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

                                   FORM 10-KSB

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

               For the fiscal year ended September 30, 2002

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

                  For the transition period from _____ to_____

                           Commission File No. 0-23450

                         CAPITOL COMMUNITIES CORPORATION
          (Name of Small Business Issuer as specified in its charter)

          Nevada                                           88-0361144
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                            Identification No.)


900 N. Federal Highway
Suite 410
Boca Raton, FL                                              33432
(Address of principal executive offices)                  (Zip Code)


Issuer's telephone number: (561) 417-7115

Securities to be registered under Section 12(b) of the Act: None

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

                          Common Stock ($.01 Par Value)
                                (Title of Class)


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

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

         State  the  issuer's   revenues  for  its  most  recent   fiscal  year.
$8,504,740.

         State the  aggregate  market  value of the  voting  stock  held by non-
affiliates  computed by reference  to the price at which the stock was sold,  or


<PAGE>

the average bid and asked price of such, as of a specified  date within the past
60 days.  $302,659  based on the average of the bid and asked  obtained from the
National Quotation Bureau, Inc. ("NQB") on December 16, 2002.

         State the number of shares  outstanding of each of the Issuer's classes
of common equity,  as of the latest  practicable  date.  25,460,061 common stock
shares, as of December 16, 2002.


                       DOCUMENTS INCORPORATED BY REFERENCE
NONE

         Transitional Small Business Disclosure Format YES [ ] NO [X}




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TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS ................................................... 4
--------------------------

PART I
ITEM 1.     DESCRIPTION OF BUSINESS........................................... 4

ITEM 2.     DESCRIPTION OF PROPERTY.......................................... 11

ITEM 3.     LEGAL PROCEEDINGS................................................ 19

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF
            SECURITY HOLDERS................................................. 20

PART II.

ITEM 5.     MARKET FOR COMMON EQUITY AND RELATED
            STOCKHOLDER MATTERS.............................................. 20

ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR
            PLAN OF OPERATION................................................ 22

ITEM 7.     FINANCIAL STATEMENTS............................................. 32

ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
            ON ACCOUNTING AND FINANCIAL DISCLOSURE........................... 32

PART III

ITEM 9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
            AND CONTROL PERSONS; COMPLIANCE WITH
            SECTION 16(a)OF THE EXCHANGE ACT................................. 32

ITEM 10.    EXECUTIVE COMPENSATION........................................... 34

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
            OWNERS AND MANAGEMENT............................................ 36

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED

TRANSACTIONS................................................................. 38

ITEM 13.    EXHIBITS AND REPORTS ON FORM 8-K................................. 39



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FORWARD-LOOKING STATEMENTS

         In   addition  to   historical   information,   this  Report   contains
forward-looking   statements.  Such  forward-looking  statements  are  generally
accompanied by words such as "intends,"  "projects,"  "strategies,"  "believes,"
"anticipates,"  "plans," and similar terms that convey the uncertainty of future
events or outcomes. The forward-looking  statements contained herein are subject
to certain  risks and  uncertainties  that could cause actual  results to differ
materially from those reflected in the forward-looking statements.  Factors that
might cause such a difference  include,  but are not limited to, those discussed
in ITEM 6 of this Report,  the section  entitled  "MANAGEMENT'S  DISCUSSION  AND
ANALYSIS  OR PLAN OF  OPERATION -- Factors  That May Affect  Future  Results and
Market Price of Stock."  Readers are  cautioned  not to place undue  reliance on
these forward-looking statements, which reflect management's analysis only as of
the date hereof and are in all cases  subject to the  Company's  ability to, (1)
cure its current  liquidity  problems,  (2) liquidate  assets to meet day-to-day
operations and (3)raise  sufficient capital to commence  meaningful  operations.
There is no assurance that the Company will be able to raise sufficient  capital
or liquidate assets to pursue the business objectives discussed herein.

         The  forward-looking  statements  contained  in this Report also may be
impacted by future  incidents of terrorism and any military  action taken by the
United  States.  The effect of these events on the  business of the Company,  if
any, is  currently  unclear.  However,  any adverse  effect on general  economic
conditions  and consumer  confidence  resulting  from these events may adversely
affect the business of the Company.

         Capitol  Communities  Corporation  undertakes no obligation to publicly
revise these forward-looking  statements to reflect events or circumstances that
arise after the date hereof.  Readers should  carefully  review the risk factors
described  in other  documents  the  Company  files  from  time to time with the
Securities  and  Exchange   Commission,   including  without   limitation  those
identified in the "Risk Factors" section of the Company's Registration Statement
filed with the Securities and Exchange  Commission (the "SEC")in  September 1996
on Form 10-SB.

PART I.

ITEM 1.  DESCRIPTION OF BUSINESS.

BUSINESS DEVELOPMENT

         Capitol Communities Corporation,  a Nevada corporation (the "Company"),
was formed on August 21, 1995. It is the  successor-by-merger to AWEC Resources,
Inc., a New York corporation (the "Predecessor Corporation"). Unless the context
otherwise  requires,  all references to the "Company" in this Report include the
Predecessor  Corporation,  and all  references  to the  Company's  business  and
properties   include  the  business  and   properties  of  Capitol   Communities
Corporation and its wholly-owned subsidiaries discussed in more detail below.

         The Predecessor  Corporation was  incorporated in the State of New York
as Century Cinema Corporation in November 1968.

         On December 20, 1993, the Predecessor  Corporation  changed its name to
AWEC Resources,  Inc. On February 11, 1994, the Predecessor Corporation formed a
wholly-owned subsidiary,  AWEC Development Corporation, an Arkansas corporation,

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which later  changed its name on January 29,  1996,  to Capitol  Development  of
Arkansas Inc., (the "Operating Subsidiary").

         In  May  1994,  the  Predecessor   Corporation  formed  a  wholly-owned
subsidiary,  AWEC Homes,  Inc., an Arkansas  corporation (the "Home Construction
Subsidiary"),  for the  purpose  of  building  single  family  homes.  The  Home
Construction Subsidiary,  which later changed its name to Capitol Homes, Inc. on
January 29, 1996, has had no construction operations.

         In order to effectuate a change in domicile and name change approved by
a  majority  of  the  Predecessor  Corporation  shareholders,   the  Predecessor
Corporation  merged,  effective  January  30,  1996,  into  Capitol  Communities
Corporation,  a Nevada  corporation formed in August 1995 solely for the purpose
of the  merger.  Under  the  terms of the  merger,  each  share  of  Predecessor
Corporation common stock was converted to a single share of Capitol  Communities
Corporation  common  stock  (the  "Common  Stock"),   and  Capitol   Communities
Corporation succeeded to all of the assets, rights,  obligations and liabilities
of the Predecessor Corporation.

         On July 21, 2000, the Operating Subsidiary,  a wholly-owned  subsidiary
of the Company which holds  substantially all of the Company's  assets,  filed a
voluntary  petition for relief under Chapter 11 of the United States  Bankruptcy
Code in the  United  States  Bankruptcy  Court,  Eastern  District  of  Arkansas
("Bankruptcy  Court").  The  Company  continued  to operate  its  business  as a
debtor-in-possession  until September 6, 2002, when the United States Bankruptcy
Court  entered an Order  Dismissing  the  Chapter  11  Proceedings  against  the
Operating  Company.  The  Company  filed a  Motion  to  Dismiss  the  Bankruptcy
Proceedings  instead of a Plan of Reorganization,  as all claims of non-insiders
of the Operating Subsidiary,  except for the claim of the Arkansas Department of
Finance and Administration had been satisfied or released.

         On July 17, 2002, Boca First Capital,  LLLP ("Boca  First"),  a Florida
limited liability limited  partnership  acquired control of Capitol  Communities
Corporation  (the "Company") in an exchange of 16 million shares of Common Stock
of the Company held by Michael G. Todd,  the Company's  president,  and Prescott
Investments,  L.P. ("Prescott"), a Nevada limited partnership beneficially owned
by Mr. Todd, for a combined 33% interest in Boca First. Boca First is controlled
by its general partner, Addison Capital Group LLC ("Addison"),  a Nevada limited
liability company,  beneficially owned by the limited partners of Boca First. As
of the date of this Report,  Boca First owns 62.84% of the Company's  issued and
outstanding shares.

         By reason of the exchange of securities,  Addison,  the general partner
of Boca First, may be deemed to have voting power and/or  dispositive power with
respect to the 16,000,000 shares of Common Stock owned by Boca First.


         BUSINESS OF THE COMPANY

         The Company is primarily in the business of selling  property  from its
inventory  of 696 acres of real  property  located in  Maumelle,  Arkansas  (the
"Maumelle  Property")  in an effort to utilize  these core  assets to acquire or
develop real estate  projects in fast  growing  areas,  such as Florida,  and/or
develop other business opportunities that will generate progressive revenues for
the Company. Such projects may be developed by the Company or with joint venture
partners.  There can be no assurance,  however, that the Company will be able to
liquidate  its  Maumelle  Property at a fair market  price or at all, or acquire
projects that generate  revenues.  See above, ITEM 1, "DESCRIPTION OF BUSINESS,"
and ITEM 2, "DESCRIPTION OF PROPERTY."


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<PAGE>



         GENERAL.  During  fiscal year ended  September  30,  2002,  the Company
focused on trying to sell its  property  in the City of  Maumelle,  Arkansas,  a
5,000 acre  planned  community  located on the Arkansas  River,  across from the
western Little Rock area and fifteen miles from downtown Little Rock, Arkansas.

         During the fiscal year ended  September 30, 2002,  the Company  retired
$8,773,825 in secured and unsecured  debt and the Operating  Subsidiary  emerged
from the  voluntary  petition for relief under  Chapter 11 of the United  States
Bankruptcy Code filed with the Bankruptcy Court.

           The  Company's  current  lack of  liquidity,  however,  prevents  the
Company from conducting any meaningful  business  activities  other than selling
assets from the Maumelle Property. Although management anticipates utilizing all
or a portion of the Maumelle  Property to generate  capital and/or raise capital
to develop or acquire other revenue generating business opportunities, there can
be no  assurance  that the Company will be able to raise  sufficient  capital to
cure its liquidity  problems and pursue the business  objectives,  strategies or
transactions  discussed  herein.  See ITEM 3, "LEGAL  PROCEEDINGS,"  and ITEM 6,
"MANAGEMENT'S  DISCUSSION AND ANALYSIS OR PLAN OF OPERATION --  Certain  Capital
Raising Transactions."

         The Company's  real estate as of September  30, 2002,  consisted of the
remaining unsold portion of the Maumelle Property comprised of approximately 696
acres, of which 250 acres are developable,  and the Company's 35.16% interest in
TradeArk  Properties,  LLC,  a Michigan  limited  liability  company  ("TradeArk
Properties").  See ITEM 2,  "DESCRIPTION  OF  PROPERTY,"  ITEM 6,  "MANAGEMENT'S
DISCUSSION  AND  ANALYSIS  OR PLAN OF  OPERATION  - -  Certain  Capital  Raising
Transactions," and ITEM 7, "FINANCIAL STATEMENTS."

         The  Maumelle  Property  is  managed  by  Maumelle  Enterprises,   Inc.
("Maumelle Enterprises"),  a real estate management firm that is affiliated with
certain officers of the Company.  The Company expects that Maumelle  Enterprises
will  continue in the  foreseeable  future to manage the Maumelle  Property.  In
other  geographic  areas, the Company expects to engage local brokers to sell or
manage any  property it may  acquire.  See ITEM 12,  CERTAIN  RELATIONSHIPS  AND
RELATED TRANSACTIONS."

         PRINCIPAL PRODUCTS AND MARKETS.

         MAUMELLE  PROPERTIES.  The  Company is  primarily  in the  business  of
selling  property  from its  inventory of the Maumelle  Property in an effort to
utilize  these core assets to acquire or develop  real  estate  projects in fast
growing areas, such as Florida, and/or develop other business opportunities that
will generate progressive revenues for the Company. The Company anticipates that
the developable Maumelle Property will be sold to developers, apartment building
operators  and/or  commercial  developers  See above,  ITEM 1,  "DESCRIPTION  OF
BUSINESS," and ITEM 2, "DESCRIPTION OF PROPERTY."

         The Company's  initial focus is selling land from its Maumelle Property
inventory to satisfy day-to-day operations,  reduce the Company's debt and raise
capital to diversity into other real estate  projects or business  opportunities
in other geographic areas.

         During the fiscal year ended  September 30, 2002,  the Company sold 751
acres  of its  real  property  for a  total  price  of  $8,500,000.  See  ITEM 6
"MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OR PLAN OF  OPERATION---LIQUIDITY  AND


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<PAGE>



CAPITAL  RESOURCES."  Management  expects that any future Maumelle Property sold
probably will be purchased by other real estate developers.

         Based on current sales trends as evidenced by building  permits issued,
recent  improvement  bond  refinancing  and renewed efforts of the Maumelle City
staff to attract industrial development, Management of the Company believes that
there is substantial unmet demand in the Maumelle area for  single-family  lots,
as well as for the  multi-family and commercial land. There can be no assurance,
however,  as to how long such demand will continue,  especially with the current
economic  uncertainties  or that the Company  will be able to sell any or all of
its inventory of Maumelle Property. See "- - GROWTH STRATEGIES," below.

         MARKETING AND ADVERTISING.

         The Company has listed the Maumelle  Property  with  unaffiliated  real
estate brokers who are responsible for advertising and marketing the property.

         GROWTH STRATEGIES.

         The Company's primary business objective is to increase long-term total
returns to shareholders  through  appreciation in value of the Common Stock. The
Company intends to achieve this objective by implementing  the long-term  growth
strategies  summarized  below.  The Company will not be able to implement any of
these  strategies  if it  cannot  overcome  its  present  illiquidity  and raise
substantial  additional capital to commence material operations,  of which there
can be no assurance.  See ITEM 6, "MANAGEMENT'S  DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION."

