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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                               AMENDMENT NO. 2 TO
                                  FORM 10-KSB

         [X]      Annual Report Under Section 13 or 15(d) of the Securities
                  Exchange Act of 1934

For the fiscal year ended December 31, 2001

                       SECURITY ASSET CAPITAL CORPORATION
                 (Name of small business issuer in its charter)

     000-20039                                            95-4729666
(Commission File Number)                    (I.R.S. Employer Identification No.)

                                     NEVADA
         (State or other jurisdiction of incorporation or organization)

              701 B STREET, SUITE 1775, SAN DIEGO, CALIFORNIA 92101
               (Address of principal executive offices) (Zip Code)

                Issuer's telephone number, including area code:
                      Voice 619-232-9950, Fax 619-232-9954

          (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class
Common Stock, $0.001 par value                 NASDAQ OTC Bulletin Board

Securities registered pursuant to Section 12(g) of the Act: None

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

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained herein, 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. ( )

Revenues for the issuer's most recent fiscal year: $151,327

On December 31, 2001 the aggregate market value of the Common equity held by
non-affiliates (based upon the average of bid and asked price as of December 31,
2001) was $ 1,350,000.

As of April 30, 2002 the Issuer has 31,846,710 Outstanding Shares of Common
Stock, $0.001 par value.

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


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Part I
Item 1. Business

THE COMPANY. The Company was founded on September 22, 1993 to build, through
acquisition and development, a team of vertically integrated companies
structured to achieve maximum economic advantage within the asset liquidation
industry. The Company has created direct relationships with most of the large
and medium size financial institutions. The Company is one of the original
members of the nation-wide Debt Buyers Association and the Company communicates
with over 400 institutional sellers of credit card loan portfolios on a regular
basis. The main direction and focus of the Company is in concentrating its
efforts on launching the Debt Registry(TM). The Debt Registry(TM) is a patented
online data warehouse for the ownership and the continuous update of all
consumer debt portfolio transactions for the financial services industry. The
Company has teamed with Expanets, Inc. the nation's largest and leading provider
of converged communications solutions to businesses ranging from 20 to 500
employees, for the development and deployment of the primary and operational
system and is in the process of signing up major financial institutions and
portfolio buyers. The Debt Registry(TM) is a wholly-owned subsidiary of Security
Asset Capital Corporation and is using a state-of-the art, n-tier, web-based
architecture, to eliminate the need to install software on individual desktops,
and allow clients in all parts of the U.S. to access the data repository via the
Internet. Overall, management estimates that in current inventories available
from financial institutions there is approximately ninety billion dollars of
delinquent credit card debt in the United States alone.

ACQUISITION OR DISPOSITION OF ASSETS. Pursuant to the Disposition Agreement the
Company sold 100% of the issued and outstanding common shares of Security Asset
Properties, Inc. ("SAP") to Western Asset Limited Partnership ("Western") and El
Dorado Properties, Inc. ("El Dorado") for $4,365,000 less encumbrances for a
net value of $1,450,000, of which $250,000 in cash and a promissory note for
$1,200,000 due in 2 years at 5% interest. The note is secured by 100% of the
stock of SAP and 900,000 shares of Common Stock of Security
Asset Capital Corporation held by the purchasers. In evaluating the sale,
the Company used valuations of assets/properties based on comparables by
Coldwell Banker and used criteria such as the value of SAP' Assets,
business relationships, and goodwill. A material relationship existed between
the acquirers of SAP as both Western and El Dorado were entities
controlled by two directors of Security Asset Capital Corporation.

SUBSIDIARIES

THE DEBT REGISTRY(TM)

The Debt Registry(TM) is an asset ownership registration and tracking system for
the asset liquidation and purchasing industry as well as for financial
institutions. The closest counterpart to this system is the process of CUSIP
system for stocks. The asset liquidation and purchasing industry is the largest
industry in which assets are bought and sold without the benefits of asset
titles or filed ownership documents. As a result, a number of problems and
issues exist, or have the potential to exist, in the industry. These include
lack of verifiable ownership of assets within the industry; difficulty of
verifying age, experience, and other important details of a particular account;
potential fraud from key data changes and multiple sales; difficulty in
reporting correct information to the credit bureaus; difficulty in obtaining
documentation from originators on a timely basis; and inability or difficulty in
locating sold accounts by debtors.

The debt buying industry will continue to grow rapidly as more financial
institutions are faced with dramatic increases in consumer debt. The debt buying
industry is the largest industry in which assets are bought and sold without the
benefits of asset titles or filed ownership documents. As a result, a number of
problems and issues exist which create potential liabilities for all of the
companies in the industry, including the originators of debt, the companies
buying and collecting the debt, and the credit bureaus reporting the status of
the account. The implementation of The Debt Registry(TM) will provide the
industry with much needed structure that should allow the industry to continue
to expand in the future without inviting government regulation.

                              ACCOUNT REGISTRATION

As banks and other originators charge off non-performing debts, they are either
placed for collection with contingency collection firms, or sold in portfolios
to the secondary market. At present, no third party tracks accounts or maintains
ownership records. The results of no supervision are potential fraudulent
changing of charge-off dates, lack of verifiable ownership following sales, and
difficulties in verifying age, experience, and details of an account.

Under the Debt Registry(TM) process, each time an account changes ownership, a
record of that sale is forwarded to the Registry Data Base. Included in the
record are identification data for the accounts, as well as experience
information (agency placement, etc.). The buyer of the accounts pays the
registration fee, and receives a registration relating to the accounts. Each
account is assigned a registration number that is updated and tracked as
ownership changes through the life cycle of the account. Once the debt is sold
the second time (from the second to the third owners), the accounts are
re-registered to document both the new ownership and the new collection
experience. Addresses and payment information are updated at this time. At each
successive sale, the account is re-registered with The Debt Registry(TM) Data
Base.

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At the sale of the accounts, the new buyer can verify the registration by
contacting The Debt Registry(TM) and checking a sampling of the accounts. If the
new buyer chooses, he can submit the full listing of accounts for verification.
As in all sales, the buyer pays for the registration and verification processes.
It is anticipated that the price of registration will not be a hindrance to any
transaction, since initial registration costs will be less than 1/2 of 1.0% of
the purchase price.

The ability to track the ownership of a particular account is also a benefit to
the debtor. Debtors often cannot locate the current owner of their old debt, due
to a lack of information from the originator regarding successive sales. Instead
of calling each "link" in the chain of title, a debtor will need only visit
www.FindMyDebts.com for up to the minute account status information.

                              ACCOUNT DOCUMENTATION

In its second phase of development, the Debt Registry(TM) Documentation
Clearinghouse will develop a means of maintaining all documentation for all sold
debt in an electronic format, which will significantly speed up the forwarding
process.

Account statements and signed applications are the backbone of legal collection
efforts. Every collector understands the frustration of spending hours "working"
an account for which no documentation can ultimately be obtained. The Debt
Registry(TM)'s proposed Documentation Clearinghouse will virtually eliminate
these types of problems.

The Registry's Clearinghouse will eventually act as the hub for document
requests. Various banks and credit grantors, are presently overwhelmed by
current industry demands. All incoming requests for applications or statements
will be sent directly to the clearinghouse and credit grantors would need only
respond to one entity for documentation requests.

SOURCES OF REVENUE

o        DOCUMENTATION REQUESTS
Charged-off credit card accounts are currently sold with little or no
documentation. Collectors who need account documents typically order them on an
account-by-account basis at roughly $5.00 to $7.00 per document. Banks and other
credit grantors price this service to recover their costs.

o        REGISTRY MEMBERSHIPS
All regular users of The Debt Registry(TM) would be offered membership at an
annual fee. Their membership will entitle them to a monthly newsletter, access
to verification services, and to account location services. For many of the
secondary and later owners, this service will generate significant additional
revenues, while allowing more debtors to settle accounts. The account owner will
pay a locating fee to The Debt Registry(TM).

o        ACCOUNT REGISTRATION FEES
Account registration will generate significant revenue for The Debt
Registry(TM). Although charged-off debt accounts are sold in large portfolios,
each individual account will be registered, and the fees would be based on per
account pricing. However, the cost of registration will not be a significant
part of the purchase price, and will therefore not be a deterrent to the sale
transaction.

o        WWW.FINDMYDEBTS.COM
Located online at www.FindMyDebts.com, this service will allow consumers to
easily locate debts that have been sold by the original credit grantor to other
parties. This page facilitates the payment of debt and helps the debtor to
regain their good credit. Debtors enter their correct personal information and
the account numbers of the accounts that they want to resolve. The possibility
of fraud is virtually eliminated, as consumers can now ensure that they are
paying the correct party. The system is designed for consumers who intend to
both LOCATE and SETTLE old accounts, and debtors are forewarned that their
contact information will be shared with the account owners. The FindMyDebts.com
service is provided at no extra cost to consumers, as debt owners will pay all
fees. In the long run, this will constitute one of the largest sources of
revenue for The Debt Registry(TM).

BROADBAND TECHNOLOGIES, INC.

Broadband Technologies Inc. is a wholly-owned subsidiary of the Company
dedicated to bringing full-screen, on-demand video to consumers via the
internet. Just as companies rely on express mail services to rapidly deliver
packages, business will soon rely on service providers to store and deliver
video content. Industries that will benefit from the ability to cast video
content directly to consumers include:

         Movie and Pay Television ,Video Rental, High-End Product Sales, Auction
         Centers
         Corporate Advertising, Infomercials, Travel and Real Estate, Corporate
         Training

The mission of Broadband Technologies, is to be an industry leader of multimedia
storage and delivery. The ultimate goals of Broadband Technologies, are to
service existing industries that would benefit from casting video to their
clients, to bring video on demand to the home through an alliance with an
established service provider, and to become the industry leader in multimedia
storage and delivery.

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Broadband has thoroughly examined four industry roadblocks that currently impede
the delivery of full-motion, on-demand video to the consumer. They are:

   1. THE HIGH COST OF POWER. In recent years, the power and speed of home
computing has increased exponentially, while the cost of personal computers has
dropped dramatically. Today's personal computer is capable of showing
full-length motion pictures on DVD, and as more consumers acquire this exciting
technology Broadband Technology Inc.'s opportunities to bring video content to
the masses grows even more. Broadband Technologies, Inc.'s ultimate objective is
to deliver stored video content effectively to a consumer base via standard
personal computer platforms without the need for additional hardware.

   2. BANDWIDTH. Delivering dense content video over the Internet has long been
a problem. However, the introduction of cable and DSL computer linkups to the
marketplace has lessened the problem associated with bandwidth. Cable and other
telecommunications companies continue to expand their services and drop their
rates for both homes and businesses. During the next years, this expansion of
Internet speed and bandwidth will continue to provide the broadband highways
required to deliver content-rich information. Broadband Technologies, desires to
be at the forefront of exploiting these technology advances as they continue to
increase their presence in homes and businesses.

   3. SERVER TECHNOLOGY. Video requires delivery that can match the necessary
frame rates that display movies seamlessly. The dense content, high frame rates
and increased client demand, create a challenge for the operation of the current
Internet server technology, which continues to gain power rapidly. Broadband
Technology Inc.'s scaled architectural approach could exploit the power of these
servers and allows us to grow as demand grows.

   4. STORAGE. A major problem surrounding on-demand video delivery is storage.
As the quality of video increases almost on a daily basis, the required storage
requirements grow with it. We believe Broadband Technologies, Inc.'s
patent-pending approach to storing media in multiple locations, while at the
same time addressing it from a central site, is the cornerstone of effective
warehousing of dense video content.

The challenge of bringing on-demand video to the consumer hinges mainly on the
storage of dense video content. Broadband Technology's data warehousing methods,
combined with currently available technology, could allow us to scale infinitely
for the inventory demands of the future. Broadband Technologies, has filed five
patent applications, all of which have been granted a patent pending status.
These applications cover the key proprietary features of the video delivery
system. The following is a summary of these five patent applications:

   1. DISTRIBUTION NETWORK. This patent utilizes a very complex and specific
"Intranet" network configuration. It allows for complete redundancy of the
information contained within the network and contemplates fail-proof
communications.

   2. HARDWARE AND SOFTWARE CONFIGURATIONS. The configuration of hardware and
software that the system employs in its viewing centers is both specific and
very unique. This combination of software provided allows for the proper
functionality of all hardware components.

