------------
Senior Care International purchased a 2/3rds undivided interest in a 6 acre
development containing 126 partially completed condominium units overlooking the
Pacific Ocean just South of Rosarito Beach in Baja California. Senior Care
issued 100,000 shares of Series F Convertible preferred valued at $6,000,000.
Senior Care agreed to assume its proportional share of the debt on this property
or approximately $600,000. The Company obtained an independent appraisal of the
value of property acquired. The "as is" appraisal amount was used to record the
transaction less the amount of the required assumption of debt of $600,000.

Oasis Planned Urban Development
-------------------------------
The Company formed Mantis Development, Inc. in November 2001 to acquire
750-acre, land tract and a 48-pad mobile home park near Oasis Nevada, which is
to be developed into a fully planned urban development. On December 31, 2001,
the Company closed escrow on the property. The purchase price can increase to
$40,000,000 based on additional milestones which considerable increase the value
of the real estate acquired which, if earned, will be satisfied through
additional shares of F Preferred. In connection therewith, the Company issued
600,000 shares of Series J Preferred stock valued at $15,870,000, based on an
appraisal of $23,120,000, less assumed debt. The Company assumed debt totaling
$7,250,000 in connection with this transaction as discussed in Note 5. As part
of the acquisition, the Company issued 1,500,000 shares of common stock valued
at $1,200,000 to a firm for the acquisition and future development of the
property, which were capitalized.

The acquisitions during the year ended December 31, 2001, were all for real
estate properties, which are not considered businesses; therefore, pro forma
results of operations are not applicable.


                                      F-21






<PAGE>


                       SENIOR CARE INDUSTRIES, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

NOTE 4 - REAL ESTATE

Real estate consists of the following as of December 31, 2000 (as restated) and
2001:

                                                           December 31,
                                                     2000               2001
                                                 -------------     -------------
                                                 (as restated)
Real estate inventory-
  Evergreen Manor                                $  7,583,000      $  3,576,000
                                                 =============     =============
Commercial rental property:
 Friendly Bear Plaza                             $  3,200,000      $  3,747,000
 Pecos Russell Business Center                              -         6,281,000
 Broadway Acacia                                    1,800,000
 Less - accumulated depreciation                     (224,000)         (433,000)
                                                 -------------     -------------
  Total Commercial Rental Property               $  4,776,000      $  9,595,000
                                                 =============     =============
Real estate held for development:
  Pecos Russell Business Center                  $  6,167,000     $           -
  Signature Properties                                608,000           619,000
  The Cottages at San Jacinto                         113,000         3,856,000
  Flamingo 55                                          92,000         1,232,000
  Oasis PUD                                                 -        24,320,000
  Various other                                       295,000           291,000
                                                 -------------     -------------
                                                 $  7,275,000      $ 30,318,000
                                                 =============     =============

Contracts for deed:
  Plaza Rosarito shopping center                  $         -      $ 12,500,000
  Plaza Rosarito residential acreage                        -        13,000,000
  Hills of Bajamar residential acreage                      -        14,950,000
  Plaza Resorts                                             -        16,000,000
  Portal Del Mar                                            -         6,000,000
                                                 -------------     -------------
                                                            -        62,450,000
  Less contingent obligations:
  Plaza Rosarito                                            -        (9,200,000)
  Hills of Bajamar acreage                                  -       (11,262,000)
  Plaza Resort                                              -        (9,079,000)
  Portal Del Mar                                            -          (600,000)
                                                 -------------     -------------
                                                            -       (30,141,000)
                                                 -------------     -------------
                                                 $          -      $ 32,309,000
                                                 =============     =============

The Company entered into contracts for deed to certain real properties in Baja
California, Mexico dated April 30, 2001, on May 22, 2001. Counsel for Senior
Care in Mexico has rendered a legal opinion that Senior Care has a binding and
fully enforceable contract for deed to these properties, that by recording the
notice of the lawsuit in Mexico, this gave notice that Senior Care has a binding
and enforceable contract and is entitled to take fee simple title to the
property at any time subject to any pre-recorded liens. The Company is required
to pay a transfer tax upon at the time of title transfer.

SFAS No. 66 was considered when making a determination as to whether there was a
sale to the Company of the Mexican properties. Under SFAS No. 66, "Accounting
for Sales of Real Estate," par 6 states "A sale shall not be considered
consummated until (a) the parties are bound by the terms of a contract, (b) all
consideration has been exchanged, (c) any permanent financing for which the
seller is responsible has been arranged, and (d) all conditions precedent to
closing have been performed.

The following facts were considered to conclude that a purchase of real estate
assets occurred:

a. the parties are bound by the terms of a contract: Our Mexican legal counsel,
Fernando Cervantes has opined that the parties are bound by the terms of the
contracts in question and that if a lawsuit were filed or arbitration instituted
in Mexico to request specific performance on the part of the sellers, the buyer
would prevail.