         LIQUIDATION  AND  DEVELOPMENT  OF THE  MAUMELLE  PROPERTY.  The Company
intends to focus on the sale of the Maumelle Property to developers. The Company
believes  that the sale of all or portions of its  Maumelle  Property  inventory
will help to capitalize the Company in order to meet its  day-to-day  operations
and commence  meaningful  operations  that may offer the Company  greater growth
opportunities.  These  opportunities  may include,  but are not limited to, real
estate development (directly or through joint partnerships) in high-growth areas
such as Florida and/or the acquisition of businesses  that generate  progressive
revenues.

         Development of Maumelle  Property.  The Company's  growth strategy with
respect  to the  Maumelle  Property  is to focus  on the sale of  single-family,
commercial and multi-family lots to developers in the real estate industry.

         Of the approximately  5,300  single-family  vacant sites in the City of
Maumelle,  approximately  687 to 787 sites are owned by the  Company or TradeArk
Properties.  Under  Maumelle's  current  Master  Land Use Plan  little or no new
property can be added to the City of Maumelle without public hearings  regarding
any proposed  annexation of land by the City and the subsequent  approval by the
City's  Board of  Directors.  Accordingly,  the  current  amount of vacate  land
available  to  developers   for   single-family,   multi-family   or  commercial
development  is  limited.  There is no  assurance,  however,  that the firms who
recently  purchased  large tracks of land from the Company will not compete with
the Company for the sale of lots to other developers/builders or that the demand
for such development will continue at its present growth rate.

         PRODUCT  DIVERSIFICATION.  Although the Company's primary focus will be
on the sale of all or portions of its Maumelle Property  inventory,  the Company
intends to diversify  its  portfolio  and income  sources by developing in other


                                       7

<PAGE>

market  areas,  especially  in the  state of  Florida,  and/or  acquiring  other
business opportunities.

         COMPETITION.

         The  real  estate  development  industry  is  highly  competitive.   In
Arkansas,  as well as Florida  where the  Company  anticipates  developing  real
estate  projects,  there are numerous  large  national  and regional  firms with
significantly  greater  experience  and  financial  resources  than the  Company
currently possesses.  The Company may compete with such firms in the sale of the
Maumelle  Property.  The  Company  will  also  compete  with  such  firms in the
development  and sale  other  real  estate  projects  if the  Company is able to
liquidate  the  Maumelle  Property  and  diversity  into  other  markets.   Such
developers may be more experienced and have greater financial resources then the
Company and will compete with the Company in the acquisition of land, the hiring
of sub-contractors,  experienced management personnel,  construction workers and
other employees, and the sale of product.

         The  Company  currently  has no  material  presence  or  reputation  in
Arkansas or any other area in the real estate development  industry.  Due to the
Company's  lack of  capital  and  revenue  from  operations  it may have to sell
portions of its Maumelle Property at less than market value. As a result,  there
may be reduced  profit margins from the Company's  operations  which may make it
more  difficult  for the  Company to achieve  the  growth  strategies  discussed
herein.

         GOVERNMENTAL REGULATIONS.

         The   development   industry  is  subject  to  extensive   and  complex
regulations.  In the sale of its Maumelle  Property,  the Company,  or any joint
venture  partners,  must  comply  with  various  federal,  state and local laws,
ordinances,  rules  and  regulations  regarding  zoning,  architectural  design,
construction,  population,  density,  availability  and  installation of utility
services, such as water, electricity,  gas, and waste disposal, the preservation
of the natural terrain, and other related matters,  which requires resources and
expertise  which,  for the most part, the Company  currently  lacks. The Company
intends to obtain such resources and expertise, when required.

         The  Company's  Maumelle  Property is subject to the City of Maumelle's
Master  Land  Use  Plan.  Under  this  Plan,  approximately  188  acres  of  the
approximately 696 acres of the Maumelle Property that was developable land as of
September 30, 2002, was zoned for single-family homes. The current zoning allows
the Company to develop and offer for sale approximately 200 to 300 single-family
home sites located on this acreage.  Although much of the Company's  property is
currently zoned for single-family homes, none of the developable land acreage is
subdivided and the Company will be required to incur significant additional cost
to subdivide  the property into  individual  lots.  The Company  believes it can
satisfy all anticipated  governmental  requirements  involved in the subdivision
process,  should  Management  decide to subdivide  the  property,  if it obtains
adequate additional funding and expertise.

         The Company may be required to mitigate any environmental impact on its
446 acres of wetlands in Maumelle that may be caused by the  Company's  proposed
development activities in Maumelle.  Although the Company is not currently aware
of any such  mitigation  requirements,  the  Company  will be required to obtain
approval from the Army Corp of Engineers of any required mitigation efforts. The


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Company may incur  additional  costs and delays in seeking  such  approvals  and
performing such mitigation. See "--ENVIRONMENTAL LAWS," below.

         Delays in obtaining  governmental  permits and  approvals  may increase
development  costs to the Company.  Zoning  requirements and restrictions  could
become more  restrictive in the future,  resulting in additional  time and money
being spent to obtain approvals for development of the Company's properties.

         The Company  also may be subject to periodic  delays or may be deterred
from  selling the  Maumelle  Property to  potential  developers  due to building
moratoriums or slow-growth or no-growth initiatives that could be implemented in
the  future in the  areas  which it does  business.  In  addition,  governmental
authorities could change the zoning of all or some of the Company's  properties,
which could result in a decrease in property values.

         The Company  believes that, with adequate  funding,  it can comply with
all  applicable  laws  regarding  its real  estate  operations.  There can be no
assurance,  however, that the Company will be able to comply with all such laws,
or that the enactment of new laws or regulations may not have a material adverse
effect on the Company.

         ENVIRONMENTAL LAWS.

         The  Company  is  subject to  various  federal,  state and local  laws,
ordinances and regulations regarding  environmental matters. Under these laws, a
current or  previous  owner or  operator  of real  property  may be  required to
investigate  and clean up hazardous  or toxic  substances  or petroleum  product
releases at such property, and may be held liable to a governmental entity or to
third parties for property  damage and the costs of  investigation,  removal and
decontamination  incurred by such parties in connection with contamination.  The
penalty  is  imposed  whether  or not the  owner or  operator  was  aware of, or
responsible for the hazardous or toxic substances,  and the liability under such
laws has been  interpreted  to be joint and several unless the harm is divisible
and there is a reasonable basis for allocation or responsibility.

         The  costs  of  investigation,   removal  or  decontamination  of  such
substances  could be substantial.  If such substances are found on real property
or there is a failure to properly remove or decontaminate the area, the property
could be  difficult  to sell,  rent,  develop or use to secure  debt  financing.
Persons  who  arrange  for the  disposal  or  treatment  of  hazardous  or toxic
substances at a disposal or treatment  facility also may be liable for the costs
of removal or remediation of a release of hazardous or toxic  substances at such
disposal  or  treatment  facility,  whether  or not  such  facility  is owned or
operated by such person. In addition,  some  environmental laws create a lien on
the contaminated site in favor of the government for damages and costs it incurs
in  connection  with  the  contamination.  Finally,  the  owner of a site may be
subject  to  common  law  claims by third  parties  based on  damages  and costs
resulting form environmental  contamination emanating from a site. In connection
with its ownership and operation of real property,  the Company  potentially may
be liable for the foregoing costs.

         In addition,  recent studies have linked radon,  a  naturally-occurring
substance, to increased risks of lung cancer. While there are currently no state
or federal  requirements  regarding the monitoring for, presence of, or exposure
to,  radon in indoor air,  the EPA and the  Surgeon  General  recommend  testing
residences  for the  presence  of  radon  in  indoor  air,  and the EPA  further
recommends that  concentrations of radon in indoor air be limited to less than 4
picocuries  per liter of air  (Pci/L)  (the  "Recommended  Action  Level").  The


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presence of radon in  concentrations  equal to or greater  than the  Recommended
Action Level in one or more of the Company's properties may adversely affect the
market value of such property and the Company's ability to sell it.

         Electric  transmission  lines  are  located  in  the  vicinity  of  the
Company's  properties.  Electric  transmission  lines are one of many sources of
electro-magnetic  fields ("EMFs") to which people may be exposed.  Research into
potential  health  impacts   associated  with  exposure  to  EMFs  has  produced
inconclusive   results.   Notwithstanding  the  lack  of  conclusive  scientific
evidence,  some states now regulate the strength of electric and magnetic fields
emanating  from  electric   transmission   lines,  while  others  have  required
transmission  facilities to measure for levels of EMFs. In addition, the Company
understands  that lawsuits  have,  on occasion,  been filed  (primarily  against
electric  utilities)  alleging personal injuries resulting from exposure as well
as fear of adverse effects from transmission  lines has been a factor considered
in  determining  property  values in  obtaining  financing  and in  condemnation
proceedings in eminent domain  brought by power  companies  seeking to construct
transmission lines. Therefore,  there is a potential for the value of a property
to be adversely affected as a result of its proximity to a transmission line and
for the Company to be exposed to damage claims by person exposed to EMFs.

         The Company has had a Phase I  investigation  conducted on the Maumelle
Property,  excluding the approximately 446 acres of wetlands.  The investigation
found no evidence of soil or ground water  contamination on the studied property
and recommended that a Phase II study was not warranted. This Phase I assessment
was carried out in accordance with accepted industry  practices and consisted of
non-invasive  investigations  of  environmental  conditions  at the  properties,
including  a  preliminary  investigation  of the  sites  and  identification  of
publicly known  conditions  concerning  properties in the vicinity of the sites,
physical  site   inspections,   review  of  aerial   photographs   and  relevant
governmental  records  where  readily  available,  interviews  of  knowledgeable
parties,  investigation for the presence of above ground and underground storage
tanks  presently  or formerly at the sites,  a visual  inspection  of  potential
lead-based paint and suspect friable ACMs where appropriate, a radon survey, and
the  preparation  and issuance of a written  report.  In 1986, an  Environmental
Protection Agency ("EPA")  representative stated in a letter to a previous owner
of the Maumelle  Property,  that although part of the Maumelle Property had been
used by the United States government during World War II as a munitions ordnance
facility  until  1950,  the  entire  site  had been  decontaminated  by the U.S.
government prior to its sale in 1961. In the letter,  the EPA  characterized the
property as not having any further environmental concerns.

         The Company is not aware of any environmental liability with respect to
any of its real property that the Company believes would have a material adverse
effect  on  the  Company's   business,   assets,   or  results  of   operations.
Nevertheless,  there can be no assurance,  that the Company's real property does
not contain  hazardous or toxic  substances,  particularly on the property which
has not been subjected to a Phase I investigation,  or that the Company will not
incur  costs  associated  with the  decontamination  of any such  substances  or
liability  arising from any such  contamination.  No assurance can be given that
the  environmental  studies  conducted on the property reveal all  environmental
liabilities or that no prior owner created any material environmental  condition
not known to the Company.  The Company  believes that compliance with applicable
environmental  laws and  regulations  may have a material  adverse effect on the
Company, its financial condition and its results of operations.


                                       10

<PAGE>


         The Company  believes  that its  properties  are in  compliance  in all
material  respects  with all  federal,  state and  local  laws,  ordinances  and
regulations  regarding  hazardous or toxic substances.  The Company has not been
notified by any governmental  authority or any third party, and is not otherwise
aware, of any material  noncompliance,  liability or claim relating to hazardous
or toxic substances or petroleum  products in connection with any of its present
properties.

         NUMBER OF EMPLOYEES.  As of the Company's fiscal  year-ended  September
30, 2002, the Company and its subsidiaries had one full-time employee.

ITEM 2.  DESCRIPTION OF PROPERTY.

GENERAL

         The  Company's  principal  asset is the Maumelle  Property,  located in
Maumelle,  Arkansas, title to which is held by the Operating Subsidiary.  At the
Company's  fiscal  year-end,  the Maumelle  Property  consisted of the following
property (sizes are  approximate and rounded up to the nearest acre):  188 acres
of single-family  sites, 47 acres of multi-family  sites, 15 acres of commercial
property,  and 446 acres of miscellaneous  undevelopable  property. The Maumelle
Property is currently  zoned under the City of Maumelle Master Land Use Plan for
various development uses, including single-family residences, multi-family units
and commercial uses.

         The  Maumelle  Property can be divided  into four  categories:  (1) the
Singe-Family Tract, (2) the Multi-Family Acres, (3) the Commercial Acres and (4)
the Miscellaneous Tract  and Property.  Each category of  Maumelle Property will
be  discussed  separately  below  after the  following  overview  of the City of
Maumelle.

         The Company, through the Operating Subsidiary, owns a 35.16% membership
interest in  TradeArk Properties.  See discussion below, "-- MAUMELLE PROPERTY--
TradeArk Property."

         Except as otherwise  noted, the Company believes that its real property
assets  are in good  condition  and  are  suitable  and  adequate  for the  uses
indicated.  Although  there  are no  insurable  improvements  on  the  Company's
properties,  the Company maintains a general liability insurance coverage on its
real property assets.

MAUMELLE PROPERTY
         THE CITY OF  MAUMELLE.  The City of  Maumelle  is a 5,000 acre  planned
community  located off Interstate 40 on the Arkansas  River.  Fifteen miles from
downtown Little Rock, the capital of Arkansas, Maumelle is patterned after other
"new town" communities such as Reston, Virginia,  Irvine Ranch in Orange County,
California and Columbia, Maryland.

         Maumelle is a master  planned city with about 11,761  residents.  Under
the Master Plan,  Maumelle  cannot add new property to the city for  residential
development without public hearings regarding any proposed annexation of land by
the City  and the  subsequent  approval  by the City  Board of  Directors.  From
Maumelle's inception in 1966 to 1996,  approximately $120 million has been spent
on infrastructure, including sewer and water capacity for a city of up to 25,000
residents and a system of designated common areas,  including  pathways,  parks,
lakes,  a golf course and other  recreational  areas.  The City of Maumelle  was
incorporated  as a city in 1985.  It is governed by a mayor and city council and
has police, fire, and emergency services.