   3. DUAL MPEG STREAMING. This patent pertains to the heart of the system. It
protects the actual process of delivering MPEG video streams. In addition, it
may implement the only method known to date for allowing a single processor to
stream two different MPEG files simultaneously.

   4. GRAPHICAL USER INTERFACE. Under this patent, the "look and feel" of the
system is protected. The graphical user interface ("GUI") is created by a unique
combination of display device drivers, file types and formats, that creates an
environment extremely intricate in delivery, yet very intuitive and user
friendly.

   5. DESIGN. This patent protects design and engineering of the "viewing
center."

We anticipate that the bulk of revenue will come from storage and delivery fees,
as these will be our primary services. Companies wishing to deliver
"infomercials" or training videos, as well as those that store product content
in video format, constitute our prospective industrial market. We foresee
industries such as real estate, education, travel and tourism all depending upon
technology and services, like those that Broadband Technologies, intends to
provide, for their success.

Consumers who want to watch movies on-demand and pay "per-view" fees comprise
the private market. We operate under the assumption that the movie-watching
consumer does not want to browse the Internet on their television, nor does the
average person want to watch full-length feature films on their PC. We believe
that consumers would, however, purchase or subscribe to an Internet service via
their television if they could watch movies on demand.

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THEDEBTTRADER.COM

theDebttrader.com is a wholly-owned Nevada company formed January 21, 2000 to
trade charged-off debt portfolios and notes over the Internet. Previously known
to the asset liquidation industry as The Note and Paper Trader.com, this
innovative web site is an industry-recognized forum for information and debt
portfolio exchange. Over $40 million of debt was sold through this site in 1999,
its first year of operation. TheDebtTrader.Com made history in February 2000 by
hosting the debt trading industry's first online chat session. TheDebtTrader.com
is a free-market exchange for debt buyers and sellers and is being structured to
be sold in late 2002.

SECURITY ASSET MANAGEMENT, INC.

Security Asset Management Inc. is a wholly-owned California corporate subsidiary
of the Company. This company was founded in 1993 to manage debt receivable
portfolios, to buy and sell these portfolios at the wholesale and retail level,
and to joint venture portfolio acquisitions with accredited investors. Its
revenues come from management and service fees arising out of these activities.
This company attempts to target portfolios for acquisition, acquire them at the
best possible price, and aid in the collection of receivables.
Today's society is becoming more and more dependent on technology. The Company
intends to pursue the incorporation of the latest technologies into its methods
of operation. Only companies who anticipate new market realities will be
positioned at the forefront of emerging Internet industries. Broadband
Technologies, Inc. represents a quantum leap by the Company into the cutting
edge of communications through the Internet and The Debt Registry(TM) represents
at the present time the only exclusive data based system for recording,
registering, and tracking delinquent debt for the financial services industry.

COMPETITION

The Company has experienced competition in acquiring receivable debt portfolios,
including from purchasers with substantially greater resources than the Company
and is concentrating its efforts on the Debt Registry(TM) product for the coming
year. In purchasing debt, the Company competes with a wide range of third-party
collection companies and other financial services companies, which may have
substantially greater personnel and financial resources than the Company.
At the present time there is no competition for the Debt Registry(TM). It is
unique in character and there is no other data base system for registering
delinquent debt in the United States. The Company is in contract with Expanets,
Inc. to develop the final product and has not been able to verify any
competition whatsoever. However, there is a possibility that other financial
services companies, which may have substantially greater personnel and financial
resources than the Company could enter the marketplace and offer great
competition.

BUSINESS CONCENTRATION

A majority of the Company's revenues to date have been from the purchasing and
selling of debt portfolios. Considering the poor economy, the Company does not
expect any significant income from portfolio sales in the first six months of
2002.

The Company is anticipating that the majority of its growth will come from the
Debt Registry(TM) and Broadband Technologies. The concentration is on the Debt
Registry(TM) in 2002 and then Broadband Technologies in 2003. By then the
Company will not be depending on debt purchasing and collecting for its income.

TRADEMARK AND COPYRIGHT ISSUES

The Company has one patent pending for the Debt Registry(TM) Company and several
patents and patents pending owned by the Broadband Technologies Company. The
Debt Registry(TM) patent pending protects the uniqueness of the registration of
the debt accounts and the Broadband Technology patents are set to be expanded
into the direct full motion video arena.

GOVERNMENTAL REGULATION

The Company is not currently subject to direct federal, state, or local
regulation in the United States other than regulations applicable to businesses
generally or directly applicable to electronic commerce. However, because the
Internet is becoming increasingly popular, it is possible that a number of laws
and regulations may be adopted in the United States with respect to the
Internet. These laws may cover issues such as user privacy, freedom of
expression, pricing, content and quality of products and services, taxation,
advertising, intellectual property rights and information security. Furthermore,
the growth of electronic commerce may prompt calls for more stringent consumer
protection laws. Several states have proposed legislation to limit the use of
personal user information gathered online or require online services to
establish privacy policies. The Federal Trade Commission has indicated that it
may propose legislation on this issue to Congress in the near future and has
initiated action against at least one online service regarding the manner in
which personal information was collected from users and provided to third
parties. The adoption of such consumer protection laws could create uncertainty
in Internet usage and reduce the demand for all products and services. The
Company does not provide customer information to third parties and, therefore,
does not anticipate any current or proposed legislation relating to online
privacy to directly affect its activities to a material extent.

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The Company is not certain how its business may be affected by the application
of existing laws governing issues such as property ownership, copyrights,
encryption and other intellectual property issues, taxation, libel, obscenity
and export or import matters. The vast majority of those laws were adopted prior
to the advent of the Internet. As a result, they do not contemplate or address
the unique issues of the Internet and related technologies. Changes in laws
intended to address such issues could create uncertainty in the Internet
marketplace. That uncertainty could reduce demand for the Company's services or
increase the cost of doing business as a result of litigation costs or increased
service delivery costs.

RISK FACTORS

         LIMITED OPERATING HISTORY. Although the Company was founded in 1993,
its subsidiary, Broadband Technologies, Inc., is in its initial stages of
development and lacks substantial prior operating history. Broadband
Technologies, Inc.'s prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in early stages of
development, particularly companies in new and rapidly evolving markets such as
the delivery of video over the Internet. Such risks include, but are not limited
to, an evolving and unproven business model and the management of growth. To
address these risks, the Company must, among other things, maintain and
significantly increase its customer base, implement and successfully execute its
business and marketing strategy, continue to develop and upgrade its technology,
provide superior customer service, respond to competitive developments, and
attract, retain and motivate qualified personnel. There is no assurance that the
Company's business strategy will be successful, or that additional capital will
not be required to continue business operations. The Company has limited working
capital and material tangible assets. To date, Broadband Technologies, Inc. has
not created any revenues and, as a result of the significant expenditures that
the Company plans to make in sales and marketing, research and development and
general and administrative activities over the near term, the Company expects
that Broadband Technologies, Inc. will continue to incur significant operating
losses and negative cash flows from operations on both a quarterly and annual
bases for the foreseeable future. There can be no assurance that the Company or
Broadband Technologies, Inc. will ever achieve or be able to sustain
profitability. The Debt Registry(TM), Inc. completed its initial phase of
funding to produce the primary and operational system. The company has teamed up
with Expanets, Inc., the nation's largest and leading provider of converged
communications solutions to businesses ranging from 20-500 employees, for
development and deployment of this patented online registration and tracking
system for consumer debt portfolio transactions for the financial services
industry. However, the Company lacks a substantial prior operating history and
the Debt Registry's(TM) prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in early stages of
development, particularly companies in new and rapidly evolving markets. Such
risks include, but are not limited to, an evolving and unproven business model
and the management of growth. To address these risks, the Company must, among
other things, maintain and significantly increase its customer base, implement
and successfully execute its business and marketing strategy, continue to
develop and upgrade its technology, provide superior customer service, respond
to competitive developments, and attract, and motivate qualified personnel.
There is no assurance that the Company's business strategy will be successful,
or that additional capital will not be required to continue business operations.

         DEPENDENCE ON KEY MANAGEMENT. The Company is highly dependent on the
services of David R. Walton, Chief Executive Officer, Darrell Musick, President,
and Daniel J. Hill, Chairman of the Board Of Directors of Broadband
Technologies, Inc. and Michael Seigfried, President of the Debt Registry(TM),
and Daniel Johnson, also of the Debt Registry(TM). The loss of their services
could have a materially adverse impact on the Company. The Company does not
currently maintain any key-man life insurance policy with respect to any of
these key management personnel.

         POSSIBLE DIFFICULTY IN RAISING ADDITIONAL EQUITY CAPITAL. There is no
assurance that the Company will be able to raise equity capital in an amount
which is sufficient to continue operations. In the event the Company requires
financing, the Company will seek such financing through bank borrowing, debt or
equity financing, corporate partnerships or otherwise. There can be no assurance
that such financing will be available to the Company on acceptable terms, if at
all. The Company does not presently have a credit line available with any
lending institution. Any additional equity financing may involve the sale of
additional shares of the Company's Common Stock or Preferred Stock on terms that
have not yet been established.

         POSSIBLE ISSUANCE OF ADDITIONAL SHARES. The Company has authorized
100,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock. At
December 31, 2001, there were 28,196,710 shares of Common Stock and 2,579,154
shares of Preferred Stock outstanding. Accordingly, the Company had authorized,
but un-issued, 71,803,290 shares of Common Stock and 7,420,846 shares of
Preferred Stock available for future issuance. The Company may issue shares of
Stock beyond those already issued for a variety of reasons such as for cash,
conversion of debt, services, or as employee or consultant incentives. To the
extent that additional shares of Common Stock or Preferred Stock are issued,
thereby increasing the number of the Company's issued and outstanding shares of
Stock, the book value per share may be diluted.

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         RISKS OF RAPID GROWTH. The Company anticipates a period of rapid
growth, which may place strains upon the Company's management and operational
resources. The Company's ability to manage growth effectively will require the
Company to integrate successfully its business and administrative operations
into one dynamic management structure.

         DIVIDENDS NOT LIKELY. No dividends on the Company's Common Stock have
been declared or paid by the Company to date. The Company does not presently
intend to pay dividends on shares for the foreseeable future, but intends to
retain all earnings, if any, for use in the Company's business. There can be no
assurance that dividends will ever be paid on the Common Stock of the Company.

         RECEIVABLES MAY NOT BE COLLECTIBLE. The Company purchases, collects and
manages previously defaulted consumer receivables generated by consumer credit
card and other consumer credit transactions. These are obligations that the
individual consumer has failed to pay when due. The Company purchases the
receivables from credit grantors, including banks, finance companies, and other
service providers. Substantially all of the receivables consist of account
balances that the credit grantor has deemed uncollectible and has been charged
off from its balance sheet. Before we purchase the receivables, the credit
grantors generally make numerous attempts to collect on the defaulted accounts.
Credit grantors typically use their in-house collection departments, as well as
third-party collection agencies to attempt to collect on the overdue payments.
We purchase the receivables at a significant discount to the amount the customer
owes. We believe we can successfully obtain recoveries on the receivables in
amounts in excess of the amount the Company pays for the receivables. Despite
this belief, actual recoveries on the receivables may vary as the result of a
variety of factors within and beyond our control and may be less than the amount
the Company expects to recover.

         RISKS ASSOCIATED WITH NEW PRODUCTS AND NEW MARKETS. The market for
Internet video services and for The Debt Registry(TM) are characterized by rapid
technological changes, changing customer requirements, frequent service and
product enhancements and introductions, and emerging industry standards. The
introduction of services or products embodying new technologies and the
emergence of new industry standards can render existing services or products
obsolete and unmarketable. The Company's, Broadband Technologies, and the Debt
Registry's(TM) future success will depend, in part, on its ability to develop
and use new technologies, respond to technological advances, enhance its
existing services and products and, develop new services and products on a
timely and cost-effective basis. There can be no assurance that the Company will
be successful in effectively developing or using new technologies, responding to
technological advances or developing, introducing or marketing service and
product enhancements or new services and products. In addition, the Company may
enter into new markets in connection with enhancing its existing services and
products and developing new services and products. There can be no assurance
that the Company will be successful in pursuing new opportunities or will
compete successfully in any new markets. There can be no assurance that a market
for Internet video delivery services will develop or that any such market, if
developed, will offer significant revenue opportunities for specialized video
delivery service providers such as the Company. The Company's customers have
only limited experience, if any, with Internet video as a marketing,
advertisement and entertainment medium, and neither its customers nor their
advertising agencies have devoted a significant portion of their budgets to
using Internet video. In order for the Company to generate revenues, Web site
owners, advertisers and entertainment companies must direct a portion of their
budgets to Internet-based content delivery, marketing and advertising that
incorporate video. If not, the Company's business, prospects, financial
condition and results of operations from Broadband Technologies, and the Debt
Registry(TM) would be materially adversely affected.