                                    F-22




<PAGE>

                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

NOTE 4 - REAL ESTATE, CONTINUED

b. all consideration has been exchanged: Acquisition consideration in the form
of Series H preferred stock in Senior Care Industries, Inc. [Senior Care] was
validly issued on the books of the company and was received by the various
selling corporations. The shares presently are validly issued on the books of
the Company, and upon certain dates being reached as set forth on the face of
the stock certificates, Senior Care will be required to either redeem those
shares for cash or will be required to issue its common stock in exchange
therefor. There is no provision on the certificates or limitation which would
prevent the holder of the shares from transferring them to a bona fide purchaser
for value and the shares are out of the control of the issuer, may not be
recalled or cancelled.

c. any permanent financing for which the seller is responsible has been
arranged: This is not applicable in the current instance as there was no
requirement to obtain financing as part of the closing requirements.

d. all conditions precedent to closing have been performed: When transfer of
title is not completed, all other steps prerequisite to a sale must have taken
place. When an escrow agent or attorney does not record the transfer of title on
a timely basis for reasons not significant to the transaction, the date of sale
for accounting purposes would likely be the date of closing (i.e., legal
transfer of title and insurance risk) rather than the date on which the transfer
was presented to governmental authorities for recording. Factors considered in
meeting this requirement are as follows:

1. the seller warranted that it had valid title to the properties and we were
able to verify that this was true through counsel who conducted a search of the
records of the recorder in the area where the property is located. We also
obtained appraisals of the property from experienced and responsible appraisers
who actually visited and photographed each of the properties in question.

2. all necessary agreements and consents to the consummation of the transaction
contemplated by the agreements, were been obtained by seller and delivered to
buyer at or before closing. The contracts for deed themselves were executed and
delivered as were the stock certificates, those being the only requirements
precedent to closing of the transactions.

3. Senior Care has the present ability to pay all transfer taxes at the time
transfer of title is requested and recorded, and such funds have been placed
with legal counsel for payment when determined appropriate by management.

Management reconsidered its position on the recording of the assets as real
estate held for development, and the related liabilities since not all the
requirements of SFAS 66 appeared to have been met. Because management believes
that the contracts for deed are fully enforceable, management has recorded the
contracts for deed based on independent "as is" appraisals, less the estimated
fair value of any lien or required assumptions of debt. Management is seeking to
enforce its contract rights in the Mexican courts.

The obligations which would be assumed, upon recording of title, are as follows:


Plaza Rosarito
--------------
A lien on real property, interest-free, face value of $9,200,000 with interest
Continuing to accrue at the rate of 10% interest per annum.

Hills of Baja Mar
-----------------
Obligation to bond holders of interest-free, Tri-National Development, face
value of $11,262,000, with interest continuing to accrue at the rate of 9% per
annum.

Plaza Resort
-------------
Note Payable to a Mexican bank, interest-free, face value of $9,079,000.  There
is no interest accruing on this obligation.,


                                      F-23




<PAGE>

                       SENIOR CARE INDUSTRIES, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

NOTE 4 - REAL ESTATE


Portal Del Mar
--------------
Payable to original seller on completion of project, face value $600,000. There
is no interest on this obligation.

Real Estate Sold

Beginning in June 2001, the company sold 24 units of its Evergreen Manor
development for total proceeds of $4,101,000. Proceeds from each closing have
been used to pay-down the construction loan, a second trust deed and pay-off
contractors for work performed on the project. In 2000, management of the
company determined that the carrying value of the project would not be realized.
Accordingly, in 2000, a provision for impairment of $143,000 was charged to
operations.

On May 31, 2001, the Broadway-Acacia building was sold to Broadway-Acacia LLC,
an entity controlled by certain officers of Senior Care, for the return of 2,334
shares of the Company's common stock valued at $449,000 and the assumption of
debt on the property totaling $1,000,000. The value of the shares returned
amounted to approximately $9,000. In connection with this transaction, the
Company recorded a loss of $678,000.

Capitalized interest costs on real estate under development at December 31, 2000
and 2001 included the following:

                                             2000              2001
                                         ------------      ------------

Pecos-Russell Business Center            $    97,000        $   75,000
Evergreen Manor                              396,000                 -
Flamingo 55                                        -            54,000
San Jacinto                                        -            29,000
Signature Properties                               -            11,000
Oasis PUD                                          -         1,200,000
                                         ------------      ------------
                                         $   493,000       $ 1,369,000
                                         ============      ============

Interest costs incurred for years ended December 31, 2001 and 2000 are as
follows:

                                             2000              2001
                                         ------------      ------------
                                        (as restated)
Interest capitalized on real estate
  under development                      $   493,000       $   169,000
Interest expenses                            921,000         2,855,000
                                         ------------      ------------
                                         $ 1,414,000       $ 3,024,000
                                         ============      ============



                                        F-24




<PAGE>

                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

NOTE 5 - MORTGAGE NOTES

The Company had secured mortgage obligations as summarized below as of December
31, 2000 (as restated) and 2001:
                                                          December 31,
                                                     2000               2001
                                                (as restated)
                                                ------------        ------------
Broadway Acacia
---------------
A loan with a bank, bearing interest at
8.375% payable in monthly installments
of principal and interest of
$7,116 through March 2027.                      $   689,000         $         -

A Loan with a bank, bearing
interest at 11% payable in
monthly installments of principal
and interest of $2,200 through
January 2001. Balloon
payment due February 2001.                          312,000                   -

Friendly Bear Property
----------------------
A bank loan bearing interest at 8.50%, per
annum, 25 year amortization, monthly
payments of principal and interest $19,975,
all due & payable on Aug. 1, 2007                 2,112,000            2,433,000

Private loan bearing interest at 15% per
annum, interest only payments, due                        -              200,000
July 2002

Pecos Russell Business Center
-----------------------------
A bank loan bearing interest at 8.19%,
per annum, payable in monthly
installments of principal and interest of
$8,880, due on January 1, 2006                    1,132,000            1,120,000

A 2nd trust deed private party loan bearing
interest at 15% stated rate with a
19% default rate, interest only payable monthly,
currently in default and due on demand.             140,000              140,000