                                       11

<PAGE>


         Almost  all of the  cities  within the  four-county  Little  Rock-North
Little Rock region gained  population  from 1990 through 2000. The population of
Maumelle  has  grown at a faster  rate  than that of  neighboring  Little  Rock,
Arkansas  with a growth rate of 57.2% in increased  population,  whereas  Little
Rock had a 4% increase from 1990 to 2000.  The community of Maumelle  appears to
be attracting  more highly  educated  residents  than does Little Rock. The U.S.
Department  of Commerce  and the Little Rock  Metropolitan  Planning  Commission
("Metroplan"),  a government  planning agency,  stated that the figures from the
2000 Census  Supplementary  Survey,  showed  Maumelle and Little Rock  residents
exceeded  the  national  average  in  education  attainment  in every  category,
particularly  in graduate  and  professional  degrees.  Maumelle has the highest
median household income at $65,534, in the State of Arkansas.

         Since  1979,  Maumelle  has  attracted  some  major  companies  to  its
industrial  areas,   including  Molex  Inc.,  Target  Distribution  Center  (800
employees), Kimberly Clark (a manufacturing facility), Ace Hardware Distribution
Center,  and  Scholastic  Distribution  Services.   However,   unemployment  has
increased in Maumelle from 1.4% to 1.6% and in Little Rock from 2.9% to 3.5% for
the period from December 2000 to November 2001.

         As of June 30, 1997,  the average new home permit value in Maumelle was
$138,480, by 2000 it was $148,306,  $174,992 by September 30, 2001, and $168,581
by  September  30,  2002,  according  to  a  Metroplan  report.  The  number  of
single-family  building  permits issued by Maumelle has increased by 1,811 units
between 1990 and 2000,  according to Metroplan.  A total of 276 building permits
were issued in Maumelle in 1999, 243 in 2000,  247 in the 12-month  period ended
September 30, 2001, and 203 for the nine months ended September 30, 2002.

         SINGLE-FAMILY  TRACT.  As of the Company's  fiscal year ended September
30, 2002, the  Single-Family  Tract was comprised of approximately  188 acres of
undeveloped residential land. Under current zoning for residential  development,
the Company believes this land can be subdivided into  approximately  200 to 300
single-family lots.

         During  fiscal  year  ended   September  30,  2002,  the  Company  sold
approximately  740  acres  of  single-family  land  for a total  sales  price of
$7,175,000.

         The Operating  Subsidiary has fee title to the Single-Family Tract, all
of which is subject to a  first-priority  mortgage made effective  September 27,
2002,  securing a  $4,000,000  line of credit from Boca First,  the  controlling
shareholder  of the  Company  ("Boca  Credit  Line").  See,  ITEM  12,  "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS." The credit line has an initial interest
rate of ten percent per annum and will, on a quarterly  basis,  adjust to a rate
which is equal to the greater of ten percent per annum or one percent  above the
prime rate, as published in The Wall Street Journal, in effect on that date. The
Boca Credit Line is due in monthly  installments  of interest only. It was first
entered  into  between  the  Company  and  Boca  First on April  26,  2002,  and
subsequently  modified  on May 15,  2002,  to  increase  the  credit  line  from
$3,000,000.00  to  $4,000,000.00  and extend the maturity  date from November 1,
2003 to November 1, 2004. The Boca Credit Line is evidenced by a promissory note
(the "Boca  Note")  which is secured by  substantially  all of the assets of the
Operating  Subsidiary.  The Boca Note is secured by a mortgage on the  remaining
Maumelle Property, including the Single Family Tract. As of the fiscal year-end,
the Company has drawn  $1,216,000 on the line of credit,  and $1,491,000,  as of
December 16, 2002. (See ITEM 6, "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION-Liquidity and Capital Resources."


                                       12

<PAGE>


         During  the  fiscal  year,  approximately  701  acres of the  Company's
single- family acreage was subject to a first-priority  mortgage by Resure Inc.,
as security for a $3,987,353.00  note ("Resure Note"),  with a liability accrued
to Resure in the amount of $5,034,497.

         On January 9, 2002,  the Operating  Subsidiary  and Nathaniel S. Shapo,
the  Director of  Insurance  for the State of  Illinois,  in his Capacity as the
Liquidator for Resure, reached a settlement agreement ("Settlement Agreement")to
resolve payment on the outstanding  Resure loan in the amount of  $3,850,000.00.
The  Settlement  Agreement  resolves the Resure  Motions and  Competing  Plan of
Reorganization  filed by Resure with the Bankruptcy Court, against the Operating
Subsidiary. The Company paid the Resure Liquidator the Settlement Agreement with
the proceeds from the sale of 451 acres of single-  family  property to Maumelle
Valley LLC ("Maumelle Valley") an unaffiliated third party, in full satisfaction
of all claims by Resure against the Operating  Subsidiary.  The Company received
from Maumelle Valley a purchase price of  $4,000,000.00,  with  $3,850,000.00 in
net  proceeds  from the sale. A listing and selling  commission  of $110,000 was
paid to Century 21 Metro, Inc. ("Century 21"), an Arkansas  corporation entirely
owned by Mary Peyton, president of the Home Construction Subsidiary. See ITEM 3,
"LEGAL PROCEEDINGS," and ITEM 6, MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION-LIQUIDITY  AND CAPITAL RESOURCES," and ITEM 12, "CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS."

         Prior to March 26,  2002,  286 acres of the Single  Family  Tract had a
mortgage on the property  used to secure a $1,750,000  line of credit from First
Arkansas Valley Bank ("First  Arkansas Line of Credit").  On March 26, 2002, the
Company sold 289 acres of single family  property,  and 11 acres of multi-family
property, to West Maumelle Limited Partnership ("West Maumelle LP"), an Arkansas
limited  partnership,  and an unaffiliated  third party, for a purchase price of
$4,200,000.00,  plus a 10% interest in the profits  derived from the development
of the 289 acre parcel ("Profit Interest").  A listing commission of $10,000 was
paid to Century 21 and $180,000 sales commission was paid to DeHaven Group, LLC.
Concurrent  with the closing,  the Company paid the First  Arkansas  Valley Bank
$1,105,812,  principal and interest, in full satisfaction of the line of credit.
At closing, West Maumelle paid $2,100,000 in cash and executed notes payable for
$1,070,000,  due September 22, 2002 ("Note 1")and  $1,030,000 due March 26, 2005
("Note 2").  Both notes bear interest at 6.25% and call for payment of principal
and accrued interest at maturity.  The Notes are secured by a second mortgage on
289 acres of single family land and the 11 acres of multi-family land,  however,
the Purchaser may obtain a release on portions of the secured property; provided
Note 1 is paid in full and additional  payments are made on Note 2 from the sale
of any released  land. On August 16, 2002,  Note 2 was modified to eliminate the
Profit  Interest and decrease the Note from $1,030,000 to $1,000,000 in exchange
for West Maumelle assuming a $300,000 debt obligation by the Company to Davister
Corp.  Note 1 was modified  September 22, 2002, to extend the maturity date from
September 22, 2002, to October 31, 2002 in  consideration of an extension fee in
the amount of  $10,000.00;  $5,000.00 due on execution of the  modification  and
$5,000 on the date of maturity. The Note 1 maturity date was extended on October
31,  2002,  to mature on December 15,  2002.  On December 15, 2002,  the Company
executed a note  extension to extend the maturity  date on Note 1, from December
15, 2002,  to January 15, 2003.  West  Maumelle paid an extension fee of $11,000
for the extension,  however,  the Company has agreed to credit the extension fee
towards payment on Note 1;


                                       13

<PAGE>

provided the entire  principal  and all accrued  interest on the note is paid in
full on or before  December 31, 2002.  See ITEM 6  MANAGEMENT'S  DISCUSSION  AND
ANALYSIS OR PLAN OF OPERATION - - LIQUIDITY  AND CAPITAL  RESOURCES-Indebtedness
and Other  Liquidity  Requirements,"  and ITEM 12,  "CERTAIN  RELATIONSHIPS  AND
RELATED TRANSACTIONS."

         All property taxes are current and have been paid on a timely basis.

         The Company,  under an oral  agreement,  has allowed  Century 21 Metro,
Inc.  ("Century  21") to offer the 188 acres of  Single  Family  Tract for sale.
Century 21 is a real estate agency wholly-owned by Mary Peyton, president of the
Home Construction  Subsidiary.  See ITEM 12, "CERTAIN  RELATIONSHIPS AND RELATED
TRANSACTIONS."

         MULTI-FAMILY LOTS. As of the Company's fiscal year-ended  September 30,
2002,  there are  approximately  47 acres of Multi-Family  Lots zoned for multi-
family use. The Operating  Subsidiary has fee title to these lots,  subject to a
first  priority  mortgage by Boca First used to secure the Boca Credit Line. See
discussion above, " --Single-Family Tract."

         During the fiscal  year,  approximately,  11 acres of the  Multi-Family
Lots, along with 289 acres of single family property, were sold to West Maumelle
LP, an  unaffiliated  third party,  for a purchase price of  $4,200,000.00  (See
discussion  above,"--Single  Family Tract"). Prior to the completion of the West
Maumelle  LP sale,  the 11 acres were  subject to a lien in favor of the Bank of
Little  Rock as  security  for a $400,000  line of credit  ("Little  Rock Credit
Line") and a $200,000 loan ("Little Rock Loan").  On March 26, 2002, the Company
paid in full the Little Rock  Credit  Line,  in the amount of  $400,000  and the
Little Rock Loan in the amount of $200,000, plus interest on both obligations of
$94,642.00 for the release of the 11 acres of Multi-Family Property.

         As of the Company's fiscal  year-end,  the Company had drawn $1,216,000
on the $4,000,000 Boca Credit Line and $1,491,000,  as of December 16, 2002. See
discussion above, "--Single Family Tract," ITEM 6, "MANAGEMENT'S  DISCUSSION AND
ANALYSIS OR PLAN OF  OPERATION--LIQUIDITY  AND CAPITAL RESOURCES--  Indebtedness
and Other  Liquidity  Requirements,"  and ITEM 12,  "CERTAIN  RELATIONSHIPS  AND
RELATED TRANSACTIONS."

         Concurrent  with the sale of 451 acres of  single  family  property  to
Maumelle  Valley,  47 acres of the Company's  remaining Single Family Tract have
been  re-designated as multi-family R-2 zoning on the municipal land use maps of
Maumelle,  Arkansas.  Although,  the City of Maumelle  zoning had allowed such a
designation,  the Company could not obtain an official designation as such until
a defined  boundary  was  procured by  proffering  a survey and  separate  legal
description.  In March,  2002,  the  Company  was able to acquire the R-2 zoning
designation for 47 Multi-Family acres from the City of Maumelle.

         The property taxes and ad valorem taxes on the 47 acres of Multi-Family
Lots owned by the Company have been paid on a timely basis.

         The Company,  under an oral  agreement,  has allowed  Century 21 Metro,
Inc.  ("Century 21") to offer the 47 acres of Multi-Family  Lots Tract for sale.
Century 21 is a real estate agency wholly-owned by Mary Peyton, president of the
Home Construction  Subsidiary.  See ITEM 12, "CERTAIN  RELATIONSHIPS AND RELATED
TRANSACTIONS."



                                       14

<PAGE>


         COMMERCIAL LOTS

         Concurrent  with the sale of 451 acres of  single  family  property  to
Maumelle  Valley,  15 acres of the  Company's  Single  Family  Tract  are in the
process of being  re-designated  as commercial  C-1 zoning on the municipal land
use maps of Maumelle,  Arkansas  (hereinafter referred to as "Commercial Lots").
The Company  expects to submit the defined and  surveyed  commercial  lots and a
separate legal description for such zoning designation with the City of Maumelle
by no later than the second quarter of the calendar year. Management anticipates
that the City of Maumelle will  re-designate said lots as commercial C-1 zoning,
but there can be no assurance that such a designation will be granted.

         The 15  acres  of  Commercial  Lots are  currently  subject  to a first
priority mortgage by Boca First Capital used to secure the Boca Credit Line. See
discussion  above,  "-  -Single  Family  Tract,"  and  See,  ITEM  12,  "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS."

         The property  taxes and ad valorem  taxes on the 15 acres of Commercial
Lots owned by the Company have been paid on a timely basis.

         Once the Company has an official  designation of C-1 zoning, it intends
to offer the 15 acres of Commercial Lots for sale through Century 21. Century 21
is a real estate  agency  wholly-owned  by Mary  Peyton,  president  of the Home
Construction  Subsidiary.  See  ITEM  12,  "CERTAIN  RELATIONSHIPS  AND  RELATED
TRANSACTIONS."

         MISCELLANEOUS TRACT AND PROPERTY.  The Miscellaneous Tract and Property
consists of approximately  446 acres of wetlands.  The Operating  Subsidiary has
fee title to the  Miscellaneous  Tract and Property,  subject to the Boca Credit
Line. The wetlands property is located in the Arkansas River and, therefore,  is
unsuitable for development.  Accordingly,  the Company has no development  plans
for  the  property.   See,   ITEM  12,   "CERTAIN   RELATIONSHIPS   AND  RELATED
TRANSACTIONS."

         The  property  taxes and ad valorem  taxes on the 446 acres of wetlands
owned by the Company have been paid on a timely basis.

         TRADEARK  PROPERTIES.  The Operating Subsidiary has a 35.16% membership
interest in TradeArk Properties, LLC ("TradeArk Properties"), a Michigan limited
liability  company.  TradeArk  Properties  owns in fee  simple 258 acres of real
property in Maumelle,  Arkansas,  consisting of 192 acres of single- family lots
("Pine Ridge Tract");  19 acres of multi-family  lots ("Rector Mountain Tract");
40 acres of commercial  lots ("Tract D"); and 6 acres of  commercial  lots(Tract
E"), (collectively known as the "TradeArk Real Property").

         TradeArk  Properties  has a mortgage on the TradeArk  Real  Property to
secure a $4,000,000 loan from New Era Life Insurance  Company ("New Era"). As of
September  30,  2002,  $3,315,915.48  in  principal  was  due  on the  loan  and
$3,541,029.96, as of December 1, 2002. The loan has a fixed interest rate of 13%
per annum and matured on June 12, 2002,  but has been  extended  verbally by New
Era.  As of  December  16,  2002,  New Era has  agreed to extend the loan for an
additional 18 months in the amount of $4,000,000.  The modified loan will mature
in November  2004,  when all  interest and  principal  is due and  payable.  The
modified loan is payable in quarterly payments of interest only at a rate of 13%
per  annum.  Trade  Partners,  the  managing  member and  controlling  member of
TradeArk  Properties has agreed to guarantee the loan.  TradeArk Properties also
has a  unsecured  loan in the  amount of  $1,334,100  from Trade  Partners,  the
manager of TradeArk Properties.