         SUBSTANTIAL COMPETITION. A number of the Company's competitors have
significantly greater financial, technical, administrative, manufacturing,
marketing and other resources than the Company. Some of the our competitors also
offer a wider range of services and products than us and have greater name
recognition and more extensive customer bases than we do. These competitors may
be able to respond more quickly to new or changing opportunities, technologies
and customer requirements than we can and may be able to undertake more
extensive promotional activities, offer more attractive terms to customers and
adopt more aggressive pricing policies than we can. Moreover, current and
potential competitors have established or may establish cooperative
relationships among themselves or with third parties or may consolidate to
enhance their services and products. We expect that new competitors or alliances
among competitors will emerge and may acquire significant market share. The
general financial success of companies within the debt collection and Internet
industries over the past several years has strengthened existing competitors. We
believe that such success will continue to attract new competitors to these
industries, such as software development companies, insurance companies,
providers of online financial and information services and others. While it is
not possible to predict the type and extent of competitive services that other
firms ultimately may offer or whether regulatory or legislative barriers will be
repealed or modified, firms such as the Company may be adversely affected by
such competition.

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The bases of competition in markets for video delivery include transmission
speed, reliability of service, ease of access price/performance, ease-of-use,
content quality, quality of presentation, timeliness of content, customer
support, brand recognition, number of end-users directed to client Web sites,
data reporting and operating experience. Broadband Technologies, Inc. must
overcome significant barriers to entry into the video delivery market as a
result of its limited operation history and relatively untested operating system
on the market. Many of the Broadband Technologies, Inc.'s competitors have
substantially greater financial, technical, managerial and marketing resources,
longer operating histories, greater name recognition more established
relationships with customers and content providers. Such competitors may be able
to devote more resources to developing Internet services or online content than
Broadband Technologies, Inc. Our ability to achieve and maintain a leadership
position in the Internet video delivery market will depend, among other things,
on the Broadband Technologies, Inc.'s ability to provide high-speed,
high-quality video over the Internet, which cannot be assured. There can be no
assurance that the Company or Broadband Technologies, Inc. will be able to
compete effectively with current or future competitors or that the competitive
pressures faced by the Company or Broadband Technologies, Inc. will not have a
material adverse effect on the Company's or Broadband Technologies, Inc.'s
business, financial condition and operating results.

The bases of competition in markets for the Debt Registry(TM) while limited at
this time could change and have material financial advantages over the
Company's. The Debt Registry(TM) must overcome significant barriers to entry
into the financial services market and as a result of its limited operation
history and relatively untested operating system on the market. The Debt
Registry(TM) has no competitors at this time however, in the future competitors
may enter this market and have substantially greater financial, technical,
managerial and marketing resources, longer operating histories, greater name
recognition more established relationships with customers and content providers.
Such competitors may be able to devote more resources to developing Internet
services or online content than the Debt Registry(TM). Our ability to achieve
and maintain a leadership position in the market will depend, among other
things, on the Debt Registry's(TM) ability to provide the system and services to
record all of the debt transactions, which cannot be assured. There can be no
assurance that the Company or the Debt Registry(TM), Inc., will be able to
compete effectively with current or future competitors or that the competitive
pressures faced by the Company or the Debt Registry's(TM) will not have a
material adverse effect on the Company's or the Debt Registry's(TM) business,
financial condition and operating results.

         DEPENDENCE ON COMPUTER SYSTEMS. The Company, Broadband Technologies,
and the Debt Registry(TM), operate through a variety of electronic mediums,
including the Internet, automated touch-tone telephones, and personal computers.
These methods are heavily dependent on the integrity of the electronic systems
supporting them. Extraordinary user volumes could cause the Company's computer
systems to operate at an unacceptably low speed or even fail. Any significant
degradation or failure of the Company's computer systems or any other systems
(e.g. online service providers, record keeping and data processing functions
performed by third parties and third-party software, such as Internet browsers)
could cause customers to suffer delays in receiving services. Such delays could
cause substantial losses for customers and could subject the Company, Broadband
Technologies, or the Debt Registry(TM) to claims from customers for losses,
including litigation claiming fraud or negligence. There can be no assurance
that the Company's, Broadband Technologies, or the Debt Registry's(TM) network
structure will operate appropriately in the event of a computer systems failure
or that, in the event of a tornado, fire or any other natural disaster, power or
telecommunications failure, act of god or war, the Company, Broadband
Technologies, or the Debt Registry(TM) will be able to prevent an extended
computer systems failure. Any computer systems' failure that causes
interruptions in the Company's, Broadband Technologies, or the Debt
Registry's(TM) operations could have a material adverse effect on the Company's,
Broadband Technologies, and the Debt Registry's(TM) business, financial
condition and operating results.

         DEPENDENCE ON INCREASED USAGE AND STABILITY OF THE INTERNET. Critical
issues regarding the stability of the Internet's infrastructure remain
unresolved. The rapid rise in the number of Internet users and increased
transmission of audio, video, graphical and other multimedia content over the
Web has placed increasing strains on the Internet's communications and
transmission infrastructures. Continuation of such trends could lead to
significant deterioration in transmission speeds and reliability of the Internet
and could reduce the usage of the Internet by businesses and individuals. Any
failure of the Internet to support the ever-increasing number of users due to
inadequate infrastructure, or otherwise, could materially and adversely affect
the acceptance of the Company's products and services which would, in turn,
materially and adversely affect the Company's business, prospects, financial
condition and results of operations.

                                       8
<PAGE>

         RISKS ASSOCIATED WITH STRATEGIC ACQUISITIONS AND RELATIONSHIPS. The
Company has pursued and may in the future pursue strategic acquisitions of
complimentary businesses and technologies. Acquisitions entail numerous risks,
including difficulties in the assimilation of acquired operations and products,
diversion of management's attention to other business concerns, amortization of
acquired intangible assets, and potential loss of key employees of acquired
companies. To date, the Company has experienced favorable results in connection
with its strategic acquisitions. Nevertheless, there can be no assurance that
the Company will be able to integrate successfully any operations, personnel,
services or products that might be acquired in the future or that any
acquisition will enhance the Company's business, financial condition or
operating results. The Company also has established a number of strategic
relationships with debt collectors. The Company's strategic relationships have
been entered into only recently and there can be no assurance that any such
relationships will be maintained, and that if such relationships are maintained,
they will be successful.

         DEPENDENCE ON INTELLECTUAL PROPERTY RIGHTS; LACK OF REGISTRATION
THEREOF. The Company's and Broadband Technologies, Inc.'s success and ability to
compete are dependent to a significant degree on its proprietary technology. The
Company, Broadband Technologies, and the Debt Registry(TM) regard their
technology as proprietary and attempt to protect it with patents, copyrights,
trademarks, trade secret laws, restrictions on disclosure and other methods. The
Company, Broadband Technologies, the Debt Registry's(TM) rely primarily on state
and federal copyright, trade secret and trademark common law to protect their
proprietary technology. The Company, Broadband Technologies, and the Debt
Registry(TM) have several unregistered trademarks and various unregistered
copyrights. Broadband Technologies, Inc. has patents pending with respect to its
technology. The Debt Registry(TM) Inc., has patents pending with respect to its
technology. There can be no assurance that any patent will issue from these
applications or that, if issued, any claims allowed will be sufficiently broad
to protect the technology.

In addition, there can be no assurance that any patent will not be challenged,
invalidated or circumvented, or that any rights granted there under would
provide proprietary protection. It is the Company's, Broadband Technologies, and
the Debt Registry's(TM) policy to enter into confidentiality and non-competition
agreements with their associates and generally to control access to and
distribution of its proprietary technology. Notwithstanding the precautions
taken by the Company, Broadband Technologies, and the Debt Registry(TM) to
protect their intellectual property rights, it is possible that third parties
may copy or otherwise obtain and use the Company's, Broadband Technologies, and
the Debt Registry's(TM) proprietary technology without authorization or
otherwise infringe on the Company's, Broadband Technologies, and the Debt
Registry's(TM) proprietary rights. It is also possible that third parties may
independently develop technologies similar to those of the Company, Broadband
Technologies, and the Debt Registry(TM). Policing unauthorized use of the
Company's, Broadband Technologies, and the Debt Registry's(TM) intellectual
property rights may be difficult, particularly because it is difficult to
control the ultimate destination or security of information transmitted over the
Internet. The Company, Broadband Technologies, and the Debt Registry(TM) believe
that due to the rapid pace of technological innovation for Internet products and
services, the Company's, Broadband Technologies, and the Debt Registry's(TM)
ability to establish and maintain a position of technology leadership in the
industry depends more on the skills of its development personnel than upon the
legal protections afforded its existing technology. In addition, the laws of
foreign countries may afford inadequate protection of intellectual property
rights.

         GOVERNMENT REGULATION. The Company is not a credit card issuer. Even
so, certain of its operations may be affected by laws and regulations applicable
to credit card issuers. The relationship of a customer and a creditor is
extensively regulated by federal and state consumer protection and related laws
and regulations. Significant laws include the Fair Debt Collection Practices Act
("FDCPA"), Federal Truth-In-Lending Act, Fair Credit Billing Act, as well as
applicable comparable statutes in the states in which customers reside or in
which the financing institutions who originated the credit account are located.
Failure to comply with applicable federal and state laws and regulations could
have a material adverse effect on the Company. Applicable laws and regulations
may limit the Company's ability to collect amounts owing with respect to
receivables, regardless of any act or omission on the part of the Company. No
assurance can be given that any indemnities received from the financial
institutions who originated the credit account will be adequate to protect the
Company from losses on the receivables or liabilities to customers. Any new laws
or rulings that may be adopted, and existing consumer protection laws may
adversely affect the Company's ability to collect the receivables. In addition,
the failure of the Company and its affiliates to comply with such requirements
could adversely affect the Company's ability to enforce the receivables and
result in liability.

The Company conducts a significant portion of its business through the Internet
and other electronic mediums and intends to expand its use of such mediums. To
date, the use of the Internet has been relatively free from regulatory
restraints. The SEC and certain states, however, are beginning to address the
regulatory issues that may arise in connection with the use of the Internet.
Accordingly, new regulations or interpretations probably will be adopted that
constrain the Company's ability to transact business through the Internet or
other electronic mediums. Any additional regulation of the Company's use of
electronic mediums could render its business or operations more costly, less
efficient, or even impossible.

                                       9
<PAGE>

ITEM 2. PROPERTIES

The Company's principal corporate offices are located at 701 B Street Suite
1775, San Diego, Ca 92101 and consist of approximately 1350 square feet. This
facility is leased on a long-term lease expiring February 2003. The Scottsdale
facility is on a month-to-month lease.

The Company sold its Security Asset Properties subsidiary in 2001. Security
Asset Properties purchased cash-flowing single and multi-family residential
rental properties in San Diego County.

ITEM 3. LEGAL PROCEEDINGS

The Company is not a party to any legal proceedings, other than in the normal
course of business, that would materially affect the Company.

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

Not applicable

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Stock Trading Symbol - SCYA
Stock Exchange Listings - NASDAQ OTC Bulleting Board
Shareholders - At April 30, 2002, there were approximately 480 shareholders
of record.