A bank loan bearing interest at 9.25%, per
annum, $9,090 monthly payments of
principal and interest, due February 2007           984,000              965,000


                                      F-25




<PAGE>

                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

NOTE 5 - MORTGAGE NOTES, CONTINUED

Pecos Russell Business Center, continued
----------------------------------------
A private loan bearing interest at 9.5%, per
annum, payments of $1,412 monthly of
principal and interest, due July 2004                     -             144,000

A bank loan bearing interest at 8.19%, per
annum, payments of principal and interest
of $9,500 per monthly, all due February 2007      1,130,000           1,120,000

Evergreen Manor Property
------------------------
A construction loan with a bank, bearing
interest at prime plus 1.25% payable in
interest only, monthly installments, payable
upon release provisions from sales
of units, which
are presently on-going                            4,831,000           2,006,000

A loan with a real estate broker at 15%
interest, payable upon release
provisions from sales of
units which are presently on-going                        -             220,000

Signature Properties
--------------------
Payable to private party, fully
satisfied on December 31, 2001
for 2,871,812 shares of common stock              2,297,000             128,000

Flamingo 55
-----------
A land loan with a bank, interest at
13% per annum, payable monthly
balloon payment due May 1, 2003                           -             675,000

Cottages of San Jacinto
-----------------------
Land loan with a private lender, interest
only at 13.50%, per annum, payable
monthly, principal due in balloon
payment on August 2002                                    -           1,922,000

Private load bearing interest at
18%, interest only payable monthly,
currently in default and due on demand                    -             551,000

                                       F-26





<PAGE>

                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

NOTE 5 - MORTGAGE NOTES, CONTINUED

Oasis Planned Urban Development
-------------------------------
A loan from the seller, interest at 7% per
annum, payable quarterly together
with principal of $31,475 beginning March,
2004 due January 2006                                    -            7,250,000
                                               ------------        ------------
Total                                            13,627,000          18,874,000
                                               ============        ============
</TABLE>

Future annual minimum principal payments of mortgage notes as of December 31,
2001 over the next five years, and thereafter are as follows:

   Year ending
    2002                                       5,239,000
    2003                                       1,003,000
    2004                                         344,000
    2005                                         200,000
    2006                                       9,288,000
    Thereafter                                 2,800,000
                                             ------------
                                             $18,874,000
                                             ============



                                   F-27




<PAGE>

                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

NOTE 6 - NOTES PAYABLE

The Company had other obligations as summarized below as of December 31, 2001
(as restated) and 2001:

                                                     December 31,
                                                  2000             2001
                                              -----------      -----------
Unsecured acquisition note
with principal and accrued interest
due on April 29, 2004, as extended              $ 700,000       $  700,000

Credit facility with a financial
institution, variable interest at a referenced
prime rate, plus 3.5% per annum, 12.5%,
per annum, or $10,000, whichever is
greater, payable monthly, expires
August 31, 2002, renewable
annually by mutual written consent                585,000          384,000
                                               ----------       ----------
                                               $1,285,000       $1,084,000
                                               ==========       ==========


Noble has a credit line with a financial institution, which is secured by
substantially all the assets of Noble, and guaranteed by the Company. Noble can
borrow 80% of eligible accounts receivable. Eligible accounts receivable are
receivables which are due within a period of 90 days. During 2000, the Company
paid off an equipment term loan and an inventory line in 2001. The agreement
expires August 31, 2002. The agreement requires the Company to pay an annual fee
of $27,000, and a monthly administrative fee equal to 0.34% of the gross
accounts receivable balance, payable monthly. Since inception of the agreement
in August 31, 2000, the Company has been required to pay the minimum interest of
$10,000 per month causing the effective interest rate to exceed the maximum
stated rate of 12.5%, per annum. The weighted average effective interest rate on
borrowings under this agreement during the year ended December 31, 2001 is
approximately 33%, per annum.

NOTE 7 - NOTES PAYABLE TO RELATED PARTIES

As of December 31, 2000, the Company had amounts due totaling $1,270,000,
including accumulated and unpaid interest, interest at 10%, per annum. See next
paragraph for further discussion of this note which was assigned to an
affiliate.

                                       F-28





<PAGE>

                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

NOTE 7 - NOTES PAYABLE TO RELATED PARTIES, CONTINUED

At December 31, 2001, the Company has an unsecured credit line with an affiliate
which accrues interest at 10%, per annum, payable together with the principal
advanced, four (4) years from date of each advance. The credit line currently
has no expiration date. The note holder has granted an irrevocable commitment of
up to $1,000,000 through December 31, 2002, and the holder has agreed not to
terminate the credit line until after March 31, 2003, as a means to ensure the
Company meets its working capital requirements. As of December 31, 2000, the
Company had amounts due totaling $1,786,000 from this affiliate.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

Operating Leases
----------------

Noble leases two buildings, a manufacturing plant, an adjacent warehouse and a
showroom in San Francisco, which require monthly payments of approximately
$13,000, $11,000 and $6,000 per month, respectively; the leases expire in
September 2003, September 2003 and June 2003 respectively.

The Company leases its corporate headquarters, which requires monthly payments
of approximately $5,833 per month and expires in June 2004. The building is
owned by a related entity.

Future annual minimum lease payments under non-cancelable operating leases at
December 31, 2001, are as follows:

     Year                                                     Total
     ----                                                     ------
     2002                                                   $432,000
     2003                                                    332,000
     2004                                                     32,000
                                                            ---------
     Total                                                  $796,000
                                                            =========


Consulting Agreements

From time to time, the Company enters into consulting agreements for services
ranging from investor relations to construction management and real estate
prospecting. Generally, the terms of the agreements provide for monthly payment
and may be terminated by either party with 30 days written notice.