                                       15

<PAGE>


         TradeArk Properties also owns life settlement  contracts ("LSC") with a
discounted  net present value of  $8,300,000,  originally  contributed  by Trade
Partners  Inc.  ("Trade  Partners"),  a  Michigan  corporation,  for its  64.84%
interest in TradeArk  Properties.  The LSC are also pledged to New Era to secure
the New Era Loan.

         On July 26,  2002,  the Company was  notified  by Trade  Partners,  the
manager of TradeArk  Properties,  of its intention to dissolve and liquidate the
limited  liability  company,  or  in  the  alternative  purchase  the  Operating
Subsidiary's 35.16% membership interest. The Company is currently negotiating to
sell its membership interest in TradeArk Properties to Trade Partners.

         Subsequent  to the  Company's  fiscal  year-end,  on November 27, 2002,
TradeArk  Properties  entered into an agreement to sell Tract D,  consisting  of
approximately  38.65 acres in the City of Maumelle to Kite  Capital,  LLC, for a
purchase  price of  $4,545,703.  The closing  shall be not be later than 45 days
after  the  inspection  period  of 90 days  from  the date of  execution  of the
agreement.  The  purchaser  has the  right  to  terminate  the  agreement  if it
determines the property is not adequate for its purposes.

PROGRAM OF DEVELOPMENT.

         During the Company's  fiscal year ended September 30, 2002, the Company
focused on liquidating property from its Maumelle Property inventory in order to
retire debt and dismiss the Operating Subsidiary's voluntary petition for relief
under  Chapter 11 of the U.S.  Bankruptcy  Code.  During the  fiscal  year,  the
Company  sold 751 acres of  property  and  listed 250  acres,  representing  the
developable land, for sale.

         The Company  will not be able to implement  its plans to diversify  its
real estate  portfolio into other geographic areas and/or acquire other business
opportunities  if the Company cannot  liquidate all or a portion of the Maumelle
Property  and  raise   sufficient   working  capital  to  commence   significant
operations,  of which  there  can be no  assurance.  See  ITEM 6,  "MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION."

         DEVELOPMENT OF PROPERTY IN MAUMELLE.  The Company  intends to offer for
sale all or portions of the Single Family Tract, the Multi-Family and Commercial
Lots during fiscal year 2003.

         There are no current plans for the  improvement  or  development of the
Miscellaneous   Tracts   since  such   properties   are  wetlands  and  as  such
undevelopable.

         DEVELOPMENT   OF  TRADEARK   PROPERTIES.   The  Company  is   currently
negotiating  to sell its 35.16%  membership  interest in TradeArk  Properties to
Trade Partners.

         Subsequent  to the  Company's  fiscal  year-end,  On November 27, 2002,
TradeArk  Properties  entered into an agreement to sell Tract D,  consisting  of
approximately  38.65 acres in the City of Maumelle to Kite  Capital,  LLC, for a
purchase price of $4,545,703.  The closing shall be not later than 45 days after
the  inspection  period of 90 days from the date of execution of the  agreement.
The purchaser  has the right to terminate  the  agreement if it  determines  the
property is not adequate for its purposes.


                                       16

<PAGE>


         The Company does not have knowledge of TradeArk Properties' development
plans, except as discussed above.

POLICIES WITH RESPECT TO CERTAIN ACTIVITIES

         GENERAL.   The  following  is  a  discussion  of  investment  policies,
financing policies,  conflict of interest policies, and policies with respect to
certain  other  activities  of the Company.  The policies  with respect to these
activities  have been  determined by the Company's Board of Directors and may be
amended or revised from time to time at the  discretion  of the Board  without a
vote of the shareholders of the Company, except that changes in certain policies
with  respect to  conflicts  of  interest  must be approved by a majority of the
independent directors and otherwise be consistent with legal requirements.

         INVESTMENT POLICIES.

         Investments  in Real Estate or Interests  in Real  Estate.  The Company
generally  conducted  all of its  investment  activities  through the  Operating
Subsidiary  and its membership  interest in TradeArk  Properties.  However,  the
Company  is  in  negotiations  to  sell  its  membership  interest  in  TradeArk
Properties to Trade Partners.

         The  Company's  investment  objective  is to increase  long-term  total
returns to shareholders  through  appreciation in the value of the Common Stock.
The Company's  policy is to acquire or develop assets where the Company believes
that favorable investment  opportunities exist based on market conditions at the
time of the investment.

         The  Company  expects to pursue  its  investment  objectives  primarily
through the direct  ownership of properties by the Operating  Subsidiary  and/or
subsidiaries,  or through indirect property ownership opportunities,  with joint
venture  partners.  The Company may pursue  other  indirect  property  ownership
opportunities, particularly if it is necessary or advisable to do so in order to
acquire the development  resources,  which the Company now lacks. If the Company
is able to  liquidate  all or a  portion  of the  Maumelle  Property  and  raise
additional  working  capital,  the Company  intends to develop other real estate
projects in fast growing geographic areas such as Florida.

         Future development or investment  activities will not be limited by the
governing  documents of the Company or its  subsidiaries to any geographic area,
product  type  or  specified  percentage  of  the  Company's  assets.  It is the
Company's policy to acquire assets primarily for possible capital gain.

         Securities of or Interests in Persons  Primarily Engaged in Real Estate
Activities and Other Issuers. The Company also may invest in securities of other
entities  engaged in real estate  activities  or invest in  securities  of other
issuers,  including  investments  by the Company  for the purpose of  exercising
control over such entities.  No such investments will be made,  however,  unless
the Board of Directors  determines the proposed  investment  would not cause the
Company  to be an  "investment  company"  within the  meaning of the  Investment
Company  Act  of  1940,  as  amended  (the  "Investment  Company  Act").  Should
management  recommend  prospective  acquisitions  in such  companies,  it is the
Company's policy to enumerate a correlation between the strategic  objectives of
the Company and the prospective  acquisition,  or a plan to enhance  shareholder
value as measured by future book value or earnings per share.


                                       17

<PAGE>


         Investments in Mortgages. The Company may acquire or warehouse mortgage
and may function as an intermediator lender. The Company may also offer and hold
mortgages generated from the sale of its Maumelle Property inventory.

         FINANCING POLICIES. The organizational documents of the Company and its
subsidiaries  impose no limits on the amount of indebtedness they may incur. The
Company  will from time to time  determine  its  borrowing  policies in light of
then-current  economic  conditions,  relative costs of debt and equity  capital,
market  value of the  Company's  real  estate  assets,  growth  and  acquisition
opportunities, and other factors.

         The  Company  intends  to  raise  additional   capital  through  equity
offerings,  debt financing,  or a combination thereof,  although there can be no
assurance that the Company will be able to raise such capital on favorable terms
or at all.

         The  Company has not  established  any limit on the number or amount of
mortgages  that  may  be  placed  on any  single  property  or on the  Company's
portfolio as a whole.

         CONFLICTS  OF INTEREST  POLICIES.  The Board of Directors is subject to
certain  provisions  of Nevada law that are  designed to  eliminate  or minimize
certain potential  conflicts of interest.  There can be no assurances,  however,
that these policies  always will be successful in  eliminating  the influence of
such  conflicts,  and if they are not  successful,  decisions could be made that
might fail to  reflect  fully the  interest  of all  shareholders.  See ITEM 12,
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."

         Under  Nevada  law,  each  director is subject to  restrictions  on the
misappropriation  of corporate  opportunities  to himself or his  affiliates  of
which he becomes  aware  solely as a result of his  service as a  director.  The
Company may transact business with one or more of its directors or officers or a
corporation,  firm or  association  in  which  one or more of its  directors  or
officers are directors, officers or are financially interested,  provided any of
the following requirements are satisfied:

         (a)      The interested  directors or officers must disclose the common
                  directorship,  office or  financial  interest  to the board of
                  directors, have it noted in the minutes, and a majority of the
                  disinterested directors must approve or ratify the contract or
                  transaction; or

         (b)      The interested  directors or officers must disclose the common
                  directorship,    office   or   financial   interest   to   the
                  shareholders,  and the shareholders must approve by a majority
                  vote the contract or transaction.  The votes of the interested
                  director  or  officer  must be counted in any such vote of the
                  shareholders; or

         (c)      The common directorship or office or financial interest is not
                  known to the director and officer at the time the  transaction
                  is brought  before the board of directors and therefore is not
                  disclosed; or

         (d)      The contract or  transaction  is fair as to the Company at the
                  time it is authorized or approved.

         CERTAIN POLICIES WITH RESPECT TO OTHER ACTIVITIES.  The Company and its
subsidiaries  have  authority to offer their  securities  and to repurchase  and


                                       18

<PAGE>

otherwise  acquire  their  securities,  and they are  likely  to  engage in such
activities.  In the future,  the Company and its  subsidiaries may make loans to
joint ventures in which they participate in order to meet working capital needs.
The Company  and its  subsidiaries  have not  engaged in trading,  underwriting,
agency distribution, or sale of securities of other issuers and do not intend to
do so. The Company and its  subsidiaries  intend to make investments in a manner
such that they will not be treated as an investment company under the Investment
Company Act.

         COMPETITIVE  CONDITIONS.  The Company's real property is subject to the
highly  competitive  conditions  of the real estate  development  and sales.  In
Arkansas--the  geographic  area in which the  Company  holds  its real  property
inventory and offers such inventory for development and sale--there are numerous
large  national and regional  firms with  significantly  greater  experience and
financial resources than the Company currently possesses. Such firms will likely
compete  with the  Company in the  marketing  and sale of land for  development.
Additionally,  if the Company  acquires real estate projects in other geographic
areas, it will compete with firms that may have greater  experience in that area
and will  compete  directly  with such firms for the  acquisition  of land,  the
hiring  of  sub-contractors,   experienced  management  personnel,  construction
workers and other employees, and the sale of product.

         Because of the restrictive  zoning in Maumelle,  Arkansas,  the Company
believes that its ownership of 250 acres of  developable  land for single family
homes,  multi-family  and commercial units will give the Company an advantage in
selling its Maumelle Property to developers.

         The  Company  currently  has no  material  presence  or  reputation  in
Arkansas or any other area in the real estate development  industry and does not
have sufficient capital to commence significant  development  activities,  other
than the liquidation of its existing Maumelle Property  inventory.  For this and
other reasons  discussed  herein,  the Company may  experience  difficulties  in
competing with established developers.

ITEM 3.  LEGAL PROCEEDINGS.

         On July 21, 2000, the Operating Subsidiary,  a wholly-owned  subsidiary
of the Company that holds  substantially  all of the Company's  assets,  filed a
voluntary  petition for relief under Chapter 11 of the United States  Bankruptcy
Code in the  United  States  Bankruptcy  Court,  Eastern  District  of  Arkansas
("Bankruptcy  Court").  Until  September  6,  2002,  when the  Bankruptcy  Court
dismissed  the Chapter 11  proceedings  against the  Operating  Subsidiary,  the
Company  continued to operate its business as a  debtor-in-possession.  As such,
the Operating  Subsidiary was authorized to operate its business in the ordinary
course of business,  but could not engage in  transactions  outside the ordinary
course of business without Bankruptcy Court approval. See discussion below.

         As a  result  of the  Operating  Subsidiary's  bankruptcy,  all acts to
collect  Pre-petition  Indebtedness  and to enforce other  existing  contractual
obligations of the Operating Subsidiary were stayed.

         Upon filing the voluntary  petition for bankruptcy relief under Chapter
11, the foreclosure  action instituted by the Liquidator for Resure on April 19,


                                       19

<PAGE>


2000 against the Operating  Subsidiary was stayed.  The  foreclosure  action was
filed in the Chancery Court of Pulaski County,  Arkansas (the "Resure lawsuit").
The  Resure  Liquidator  sought  to  foreclose  on  approximately  701  acres of
residential  land of the Maumelle  Property  securing a $3,500,000 loan ("Resure
Note") owed by the Company.  The action also sought  $2,000,000  in  Development
Fees the Liquidator  claimed the Operating  Subsidiary  owed under the terms and
conditions of the September 30, 1997, settlement agreement, which was secured by
the same 701 acres as the Resure Note.

         On December 20, 2001,  the Operating  Subsidiary  and Resure  reached a
settlement  agreement (the  "Settlement  Agreement")  to resolve  payment on the
outstanding   Resure  Note  and  the  Resure   Motions  and  Competing  Plan  of
Reorganization.  The Bankruptcy  Court entered an Order approving the Settlement
Agreement on December 20, 2001,  and  dismissed  all pending  motions by Resure,
subject to the Resure Liquidator receiving approval of the agreement by the Cook
County  Court.  The Cook County  Circuit  Court  entered an Order  approving the
Settlement Agreement on January 9, 2002.

         Under the terms of the  Settlement  Agreement,  the  Resure  Liquidator
agreed to accept  $3,850,000 in satisfaction of all claims against the Operating
Subsidiary.  On  February  4,  2002,  the  $3,850,000  was  paid  to the  Resure
Liquidator  from  the  proceeds  of a sale of 451  single  family  acres  of the
Maumelle Property, to an unaffiliated third party, for a total purchase price of
$4,000,000.

         As of September 6, 2002, all claims of the Operating Subsidiary,  other
than  those  owed to  affiliates  and  the  Arkansas  Department  of  Finance  &
Administration  had been  satisfied  or  released.  Accordingly,  the  Operating
Subsidiary  filed a Motion to Dismiss Chapter 11 Proceedings with the Bankruptcy
Court instead of a Plan of Reorganization.  On September 6, 2002, the Bankruptcy
Court  entered an Order  Dismissing  the  Chapter  11  Proceedings  against  the
Operating Company.

         The Company is not involved in any other  litigation,  other than those
actions  arising from the normal  course of business,  and for which  Management
does not believe will have a material effect on the Company's operations.

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

         No matters were submitted  during the fourth quarter of the fiscal year
covered by this Report to a vote of security  holders,  through the solicitation
of proxies or otherwise.