FISCAL YEAR 2000             HIGH             LOW
----------------             ----             ---

First Quarter                2.75             2.25
Second Quarter               2.00             1.81
Third Quarter                .81              .75
Fourth Quarter               .65              .56

FISCAL YEAR 2001             HIGH             LOW
----------------             ----             ---

First Quarter                .68              .53
Second Quarter               .32              .23
Third Quarter                .15              .10
Fourth Quarter               .08              .07

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

FORWARD-LOOKING STATEMENTS

Certain information set forth herein (other than historical data and
information) may constitute forward-looking statements regarding events and
trends which may affect the Company's future operating results and financial
trends which may affect the Company's future operating results and financial
position. The words "believe," "endeavor," "expect," "anticipate," "estimate,"
"intends," and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks, uncertainties and
assumptions, including, without limitation, the risks and uncertainties
concerning technological changes, increased competition, and general economic
conditions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated, or projected. The Company cautions
potential investors not to place undue reliance on any such forward-looking
statements, all of which speak only as of the date of this Annual Report on Form
10-KSB. It is not possible to foresee or identify all such factors. The Company
disclaims any intention, commitment or obligation to revise or update any
forward-looking statement, or to disclose any facts, events or circumstances
that occur after the date hereof, which may affect the accuracy of any
forward-looking statement.

Overview

As of December 2001, the Company converted approximately $5.2 million of short
term debt into preferred stock with conversion rights at $2.00 per share and
$2.2 million of short term debt into 16 to 24 month notes at an annual interest
rate of 4%. The Company is endeavoring to complete the conversion of the
remaining $400,000 of its short term debt into preferred stock.

A majority of the Company's revenues to date have been from the purchasing and
selling of debt portfolios.

The Company is anticipating that the majority of its future growth will come
from The Debt Registry(TM) and Broadband Technologies. The concentration is on
The Debt Registry(TM) in 2002 and then Broadband Technologies in 2003.

                                       10
<PAGE>

RESULTS OF OPERATIONS

Revenues

Revenues decreased to $151,327 in 2001 from $1,533,504 in 2000 as a result of
the sale of the real estate subsidiary (SAP) in the first quarter of 2001 and
the adverse economic conditions during 2001 which negatively affected Credit
card portfolio activities.

Expenses

Portfolio expenses were essentially unchanged, while general and administrative
expenses were reduced primarily due to the sale of SAP and improved cost
management.

Net loss per share

Net loss per share of $.24 in 2001 decreased from $.61 in 2000 as a result of
the decrease in net loss of $2,303,600 and the increase of approximately nine
million shares in the average number of shares outstanding.

Liquidity and Capital Resources

The Company plans to continue funding its operations from the proceeds of
additional debt and equity capital offerings. There is no assurance that
management will be successful in these endeavors.

As of December 2001, the Company converted approximately $5.2 million of its
short-term debt into preferred stock with conversion rights at $2.00 per share
and $2.2 million of the short-term debt into 16 to 24 months obligations at an
annual interest rate of 4%. The Company is endeavoring to complete the
conversion of the remaining $400,000 short term debt into preferred stock.

ITEM 7. FINANCIAL STATEMENTS

See Section F


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

On June 26, 2001, Security Asset Capital Corporation and the registrant's
previous independent auditors, PANNELL KERR FORSTER (PKF) terminated the
client-auditor relationship. The reports of PKF on the Registrant's financial
statements for the past two fiscal years contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles except that the report for the year ended
December 31, 2000 include a paragraph expressing substantial doubt as to the
Company's ability to continue as a going concern. During the Registrant's two
most recent fiscal years and through the date of this report, there have been no
disagreements with PKF on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of PKF would have caused PKF
to make reference thereto in their report on financial statements. During the
two most recent fiscal years and through June 26, 2001, there have been no
reportable events as defined in Regulation S-K Item 304 (a) (1) (v)).

On July 19, 2001, the Registrant engaged Hurley & Company as its new independent
auditors. During the two most recent fiscal years and through today's date, the
Registrant has not consulted with Hurley & Company on items which (1) are
described in Regulation S-K Item 304(a)(2)(i) or (2) concerned the subject
matter of a disagreement or reportable event with the former accountants (as
described in Regulation S-K Item 304(a)(2)(ii)).

PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth information about our directors and officers.

DAVID R. WALTON, 53, has been the Chairman of the Board and Chief Executive
Officer of the Company since 1993. From 1987 until 1993, Mr. Walton was
Executive Vice President of El Dorado Asset Management, a financial services
firm, and President of Desert Financial Services, Inc., a company that developed
over 3,000 condominiums in California. Mr. Walton recently was responsible for
restructuring most of the Company's debt into equity and long term low interest
obligations. Mr. Walton received his Juris Doctorate from California Western
School of Law in 1976.

DARRELL MUSICK, 66, has been the President of the Company since 1993. Since
1997, Mr. Musick has been on the Board of Directors of the Debt Buyers
Association, and maintains direct relationships with credit grantors from the
credit card, financing, banking and commercial industries. Previously, Mr.
Musick was Regional Manager of Fedmart, now known as Costco, where he worked
from 1958 through 1964. From 1964 to 1982, he was General Manager of Crocker
Capital Corporation, an investment company. Mr. Musick has been treasurer of the
nationwide "Debt Buyers Association" for the past two years.

                                       11
<PAGE>

DANIEL J. HILL, 49, has been a Director of the Company since 1998. Mr. Hill has
over 20 years management experience in the high technology electronics business.
>From 1992 until 1995, Mr. Hill was the Chief Executive Officer of Micro
Component Technology, Inc. (MCTI). Since 1995, Mr. Hill has been the Executive
Director, Semiconductor Industry at PriceWaterhouseCoopers. From 1980 until
1992, Mr. Hill was Vice President and Division General Manager of National
Semiconductor, where he was responsible for over 6,000 employees. Mr. Hill is an
industry speaker and publisher in the semi-conductor field. He has served on 20
different boards of directors of technology companies in eight countries.

RICHARD GARTRELL, 53, has been the Chief Financial Officer of the Company since
1998. Mr. Gartrell was a Senior Tax Accountant at Arthur Andersen & Co from 1974
until 1978. He became a Certified Public Accountant in the State of Colorado in
1975. From 1981 until 1989, Mr. Gartrell was the Corporate Vice President of
Operations and Finance of the Bill L. Walters Company, Inc., with
responsibilities including financial reporting and management of 110 diverse
entities. From 1991 and 1998, Mr. Gartrell was an independent consultant to
various companies in the real estate, investment, banking and online business.
Mr. Gartrell is a recognized expert in the preparation and implementation of
project feasibility plans, marketing, financial controls, loan negotiations and
joint venture structuring. Mr. Gartrell has worked extensively as a forensic
accountant in civil and family law litigation and has been qualified in the
California court system as an expert witness in real estate, finance, and
accounting.

DAVID S. WALTON, 75, has been the Secretary, Treasurer and a Director of the
Company since 1996. Mr. Walton is David R. Walton's father. Mr. David S. Walton
has substantial experience in internal controls and auditing. Mr. Walton was
President of Transeastern Commodities, Inc., as well as the internal auditor and
a consultant for James Copley of the Copley newspaper chain. Additionally, Mr.
Walton consulted for the Loomis Armored Car and Courier Services, the James
White Oil Company, and the Eleventh Naval Headquarters in San Diego. Mr. Walton
is the founder and an owner of the San Diego Athletic Club.

Michael Seigfried, 59 has been the President of the Debt Registry(TM) since
December, 2001 His career includes executive positions in sales, marketing and
operations at IBM, sales and operations at ROLM/Siemens, global operations at
MasterCard and sales and marketing at MicroAge. Mr. Seigfried has very extensive
experience in sales and marketing, computer systems and information management,
telecommunications, purchasing and inventory control, customer service,
corporate operations and Internet applications. Mr. Siegfried was Senior Vice
President - MasterCard International Corporate Services, and managed a budget of
$300 million, 2 major locations, 28 smaller domestic and international
locations, a total of one million square feet of office space. At ROLM Company
(IBM and Siemens Joint Venture) Mr. Seigfried was the director of Corporate
Marketing Operations and Quality where he managed a budget of $100 million, all
corporate operations and internal systems for 2 major locations, 100 smaller
domestic locations, a total of two million square feet of office space and at
IBM, Mr. Seigfried was Director of Quality - U.S. Sales and Marketing Division.
Mr. Seigfried has an excellent record of building successful and profitable
organizations.

The Directors and Executive officers named above will serve until the next
annual meeting of the shareholders of the Company in the year 2001. Directors
will be elected for one-year terms at each annual shareholder's meeting.
Officers hold their positions at the appointment of the Board of Directors.
Each Director holds office until his successor is elected and qualified or until
his earlier resignation in the manner provided in the bylaws of the Company.

                                       12
<PAGE>

Effective March 2001, the Board accepted the resignation of Daniel Smith and
Daniel Dallenbach from the Board of Directors. Both Mr. Dallenbach and Mr. Smith
resigned when Security Asset Properties was sold and their respective time was
needed to be spent elsewhere. Effective September 28, 2001, the board of
Directors also accepted the resignation of Randall Johnson and on December 20,
2001 the board of directors accepted the resignation of Richard Wensel in order
to pursue his fulltime efforts in facilitating the Debt Registry(TM).

The Board of Directors has established an Audit Committee, consisting of Mr.
David S. Walton, Mr. Gartrell, and Mr. Musick and a Compensation Committee,
consisting of Mr. David R. Walton and Mr. Musick. The Audit Committee reviews
the Company's independent auditors, the scope and timing of the audit services,
and other services they are asked to perform, the Auditor's Report on the
Company's financial statements following completion of the audit, and the
Company's policies and procedures, with respect to internal accounting and
financial controls. In addition, the Audit Committee makes annual
recommendations to the Board of Directors for the appointment of independent
auditors for the ensuing year. The Compensation Committee reviews and recommends
to the Board of Directors the compensation and benefits of all officers of the
Company and reviews general policy matters relating to compensation and stock
issuance and benefits of employees and consultants of the Company.

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth all annual and long-term compensation for
services in all capacities to the Company in respect of each of the individuals
who were, as of December 31, 2001, considered executive officers.

David R. Walton      53       CEO, Director since 1993
Darrell G. Musick    66       President, Director Since 1993
David S. Walton      76       Secretary, Director Since 1999
Richard Gartrell     53       CFO, Since 1998


<TABLE>
<CAPTION>
                                           SUMMARY COMPENSATION TABLE
                                   ANNUAL                                 LONG TERM
                                C0MPENSATION                            COMPENSATION
NAME AND PRINCIPAL POSITION         YEAR           SALARY & FEES      RESTRICTED STOCK        SECURITIES
                                                                           AWARDS         UNDERLYING OPTIONS
<S>                                 <C>               <C>                 <C>                   <C>
David R Walton                      2001              $23,565             $100,000                0
 Chief Executive Officer            2000              $66,250             $273,593                0

Darrell Musick                      2001              $18,500             $100,000                0
 President                          2000              $62,500                    0                0

Richard Gartrell                    2001                  0                $56,000           $7,407
 Chief Financial Officer            2000              $10,000             $382,500                0

David S Walton                      2001              $21,000             $100,000                0
 Secretary                          2000              $35,750             $260,312                0
</TABLE>

                                       13
<PAGE>

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information about our directors and executive
officers.

                          NAME OF             SHARES OF
    TITLE OF CLASS    BENEFICIAL OWNER       COMMON STOCK    PERCENT OF CLASS(h)
    --------------    ----------------       ------------    -------------------

   Common             Cede & Company(a)        6,877,418           24.40%

                      Darrell Musick(b)        2,750,000            9.57%

                      David R. Walton(c)       2,275,000            8.07%

                      David S. Walton(d)       1,575,000            5.59%
Directors and
Officers as a
Group                                          6,550,000           23.23%

(a) Cede & Company is a holding company for private investors. Cede & Company
does not hold any shares of the Company's Common Stock for the benefit of any of
the Company's officers or directors.

(b) Mr. Musick and his wife, Marie A. Musick, are the beneficial owners of Tonda
Corporation, a Nevada corporation, that owns 1,400,000 shares of the Company's
Common Stock. Although Mr. Musick disclaims beneficial ownership of more than
the shares listed, his son, Daniel Warren Musick, owns 883 shares, his mother,
Esther G. Musick, owns 333 shares, and his wife, Marie A. Musick, owns 333
additional shares.

(c) Mr. David R. Walton is one of the beneficial owners of Jade Corporation, a
Nevada corporation, that owns 1,100,000 shares of the Company's Common Stock.
Although Mr. Walton does not beneficially own more than the shares listed, his
brother, Jeffrey Walton, his sister, Christina Walton, are also beneficial
owners of Jade Corporation.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not applicable


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) Index to Exhibits

        1       Certificate of Incorporation of the Company - Nevada

        2       Bylaws of the Company

        3       Stock Option Plan (1997)

        (b) Report on Form 8-K - None.