Contingencies
-------------
Rent USA Equipment Leases

On January 23, 2001, the Company leased mining equipment which it in turn
sub-leased to Equip USA, a wholly owned subsidiary of Rent USA. The leases were
obtained and the Company agreed to become liable under the terms of the leases
based upon Rent USA's representation that the equipment would be leased
continually for at least the first two years to a single user under a written
contract for the rental of the equipment.

The Company's management discovered that after only three months use, the
equipment was being returned to the Company by the end user and that the Company
would have to find a new user for the equipment. The Company's management
negotiated with the original lessor of the equipment to find a new lessee for
that equipment, unsuccessfully. The Company brought suit against Rent USA, Equip
USA, an affiliate, and their management team for breach of contract, fraud and
deceit. The lessors of the leases have also brought suit against the Company to
collect the deficiency.

Noble Furniture Leases
----------------------

The Company has an equipment lease on equipment used by Noble Furniture
requiring payments of $320 per month which will expire in July, 2002.



                                     F-29





<PAGE>

                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

NOTE 8 - COMMITMENTS AND CONTINGENCIES, CONTINUED

The Company claims that any loss which it may suffer as a result of the
deficiency should be assessed against Rent USA, Equip USA, its officers and
directors and that the lessors themselves should assume a part of the liability
due to kick backs which were built into the lease contracts by sales personnel
of the lease companies resulting in fraud against the Company and the share
purchase transaction void. However, because the leasing company is seeking a
deficiency against the Company, management believes that it may ultimately be
responsible for approximately $300,000 in deficiencies. Management recorded a
provision for loss during the year ended December 31, 2001.

Tri-National

On December 14, 2001, the Company and its subsidiary, Senior Care International,
filed a complaint in the United States Bankruptcy Court in the Southern District
of California against Tri-National Development Corp. and four of its Mexican
subsidiaries which own real property in Mexico. The complaint seeks declaratory
and injunctive relief. The complaint requests, among other things, that the
Bankruptcy Court declare that Senior Care International has a right to complete
the transfer of title in the real property and stock in Mexican subsidiaries of
Tri-National in accordance with Senior Care's contracts for deed. The complaint
further requests a finding that the automatic stay provided by the Bankruptcy
Code does not prohibit the Company from taking all necessary actions to protect
and preserve its Mexican property.

On or about February 15, 2002, Tri-National filed a motion to extend the
exclusivity period of the debtor for filing a plan of reorganization. Both the
unsecured creditors' committee and the Company opposed this motion because the
Company desires to propose its own plan of reorganization of the assets of
Tri-National. The motion was granted and the time for filing a plan was extended
to July 31, 2002. Tri-National also filed a complaint against the Company
alleging misrepresentations at the time of sale. This action is the discovery
stage and the outcome cannot be presently assessed; however, management intends
to vigorously seek its own damages and defend itself against these allegations.
According to the Company's bankruptcy counsel, executory contracts are not the
jurisdiction of the Bankruptcy court. No provision for loss has been recorded in
these consolidated financial statements since management believes any liability
is remote.

See Note 12 for other risks and uncertainties.

NOTE 9 - CAPITAL TRANSACTIONS

General
-------

These financial statements have been adjusted to reflect a 1 for 30 reverse
split of common stock in Senior Care, which became effective on March 15, 2001
(Note 1). The Company's articles of incorporation, as amended, authorize a total
of 110,000,000 shares with a stated par value of $.001 per share. All shares of
common stock and preferred stock are entitled to one vote each.

On August 11, 2000, the Company declared an 11 for 10 stock dividend resulting
in an additional 33,111 shares issued. The stock dividend was accounted for as a
charge to accumulated deficit since the effect of the dividend was less than 20%
of the total shares outstanding on the date of declaration, as required by
accounting standards, even though the Company has no accumulated earnings. The
total charge to accumulated deficit was $1,243,000.

                                        F-30





<PAGE>

                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

NOTE 9 - CAPITAL TRANSACTIONS, CONTINUED

Acquisitions
------------

Refer to Note 3 for discussion of capital stock issued for real estate purchases
and the acquisition of Noble.

Stock-based Compensation
------------------------

The Company issued stock during the years ended December 31, 2000, as restated,
and 2001 in lieu of cash compensation to various individuals and entities for
services rendered as follows:

<TABLE>
<CAPTION>
                                                                       Compensatory
Purpose for                          Share Issued                          Value
Issuing Stock                    2000             2001              2000           2001
--------------------------     ---------        ---------        ----------     ----------
<S>                              <C>            <C>             <C>            <C>
Accounting                          233                 -       $    33,000    $         -

Legal                             4,162           200,000           573,000        202,000

Real estate due diligence,
 prospecting & consulting        63,837         3,837,000         1,225,000      4,910,000

Director fees                     3,334           200,000           102,000        203,000

Employee compensation,
 excluding Chief Executive       19,499         1,800,000           659,000      1,997,000

Chief Executive                     417         8,000,000            41,000      8,000,000

Other                                 -                 -                 -              -
                               ---------     ------------      ------------   ------------
Totals                           91,482        14,037,000       $ 2,633,000    $15,312,000
                               =========     ============      ============   ============
</TABLE>

Stock issued to cancel notes payable
------------------------------------

The Company issued stock during the years ended December 31, 2000 and 2001 to
pay debts in lieu of cash as follows:

<TABLE>
<CAPTION>

                                                                       Compensatory
Purpose for                          Share Issued                          Value
Issuing Stock                    2000             2001              2000           2001
--------------------------     ---------        ---------        ----------     ----------
<S>                                    <C>      <C>                       <C>  <C>
Payment to contractors                 -            1,683                 -    $   14,000

Payoff mortgage                        -        2,871,812                 -     2,068,000
--------------------------     ---------     ------------      ------------   ------------
Total                                  -        2,873,495                 -    $2,082,000
                               =========     ============      ============   ============
</TABLE>

2000 Issuances:

During 2000, the Company issued 68,232 shares of common stock for legal,
accounting and real estate due diligence, prospecting and consulting services
valued at $1,831,000 based on the quoted market price less a discount of 10% for
transfer restrictions.