PART II.

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The Common Stock is listed for trading in the  over-the-counter  market
on the NASDAQ electronic  bulletin board under the symbol "CPCY";  however,  the
market for  shares of the Common  Stock is  extremely  limited.  There can be no
assurance that the present  limited  market for the Company's  common stock will
become more active or even be  sustained.  In  addition,  any future sale of the
Company's  stock by any of the controlling  shareholders  may have a substantial
adverse impact on any such public market.

         The high and low bid prices for shares of common  stock of the  Company
for each quarter within the last two fiscal years are as follows:


                                       20

<PAGE>
                                            BID

Quarter Ending                              High                     Low

September 30, 2000                          .250                     .013

December 30, 2000                           .180                     .0625

March 31, 2001                              .75                      .065

June 30, 2001                               .570                     .130

September 30, 2001                          .320                     .012

December 30, 2001                           .87                      .13

March 31, 2002                              .37                      .037

June 30, 2002                               .20                      .04

September 30, 2002                          .14                      .065

         These bid prices were obtained from the National Quotation Bureau, Inc.
("NQB"), and reflect  inter-dealer prices,  without retail mark up, mark down or
commission and may not reflect actual transactions.

HOLDERS

         The number of record  holders of the Company's  common stock was 1,021,
as of September 30, 2002.

DIVIDENDS

         During the fiscal  year ended  September  30,  2002 and the fiscal year
ended  September 30, 2001,  the Company did not declare any cash  dividends with
respect to its Common Stock. The Company does not expect to declare dividends on
its common stock in the  foreseeable  future.  The future dividend policy of the
Company cannot be ascertained with any certainty, particularly since the Company
has  decided to focus on  liquidating  its  present  inventory  of the  Maumelle
Property  due to its present  illiquidity.  There are no  material  restrictions
limiting, or restrictions that are likely to limit, the Company's ability to pay
dividends  on its  Common  Stock in the  future,  except  that the  articles  of
incorporation  of the  Company  permit the board of  directors  to  approve  the
issuance of preferred stock having such rights as may be designated by the board
without shareholder approval.

         During the fiscal year ended  September  30, 2002,  the Company  issued
3,843,698 shares of Preferred Stock,  Series A, that bears a cumulative dividend
of 5 1/4%. As of September 30, 2002,  the Company  prepaid one year of dividends
on  the  3,843,698  shares  of  Series  A  Preferred  Stock  in  the  amount  of
$203,032.79. The Company, through its board of directors, has the right to issue
other  series of  preferred  stock.  Such  rights may include  preferences  with
respect  to  dividends  as well  as  prohibitions  against  the  declaration  of
dividends on Common Stock under certain circumstances.

         The following  unregistered  securities  were issued during fiscal year
ended September 30, 2002:

On October 18, 2001 the Company issued 100,000 shares of restricted common stock
to M. L. Schehin,  a consultant of the Company,  in consideration of cash at the
price of $0.05 per share.  The Company  relied on Section 4(2) of the Securities
Act  of  1933,  as  amended  ("Securities  Act"),  in  agreeing  to  issue  such
securities.


                                       21

<PAGE>


On October 18, 2001 the Company  issued  6,000,000  shares of restricted  common
stock to Prescott  Investments LLC, an affiliated company for the purchase price
of $0.05 per share  payable  in a note  payable  in full no later than March 31,
2002.  The Note's  maturity  was  extended to  September  30,  2003.  Additional
compensation  for services was  recognized  at the rate of $0.10 per share.  The
Company  relied on Section 4(2) of the  Securities Act in agreeing to issue such
securities.  See  ITEM  6,  "MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OR PLAN OF
OPERATION- - Subsequent Events."

On October 18, 2001 the Company issued  10,000,000  shares of restricted  common
stock to Michael G. Todd, an officer of the Company,  in consideration of and in
lieu of unpaid cash  compensation  and benefits at the price of $0.05 per share.
Additional  compensation  for services was  recognized  at the rate of $0.05 per
share.  The Company  relied on Section 4(2) of the Securities Act in agreeing to
issue such securities.

On February 25, 2002 the Company issued  2,000,000  shares of restricted  common
stock to Tom Blake, a Director of the Company,  in  consideration of and in lieu
of unpaid cash  compensation at the price of $0.05 per share. The Company relied
on Section 4(2) of the Securities Act in agreeing to issue such securities.

On February 25, 2002 the Company  issued  500,000  shares of  restricted  common
stock to Will Schwartz,  an advisor to the Company,  in  consideration of and in
lieu of unpaid cash  compensation  at the price of $0.05 per share.  The Company
relied  on  Section  4(2)  of the  Securities  Act in  agreeing  to  issue  such
securities.

On February 25, 2002 the Company  issued  100,000  shares of  restricted  common
stock to M.L.  Schehin,  an advisor to the Company,  in  consideration of and in
lieu of unpaid cash  compensation  at the price of $0.05 per share.  The Company
relied  on  Section  4(2)  of the  Securities  Act in  agreeing  to  issue  such
securities.

         Effective August 15, 2002, the Company agreed to exchange $3,843,698 in
debt, including principal and interest, with a group of existing promissory note
security holders ("Note Holders") for 3,843,698 restricted shares of Convertible
Preferred Stock, Series A Non-Voting stock (the "Series A Preferred Stock"), par
value $0.01 per share. Each share of Series A Preferred Stock bears a cumulative
dividend rate of 5.25% per annum.  The Series A Preferred Stock, in the event of
any  liquidation,  dissolution  or winding up of the  Company,  is senior to the
holders of Common Stock.  The Company relied on Section  3(a)(9) and Rule 145 of
the  Securities  Act in agreeing to issue such  securities.  As of September 30,
2002,  the Company had issued  3,843,698  shares of Series A Preferred  Stock to
promissory note holders.  See ITEM 6,  "MANAGEMENT'S  DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION -Liquidity and Capital  Resources-Debt  Reduction-Issuance  of
Preferred Stock."

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

OVERVIEW

         The  following  discussion  should  be read  in  conjunction  with  the
financial  statements  and the notes thereto  appearing in Item 7 of this Report
(the "Financial  Statements").  As noted below and elsewhere in this Report, the
Company needs to cure its current liquidity in order to diversity its portfolio,
acquire new business  opportunities  and  generate  revenues.  Accordingly,  the
Company  is in the  process  of  liquidating  all or  portions  of the  Maumelle
Property and raise sufficient capital to commence meaningful  operations.  There
can be assurance, however, that the Company will be able to sell all or portions
of the Maumelle  Property for a fair market value or at all, or raise sufficient
capital in order to implement its growth strategy.


                                       22

<PAGE>


RESULTS OF OPERATIONS

         COMPARISON OF YEAR ENDED SEPTEMBER 30, 2002 TO YEAR ENDED SEPTEMBER 30,
2001. For the year ended  September 30, 2002, the Company  experienced a gain of
$4,246,713  compared with a loss of $2,115,003 for the year ended  September 30,
2001.  The  difference in  performance  resulted  primarily  from an increase in
revenues from $202,351 in the year ended  September 30, 2001, to $8,504,740  the
year ended September 30, 2002, an increase of $8,302,389.  The cost of sales and
the cost of sales for related party  commission for the year ended September 30,
2002, amounted to $4,256,899,  resulting in a gross profit of $4,127,841.  Gross
profits  as a  percentage  of  revenues  decreased  to 48.54% in the year  ended
September  30,  2002 from  94.92% in the year  ended  September  30,  2001.  The
revenues  for  the  year  ended  September  30,  2002,  were  increased  by  the
recognition of $8,500,000 in land sales profit.

         During the year ended September 30, 2002,  operating expenses increased
to $1,474,880 from $431,278 in the year ended September 30, 2001, an increase of
$1,043,602  or  241.98%.  The primary  cause of the  increase  was the  expenses
recognized for stock based compensation to an officer and various consultants.

         Sales for the fiscal year-end were $8,500,000 an increase of $8,425,000
from the year ended  September  30, 2001,  as a result of increase land sales of
the Maumelle  Property.  Gross profit for the year ended  September 30, 2002 was
$4,127,841 an increase of  $3,935,768  from the gross profit of $192,073 for the
year ended September 30, 2001.

         From the year ended  September 30, 2002 to the year ended September 30,
2001,  operating expenses increased from $431,278 to $2,660,053,  an increase of
$1,043,602  or 241.96%.  Officers'  salaries  decreased to $190,000 for the year
ended  September 30, 2002 from $240,000 for the year ended September 30, 2001, a
decrease of $50,000. Officers' salary for the year ended September 30, 2002, was
composed  of the amount  paid of  $85,000  and an amount  accrued  and unpaid of
$105,000. Consulting fees increased to $847,358 for the year ended September 30,
2002 from  $21,632  for the year  ended  September  30,  2001,  an  increase  of
$825,726.  Legal fees and audit fees  increased  by $110,248 to $185,116 for the
year ended  September  20, 2002 from  $74,868 for the year ended  September  30,
2001. Miscellaneous charges increased by $97,431 to $104,167 for the year ended
September 30, 2002 from $6,736 for the year ended September 30, 2001.  Operating
expenses-related  parties increased to $1,185,173 from $73,618 in the year ended
September  30,  2001,  an  increase  of  $1,111,555  or  1,509.90%.  The expense
recognized  for stock based  compensation  to an  officer/directors  and various
consultants  increased to $1,099,500 for the year ended September 30, 2002, from
$0 for the year ended September 30, 2001, an increase of $1,099,500.  Consulting
fees increased to $45,500 for the year ended September 30, 2002, from $0 for the
year ended  September  30,  2001,  an increase of $45,500.  Management  expenses
decreased from $73,618 for the year ended September 30, 2001, to $22,173 for the
year ended  September  30,  2002,  a decrease of $51,445.  The  decrease was the
result of a decrease  in expense  fees due to  Maumelle  Enterprises,  a related
party,  of $22,173 for the year ended  September 30, 2002,  from $73,618 for the
year ended September 30, 2001. For fiscal year ended September 30, 2002, and for
the fiscal year ended  September 30, 2001,  accrued expense fees due to Maumelle
Enterprises were at $55,329 and $66,329 respectively.

         Interest  expenses  decreased by $1,023,333 from $1,619,187  during the
year ended  September 30, 2001, to $595,854  during the year ended September 30,
2002, a decrease of 63.20%.


                                       23

<PAGE>


         The operating loss recorded for unconsolidated  subsidiaries  accounted
for under  the  equity  method  totaled a loss of  $325,791  for the year  ended
September 30, 2002,  compared to a loss of $240,657 for the year ended September
30, 2001.

         The  Company  recognized  a current tax expense of $74,183 for the year
ended September 30, 2002,  compared to $0 for the year ended September 30, 2001.
The increase  resulted from the  liability  incurred at the state level from the
sale of assets of the Operating Subsidiary in Arkansas. The Company recognized a
deferred income tax benefit of $1,203,000 for the year ended September 30, 2002,
compared to $0 for the year ended September 30, 2001. The Company had previously
recorded a valuation allowance equal to its deferred tax benefit. As a result of
sales and gain from  retirement  of debt at a  discount  during  the year  ended
September  30,  2002,  the  Company  utilized  a  substantial  amount of the net
operating loss ("NOL") and subsequently  examined its ability to utilize more of
its remaining NOL and recognized a benefit from a portion of its remaining NOL.

         On February 4, 2002, the Operating  Subsidiary,  under the terms of the
2001 Settlement  Agreement with Resure, paid the outstanding Resure Note in full
for the payment of $3,850,000.  The Company had a liability accrued to Resure of
$5,034,497.  The Company  recognized and extraordinary gain of $1, 184,497 under
SFAS 15.As of  September  30,  2002 the Company  negotiated  a  settlement  with
certain existing promissory Note Holders for principal debt and accrued interest
of $1,941,484.26 for cash settlements of $612,163.85.

         The  Company  continues  to  accrue  management  fees,  to  the  extent
possible,  to Maumelle  Enterprises,  a related party.  However actual expenses,
which  include  overhead and  salaries,  have been paid to Maumelle  Enterprises
during fiscal year ended September 30, 2002. During the fiscal year-end Maumelle
Enterprises  was paid $22,173 and accrued $0 in management  fees.  During fiscal
year ended September 30, 2001, Maumelle Enterprises was paid $73,618 and accrued
$0 in management fees. During fiscal year, Mr. Todd was paid $85,000,  a portion
of the salary Mr. Todd was  scheduled  to be paid with the  remaining  amount of
$105,000  accrued,  bringing  the balance  accrued at  September  30,  2002,  to
$105,000.  Notwithstanding,  Mr. Todd has agreed,  as of September  27, 2002, to
forego salary until the Company is in a financial position to pay such expenses.
On April 24,  2002,  Mr.  Todd's  employment  contract was modified to reflect a
salary of $10,000 per month, due to the financial condition of the Company.  See
ITEM 12, "CERTAIN  RELATIONSHIPS AND RELATED  TRANSACTIONS-Maumelle  Enterprises
Inc., Agreement."

         The Company  believes that its results of operations can improve in the
future if it is able to liquidate all or portions of the Maumelle Property,  and
secure long-term debt or equity to commence significant operations and diversify
its portfolio. The Company, through its subsidiary, intends to take advantage of
an apparent  increase in building  activity in the City of Maumelle,  summarized
below to liquidate its Maumelle  Property  holdings.  There can be no assurance,
however,  that such  trends will  continue  or that the Company  will be able to
capitalize on these trends.

         There were 256  permits  were  issued by the City of  Maumelle  for the
construction  of new  single-family  homes during the 2001 calendar  year.  From
January   through   September  2002,  203  permits  have  been  issued  for  the
construction of new homes. Although there can be no assurance that such increase
in  activity  will  continue,  the  Company  believes  that  the  level  of home
development  activity in Maumelle will  continue to increase in the future,  for
the following reasons:

         (1) The  Country  Club of  Arkansas,  a  golf-oriented  development  in
Maumelle,  has  completed  improvements  and opened  its new golf  course to the
public in the Fall of 1996. The  owner/developer of the Country Club of Arkansas


                                       24

<PAGE>

has placed  substantial  amounts of  advertising  and promotion into local print
media which may  produce a positive  effect for future  development  activity in
Maumelle.