                                       14
<PAGE>

                                   SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                     Security Asset Capital Corporation,
                                     a Nevada corporation


DATED: June 5, 2002                  /s/ DAVID R. WALTON
                                     ------------------------------------------
                                     David R. Walton, Chief Executive Officer


                                       15
<PAGE>

                       SECURITY ASSET CAPITAL CORPORATION
                                AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS
                        AND INDEPENDENT AUDITORS' REPORTS

                 For The Years Ended December 31, 2001 and 2000

                                 TABLE OF CONTENTS

INDEPENDENT AUDITORS'REPORTS                                 F-1 - F-1A

FINANCIAL STATEMENTS

      Consolidated Balance Sheet                             F-2 - F-3

      Consolidated Statements of Operations                        F-4

      Consolidated Statements of Shareholders' Equity        F-5 - F-6

      Consolidated Statements of Cash Flows                  F-7 - F-8

      Notes to Consolidated Financial Statements            F-9 - F-25


<PAGE>

                          INDEPENDENT AUDITORS' REPORT

Board of Directors
Security Asset Capital Corporation

We have audited the accompanying consolidated balance sheet of Security Asset
Capital Corporation and Subsidiaries (the "Company"), as of December 31, 2001,
and the related consolidated statements of operations, shareholders' equity, and
cash flows for the year then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit. The
Company's consolidated financial statements for the year ended December 31, 2000
were audited by other auditors whose report, dated April 12, 2001, expressed an
unqualified opinion on those statements. The consolidated financial statements
for the year ended December 31, 2000 reflect total revenues and net loss of
$1,952,256 and $7,429,236, respectively, of the related totals. The other
auditors' report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for such prior period, is based solely on the
report of such other auditors.

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

In our opinion, based on our audit and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Security Asset Capital Corporation
and Subsidiaries as of December 31, 2001, and the results of its operations and
its cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has incurred significant losses
from operations and its largest assets are not currently generating revenue. The
Company's revenues are not sufficient to meet its near term working capital
requirements. These factors raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 2. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

Hurley & Company

Granada Hills, California
May 10, 2002

                                       F-1

<PAGE>

                          INDEPENDENT AUDITORS' REPORT



To the  Shareholders
Security Asset Capital Corporation and Subsidiaries
San Diego, California

We have audited the consolidated statements of operations, shareholders'
(deficit) equity, and cash flows for the year ended December 31, 2000 of
Security Asset Capital Corporation and Subsidiaries (the "Company"). These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated results of operations and
cash flows for the year ended December 31, 2000 of Security Asset Capital
Corporation and Subsidiaries, in conformity with accounting principles generally
accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations,
significant negative working capital and no guaranteed access to capital
resources. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.




San Diego, California                            PANNELL KERR FORSTER
April 12, 2001                                   Certified Public Accountants
                                                 A Professional Corporation

                                      F-1a
<PAGE>


               SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                December 31, 2001

                                     ASSETS
                                     ------

Current assets:

      Loan portfolio assets                                     $    400,000
      Related party receivables - directors                           21,789
      Prepaid expenses and other current assets                       67,200
                                                                -------------
            Total current assets                                     488,989

Loan portfolio assets, net of current portion                        400,000

Long-term note receivable, related parties                         1,200,000

Furniture and equipment, net of accumulated depreciation              67,201

Patent and patents pending                                         1,552,500

The Debt Registry domain names                                       900,628
                                                                -------------

            Total assets                                        $  4,609,318
                                                                =============

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

                                      F-2

<PAGE>

               SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                December 31, 2001

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                 ----------------------------------------------

Current liabilities:
      Bank overdraft                                            $     25,963
      Accounts payable                                               422,251
      Accrued expenses and other liabilities                         158,573
      Notes payable                                                  968,154
                                                                -------------
        Total current liabilities                                  1,574,941

Notes payable, net of current portion                              1,841,117

Deferred gain                                                        382,190
                                                                -------------
        Total liabilities                                          3,798,248
                                                                -------------

Commitments and contingencies                                            -

Shareholders' equity:
      Preferred stock, par value $0.001 per share,
        20,000,000 authorized, 2,579,154 issued
        and outstanding, total liquidation preference
        $5,158,308                                                     5,158
      Common stock, par value $0.001 per share,
        100,000,000 shares authorized; 28,196,710
        shares issued and outstanding                                 28,197
      Additional paid-in capital                                  16,069,116
      Accumulated deficit                                        (15,082,801)
      Less treasury stock at cost, (175,000 shares)                 (208,600)
                                                                -------------
        Total shareholders' equity                                   811,070
                                                                -------------
        Total liabilities and shareholders' equity              $  4,609,318
                                                                =============

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

                                      F-3

<PAGE>

               SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 For the Years Ended December 31, 2001 and 2000

                                                     2001           2000
                                                 -------------  -------------
Revenues:
   Portfolio                                     $    151,327   $  1,533,504
                                                 -------------  -------------

Expenses:
   Portfolio                                        1,202,473      1,251,527
   General and administrative                       2,856,152      5,235,820
                                                 -------------  -------------

   Total expenses                                   4,058,625      6,487,347
                                                 -------------  -------------

      Loss from continuing operations              (3,907,298)    (4,953,843)
                                                 -------------  -------------
Other income (expense):
   Other income                                        14,526         29,280
   Loss on sale of assets                                 -          (84,296)
   Interest expense (including amortization of
     deferred financing costs of $273,160 and
     $1,079,154 in 2001 and 2000, respectively)    (1,072,699)    (2,041,806)
   Other expenses                                         -         (135,468)
   Impairment of acquired goodwill                   (200,000)      (675,000)
                                                 -------------  -------------

   Total other expense                             (1,258,173)    (2,907,290)
                                                 -------------  -------------

      Loss before discontinued operations
         and income tax benefit                    (5,165,471)    (7,861,133)

Income from discontinued operations, net of
  income taxes of $0                                   39,835        181,897
                                                 -------------  -------------

      Loss before income tax benefit               (5,125,636)    (7,679,236)

Income tax benefit                                        -          250,000
                                                 -------------  -------------

Net loss                                         $ (5,125,636)  $ (7,429,236)
                                                 =============  =============

Basic and diluted net loss per share             $      (0.24)  $      (0.61)
                                                 =============  =============
Weighted average number of shares
  outstanding, basic and diluted                   21,328,000     12,247,066
                                                 =============  =============

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

                                      F-4

<PAGE>
<TABLE>

                              SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                For the Years Ended December 31, 2001 and 2000
<CAPTION>

                                    Common Stock        Treasury Stock      Preferred Stock     Additional
                               -------------------- --------------------- -------------------   Paid-In    Accumulated
                                  Shares      Amount   Shares      Amount    Shares     Amount      Capital      Deficit      Total
                               ----------  -------- ---------  ---------- -------- ---------- ------------ ------------ -----------
<S>                            <C>         <C>        <C>      <C>              <C><C>        <C>          <C>          <C>
Balance, January 1, 2000       10,826,000  $ 10,826        --  $       --       -- $       -- $  3,422,274 $ (2,527,929)$   905,171

Issuances of common stock:

  Consulting services:

      February and March 2000     331,500       332        --          --       --         --      625,269           --     625,601

      April 2000                  200,000       200        --          --       --         --      382,300           --     382,500

      July and August 2000        237,500       237        --          --       --         --      255,907           --     256,144

      October, November and
        December 2000           1,555,000     1,555        --          --       --         --      941,414           --     942,969

   Acquisition of subsidiary,
      Universal View Corp.        400,000       400        --          --       --         --      899,600           --     900,000

   Acquisition of subsidiary,
      The Debt Registry         1,100,000     1,100        --          --       --         --      899,528           --     900,628

   Settlement of legal dispute     75,000        75        --          --       --         --      135,394           --     135,469

   Services of executive officers 750,000       750        --          --       --         --      533,156           --     533,906

   Various consulting services     98,510        98        --          --       --         --       78,872           --      78,970

   Issuance of common stock
   options for consulting services     --        --        --          --       --         --      572,342           --     572,342

   Purchase of treasury shares         --        --   328,850    (523,085)      --         --           --           --    (523,085)

Net loss for the year ended
   December 31, 2000                   --        --        --          --       --         --           --   (7,429,236) (7,429,236)
                               ----------  -------- ---------  ---------- -------- ---------- ------------ ------------ -----------
Balance, December 31, 2000     15,573,510  $ 15,573   328,850  $ (523,085)      -- $       -- $  8,746,056 $ (9,957,165)$(1,718,621)

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

                                                     F-5

<PAGE>

                              SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                For the Years Ended December 31, 2001 and 2000

                                    Common Stock        Treasury Stock      Preferred Stock    Additional
                               -------------------- -------------------- --------------------   Paid-In    Accumulated
                                 Shares     Amount   Shares     Amount     Shares     Amount    Capital      Deficit      Total
                               ----------  -------- --------- ---------- ---------- --------- ------------ ------------ -----------

Issuances of common stock:

  Consulting services           9,180,000  $  9,180  (153,850) $ 314,485         -- $      -- $  1,789,080 $         -- $ 2,112,745

  Interest and financing costs    143,200       144        --         --         --        --       35,456           --      35,600

  Services of
    executive officers          3,000,000     3,000        --         --         --        --      177,000           --     180,000

  Issued in acquisition
   of Universal View              300,000       300        --         --         --        --      168,750           --     169,050

Issuance of preferred stock
 in conversion of notes payable        --        --        --         --  2,579,154     5,158    5,152,774           --   5,157,932

Net loss for the year ended
  December 31, 2001                    --        --        --         --         --        --           --   (5,125,636) (5,125,636)
                               ----------  -------- --------- ---------- ---------- --------- ------------ ------------ -----------

Balance, December 31, 2001     28,196,710  $ 28,197   175,000 $ (208,600) 2,579,154 $   5,158 $ 16,069,116 $(15,082,801)$   811,070
                               ==========  ======== ========= ========== ========== ========= ============ ============ ===========
</TABLE>

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

                                                     F-6

<PAGE>
<TABLE>

               SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 For the Years Ended December 31, 2001 and 2000
<CAPTION>

                                                          2001           2000
                                                      -------------  -------------
<S>                                                   <C>            <C>
Cash flows from operating activities:
   Net loss                                           $ (5,125,636)  $ (7,429,236)
   Adjustments to reconcile net loss to net
     cash flows used in operating activities:
       Depreciation and amortization                        11,169        261,471
       Amortization of deferred financing costs            273,160      1,079,154
       Loss on sale of property and equipment                  -           84,296
       Increase in accrued interest on notes payable        35,600        375,829
       Issuances of common stock for settlement
          of legal disputes                                    -          135,469
       Issuances of common stock for consulting
          and other services                             1,798,260      2,286,184
       Issuances of common stock for consulting
          and other services of executive officers         180,000        533,906
       Impairment of acquired goodwill                     200,000        675,000
       Issuance of treasury stock for services             314,485            -
       Issuance of common stock for acquisition
            costs expensed                                 169,050            -
       Issuance of common stock options for
          consulting and other services                        -          572,342
   Changes in operating assets and liabilities:
    (Increase) decrease in:
       Cash in transit                                         -        1,649,972
       Loan portfolio assets                             1,149,598      1,294,266
       Related party receivables - directors                24,500       (213,361)
       Prepaid expenses and other current assets           (42,784)           -
     Increase (decrease) in:
       Accounts payable, accrued expenses and
         other liabilities                                 230,313     (1,530,095)
       Deferred income taxes payable                           -         (250,000)
                                                      -------------  -------------

       Net cash flows used in operating activities        (782,285)      (474,803)
                                                      -------------  -------------

Cash flows from investing activities:
   Acquisition/additions to rental properties                  -          (46,704)
   Purchase of property and equipment                       (6,263)       (32,698)
   Proceeds from sale of rental properties, net            250,000        837,276
   Acquisition of subsidiary                                   -         (125,000)
                                                      -------------  -------------

      Net cash flows provided by investing activities      243,737        632,874
                                                      -------------  -------------

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

                                      F-7

<PAGE>

               SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                 For the Years Ended December 31, 2001 and 2000