                                      F-31






<PAGE>


                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------
NOTE 9 - CAPITAL TRANSACTIONS, CONTINUED

In April 2000, the holders of 400,000 shares of B Preferred converted their
shares into 66,667 shares of common stock under its terms.

In April 2000, the Company issued 5,000 shares of common stock to the former
owners of two properties acquired in April 1999 pursuant to settlement
agreements. In connection with these issuances, the Company charged operations
for the market value of the stock or $491,000.

As discussed in Note 3, the Company issued 25,000 shares of common stock valued
at $2,453,000 for the assets net of liabilities assumed of Noble.

During 2000, the Company issued a total of 23,250 shares valued at $805,000 its
officers and directors.

In October 2000, the Company issued 3,301 shares of common stock to non-resident
investors pursuant to Regulation S of the Securities Act in exchange for $51,000
in cash. In connection with this issuance, the Company recorded a charge to
operations for $72,000 in expense recognized for the sale of stock below market
value included in other expense in the accompanying statements of operations.

2001 Issuances:

During 2001, the Company issued 4,037,000 shares of common stock for legal and
real estate due diligence, prospecting and consulting services valued at
$5,112,000 based on the quoted market price less a discount of 10% for transfer
restrictions.

In February 2001, the Company issued 2,800 shares of common stock to the former
owner of a property acquired in April 1999 pursuant to a settlement agreement.
In connection with these issuances, the Company charged operations for the
market value of the stock or $41,000.

In February 2001, the Company issued 24,793 shares of common stock to
non-resident investors pursuant to Regulation S of the Securities Act in
exchange for $8,000 in cash. In connection with this issuance, the Company
recorded a charge to operations for $88,000 in expense recognized for the sale
of stock below market value included in other expense in the accompanying
statements of operations.

As noted in the above table, the Company issued a total of 2,873,495 valued at a
total of $2,082,000 in settlement of debt in December 2001 and unpaid contractor
invoices in February 2001.

In April 2001, the Company issued a total of 1,565,000 shares of common stock
for the acquisition of two real estate properties. The stock was valued at
market quotes less a 10% discount for transfer restrictions or a total of
$1,661,000.

As discussed in Note 3, on May 31, 2001, the Company sold the Broadway-Acacia
building to Broadway-Acacia LLC, an entity controlled by certain officers of
Senior Care, for the return of 2,334 shares of the Company's common stock valued
at $795,000 and the assumption of debt on the property totaling approximately
$1,000,000. The value of the shares returned amounted to approximately $9,000.
In connection with this transaction, the Company recorded a loss of $678,000.

Also, as discussed in Note 3, the Company issued 1,500,000 shares of common
stock valued at $1,200,000 in connection with the acquisition of land near
Oasis, Nevada.

Preferred Stock
---------------
The Company has filed with the Secretary of State of the State of Nevada
Certificates of Powers, Designations, Preferences and Rights regarding Series A,
Series F and Series G, Series J and Series K preferred stock. As discussed
above, each share of preferred stock is entitle to one vote, same as common
stock rights. None of the shares issued to date have any liquidation value.
Additional powers, designations, preferences and rights are summarized below:

                                      F-32





<PAGE>

                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

NOTE 9 - CAPITAL TRANSACTIONS, CONTINUED


A Preferred
-----------
On January 23, 2002, the Board of Directors authorized and granted an option to
two officers acquire 30,000,000 shares of Preferred stock ("A Preferred") in the
aggregate. Each share of A Preferred is voting, but provides no rights to
dividends nor contains a liquidation preference. The A Preferred is purely a
"poison pill" and, therefore, the option to acquire the shares of A Preferred is
contingent upon a hostile takeover attempt. As of April 15, 2002, the option is
not exercisable. Any consideration with respect to the option to acquire the A
Preferred will be triggered upon the event of a hostile take-over attempt.

D Preferred
-----------
On October 3, 2000, the Board of Directors authorized Series D Preferred Stock
("D Preferred"). The Company entered into an agreement to acquire 5,000,000
shares of Rent USA, which represented 44% of the voting stock. The Company
issued 2,000,000 shares of D Preferred on the basis that the Company's pro rata
share of the estimated fair value of the underlying assets of Rent USA,
primarily construction equipment, was $2,250,000. The Company recorded the D
Preferred based on the underlying value of the Company's common stock based on
the conversion into common stock on a one-to-one basis or $2,250,000. On May 15,
2001, the Company's Board of Directors rescinded the transaction because of
fraudulent actions by Rent USA management. The Company's management believe that
D Preferred held by Rent USA was void. Management of Rent USA returned the D
Preferred shares in return for the Rent USA shares held by the Company in an
effort to void the transaction.