         (2) In the period 1990 through 2000, the SMSA of the Little  Rock/North
Little Rock area, which includes Maumelle,  has shown a total increase of 20.55%
in new jobs. However,  the job market has not grown during the first nine months
of 2002,  and with the current  national  economic  downturn and other  economic
uncertainties,  there can be no assurance  that the city will have job expansion
in the near future or at all.

         The Company does not foresee any significant elements of income or loss
that would arise  outside of the  ordinary  course of  business,  except for the
losses that would likely arise if the Company  becomes  unable to (i)  liquidate
property,  (ii) has to liquidate its property for less than fair market value or
(iii) if the  Company is not able to secure  long-term  capital,  equity  and/or
liquidate  portions  of the  Maumelle  Property  sufficient  to meet  day-to-day
operating expenses and commence meaningful operations.

         Even if the  Company  can  overcome  its  present  liquidity  and raise
sufficient capital to commence meaningful operations,  there is no assurance the
Company  will be able to  successfully  acquire  real  estate  projects or other
business opportunities at a fair market price or at all.

         FACTORS THAT MAY AFFECT FUTURE  RESULTS AND MARKET PRICE OF STOCK.  The
factors  identified  below  are  believed  to  be  important  factors  (but  not
necessarily  all of the important  factors)  that could cause actual  results to
differ  materially from those expressed in any forward looking statement made by
or on behalf of the Company, whether in this section or elsewhere in this Report
or in any other  written or verbal  statement  of the Company or its officers or
directors. Unpredictable or unknown factors not discussed herein could also have
material  adverse effects on forward looking  projections.  The Company does not
intend to update these cautionary statements.

         Liquidity  Issues. As of September 30, 2002, the Company was in default
on non-recourse promissory notes in the amount of $2,029,168,  and $1,557,838 as
of December  15, 2002.  Subsequent  to the fiscal year end and as of December 1,
2002,  the Company has  negotiated  settlements  with  certain  promissory  note
holders to exchange  $291,539 in debt,  including  principal and  interest,  for
291,539 shares of Series A Preferred  Stock. As of December 1, 2002, the Company
has negotiated  settlement  agreements  with certain  promissory note holders to
exchange   $1,011,330.19  in  debt  and  accrued  interest  of  $301,709.95  for
$470,250.29 in cash and notes and 302,389 shares of Series A Preferred Stock. Of
these totals, the Company, as of December 15, 2002, closed settlements with Note
Holders to exchange $381,330.19 in debt and accrued interest of $98,834.52,  for
$122,247.18 in cash and notes and 216,858 shares of Series A Preferred Stock.

         The  Company,  without  liquidating  all or  portions  of the  Maumelle
Property,  does not have sufficient capital to meet its day-to-day operations or
commence any meaningful operations.  This illiquity may prevent the Company from
realizing or consummating any of its business plans, objectives,  strategies, or
transactions discussed in this Report. Except for the Company's credit line with
Boca First,  the Company has minimal  operating income and its primary source of
funds to meet operating expenses for the last two years has been the liquidation
of its real property inventory.  If the Company has to liquidate portions of its
Maumelle Property during fiscal year 2003 to service its debt, it may be at less
than fair market value.

         If the Company is able to  liquidate  all or  portions of the  Maumelle
Property and/or raise sufficient  capital,  the Company  contemplates  acquiring


                                       25

<PAGE>

and/or developing real estate projects in fast growing areas such as Florida, or
acquiring  business  opportunities  that  generate  revenues.  There  can  be no
assurance that the Company will be able raise sufficient capital and/or sell the
Maumelle  Property in order to diversify  its portfolio or that the Company will
be able to acquire real estate  projects and other business  opportunities  that
will generate progressive revenues. See discussion below, "LIQUIDITY AND CAPITAL
RESOURCES."

         Competition.   The  real   estate   development   industry   is  highly
competitive.  In  Arkansas--the  geographic area in which the Company intends to
sell  residential,  multi-family and commercial lots from its Maumelle  Property
inventory--there   are  numerous   large   national  and  regional   firms  with
significantly  greater  experience  and  financial  resources  than the  Company
currently possesses. Such firms will likely compete with the Company in the sale
of land. If the Company is able to obtain  capital  through the sale of property
and/or debt or equity and diversify its portfolio into geographic  areas such as
Florida,  the  Company  may have to  compete  with  development  firms that have
greater  resources and experience for the  acquisition of land for  development,
the hiring of sub-contractors,  experienced  management personnel,  construction
workers and other employees. See ITEM 2, "DESCRIPTION OF PROPERTY--POLICIES WITH
RESPECT TO CERTAIN ACTIVITIES--Competitive Conditions."

         The  Company  currently  has no  material  presence  or  reputation  in
Arkansas or any other area in the real estate development  industry and does not
have sufficient capital to commence significant development activities. For this
and other reasons discussed herein,  the Company may experience  difficulties in
competing with established developers.

         Lack of Experience.  The Company has no  operational  experience in the
real  estate  development  industry,  other than in the sale of  property.  Such
inexperience may make it difficult for the Company to achieve its business plans
and  objectives,  particularly  given the  existence  of  competition  from more
experienced and better capitalized companies.

         Interest Rates;  Mortgage  Financing.  Demand for residential  lots and
homes,  multi-family  construction,  as  well  as  commercial  construction,  is
adversely  affected by increases in interest  rates. If interest rates increase,
demand for the Maumelle Property may be significantly reduced due to prospective
buyers' inability to obtain  financing.  Any adverse changes in the availability
of Federal Housing Administration or Veterans  Administration mortgage financing
may also adversely impact the Company's ability to sell the Maumelle Property to
developers.

         Many  Factors  Beyond  The  Company's  Control.  The nature of the real
estate  development  industry  is cyclical  and is  affected by various  factors
beyond  the  Company's  control,  including  changes  in the  general  and local
economy,  employment,  availability  of financing,  interest  rates,  changes in
demographics,   housing  demands,  the  possibility  of  expanding  the  war  on
terrorism, as well as changes in government regulations.  Developers are subject
to a number of other risks,  including availability and cost of land, materials,
and  labor,  weather  conditions,   construction  delays,  costs  controls,  and
increases in real property taxes and local government fees.

LIQUIDITY AND CAPITAL RESOURCES

         INDEBTEDNESS AND OTHER LIQUIDITY REQUIREMENTS.  The principal amount of
the Company's total debt at September 30, 2002,  included,  without  limitation,
the following  (see ITEM 2,  "DESCRIPTION  OF  PROPERTY--MAUMELLE  PROPERTY" for
descriptions of encumbered properties referenced below):


                                       26

<PAGE>


                  $1,216,000.00  has been drawn on a  $4,000,000.00  credit line
                  from  Boca  First  evidenced  by  the  Boca  Note  secured  by
                  substantially  all of the assets of the Operating  Subsidiary.
                  The collateral  securing the Boca Note, includes a mortgage on
                  the remaining 696 acres of the Maumelle Property, 1,000 shares
                  of  common  stock  of the  Operating  Subsidiary  owned by the
                  Company,  representing  one hundred  percent of the issued and
                  outstanding  shares;  the 35.16  percent  interest in TradeArk
                  Properties, LLC, a Michigan limited liability company which

                  owns viatical life  settlement  contracts and real property in
                  Maumelle,  Arkansas;  and  two  notes  receivable  payable  on
                  January  15,  2003 and  March 26,  2005  with a face  value of
                  $1,070,000.00 and 1,000,000.00,  respectively,  with an annual
                  rate of  interest of 6.25%.  The Boca  Credit Line  matures on
                  November  1,  2004,  and has an initial  interest  rate of ten
                  percent (10%) per annum and will, on a quarterly basis, adjust
                  to a rate  which is equal to the  greater of ten  percent  per
                  annum or one percent  (1%) above the prime rate,  as published
                  in The Wall Street Journal, in effect on that date.

                  As of the fiscal year-end, the Company has drawn $1,216,000.00
                  on the Boca Credit Line,  and  $1,491,000,  as of December 16,
                  2002.

                  $2,029,168 in non-secured  short-term debt financed by private
                  sources  ("Promissory  Notes"). The Promissory Notes generally
                  bear  interest at a rate  ranging from 10.9% to 14% per annum,
                  with a weighted average as of the Company's year end of 11.03%
                  per annum, and mature nine months from the date of issuance of
                  each note.  As of the  Company's  fiscal year end, the Company
                  was in default on  $1,939,168.17  of the short-term debt, plus
                  $441,730 in accrued interest.  Management has been notified by
                  New England International Surety Inc. (the "Surety"), the firm
                  that issued the surety bonds for the Promissory Notes, that it
                  has been served with a class action suit in federal court.  As
                  such,  even though the Company has defaulted on the Promissory
                  Notes  discussed  above,  the Surety will not make interest or
                  principal  payments  to the  noteholders  until the  action is
                  settled, if at all.

         CERTAIN  RECENT  EVENTS  RELATING  TO THE  COMPANY'S  INDEBTEDNESS  AND
LIQUIDITY REQUIREMENTS

Debt Reduction - Issuance of Preferred Stock

         During the fiscal year ended  September 30, 2002,  the Company  retired
$8,773,825 in secured and unsecured debt.

         Part of the debt  reduction  was a condition of the transfer of control
of the Company to Boca First.  During the fiscal year ended  September 30, 2002,
the Company  reduced its obligations to Promissory Note Holders by an offer of a
cash  settlement or an exchange of the note for Series A Preferred  Stock of the
Company. The settlement offer was satisfied from the Boca Credit Line.

         As of September 30, 2002, the Company has exchanged $3,843,698 in debt,
including  principal and interest,  with a group of Promissory  Note Holders for
3,843,698  shares  of  Convertible  Preferred  Stock,  Series A (the  "Series  A
Preferred  Stock"),  par value $0.01 per share. Each share of Series A Preferred
Stock bears a cumulative  dividend  rate of 5.25% per annum.  Commencing 60 days
from the date of issuance,  but not sooner than August 15,  2002,  each Series A
Preferred Stock shall have a mandatory conversion, at the Company's sole option,
to convert  into one share of Common  Stock for each share of Series A Preferred


                                       27

<PAGE>

Share held by Investor, predicated upon certain events ("Triggered Events"). The
Triggered  Event shall occur,  when and if, the  Company's  stock,  based on the
average of the high and low prices of the Common Shares for a consecutive period
of ten (10) trading days,  as reported by the National  Quotation  Bureau,  Inc.
("NQB"),  and reflect  inter-dealer  prices as reported on the NASDAQ electronic
bulletin board, reaches a price of $1.50 per share of Common Stock.  However, in
the event the  Company  elects  such  option,  it will use its best  efforts  to
register  such  common  shares  for  resale  within  180  days  from the date of
conversion.  Commencing 90 days after issuance (the "Conversion  Date"), and any
time  thereafter,  the Series A Preferred is  convertible,  at the option of the
holder,  into one share of the  Company's  Common  Stock.  All or any  number of
Series A Preferred  Stock may be  converted  by the holder  thereof from time to
time on or after the  Conversion  Date.  However,  such  optional  conversion is
limited by the  Triggered  Events.  The Series A Preferred  Stock is  restricted
stock.

         The  Series  A  Preferred  Stock is  non-voting,  except  as  otherwise
provided  under  Nevada law. The Series A Preferred  Stock,  in the event of any
liquidation,  dissolution or winding up of the Company, is senior to the holders
of Common  Stock.  Series A Preferred  Stock  holders are  entitled to receive a
liquidation  preference of $1.00 per share, plus accrued and unpaid dividends to
the payment date. See ITEM 5, "MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS
MATTERS - - Dividends."

         As of September  30,  2002,  the Company  negotiated a settlement  with
certain  existing  promissory  Note Holders for principal debt of $1,941,484 for
cash settlements of $612,164.

         In  addition  to  negotiating  settlements  with  the  Promissory  Note
Holders,  the Company retired  $5,650,454 in other debt. This debt was comprised
of  $1,105,812.00 in principal and interest paid to First Arkansas Bank on March
26, 2002 for a loan secured by 289 acres of single family property,  $694,642 in
principal  and  interest on two loans owed to the Bank of Little  Rock,  paid on
March 26, 2002, that secured 11 acres of Multi-Family  Lots,  $3,850,000 paid on
February 4, 2002, to the Resure  Liquidator  as settlement on a promissory  note
secured by 289 acres of the Maumelle  Property,  and  $300,000 in principal  and
interest to Davister Corp., on a non-recourse,  unsecured note. The Company used
proceeds  from the sale of 451 acres of the Maumelle  Property to satisfy  these
debts. See ITEM 2, "DESCRIPTION OF PROPERTY."

         The  Company's   current   illiquidity   prevents  it  from  conducting
meaningful  business  activities  other than  selling  assets from the  Maumelle
Property.  Although  management  anticipates  utilizing  all or a portion of the
Maumelle  Property to acquire or develop  real estate  projects in fast  growing
areas,  such as Florida and/or develop other  business  opportunities  that will
generate  progressive  revenues for the Company,  there can be no assurance  the
Company will be able implement these plans. See ITEM 6, "MANAGEMENT'S DISCUSSION
AND ANALYSIS OR PLAN OF OPERATION - - Certain Capital Raising Transactions."

         CERTAIN  CAPITAL  RAISING  TRANSACTIONS.  During the fiscal  year ended
September  30,  2002,  the  Company   obtained  capital  through  the  following
transactions:

                  The  Company  sold 431 acres of  residential  property  of the
                  Maumelle Property to an unaffiliated  third party, for a price
                  of  $4,000,000.00.  The net proceeds of $3,850,000.00 was used
                  to settle  all claims  and  obligations  owed to Resure by the
                  Company.


                                       28

<PAGE>

                  The Company sold 289 acres of single family  property,  and 11
                  acres  of  multi-family   property,   to  West  Maumelle,   an
                  unaffiliated   third   party,   for  a   purchase   price   of
                  $4,500,000.00.

See ITEM 2, "DESCRIPTION OF PROPERTY," and ITEM 3, "LEGAL PROCEEDINGS."