                                                          2001           2000
                                                      -------------  -------------
Cash flows from financing activities:
   Increase (decrease) in bank overdraft              $     18,921   $     (7,042)
   Decrease in deferred financing costs                        -         (948,067)
   Purchase of treasury stock                                  -         (314,480)
   Repayments of notes payable                                 -       (6,915,548)
   Proceeds from borrowings - notes payable                516,184      8,654,151
   Repayments of long-term debt                                -         (653,222)
                                                      -------------  -------------

      Net cash flows provided by (used in)
             financing activities                          535,105       (184,208)
                                                      -------------  -------------

Net decrease in cash and cash equivalents                   (3,443)       (26,137)

Cash and cash equivalents at beginning of year               3,443         29,580
                                                      -------------  -------------

Cash and cash equivalents at end of year              $        -     $      3,443
                                                      =============  =============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the year for:
      Interest                                        $        -     $    622,391
                                                      =============  =============
      Income taxes                                    $        -     $        -
                                                      =============  =============

Supplemental disclosure of non-cash investing and financing activities:

      Issuance of common stock for patent and patents
            pending technology, other technology and the
            acquisition of Universal View Corporation and
            The Debt Registry                         $        -     $  1,800,628
                                                      =============  =============

      Acquisition of treasury stock in exchange for
            note receivable - executive officer       $        -     $    208,605
                                                      =============  =============

      Conversion of notes payable to preferred stock  $  5,157,932   $        -
                                                      =============  =============

      Note receivable from related party in
            in disposition of operations              $  1,200,000   $        -
                                                      =============  =============
</TABLE>

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

                                      F-8

<PAGE>

               SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------------

ORGANIZATION AND BUSINESS

         Security Asset Capital Corporation ("SACC"), a Nevada corporation,
         traded under the symbol ("SCYA"), operates through the following wholly
         owned subsidiaries:

         Security Asset Management, Inc. ("SAM"), a California corporation,
         which, together with SACC, acquires, manages, collects and markets
         distressed consumer credit portfolios for their own account and third
         parties.

         Security Asset Properties, Inc. ("SAP"), a Nevada corporation, owns and
         operates fourteen income producing residential properties in San Diego
         County, California. This corporation, formerly known as Four D
         Corporation, was acquired in a stock swap on October 31, 1999, whereby
         SACC acquired 100% of the outstanding common stock of Four D
         Corporation in exchange for 900,000 shares of Security Asset Capital
         Corporation's common stock. This transaction has been recorded as a
         purchase. The excess fair value of assets acquired over liabilities
         assumed of $1,067,810 was allocated to rental real estate. The results
         of operations of the acquired business have been included in Security
         Asset Capital Corporation and subsidiaries' consolidated results of
         operations from the date of acquisition. SAP was sold to officers of
         SAP in March 2001. (See Note 4)

         Broadband Technologies, Inc. ("Tech"), a Nevada corporation, was formed
         in 1999. Tech was capitalized by the contribution from SACC of a patent
         and certain patents pending and licensing for direct on-line full
         screen video technology which was acquired for cash and stock in 1999
         by SACC. Tech will continue development of its capability for video
         streaming on-line and enhanced distributive database management on the
         Internet. There has been no activity within this segment in 2000 or
         2001.

         The Debt Trader holds certain technology and rights related to an
         online market place for buyers and sellers of distressed debt
         portfolios, internally known as theDebtTrader.com.

         The Debt Registry, a Nevada corporation has contracted with Expanets,
         Inc. to develop the software system which applies to the registration
         and tracking of individual debt accounts sold by lending institutions
         to third parties. The CUSIP type tracking system will bring order and
         accountability to the buying and selling of debt portfolios in a manner
         similar to what the Department of Motor Vehicles does for the
         automotive industry. The Company has had tentative agreements for over
         a year with five major banks and companies to require the registration
         of their credit card accounts when they are sold to third parties.
         Management anticipates The Debt Registry will be operating prior to the
         end of the second quarter of 2002.

                                      F-9

<PAGE>

               SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
---------------------------------------------------------

         Universal View Corp., an inactive reporting public shell, was
acquired in 2000 for $1,194,050, consisting of $125,000 cash, 400,000
shares of the Company's common stock in 2000 and 300,000 shares in
2001. Universal View Corp. had no operations in 2001 and 2000.

PRINCIPLES OF CONSOLIDATION

         The accompanying financial statements consolidate the accounts of
         Security Asset Capital Corporation and its wholly-owned subsidiaries,
         Security Asset Management, Inc., Security Asset Properties, Inc.,
         (prior to its sale in March 2001) Broadband Technologies, Inc., the
         DebtTrader.com and The Debt Registry. All significant intercompany
         accounts and transactions have been eliminated in consolidation.

FINANCIAL INSTRUMENTS

         The carrying amounts reported in the consolidated balance sheet for
         notes receivable, bank overdraft, accounts payable, loan sales payable
         to third parties, loan portfolio payable, accrued expenses and notes
         payable approximate fair value due to the immediate short-term maturity
         of these financial instruments. The fair value of the Company's
         long-term obligations approximates the carrying amount based on the
         current rates offered to the Company for debt of the same remaining
         maturities with similar collateral requirements.

FAIR VALUE OF LOAN PORTFOLIO ASSETS

         The fair value of the Loan Portfolio Assets as evaluated by management
         is estimated by using available market information and other valuation
         methodologies. Management estimates the fair value of the Company's
         Loan Portfolio Assets to exceed the related book value.

         Management estimates that the gross margin on resales of Loan Portfolio
         Assets approximates 10% and that the gross potential collections from
         the Loan Portfolio Assets held as of December 31, 2001 will be in the
         range of $2,000,000 to $3,000,000, with estimated related collection
         costs of approximately 50% to 60%. These assets are carried on the
         books of the Company at $800,000 at December 31, 2001.

CASH AND CASH EQUIVALENTS

         The Company considers all cash accounts, which are not subject to
         withdrawal restrictions or penalties, and certificates of deposit and
         money market funds purchased with an original maturity of three months
         or less to be cash equivalents. The Company maintains its primary
         checking and savings accounts at two financial institutions located in
         California. Accounts at these banks are insured by the Federal Deposit
         Insurance Corporation (FDIC) up to $100,000.

                                      F-10

<PAGE>

               SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
---------------------------------------------------------

LOAN PORTFOLIO ASSETS AND REVENUE RECOGNITION

         Loan Portfolio Assets ("Portfolio Assets") represent liquidating loan
         portfolios of delinquent accounts which have been purchased by SACC for
         resale and collection and are stated at cost. The cost of the Loan
         Portfolio Assets are the actual dollars spent for the purchase of the
         portfolio, including related brokerage commissions, if any.

         Loan Portfolio Asset costs are written off by a percentage of cash
         collections on a portfolio-by-portfolio basis. Management had estimated
         that Portfolio Assets in collection would realize gross collections
         equal to approximately three times the purchase price of the Portfolio
         Assets. The Company, had written off one dollar of cost of Portfolio
         Assets for every three dollars in gross collection. In 2001, the
         estimate of future collection was reduced such that the Company will
         now write off $0.90 of cost for every dollar of gross collection.

         Certain Loan Portfolio Assets are sold in part or in whole by the
         Company. Gains and losses from the disposition of all or part of Loan
         Portfolio Assets are recorded as appropriate when Loan Portfolio Assets
         are sold. The amount of the portfolio cost written off is a percentage
         of the amount sold using the experiences, if any, in sales of the
         specific loan portfolio assets. As a number of sales have and will
         occur, with any one portfolio, various sales prices are considered in
         determining the write off of the portfolio costs against the sales
         proceeds.

         The Company considers a sale to have taken place when there has been a
         transfer of Loan Portfolio Assets and where the Company surrenders
         control over the Loan Portfolio Assets to the extent that consideration
         other than beneficial interests in the transferred Loan Portfolio
         Assets is received in exchange for the Loan Portfolio Assets.

FURNITURE AND EQUIPMENT

         Furniture and equipment is recorded at cost. Depreciation is calculated
         on the straight-line basis over an estimated useful life of five years.

DEFERRED FINANCING COSTS

         Deferred financing costs represent debt financing costs which have been
         capitalized and are being amortized on a straight-line basis over the
         terms of the respective loans.

                                      F-11

<PAGE>

               SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
-----------------------------------------------------------

NET LOSS PER SHARE

         Basic net loss per share excludes dilution and is computed by dividing
         net loss by the weighted average number of common shares outstanding
         during the reported periods. Diluted net loss per share reflects the
         potential dilution that could occur if preferred stock were converted,
         and stock options and other commitments to issue common stock were
         exercised. During the years ended December 31, 2001 and 2000, options
         to purchase 1,980,000 and 1,780,000 common shares, respectively, were
         anti-dilutive and have been excluded from the weighted average share
         computation. The 2,579,154 shares of preferred stock outstanding at
         December 31, 2001 are also anti-dilutive and not included in the
         computation.

INCOME TAXES

         The Company accounts for income taxes in accordance with SFAS No. 109
         "Accounting for Income Taxes." Under this method, deferred income taxes
         are recognized for the tax consequences of "temporary differences" by
         applying enacted statutory tax rates applicable to future years to
         differences between the financial statement carrying amounts and the
         tax bases of existing assets and liabilities. Deferred tax assets are
         reduced by a valuation allowance when, in the opinion of management, it
         is more likely than not that some portion or all of the deferred tax
         assets will not be realized.

STOCK BASED COMPENSATION

         The Financial Accounting Standards Board (FASB) issued Statement of
         Financial Accounting Standards (SFAS) No. 123, "Accounting for
         Stock-Based Compensation." This statement encourages, but does not
         require, companies to recognize compensation expense for grants of
         stock, stock options, and other equity instruments based on a
         fair-value method of accounting.

         Companies that do not choose to adopt the expense recognition rules of
         SFAS No. 123 will continue to apply the existing accounting rules
         contained in Accounting Principles Board Opinion (APB) No. 25, but will
         be required to provide proforma disclosures of the compensation expense
         determined under the fair-value provisions of SFAS No. 123. APB No. 25
         requires no recognition of compensation expense for most of the
         stock-based compensation arrangements provided by the Company, namely,
         broad-based employee stock purchase plans and option grants where the
         exercise price is equal to the market price at the date of the grant.
         The Company has adopted the disclosure provisions of SFAS No. 123,
         effective January 1, 1998. The Company has opted to follow the
         accounting provisions of APB No. 25 for stock-based compensation and to
         furnish the pro forma disclosures required under SFAS No. 123.
         (See Note 11)

TREASURY STOCK

         The Company has elected to record treasury stock at cost in accordance
         with APB No. 6.

                                      F-12

<PAGE>

               SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
-----------------------------------------------------------

PREFERRED STOCK

         The Company has authorized 20,000,000 shares, $0.001 par value of
         preferred stock. The preferred stock has a $2.00 per share liquidation
         preference. The preferred shares issued in conversion of the investor
         notes were valued at $2.00 per share. The converting shareholders have
         the right to convert their preferred shares to common stock at $2.00
         per share anytime between September 30, 2002 and August 30, 2003. The
         preferred stock will be automatically converted to common stock upon
         closing of a public offering with a value of at least $20,000,000.

USE OF ESTIMATES

         The preparation of these consolidated financial statements in
         conformity with accounting principles generally accepted in the United
         States of America requires management to make estimates and assumptions
         that affect the 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. Significant estimates include the
         estimation of the fair value of rental real estate acquired and the
         expected future return on investments in Broadband Technologies, Inc.
         and The Debt Registry. Expected collections on the loan portfolio and
         the ultimate collectibility of the note due from the sale of SAP are
         also significant estimates. Actual results could materially differ from
         those estimates.

COMPREHENSIVE INCOME

         The FASB has issued Statement of Financial Accounting Standards (SFAS)
         No. 130, "Reporting Comprehensive Income." This statement establishes
         standards for reporting and display of comprehensive income and its
         components. The Company adopted this statement effective January 1,
         1998. For the years ended December 31, 2001 and 2000, the Company had
         no material items that were required to be recognized as components of
         comprehensive income.