F Preferred
-----------
During 2001, the board of directors authorized the issuance of 1,050,000 shares
of Series F Convertible preferred for the purchase of properties in Baja
California del Norte, Mexico. These shares are convertible into common stock of
Senior Care on a formula which allows 20% of the number of preferred shares to
be converted into common stock on the 24 month anniversary date of the issuance
of the preferred shares and 20% of the preferred shares convertible on each
anniversary date thereafter until all shares have been converted. The period of
the conversion, therefore, is six years from the date of issue. Each share of
Series F preferred converts into 20 shares of common stock. However, Senior Care
has, at its sole discretion, redeem the preferred shares prior to the conversion
date by payment of cash either to the seller or to a lien holder of the seller
upon 30 days prior to the conversion date. In the event of redemption, and the
redemption is to be paid through the sales of the underlying real property the
exact payment terms as to each parcel of real property will vary depending on
whether cash is paid from sales of properties. Since the Company has the sole
right to redeem the F Preferred, the conversion into common stock will be a
forced conversion. The number of common shares which may result from the
conversion of Series F preferred, if not redeemed by the Company, will not
change.

                                      F-33





<PAGE>

                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

NOTE 9 - CAPITAL TRANSACTIONS, CONTINUED

Optional Redemptions from date of issue April 30, 2001:

                F Preferred     Optional          Shares of
Period             Shares      Redemption        Common Stock
------          -----------    ----------        ------------

Plaza Rosarito:
24 months:          73,000   $  4,800,000          1,460,000
36 months:          73,000      4,800,000          1,460,000
48 months:          73,000      4,800,000          1,460,000
60 months:          73,000      4,800,000          1,460,000
72 months:          73,000      4,800,000          1,460,000
                  ---------    -----------        -----------
Total:             365,000    $24,000,000          7,300,000

Hills of Bajamar:
24 months:          14,400    $   718,000            912,000
36 months:          14,400        718,000            912,000
48 months:          14,400        718,000            912,000
60 months:          14,400        718,000            912,000
72 months:          14,400        717,000            912,000
                  ---------    -----------        -----------
Total:              72,000    $ 3,589,000          4,560,000

Plaza Resorts:
24 months:          30,000    $ 1,400,000            600,000
36 months:          30,000      1,400,000            600,000
48 months:          30,000      1,400,000            600,000
60 months:          30,000      1,400,000            600,000
72 months:          30,000      1,400,000            600,000
                  ---------    -----------        -----------
Total:             150,000    $ 7,000,000          3,000,000

Portal Del Mar:
24 months:          20,000    $ 1,200,000            200,000
36 months:          20,000      1,200,000            200,000
48 months:          20,000      1,200,000            200,000
60 months:          20,000      1,200,000            200,000
72 months:          20,000      1,200,000            200,000
                  --------     ----------         -----------
Total:             100,000    $ 6,000,000          1,000,000
                  --------     ----------         -----------
Total available
 for redemption    687,000    $40,589,000         15,860,000
                 =========     ==========         ==========

The remaining F Preferred, see below, of the 1,050,000 shares issued will be
returned upon the repayment of the obligations, at face value, as specified
below:

Project            F Preferred       Face Value
Obligator             Shares       of Obligations
---------------    -----------     --------------
Plaza Rosarito
 Noteholders          135,000        $ 9,200,000

Hills of Bajamar
Creditor lien         228,000         11,262,000
                    ---------        -----------
                      363,000        $20,462,000
                    =========        ===========


                                      F-34





<PAGE>

                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

NOTE 9 - CAPITAL TRANSACTIONS, CONTINUED

G Preferred
-----------
On April 30, 2001, a total of 3,163 shares of Series G preferred ("G Preferred")
shares were authorized and issued in connection with certain settlements with
existing common shareholders which demanded relief from the Company's one (1)
for 30 reverse stock split. The shares were valued at $190,000 and charged to
operations. The G Preferred shares are convertible into 60 shares of common
stock on a formula, which allows conversion of 20% of the number of preferred
shares held by an individual preferred shareholder on the anniversary date of
the issuance of those preferred shares and 20% on each anniversary date
thereafter until all preferred shares have been converted. The conversion period
is five years from the date of issuance. The 3,163 Series G preferred shares
will convert into 189,780 shares of common stock.

J Preferred
-----------
A total of 600,000 shares of Series J preferred shares ("J Preferred")
wereoutstanding held by one (1) shareholder. Each share of J Preferred has been
assigned a value as of the issuance date of $3.85 per share, based on the an
independent appraisal of the real estate acquired, less assumed debt, of
$15,870,000 (Note 3). Over a period of 10 years, the Series J preferred converts
into common stock, 20% of the Series J preferred converting after 24 months and
additional 20% conversions occurring on each 24 month anniversary date. A total
of $15,870,000 will be paid in common stock on the conversion date using the
average ask price of that stock during the 10 day period prior to the actual
conversion.  The shares are voting and have no liquidation value.

K Preferred
-----------
The board of directors authorized and the Company issued an aggregate of 50,000
shares of Series K Preferred Shares ("K Preferred") on October 10 2001, valued
at $2,000,000. The shares were issued pursuant to certain settlements reached
with certain former sellers of assets to the Company. The K Preferred was issued
because the sellers of certain assets suffered a decline in share value held by
these individuals. These shares convert into common stock, each share converting
into a sufficient number of common shares which equals a price of $40.00 for
each K preferred share on the conversion date. On the conversion date, the
average ask price of that stock during the 10 day period prior to the actual
conversion will be used to determine underlying value of each share of common
stock. A a total of 20% of the outstanding shares convert each year for a period
of 5 years. Assuming a recent ask price of Senior Care at $.40 per share,
5,000,000 shares of common stock would be issued over the conversion period.