         SUBSEQUENT EVENTS

                  On December 15, 2002,  the Company  executed a note  extension
                  with West  Maumelle to extend the  maturity  date on Note 1 in
                  the amount of  $1,070,000  from  December 15, 2002, to January
                  15, 2003.  West  Maumelle paid an extension fee of $11,000 for
                  the extension,  however,  the Company has agreed to credit the
                  extension  fee towards  payment on Note 1; provided the entire
                  principal and all accrued interest on the note is paid in full
                  on or before December 31, 2002.

                  On November  27,  2002,  TradeArk  Properties  entered into an
                  agreement to sell Tract D, consisting of  approximately  38.65
                  acres in the City of  Maumelle  to Kite  Capital,  LLC,  for a
                  purchase price of  $4,545,703.  The closing shall be not later
                  than 45 days after the  inspection  period of 90 days from the
                  date of  execution of the  agreement.  The  purchaser  has the
                  right to terminate the agreement if it determines the property
                  is not adequate for its purposes.

                  As of December 1, 2002, the Company has negotiated settlements
                  with certain promissory note holders to exchange $1,011,330.19
                  in debt, and accrued  interest of $301,709.95  for $470,250.29
                  in cash and notes  and  302,389  shares of Series A  Preferred
                  Stock. Of these totals, the Company,  as of December 15, 2002,
                  closed  settlements with Note Holders to exchange  $381,330.19
                  in debt and accrued  interest of $98,834.52 for $122,247.18 in
                  cash and notes and 216,858 shares of Series A Preferred stock.

                  On October 18, 2001, the Company  issued  6,000,000  shares of
                  restricted   common  stock  to  Prescott  LP,  a   partnership
                  beneficially   owned  by  Michael  G.  Todd,   the   Company's
                  president,  chief  executor  officer  and  director.  Mr. Todd
                  purchased   the  stock  for  $0,05  per  share  payable  in  a
                  promissory note for $300,000 with a maturity date of September
                  30, 2002.  On October 15,  2002,  Mr. Todd agreed to accept as
                  partial  satisfaction  and  release  of his claim for past due
                  compensation  and accounts  payable in the amount of $178,568,
                  the  Company's  claim  against  Prescott LP on the  promissory
                  note. The Company agreed to accept a modified promissory note,
                  dated effective  October 1, 2002, in the amount of $38,692.27,
                  representing  the remaining unpaid balance due on the Prescott
                  stock  purchase.  The modified  note matures on September  30,
                  2003.

         On January  10,  2003,  West  Maumelle  L.P.,  retired  its debt to the
Operating  Subsidiary,  comprised  of a  promissory  note in the face  amount of
$1,070,000,  with a cash payment of $500,000.00  and an assignment of a $640,000
promissory  note  made  by   Transcontinental   Realty   Investors,   Inc.  (the
"Transcontinental  Note"),  a Nevada  corporation,  and payable to West Maumelle
L.P. The $640,000 note is secured by a mortgage to certain  property  located in
Maumelle, Arkansas, and pays interest at a rate of 5.75% per annum with interest
paid monthly,  with a maturity date of July 10, 2004.  The Company has agreed to
allow West Maumelle to repurchase the  Transcontinental  Note for a period of 90
days,  from the date of  assignment,  at a discounted  rate that  increases each
30-day period.

         The Company  renewed Note 2 owed by West Maumelle L.P. to the Operating
Subsidiary in the face amount of  $1,030,000.00.  The new note ("Renewal Note"),
with a face value of $1,000,000.00,  bears interest at a rate of 5.75% per annum
with  interest  due  annually,  with a maturity  date of January 10,  2006.  The
Renewal Note is secured by a mortgage to certain  property  located in Maumelle,
Arkansas,  and is junior to a senior  mortgage from Great  Southern  Bank.  West
Maumelle L.P.,  also made a unsecured note  ("Differential  Note) payable to the
Operating Subsidiary in the amount of $46,170.00,  with the unpaid principal due
and payable on April 10, 2003.

         The Renewal Note, the  Transcontinental  Note and the Differential Note
have been pledged, as substitute collateral for Note 1 and Note 2, to Boca First
Capital LLLP to secure its $4,000,000.00 line of credit.

         PROSPECTIVE SOURCES OF LIQUIDITY. Current operating cash flows will not
be  sufficient  to  service  the  Company's   existing  debt  or  the  Company's
anticipated operating cash needs.

         To raise  sufficient  funds to generate  income  necessary  to meet the
Company's  debt  obligations  and  operating  expenses,  the Company  listed the
Maumelle Property for sale during the fiscal year ended September 30, 2002.

         The  Operating  Subsidiary  is  continuing  to  solicit  buyers for its
Maumelle Property in order to reduce its current debt and for working capital.

         With respect to prospective long-term liquidity, the Company intends to

                                       29
<PAGE>

sell all or portions of the Maumelle  Property to generate capital to acquire or
develop real estate in fast growing  markets,  such as Florida,  and/or  develop
other business  opportunities  that will generate  progressive  revenues for the
Company.  Such  projects may be  developed by the Company or with joint  venture
partners.  At  present,  Management  believes  that the most  likely  sources of
substantial  cash flow during the next two years are 1) the sale of the Maumelle
Property;  (2)  the  sale  of the  Company's  membership  interest  in  TradeArk
Properties;  and (3)the procurement of real estate and/or business  acquisitions
that  generate  progressive  revenues.  See ITEM 1,  "DESCRIPTION  OF BUSINESS--
BUSINESS OF THE COMPANY--GROWTH STRATEGIES."

         The Company intends to raise operating  capital by obtaining  long-term
debt  and/or  the  sale  of  equity  securities  to  the  public  or in  private
transactions.  There can be no assurance  that such public or private  offerings
will be  successful,  or that the Company will be able to divest all or portions
of the Maumelle  Property at a fair market value to acquire  revenue  generating
projects and/or businesses.

         COMPARISON OF YEAR ENDED SEPTEMBER 30, 2002 TO YEAR ENDED SEPTEMBER 30,
2001.  At September  30, 2002,  the Company had total  assets of  $6,972,179,  a
decrease of  $1,009,752  or 12.65%  from the  Company's  total  assets as of the
fiscal  year  ended  September  30,  2001.  The  Company  had cash of $16,981 at
September  30,  2002,  compared to $134 on September  30,  2001,  an increase of
$16,847.  This  decrease  was a result of  operating  income for the fiscal year
ended September 30, 2002. See "LIQUIDITY AND CAPITAL RESOURCES" above.

Accounts  receivable increased  from $150 on  September  30, 2001,  to $2,273 on
September 30, 2002, an increase of $2,123. Accrued interest receivable increased
to $5,463 on September  30, 2002 from $0 on September  30, 2001,  an increase of
$5,463.  Current  notes  receivable  increased to $500,000 on September 30, 2002
from $0 on  September  30,  2001.  This  increase  was a  result  of the sale of
approximately  289  acres  of  single  family  residential  land and 11 acres of
multi-family land. Non-current interest receivable increased from 0 on September
30,  2001 to  $78,432  on  September  30,  2002.  Non-current  notes  receivable
increased from $0 on September 30, 2001, to $1,570,000 on September 30, 2002, an
increase of $1,570,000. See discussion below.

         The carrying value of the Company's real estate  holdings  decreased by
$4,057,370  during the year,  from $5,357,510 in fiscal year ended September 30,
2001 to $1,300,140 in fiscal year ended September 30, 2002. The net decrease was
a result was a result of two sales  during this  period.  The first sale was for
approximately  451 acres of  residential  land in  Maumelle  for a sale price of
$4,000,000  in cash.  The other sale was for  approximately  289 acres of single
family  residential  land and 11 acres of  multifamily  land for a sale price of
$4,200,000.  The terms of the sale  include  $2,100,000  cash at closing,  a six
month note for $1,070,000 due September 22, 2002 ("Note 1")and a three year note
for $1,030,000 due March 26, 2005 ("Note 2"). Additionally,  the Company retains
a 10% interest in the profits  derived from the  development  of the land.  Both
notes bear interest at 6.25% and terms call for payment of principal and accrued
interest at maturity. The Notes are secured by a second mortgage on 289 acres of
single family land and the 11 acres of multi-family land; however, the Purchaser
may obtain a release on  portions of the secured  property;  provided  Note 1 is
paid in full and the additional payments are made on Note 2. On August 16, 2002,
Note 2 was modified to decrease the Note in exchange for West Maumelle  assuming
a $330,000 debt  obligation by the Company to Davister Corp and to eliminate the
Profit Interest in the 289 acre parcel for $300,000 and thereby reducing the net
Note to  $1,000,000.  As per SFAS 66,  Accounting  for Sales of Real Estate,  no
sales value was assigned to that profit interest and all the costs of sale would


                                       30

<PAGE>

be recognized at the time of the sale.  Due to the  cancellation  of the profits
interest,  the value of  $300,000  was  recognized  as an  addition to the sales
price. Note 1 was modified  September 22, 2002, to extend the maturity date from
September 22, 2002, to October 31, 2002 in  consideration of an extension fee in
the amount of  $10,000.00;  $5,000.00 due on execution of the  modification  and
$5,000 on the date of maturity.  The Note 1 maturity  date was extended  October
31, 2002 to mature on December  15, 2002,  and again on December  15,  2002,  to
mature on January 15, 2003.  West  Maumelle paid an extension fee of $11,000 for
the third extension;  however the extension fee will be credited towards payment
on the Note 1,  provided  the Note 1 is paid in full on or before  December  31,
2002.

         There was a  deferred  tax  benefit  of  $1,203,000  for the year ended
September 30, 2002, compared to $0 for the year ended September 30, 2001.

         Deferred tax benefit of  $1,203,000  for the year ended  September  30,
2002 compared to $0 for the year ended September 30, 2001.

         The  Company's  investment in TradeArk  decreased  from  $2,616,880  to
$2,291,089, or a 12.45% decrease, in the period reflecting the Company's portion
of the net loss by Trade Ark, which is accounted for by the equity method.

         Total  liabilities  of the  Company  as of  September  30,  2002,  were
$4,291,007  a decrease  of  $11,364,681  from the  September  30,  2001 total of
$15,655,688.  The current  liability for notes  payable  decreased by $9,659,825
during the fiscal year ended September 30, 2002, from $11,688,993 to $2,029,168.
The decrease  was the result of net payments of all of the secured  notes of the
Company  and the  exchange  of  $3,843,698  in  debt,  including  principal  and
interest,  with a group of  Promissory  Note  Holders  for  3,843,698  shares of
Convertible Preferred Stock, Series A and the negotiated settlement with certain
existing  promissory  Note Holders for  principal  debt of  $1,941,484  for cash
settlements of  $612,163.85.  Notes  payable-related  party,  non-current  notes
increased from $0 on September 30, 2001, to $1,216,000 on September 30, 2002, an
increase of $1,216,000.

         Accounts  payable and  accrued  expenses  decreased  by  $2,511,029  to
$995,045, as of September 30, 2002, from $3,506,074, as of September 30, 2001.

         Accrued interest  decreased by $2,434,501 to $441,730,  as of September
30, 2002,  from  $2,876,231,  as of September 30, 2001. The major portion of the
decrease was comprised of recaptured  Accrued  Interest Payable and gain from of
Debt of $2,533,002.

         Shareholders'  Equity  increased by $9,250,919.  The increase  resulted
from the issuance of 100,000 new shares of the  Company's  common stock at $0.05
per share for cash and an additional $0.10 per share for services, the  issuance
of  10,000,000  new shares of the  Company's  common stock at $0.05 per share as
payment  of  services  rendered  and in lieu of  unpaid  cash  compensation  and
benefits due an employee and additional compensation for services was recognized
at the rate of $0.10 per share,  and the issuance of 6,000,000 new shares of the
Company's  common  stock  at $0.05  per  share  to an  affiliate  for a Note and
additional  compensation  for services was  recognized  at the rate of $0.10 per
share,  the issuance of 2,600,000  new shares of the  Company's  common stock at
$0.05 per share to affiliates and  consultants  as payment of services  rendered
and additional compensation for services was recognized at the rate of $0.01 per
share,  the issuance of 1,600,000  new shares of the  Company's  common stock at
$0.10 per share to affiliates and  consultants as payment of services  rendered,
the  issuance of 75,000 new shares of the  Company's  common  stock at $0.05 per


                                       31

<PAGE>

share to an  affiliate  and  consultant  as payment of  services  rendered,  the
issuance of 140,000 shares of the Company's common stock at $0.0625 per share as
reimbursement for company expenses due an employee, the issuance of 5,000 shares
of the Company's  common stock at $0.0625 per share to affiliate and  consultant
as payment of services  rendered,  the  issuance of options for an  aggregate of
200,000  shares of the Company's  common stock at $0.045 per share to an officer
of the Company in  consideration  of and in lieu of unpaid  reimbursements,  the
issuance of options for an aggregate of 200,000  shares of the Company's  common
stock at  $0.045  per  share to an  affiliate  and  advisor  of the  Company  in
consideration of and in lieu of cash  compensation,  the issuance of options for
an aggregate of 200,000 shares of the Company's common stock at $0.045 per share
to an affiliate  and advisor of the Company in  consideration  of and in lieu of
cash compensation, the issuance of options for an aggregate of 200,000 shares of
the  Company's  common stock at $0.045 per share to an advisor of the Company in
consideration  of and in lieu of cash  compensation.  As of September  30, 2002,
there were 2,475,000 options granted under the Employee Incentive Stock Plan. As
of September 30, 2002, all of the 2,475,000  options had been exercised.  During
the fiscal year ended  September  30, 2002,  the Company  issued  3,843,698  new
shares of the Company's  Convertible  Preferred  Stock,  Series A (the "Series A
Preferred Stock"),  par value $0.01 per share in exchange of $3,843,698 in debt,
including  principal  and  interest.  The  repurchase  of  25,000  shares of the
Company's  common stock at $0.1059 per share, the repurchase of 47,000 shares of
the  Company's  Common  Stock at $0.1047 per share and the  repurchase  of 5,300
shares of the Company's  Common Stock at $01068 per share providing a net income
of $4,246,713 for the 12 month period ended September 30, 2002.