DERIVATIVE INSTRUMENTS

         In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
         Instruments and Hedging Activities - Deferral of the Effective Date of
         FASB Statement No. 133," ("SFAS No. 137"). SFAS No. 137 delayed the
         effective date of implementation of SFAS No. 133 for one year and made
         SFAS No. 133 effective for all fiscal quarters of all fiscal years
         beginning after June 15, 2000. Retroactive application to periods prior
         to adoption is not allowed. The Company adopted SFAS No. 137 in the
         first quarter of 2001 and it has not had a material impact on the
         consolidated financial statements.

INTANGIBLE ASSETS

         Prior to July 1, 2001, the cost of acquired businesses in excess of the
         fair value of net assets acquired was recorded as goodwill and
         amortized on the straight-line method over periods not exceeding forty

                                      F-13

<PAGE>

               SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
---------------------------------------------------------

         years. Pursuant to the new accounting standards issued in July 2001,
         effective July 1, 2001, goodwill recorded in connection with
         acquisitions consummated prior to that date continue to be amortized
         through December 31, 2001 and will not be amortized thereafter.
         Goodwill recognized in connection with acquisitions consummated after
         June 30, 2001 will not be amortized. Other intangible assets (primarily
         patents and patents pending) are recorded at fair market value at the
         date of acquisition based upon appraisals obtained by management and
         will be amortized on the straight-line method over periods not
         exceeding fifteen years when the products pertaining to the intangible
         assets are available for use by outside parties.

IMPAIRMENT OF ASSETS

         In accordance with SFAS No. 121 "Accounting for Impairment or Disposal
         of Long-Lived Assets" ("SFAS 121"), the Company reviews the
         recoverability of its long-lived assets, including goodwill and
         intangible assets, when events or changes in circumstances occur that
         indicate that the carrying value of the asset may not be recoverable.
         Evaluation of possible impairment is based on the Company's ability to
         recover the asset from the expected future pretax cash flows
         (undiscounted and without interest charges) of the related operations.
         If the expected undiscounted pretax cash flows are less than the
         carrying amount of such asset, including any goodwill associated with
         the asset, an impairment loss is recognized for the difference between
         the estimated fair value and carrying amount of the asset (Note 6).

SEGMENT REPORTING

         The Company currently operates in three reportable business segments.
         Substantially all of the Company's services are provided within the
         United States, and substantially all of the Company's assets are
         located within the Unites States. No one customer accounted for ten
         percent or more of net revenues in 2001 or 2000.

RECENT PRONOUNCEMENTS

         In July 2001, the Financial Accounting Standards Board ("FASB") issued
         SFAS No. 141, "Business Combinations" ("SFAS 141"), which requires
         business combinations initiated after June 30, 2001 to be accounted for
         using the purchase method of accounting, and SFAS No. 142, "Goodwill
         and Other Intangible Assets" ("SFAS 142"), which broadens the criteria
         for recording intangible assets separate from goodwill. SFAS 142
         requires the use of a non-amortization approach to account for
         purchased goodwill and certain intangibles. Under this approach,
         goodwill and certain intangibles will not be amortized into results of
         operations, but instead will be reviewed for impairment and an
         impairment charge will be recorded in the periods in which the recorded
         carrying value of goodwill and certain intangibles is more than its
         estimated fair value. The provisions of SFAS 141 and SFAS 142 will be
         adopted commencing January, 2002.

                                      F-14

<PAGE>

               SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
---------------------------------------------------------

         In August 2001, the FASB issued SFAS No. 144 "Accounting for Impairment
         or Disposal of Long-Lived Assets" ("SFAS 144"), which supercedes SFAS
         No. 121. SFAS 144 further refines SFAS 121's requirement that companies
         recognize an impairment loss if the carrying amount of a long-lived
         asset is not recoverable based on its undiscounted future cash flows
         and measure an impairment loss as the difference between the carrying
         amount and fair value of the asset. In addition, SFAS 144 provides
         guidance on accounting and disclosure issues surrounding long-lived
         assets to be disposed of by sale. SFAS is effective for fiscal years
         beginning after December 15, 2001.

         Management believes that the adoption of SFAS 142 and SFAS 144 will not
         have a material effect on the Company's consolidated results of
         operations or financial position.

RECLASSIFICATIONS

         Certain prior year amounts in the accompanying financial statements
         have been reclassified to conform to the current year's presentation.

NOTE 2 - BASIS OF PRESENTATION
------------------------------

         During the two years ended December 31, 2001 and 2000, the Company has
         suffered recurring losses from operations, significant negative working
         capital and no guaranteed access to capital resources. At present, the
         Company's working capital deficit and limited capital resources do not
         enable it to meet the Company's near term capital needs.

         In addition, the Company's largest assets, The Debt Registry and
         Broadband Technologies, Inc., are not generating any revenue. The note
         receivable from related parties has no payments due until March 2003.

         Management is hopeful that The Debt Registry will become operational in
         June 2002. Management is planning to borrow and raise investment
         capital sufficient to fund The Debt Registry. The Broadband
         Technologies, Inc. has received encouragement from competitors bringing
         the direct full-motion view on-demand concept to market. Management
         hopes to find a partner to bring this concept to market.

         It is not possible to predict the success of management's subsequent
         efforts to achieve profitability. If management is unable to achieve
         its goals, the Company may find it necessary to undertake other actions
         as may be appropriate to continue operations and meet its commitments.

         The accompanying consolidated financial statements do not include any
         adjustments relating to the recoverability and classification of the
         recorded asset amounts or the amounts and classification of liabilities
         that might be necessary should the Company be unable to continue in
         existence.

                                      F-15

<PAGE>

               SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

NOTE 3 - SALE OF INVESTMENT IN RENTAL REAL ESTATE
-------------------------------------------------

         In 2001, the Company sold its subsidiary SAP to Western Asset Limited
         Partnership ("Western") and El Dorado Properties, Inc. ("El Dorado"),
         entities controlled by SAP's former owners, for a $1,200,000 note
         receivable and $250,000 in cash. The note bears interest at 5% per
         annum, payable in arrears, with all unpaid principal and interest due
         on March 28, 2003. The note is secured by SAP's stock as well as the
         900,000 shares of the Company's common stock owned by SAP's former
         owners that were received by them in 1999 when the Company first
         acquired SAP. The sale of SAP resulted in a deferred gain of $382,190
         at December 31, 2001. Due to the uncertainty of collection, the gain
         and the interest on the note will be recognized when the amounts are
         received. The shareholders of SAP have agreed not to sell or encumber
         the rental properties owned by SAP without prior notification and
         approval by SCYA Management.

NOTE 4 - FURNITURE AND EQUIPMENT
--------------------------------

                 Furniture and equipment                          $      95,972
                 Less: accumulated depreciation                         (28,771)
                                                                  --------------
                                                                  $      67,201
                                                                  ==============

NOTE 5 - PATENTS AND PATENTS PENDING
-------------------------------------

         During 1999, the Company acquired a patent, certain patents pending and
         licensing for direct on-line full-motion video on-demand technology in
         exchange for stock. The fair market value at the date of acquisition
         was $1,552,500, based on an appraisal obtained by management.

         Management is seeking a working cable system joint venture partner to
         fully develop the revenue potential of Broadband Technologies, Inc.'s
         patents and patents' pending.

         Broadband Technologies, Inc. in furtherance of its business model,
         plans to have earnings in late 2003. If no earnings can be achieved by
         late 2003, the carrying value of the Company's intellectual property
         could be substantially impaired.

NOTE 6 - GOODWILL
-----------------

         During March 2000, the Company acquired 100% of the outstanding common
         stock of Universal View Corporation (an inactive public shell) in
         exchange for $125,000 cash, 400,000 shares of its common stock in 2000
         and 300,000 shares of its common stock in 2001. At the time of

                                      F-16

<PAGE>

               SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

NOTE 6 - GOODWILL (Continued)
-----------------

         purchase, goodwill was recorded based on the excess of the fair market
         value of the cash given and the Company's common shares at the date of
         acquisition. Goodwill was recorded in the amount of $1,025,000 in 2000.

         During 2000, this goodwill was reduced to a net book value of $350,000
         in accordance with FASB No. 121. The amount of impairment loss
         recognized in 2000 for this item was $675,000. In the year ended
         December 31, 2001, the unamortized net book value of goodwill
         associated with the purchase of Universal View Corporation of $200,000
         was written off as impaired and the additional acquisition cost of
         $169,050 incurred in 2001 was expensed.

NOTE 7 - THE DEBT REGISTRY DOMAIN NAMES
---------------------------------------

         During 2000, the Company issued 1,100,000 shares of common stock in
         exchange for 100% of the outstanding common stock and the "domain
         names" associated with The Debt Registry valued at $900,628, based on
         the fair market value of the common stock on the dates issued.
         Amortization will be calculated on the straight-line basis over an
         estimated useful life of 5 years and will begin when operations
         commence. No amortization was recorded during 2001 or 2000.

NOTE 8 - NOTES PAYABLE
----------------------

         In December 1998, the Company entered into a funding agreement with
         Secure Investments, Inc. under which Secure Investments, Inc. has
         agreed to provide up to $24,000,000 in notes payable ("Investor Notes")
         to be used for the purchase of debt portfolios and related note
         expenses. The Investor Notes were structured as nine (9) month notes
         carrying interest at 12% per annum.

         In 2001, management negotiated a restructuring of the Investor Notes
         into a new class of notes payable bearing interest at 4% per annum due
         over 16 to 24 months.

         In 2001, $5,157,932 of Investor Notes were exchanged for preferred
         stock which is convertible into common stock at a value of $2.00 per
         share.

         Funds from the Investor Notes have been used primarily to fund
         acquisitions of distressed consumer loan portfolios and pay costs
         related to notes including commissions and interest.

                                      F-17

<PAGE>

               SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

NOTE 8 - NOTES PAYABLE (Continued)
----------------------

         Notes payable consist of the following as of December 31, 2001:

         Investor notes, paying interest at 4%, due by 2003  $   2,161,271
         Investor notes paying interest at 12%, due in 2002        400,000
          Other                                                    248,000
                                                             --------------
                                                                 2,809,271
          Less current portion                                      968,154
                                                             --------------
          Long-term portion                                  $   1,841,117
                                                             ==============

         Notes payable at December 31 2001 are scheduled to mature as follows:

                        Year Ending                               Amount
                        -----------                           -------------
                           2002                               $    968,154
                           2003                                  1,841,117
                                                              -------------
                                                              $  2,809,271
                                                              =============

NOTE 9 - COMMITMENTS AND CONTINGENCIES
--------------------------------------

LITIGATION

         The Company is involved in litigation arising in the normal course of
         business. The outcome of such matters is not considered to be material
         in relation to the financial statements of the Company.

OFFICER COMPENSATION

         The Board of Directors established minimum salaries for three of its
         officers aggregating $350,000 for 2002 and a minimum salary of $150,000
         per year from 2003 through 2005 for its CEO.

                                      F-18

<PAGE>

               SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)
--------------------------------------

LEASES

         The Company rents office space under various lease agreements through
         February 2003. Monthly lease payments total approximately $3,200. Rent
         expense for the years ended December 31, 2001 and 2000 totaled $54,000
         and $68,645, respectively. At December 31, 2001, the future minimum
         lease payments required over the remaining terms of these leases are as
         follows:

                                  Year Ended
                                  ----------
                                    2002                          $      38,400
                                    2003                                  6,400
                                                                  --------------
                                                                  $      44,800
                                                                  ==============

NOTE 10 - SHAREHOLDERS' EQUITY
------------------------------

STOCKHOLDERS' EQUITY

         In 2001 and 2000, the Company committed to issuing a total of
         12,623,200 and 4,747,510 shares of common stock, respectively. The
         Company also reacquired 328,850 shares of common stock in 2000. The
         shares were granted and acquired in the amounts and for the purposes
         described below:

              Purpose                                       Number of Shares
              -------                                       ----------------
          2001
          ----
          Acquisition of Universal View Corp.                        300,000
          Issued to officers for services                          3,000,000
          Issued to third parties for consulting services          9,180,000
          Issued in payment of interest and financing costs          143,200
                                                                  -----------
                                                                  12,623,200
                                                                  ===========

                                      F-19

<PAGE>

               SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

NOTE 10 - SHAREHOLDERS'EQUITY (Continued)
-----------------------------
              Purpose                                       Number of Shares
              -------                                       ----------------
          2000
          ----
          Acquisition of The Debt Registry                         1,100,000
          Acquisition of Universal View Corp.                        400,000
          Issued to officers for services                            750,000
          Issued to third parties for consulting services          2,422,510
          Issued in settlement                                        75,000
                                                                   ----------
                                                                   4,747,510

          Purchase of treasury stock                                (153,850)
          Acquisition of treasury stock for extinguishment
            of officer note receivable                              (175,000)
                                                                   ----------
                                                                   4,418,660
                                                                   ==========

         During August 2001, the Company issued a total of 3,000,000 shares of
         common stock to officers of the Company as compensation for services
         provided to the Company. For the year ended 2001, the Company
         recognized $180,000 as compensation expense associated with these
         grants, based on the fair value of the stock at the time of the grant.