                                       F-35





<PAGE>


                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

NOTE 10 - INCOME TAXES

The deferred income tax balances at December 31, 2000 (as restated) and 2001 are
comprised as follows:

                                                         December 31,
                                                   2000              2001
                                                -------------     ------------
                                               (as restated)
Deferred income tax assets:
    Net operating loss carry forwards           $   3,700,000     $11,880,000
    Accrued expenses                                        -         120,000
    Valuation allowance                            (3,700,000)    (12,000,000)
                                                -------------     ------------
                                                            -                -
                                                =============     ============

The valuation allowance for deferred tax assets increased approximately
$8,300,000.

At December 31, 2001, the Company had net operating loss ("NOL") carryfowards
for Federal and California income tax purposes of approximately $30.0 million
and $30.0 million, respectively. Federal NOLs will begin to expire in 2019 and
fully expire in 2021, and California NOLs will begin to expire in 2004 and will
fully expire in 2014.

In 2000 and 2001, the difference between the tax benefit derived by using the
34% Federal tax rate and the zero benefit recorded by the Company is due to the
Company providing a 100% valuation allowance against any deferred tax assets.

As a result of changes in ownership in the first quarter of 2001, the Company's
use of net operating loss carryforwards may be limited by section 382 of the
Internal Revenue Code until such net operating loss carryforwards expire.
Deferred tax assets have been computed using the maximum expiration terms of 20
and 5 years for federal and state tax purposes, respectively.

NOTE 11 - SEGMENT INFORMATION

The Company has adopted Statement of Financial Accounting Standards No. 131
("SFAS 131"), "Disclosures about Segments of an Enterprise and Related
Information." SFAS 131 changes the way public companies report information about
segments of their business in their annual financial statements and requires
them to report selected segment information in their quarterly reports issued to
stockholders. It also requires entity-wide disclosures about the products and
services an entity provides, the material countries in which it holds assets and
reports revenues and its major customers.

Senior Care has developed the following segment information, the first being
from rental income which the Company receives from the rental of its income real
property, Broadway-Acacia, Pecos Russell Business Center and Friendly Bear. The
second is income received from the Noble Furniture manufacturing operation.

Commercial Rental Property
--------------------------

Rental property as of December 31, 2000 was comprised of Broadway Acacia, in
Laguna Beach, CA and Friendly Bear Plaza in Las Vegas, Nevada.

The assets and liabilities associated with these properties are as follows:

<TABLE>
<CAPTION>

Name of Asset               Assets                    Less: Liabilities           Net Assets
----------------------------------------------------------------------------------------------------
                            12/31/00     12/31/01     12/31/00     12/31/01    12/31/00    12/31/01
                            ------------------------------------------------------------------------
<S>                         <C>          <C>         <C>         <C>           <C>         <C>
Broadway Acacia             1,576,000            -   (1,001,000)          -      575,000           -
Friendly Bear               3,200,000    3,541,000   (2,112,000) (2,433,000)   1,088,000   1,108,000
Pecos Russell                       -    6,054,000            -  (3,489,000)           -   2,565,000
                            ------------------------------------------------------------------------
Total Rental Property       4,776,000    9,595,000   (3,113,000) (5,922,000)   1,663,000   3,673,000

</TABLE>

                                               F-36




<PAGE>

                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

NOTE 11 - SEGMENT INFORMATION, CONTINUED

Income from the rental property segment and expenses incurred in connection with
that segment for the 12 month period ended is as follows [there was no separate
reporting of segments during the year 1999 due to the fact that the Company was
beginning its operations and had not yet identified segments]:

                                     2000                2001
                                 ------------        -----------
Rental Income                    $   644,000         $  875,000
Less: Cost of revenues               228,000            619,000
      Interest                       376,000            476,000
                                 ------------        -----------
Gain or loss attributable to
 Rental Operations:              $    40,000         $ (220,000)
                                 ============        ===========

At December 31, 2001, the Company had assets totaling $70,229,000 of real estate
interests the country of Mexico.  All other assets and interests are located in
the United States.

Income and expenses incurred in connection with the Noble manufacturing
operations are as follows:

                                                        December 31
                                              -------------------------------
                                                  2000               2001
                                             (as restated)

Net sales                                     $3,587,000         $4,700,000
Cost of sales                                  3,351,000          3,878,000
                                               ---------          ---------
  Gross profit                                   236,000            822,000

Selling and marketing expenses                   186,000            269,000
General and administrative expenses              304,000            643,000
Interest expense                                  81,000            158,000
                                               ---------          ---------
Total expenses                                   571,000          1,070,000
                                               ---------          ---------
Net loss                                      $ (335,000)        $ (248,000)
                                               =========          =========

Property and equipment consist of the following as of December 31:

                                                 2000                2001
                                            ------------       ------------
Equipment                                   $    34,000        $    34,000
Improvements                                     49,000             50,000
Machinery                                       949,000            970,000
                                            ------------       ------------
                                              1,032,000          1,054,000
Less accumulated depreciation                   (95,000)          (259,000)
                                            ------------       ------------
                                            $   937,000        $   795,000
                                            ============       ============

During the years December 31, 2000 and 2001, depreciation expense totaled
$95,000 and $163,000, respectively.

Inventories are stated at the lower of cost (using the first-in, first-out
method) or market. Inventories consist of the following at December 31,

                                                 2000                2001
                                            ------------       ------------
Finished goods                              $    78,000        $    55,000
Work in process                                 137,000            138,000
Raw materials and component parts               338,000            291,000
                                            ------------       ------------
                                            $   553,000        $   484,000
                                            ============       ============

Inventories are carried at the lower of cost or management's estimate of their
net realizable value.

The assets of Noble are pledged as collateral in connection with its credit
facility.


                                      F-37



<PAGE>

                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

NOTE 12 - MANAGEMENT'S PLANS

Management's Plans

During the years ended December 31, 2000 and 2001, the Company incurred net
losses of $5,920,000 and $20,416,000, respectively. In 2001, the Company's
losses included $15,312,000 stock-based compensation and other non-cash
transactions. At December 31, 2001, the Company's current liabilities exceed
current assets by $234,000. To date, the Company has funded its working capital
requirements from cash obtained from equity lines of credit, $3,500,000 of which
is from an affiliate, which expires in August 2004. This agreement is
irrevocable until March 2003, with guaranteed advances of approximately $1.2
million. The Company currently has $1,714,000 available under the credit
facility with this affiliate.

Net cash provided by operating activities totaled $928,000 for the year ended
December 31, 2001. The Company's cash flows were positive due to the sales of
its real estate inventories. Management expects the sales of its real estate
inventories to continue in 2002 to generate additional cash flows. Net cash
provided by investing activities totaled $82,000 for the year ended December 31,
2001, largely due to the fact the Company has acquired real property by issuance
of its preferred shares, which have no mandatory redemption provisions or
redemption provisions which are outside the Company's control. Management does
not expect to incur significant cash to be used in investing activities in 2002.

Requirements for cash during the next 12 months will be the need for cash for
real estate development projects. Initially, there is the need for cash to
purchase land. Secondly, there is a need for cash to provide the entitlements to
ready property for construction. Finally, there is the need for cash to build
the project.

Senior Care attempts to purchase land in exchange for stock, either common or
preferred or, in certain circumstances, a combination of both. In these
instances there may be no requirement for cash other than for entitlements which
may need to be done either prior to the taking of title or after we secure
title. When there is a need for cash, then the Company anticipates raising that
cash by the formation of a limited partnership where the limited partners will
receive an equity participation in the ownership of the project in exchange for
cash. Senior Care or its subsidiary acts as the general partner in these
transactions and would normally hold a controlling interest in the partnership.
Monies invested in these partnerships is used for the purchase of land and
securing of entitlements when necessary. Construction generally will come from
construction loans which the Company will obtain directly from bank lenders or
other institutions.

As of December 31, 2001, Senior Care had not yet arranged construction financing
for its Flamingo 55 project, the Cottages at San Jacinto or for the apartment
complex in New Mexico. Management is working to obtain construction financing
for these projects from lending institutions. However, there is no assurance
that any financing will be found. If Senior Care is not able to find the
necessary financing or fund the loan commitment it already has, this would
seriously impact Senior Care's ability to complete these planned projects.
However, management believes that if it became impossible to find such
financing, Senior Care could sell the projects to others and would not suffer
any loss due to the enhancements to the value of those projects which Senior
Care has already completed such as the recording of a plot map, completion of
engineering and plan approval.

                                      F-38




<PAGE>

                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

NOTE 12 - MANAGEMENT'S PLANS, CONTINUED

Recent appraisals indicate the Company's Flamingo 55, The Cottages at San
Jacinto, and Signature Apartments properties have a fair value that exceeds the
carrying value by $2.5 million. In the event the Company requires capital for
its operations in 2002, the Company may be required to sell certain of its
properties to generate additional cash flows. Management believes the Company
has the ability to meet its working obligations requirements as they become due,
based its available credit lines, over the next 12 months,

Subsequent to the next twenty-four months, we plan to finance our long-term
operations and capital requirements with the profits and funds generated from
the revenues from the sale of our condominiums, single family residences, from
rents from our buildings including both commercial and residential properties,
from profits in our manufacturing facility, investment funds received from
limited partnerships and further borrowings against credit lines which we
already have available to us. We may obtain future funding through new private
financings and public offerings of debt and equity securities and most
certainly, will continue to borrow money from banks and savings institutions to
continue construction projects and real estate development projects.


                                      F-39




<PAGE>
                          SENIOR CARE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              YEARS ENDED DECEMBER 31, 2000, AS RESTATED, AND 2001
--------------------------------------------------------------------------------

NOTE 13 - SUBSEQUENT EVENTS

On January 23, 2002, the board of directors authorized the issuance of 3,300,000
shares of common stock to the directors and officers of the Company. The shares
were valued at $2,475,000 based on the market quotes on the date authorized. The
Company will record such as compensation expense in the first quarter of 2002.

On January 25, 2002, the Company entered into a consulting agreement for
investor relation services for a period of one year. Pursuant to the agreement,
the Company issued 100,000 shares of restricted common stock into an escrow
account in the name of the consultant. The shares were valued at $56,700 based
on quoted market prices including a 10% discount for transferability
restrictions.

On January 23, 2002, the shareholders approved to increase the authorized shares
of all classes of stock to 110 million shares, $0.001 par value per share.

Subsequent to year end, the Company's board of directors approved the formation
and has formed limited partnerships for the purpose of developing Flamingo 55,
The Cottages at San Jacinto and Plaza Rosarito whereby a wholly owned subsidiary
of Senior Care will become the general partner. It is contemplated that the
money raised from the limited partners will pay off the land loans and will then
commence development of those properties.


                                      F-40