         During 2001, the Company issued 9,180,000 shares of common stock to
         third parties as compensation for consulting services provided to the
         Company. For the year ended 2001, the Company recognized $2,112,745 as
         expense related to these issuances based on estimated fair market value
         at the time of issuance.

         During 2001, the Company issued 143,200 shares for payment of interest
         and finance costs for the year. $35,600 was recorded as expense based
         on share price at the time of issuance.

         During April 2000, the Company issued a total of 750,000 shares of
         common stock to officers of the Company as compensation for services.
         For the year ended 2000, the Company recognized $533,906 as
         compensation expense associated with these grants, based on the value
         of the stock at the time of the grant.

         During 2000, the Company issued 2,422,510 shares of common stock to
         third parties as compensation for consulting services provided to the
         Company. For the year ended 2000, the Company recognized $2,286,184 as
         compensation expense associated with these issuances, based on the fair
         value of the stock.

         During 2000, the Company issued 75,000 shares of common stock in
         conjunction with a legal settlement for the year ended December 31,
         2000. The Company recognized $135,469 as compensation expense
         associated with the settlement.

                                      F-20

<PAGE>

               SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

NOTE 10 - SHAREHOLDERS' EQUITY (Continued)
------------------------------

         During 2000, the Company purchased 153,850 shares of common stock on
         the open market as authorized by the Board. Cost of this repurchase was
         $314,480.

         During December 2000, the Company acquired 175,000 shares of common
         stock in exchange for a note receivable from an officer in the amount
         of $208,605.

NOTE 11 - STOCK OPTION PLAN
----------------------------

         The Company has adopted a stock option plan (the Plan) under which
         options to purchase up to 10,000,000 shares of common stock may be
         granted to officers, employees or directors of the Company, as well as
         consultants, independent contractors or other service providers of the
         Company. "Nonqualified" options may be granted under the Plan.
         Nonqualified options may be granted at an exercise price determined by
         the Board of Directors. Individual option agreements will contain such
         additional terms as may be determined by the Board of Directors at the
         time of the grant. The Plan provides for grants of options with a term
         of up to ten years.

STOCK OPTIONS

         The Company has elected to account for nonqualified grants and grants
         under its Plan following APB No. 25 and related interpretations.
         Accordingly, $0 and $15,625 compensation costs have been recognized for
         nonqualified options for the years ended December 31, 2001 and 2000,
         respectively. Under FASB Statement No.123, Accounting for
         Stock-Compensation, the fair value of each option granted during the
         years ended December 31, 2001 and 2000 was estimated on the measurement
         date utilizing the then current fair value of the underlying shares
         less the exercise price discounted over the average expected life of
         the options of ten years, with an average risk-free interest rate of
         4.88% to 6.29%, price volatility of 1 and no dividends. Had
         compensation cost for all awards been determined based on the fair
         value method as prescribed by FASB Statement No. 123, reported net loss
         and net loss per common share would have been as follows:

                                                        2001           2000
                                                    ------------   ------------
         Net loss:
            As reported                             $ (5,125,636)  $ (7,429,236)
            Proforma                                $ (5,125,636)  $ (7,447,690)

         Basic and diluted net loss per share:
            As reported                             $      (0.24)  $      (0.61)
            Proforma                                $      (0.24)  $      (0.61)

                                      F-21

<PAGE>

               SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

NOTE 11 - STOCK OPTION PLAN  (Continued)
----------------------------

         A summary of the activity of the stock options for the years ended
         December 31, 2001 and 2000 is as follows:
<TABLE>
<CAPTION>
                                               2001                2000
                                        -------------------------------------------
                                                    Weighted               Weighted
                                                    Average                Average
                                                    Exercise               Exercise
                                          Shares     Price      Shares      Price
                                        -------------------------------------------
         <S>                               <C>        <C>       <C>         <C>
         Outstanding, beginning of period  1,980,000  $0.37     1,350,000   $  0.19
         Granted                             200,000  $1.00       630,000      0.76
         Forfeited                                --     --            --        --
         Expired                                  --     --            --        --
                                        -------------------------------------------
         Outstanding at end of period      2,180,000  $0.43    1,980,000    $  0.37
                                        ===========================================
         Exercisable at end of period      1,980,000  $0.43    1,780,000    $  0.37
                                        ===========================================
         Weighted-average fair value of
          options granted during the period           $1.00                 $  2.48
                                                      =====                ========
</TABLE>

         A further summary of options outstanding at December 31, 2001 is as
         follows:

                             Options Outstanding          Options Exercisable
               -----------------------------------------------------------------
                                  Weighted
                                   Average    Weighted                Weighted
                                  Remaining   Average                 Average
                 Number          Contractual  Exercise     Number     Exercise
               Outstanding           Life      Price     Exercisable   Price
               -----------------------------------------------------------------
                   20,000         1.00 years   $ 0.75        20,000   $ 0.75
                  450,000         6.90 years     0.08       450,000     0.08
                  100,000         7.50 years     0.25       100,000     0.25
                  500,000         7.75 years     0.25       500,000     0.25
                  400,000         8.00 years     0.25       400,000     0.25
                  265,000         8.40 years     0.91       265,000     0.91
                  245,000         8.75 years     0.80        45,000     0.80
                  200,000         9.25 years     1.00       200,000     1.00
               -----------                               -----------
                2,180,000                                 1,980,000
               ===========                               ===========

         Included in the 630,000 options granted during 2000 are 200,000 options
         which become exercisable at the time the Company's share price reaches
         $5.00 per share. At such time, the Company will record an expense of
         approximately $973,000.

                                      F-22

<PAGE>

               SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

NOTE 12 - INCOME TAXES
-----------------------

         Deferred income taxes reflect the net tax effects of the temporary
         differences between the carrying amounts of assets and liabilities for
         financial reporting and the amounts used for income tax purposes. The
         Company has not filed tax returns since 1998. The tax effect of
         temporary differences consisted of the following as of December 31,
         2001:

         Deferred tax assets:
         Net operating loss carryforwards                           $ 5,000,000
         Compensation element of stock options issued                       -

         Less valuation allowance                                    (5,000,000)
                                                                    ------------
                  Net deferred tax assets                           $       -
                                                                    ============

         Realization of deferred tax assets is dependant upon generating
         sufficient future taxable income during the period that deductible
         temporary differences and carryforwards are expected to be available to
         reduce taxable income. As the achievement of required future taxable
         income is uncertain, the Company recorded a valuation allowance. The
         valuation allowance increased by $1,722,000 and $2,397,700 for the
         years ended December 31, 2001 and 2000, respectively. The Company will
         continue to assess the valuation allowance and to the extent it is
         determined that such allowance is no longer required, the tax benefit
         of the remaining net deferred tax assets will be recognized in the
         future.

         As of December 31, 2001, the Company has net operating loss
         carryforwards for both federal and state income tax purposes. Federal
         net operating loss carryforwards totaling approximately $12,000,000
         expire in the years 2008 through 2021. State net operating loss
         carryforwards totaling approximately $7,000,000 expire in the years
         2002 through 2006. Due to Internal Revenue Service regulations, the
         availability of the operating loss carryforwards may be limited upon a
         substantial change in ownership.

         In 2000, the Company eliminated a deferred tax liability of $250,000
         specific to SAP.

         A reconciliation of the effective tax rates with the federal statutory
         rate is as follows as of December 31:

                                                           2001         2000
                                                       ------------ ------------
         Income tax benefit at 35% statutory rate      $ 1,722,000  $ 2,676,700
         Nondeductible expenses                                -       (328,000)
         Change in valuation allowance                  (1,722,000)  (2,397,700)
         State income taxes, net                               -        457,300
         Other                                                 -       (158,300)
                                                       ------------ ------------
                                                       $       -    $   250,000
                                                       ============ ============

                                      F-23

<PAGE>

               SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

NOTE 13 - RELATED PARTY TRANSACTIONS
------------------------------------

         SAP paid commissions on the sale of its properties to its executive
         officers and their affiliated companies of approximately $0 and
         $57,000, respectively for the years ended December 31, 2001 and 2000.

         During 2001 and 2000, the Company made payments for consulting services
         to the CEO, President, CFO, and the Secretary of the Corporation.
         Payments for consulting services made to these individuals were,
         $23,565 $18,500, $0 and $21,000 and $66,250, $62,500, $10,000 and
         $35,750, respectively. Also during 2001 and 2000, these individuals
         received common stock valued at $60,000, $60,000, $65,000 and $60,000
         and $273,593, $0, $382,500, and $260,312, respectively. These shares
         have been valued based on the fair value of the shares on the date of
         grant.

NOTE 14 - SEGMENT INFORMATION
-----------------------------

         The Company has three reportable segments: consumer credit portfolio,
         rental real estate portfolio and broadband technology. The consumer
         credit portfolio segment acquires, manages, collects and markets
         distressed consumer credit portfolios. The rental real estate portfolio
         acquires, manages and sells residential properties located in San Diego
         County, California. The broadband segment holds a patent, certain
         patents pending and licensing for direct on-line full screen video
         technology.

         The accounting policies of the segments are the same as those described
         in the summary of significant accounting policies. The Company
         evaluates performance based on income or loss from operations before
         income taxes not including nonrecurring gains and losses. The Company's
         reportable segments are strategic business units that offer different
         products or services. They are managed separately because each business
         requires different marketing strategies.

         Information about reported segment profit or loss and segment assets
         for the years ended December 31, 2001 and 2000 are as follows:

<TABLE>
<CAPTION>

                                     Consumer      Rental
                                      Credit     Real Estate    Broadband
                                     Portfolio    Portfolio     Technology       Total
                                     ----------   -----------  -------------  ------------
  <S>                                <C>          <C>            <C>          <C>
  2001 Revenues                      $  151,327   $        --    $       -    $    151,327
  2000 Revenues                       1,533,504       418,752            -       1,952,256

  2001 Interest expense               1,072,699            --            -       1,072,699
  2000 Interest expense               1,791,062       250,744            -       2,041,806

  2001 Profit (loss) before taxes    (5,155,884)       30,248            -      (5,125,636)
  2000 Profit (loss) before taxes    (7,366,605)       29,177            -      (7,337,428)

  2001 Assets                         3,056,818            --      1,552,500     4,609,318
  2000 Assets                         8,571,111     2,223,686      1,552,500    12,347,297

</TABLE>

                                      F-24

<PAGE>

               SECURITY ASSET CAPITAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

NOTE 14 - SEGMENT INFORMATION (Continued)
-----------------------------

         Reconciliations of reportable segment profit or loss, and assets to
         consolidated totals for the years ended December 31, 2001 and 2000 are
         as follows:
<TABLE>
<CAPTION>
                                                         2001           2000
                                                     -------------- --------------
    Profit or Loss
    --------------
    <S>                                              <C>            <C>
    Total loss for reportable segments               $  (5,125,636) $  (7,337,428)
    Consolidating entries:
       Additional depreciation and elimination of gain
       on sale on properties based on increase in
       in fair value at date of acquisition                    -         (341,808)
                                                     -------------- --------------
            Loss before income taxes                 $  (5,125,636) $  (7,679,236)
                                                     ============== ==============
    Assets
    ------
    Total assets for reportable segments              $  4,069,318  $  12,547,297
    Eliminations:
       Intercompany receivables                                -       (1,174,421)
       Investment in subsidiaries                              -       (4,213,819)
    Unallocated amounts:
       Increase in fair value of properties at date
         of acquisition                                        -          956,488
                                                     -------------- --------------
            Consolidated total assets                $   4,069,318  $   8,115,545
                                                     ============== ==============
</TABLE>

                                      F-25