ITEM 7.  FINANCIAL STATEMENTS.

         The audited financial statements of the Company are included
in this Annual Report on Form 10-KSB starting at page F1.

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

         The  Company  has not  changed  accountants  during the last two fiscal
years;  nor has the Company had any  disagreements  with the  accountants on any
matter of accounting principles or practices,  financial statement  disclosures,
or auditing scope or procedures.

PART III

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


DIRECTORS AND EXECUTIVE OFFICERS

                                                    Date of       Expiration of
Name                Age     Position                Election      Director Term
----                ---     --------                --------      --------------

Michael G. Todd     53      Chairman,               7/95          2003 or until
                            and President                         Successor
                                                                  elected

Thomas Blake        68      Director                3/97          2003 or until
                                                                  successor
                                                                  elected




                                       32

<PAGE>


David R. Paes       47      Vice President,         7/95          N/A
                            Treasurer and
                            Assistant Secretary

Raymond Baptista    60      Director                 5/01         2003 or until
                            Vice President          10/97         successor
                            Of Finance and                        elected
                            Secretary

Ashley Bloom        28      Vice President          7/02          2003 or until
                                                                  successor
                                                                  elected

         The  following  is a  biographical  summary  of the  experience  of the
directors and executive officers of the Company:

MICHAEL G. TODD. Chairman of the Board, President and Chief Executive Officer of
the  Company.  Todd also is the sole  Director and  President  of the  Operating
Subsidiary.  Todd has extensive experience in the banking industry,  having been
the  President and Chief  Executive  Officer of two Southern  California  banks,
Orange City Bank and Bay Cities  National Bank. Todd also serves on the board of
directors  of   eRADLINK,   a  privately   held   medicial-film-to-digital-image
conversion company.

THOMAS BLAKE. Director. Blake is the Director, Business/Finance,  of Glenwood L.
Garvey Associates,  an urban planning and consulting firm. As Special Advisor to
Self-Cleaning Environments USA, Inc., a manufacturer of environmentally friendly
waste disposal units,  Blake provides  consulting  services  regarding  business
planning,  financing,  and  marketing.  His the founder and former  principal of
Thomas C. Blake  Consulting,  an advisory  service firm, and was Chief Executive
Officer of Interstate Group Administrators, Inc., a benefit services company. He
is a  director  of West Coast  Savings & Loan and  formerly  was a  director  of
various other financial institutions.

RAYMOND C. BAPTISTA. Director, Vice President - Finance and Secretary.  Baptista
has  25  years   experience  in  banking  and  finance,   both   nationally  and
internationally.  He has also been actively involved in real estate acquisitions
and development  and was president and CEO of a national real estate  management
company.  Baptista has served as director of Summa Energy  Development  Corp., a
mining services company, since July 2001.

DAVID R. PAES.  Vice  President,  Treasurer,  and Assistant  Secretary.  Paes is
Executive Vice President and a controlling  shareholder of Maumelle Enterprises,
a  real  estate  management  company  that  currently  provides  management  and
administrative  service to the Company. See ITEM 12, "CERTAIN  RELATIONSHIPS AND
RELATED  TRANSACTIONS--SERVICES  PROVIDED BY AFFILIATED  COMPANIES." He has been
involved in real estate  development  as a chief  financial  officer of two real
estate land companies since 1977, and is a certified public accountant.

ASHLEY B. BLOOM.  Vice President.  Bloom is a certified public  accountant and a
licensed mortgage broker in the state of Florida.  Bloom's  experience  includes
working  with  Coopers & Lybrand LLP in the Ligation  Consulting  and  Corporate
Finance department and in the real estate development industry since 1998. Bloom
has  assisted  in  developing   various  real  estate  projects  in  Florida  by
negotiating the acquisition and development of projects,  through site planning,
pro forma and cash flow analysis, financing, operational management to sales and
marketing programs.


                                       33

<PAGE>


SIGNIFICANT EMPLOYEES

         The Company's sole significant  full-time  employee is Michael G. Todd,
its Chairman, President and Chief Executive Officer.

FAMILY RELATIONSHIPS

         There are no family  relationships  between any  directors or executive
officers of the Company, either by blood or by marriage.

INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

         During the past five years, any director,  person nominated to become a
director, executive officer, promoter or control person of the Company:

         (1) was a general partner or executive  officer of any business against
which any bankruptcy petition was filed, either at the time of the bankruptcy or
two years prior to that time;  The officers and  directors of the Company due to
the Operating  Subsidiary  filing a voluntary  petition  under Chapter 11 of the
Bankruptcy Code.

         (2) was  convicted  in a  criminal  proceeding  or named  subject  to a
pending  criminal  proceeding  (excluding  traffic  violations  and other  minor
offenses);

         (3) was  subject to any order,  judgment  or decree,  not  subsequently
reversed,  suspended  or  vacated,  of  any  court  of  competent  jurisdiction,
permanently or temporarily enjoining,  barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; or

         (4) was found by a court of competent jurisdiction (in a civil action),
the SEC or the Commodity  Futures Trading  Commission to have violated a federal
or state  securities or commodities law, and the judgment has not been reversed,
suspended or vacated.

         The following officers, directors, and beneficial owners of 10% or more
of the Company's Common Stock were delinquent in filing an Initial  Statement of
Beneficial  Ownership of Securities on Form 3: Raymond  Baptista,  Thomas Blake,
and Ashley Bloom, and Kenneth Richardson and Michael G. Todd were delinquent  in
filing Statement of Changes of Beneficial Ownership on Form 4.

ITEM 10. EXECUTIVE COMPENSATION.

EXECUTIVE COMPENSATION

         The following table sets forth certain  information with respect to the
compensation  that was paid in the 2002 fiscal year to the  Company's  executive
officers.

         The following table sets forth the aggregate  compensation  paid by the
Company for services rendered during the periods indicated:



                                       34

<PAGE>

<TABLE>

<CAPTION>

                           SUMMARY COMPENSATION TABLE

                                                    LONG-TERM COMPENSATION

      ANNUAL COMPENSATION                    AWARDS              PAYOUTS

(a)        (b)      (c)        (d)     (e)          (f)           (g)        (h)     (i)
<S>        <C>      <C>        <C>     <C>          <C>           <C>        <C>     <C>

Name &     Year     Salary     Bonus   Other        Res-          Securi-     LTIP   All
Prin-      or         ($)       ($)    Annual       tric-         ties        Pay-   Other
cipal      Period                      Compen-      ted           Under-      outs   Compen-
Position   Ended                       sation       Stock         Lying              sation
                                                                  Options

Michael    9/30/02  $190,000(1)  0       0       16,000,000(2)   200,000(3)    0       0
Todd,
Chairman/
President

</TABLE>

(1) Michael G. Todd has been employed as President of the Company since November
1994.  During fiscal year,  Mr. Todd was paid $85,000,  and accrued  $105,000 in
compensation for the period October 1, 2001,  through September 30, 2002. Due to
the  financial  condition of the Company,  Mr.  Todd's  employment  contract was
modified on April 24 2002, to reflect a salary of $10,000 per month.

(2) Mr. Todd exchanged $500,000 in deferred salary and other compensation to pay
for 10,000,000 shares of the Company's common stock issued at $0.05 per share.

Mr. Todd  exchanged  $300,000  in deferred  salary and  other  compensation  for
6,000,000 shares of the Company's common stock purchased by Prescott Investments
L.P. ("Prescott"),  a Nevada limited partnership beneficially owned by Mr. Todd,
at a price of $0.05 per share.  Prescott  executed a promissory  note on October
15,  2001 in the amount of $300,000  for the sale of stock.  The note is due and
payable on March 31, 2002,  but has been extended to September 30, 2003, and has
an  interest  rate of six  percent  (6%) per  annum.  See ITEM 6,  "MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION- - Subsequent Events."

(3) On April 18, 2002, the Company issued Mr. Todd options,  available under the
Company's  Non-Qualified  Employee  Incentive  Stock Plan for 200,000  shares of
common stock at an exercisable price of $0.045 per share. Mr. Todd exercised the
200,000  options on September  18,  2002,  and  exchanged  $9,000.00 in deferred
salary and compensation for the option price.

         The Company has a five-year  written agreement with Todd to perform the
duties of President.  Under the agreement,  which became effective on October 1,
2001,  Todd is to be compensated at a rate of $20,000 per month.  The employment
agreement was modified on April 24, 2002, to reduce Mr. Todd's salary to $10,000
per month due to the financial  condition of the Company.  Notwithstanding,  Mr.
Todd has agreed, as of September 27, 2002, to forego salary until the Company is
in a financial position to pay such expenses. See discussion above.

         The following table provides  information  about the Company's  capital
common stock that may be issued under the  Non-Qualified  Stock  Incentive  Plan
("Employee Stock Plan").

(a) The information presented in the Financial  Statements,  Financial Footnotes
entitled "Capital Transactions," is incorporated herein by reference.

(b) The following table provides  information about the Company's capital common
stock that may be issued under the Employee Stock Plan, as of December 1, 2002.




                                       35

<PAGE>

<TABLE>

<CAPTION>


                      EQUITY COMPENSATION PLAN INFORMATION
<S>               <C>                   <C>                      <C>

Plan              No. of Securities     Weighted-average         No. of securities re-
Category          to be issued upon     exercise price of        maining available
                  exercise of out-      outstanding options,     for future issuance under
                  standing options,     warrants & rights        equity compensation plan
                  warrants & rights                              (excluding securities reflect-
                                                                 ed in column
                           (a)(1)            (b)(2)                        (c)
Non-Qualified
Employee Incent-
ive Stock Plan             3,000,000         N/A                         525,000
Approved by
Security Holders(3)



Total                      3,000,000         N/A                        525,000

</TABLE>

(1) Column (a)  represents  stock  options  granted under the February 20, 2002,
Employee Stock Plan ("Employee Plan"),  authorized by the Board of Directors and
approved by a majority of security holders.
(2)Determined  at the date of option  based on the  average  of the high and low
prices of the  Common  Shares  for the last  five days  prior to the date of the
option grant, as reported by the National Quotation Bureau, Inc. ("NQB").
(3)The  Employee  Plan was voted and approved by a majority of  shareholders  on
February 20, 2002.

Non-Qualified Employee Incentive Stock Plan

         The  Company  registered  3,000,000  shares of  common  stock par value
$0.01,  filed on Form S-8 with the Securities and Exchange  Commissions on March
6, 2002.  The shares of common  stock are to be offered or sold  pursuant to the
Employee  Stock  Plan,  dated  February  20,  2002  authorized  by the board and
directors and approved by a majority of security  holders.  The options  granted
under the Employee Plan must be exercised no later than 10 years from the option
date and the exercise price must be fair market value or greater,  as determined
on the option grant date.


DIRECTOR COMPENSATION

         Outside  directors are  compensated for their services in the amount of
$500 per month. The amount of deferred director compensation for the fiscal year
ended  September 30, 2002 was $4,500.  The deferred  director  compensation  for
outside  director,  Thomas  Blake in the amount of $18,500 for the period  ended
September 30, 2001, has been  exchanged for the issuance of 2,000,000  shares of
common  stock at a price of $0.05 per share.  Mr.  Blake has agreed to defer any
compensation  for the fiscal year ended September 30, 2003,  until the Treasurer
of the Company  determines  that  sufficient  funds are  available  to make such
payments.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The following  table sets forth the  beneficial  ownership of shares of
Common Stock as of September  30, 2002,  for (i) each person who is known by the
Company to be the  beneficial  owner of more than a 5% interest in the  Company,
(ii) directors of the Company,  (iii) the sole "named executive  officer" of the


                                       36

<PAGE>

Company,  as defined  in Item  402(a)(2)  of SEC  Regulation  S-B,  and (iv) the
directors  and  named  executive  officer  of the  Company  as a  group.  Unless
otherwise indicated in the footnotes, all such interests are owned directly, and
the indicated person or entity has sole voting and investment  power.  Addresses
are provided only for 5% or greater owners.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                    Name and
Title of Class      address of                Amount and              Percent of
                    beneficial                nature of bene-         class
                    owner(1)                  ficial owner

Common Stock        Michael G. Todd(2)        16,706,851 shares       65.62%

Common Stock        Howard Bloom(3)           16,090,000 shares       63.20%

Common Stock        Kenneth Richardson(4)     16,200,000 shares       63.63%

Common Stock        Thomas Blake               2,000,000 shares        7.86%

Common Stock        Raymond Baptista                   0 shares           0%

Common Stock        David Paes                    50,000 shares        0.20%

Common Stock        Ashley Bloom                  35,000 shares        0.14%

Common Stock        Directors and Executive
                    Officers as a Group       19,036,851 shares       74.95%

(1)      Unless otherwise indicated,  the address of the beneficial owner is 900
         N. Federal Highway, Suite 410, Boca Raton, Florida 33432.

(2)      506,851 of these shares are owned by Prescott Investments, L.P. Michael
         G. Todd is the sole managing member of Granite Industries LLC, which is
         the  managing  general  partner of Prescott LP. Todd is the sole "named
         executive officer" of the Company,  as defined in Item 402(a)(2) of SEC
         Regulation  S-B. Mr. Todd also has a beneficial  interest in 16,000,000
         shares owed by Boca First Capital LLLP, the controlling  shareholder of
         the Company.  Mr. Todd is a managing  member of Addison  Capital Group,
         LLC, a Nevada limited  liability  company,  the general partner of Boca
         First  Capital  LLLP.  See  ITEM  9,  "DIRECTORS,  EXECUTIVE  OFFICERS,
         PROMOTERS AND CONTROL PERSONS."

(3)      16,000,000 of these shares are owned by Boca First  Capital  LLLP,  the
         controlling  shareholder  of the  Company.  Howard  Bloom is a managing
         member of Addison  Capital  Group,  the  general  partner of Boca First
         Capital LLLP. 45,000 shares are owned by Diane E. Bloom,  spouse of Mr.
         Bloom.

(4)      16,000,000 of these shares are owned by Boca First  Capital  LLLP,  the
         controlling  shareholder of the Company.  Mr.  Richardson is a managing
         member of Addison  Capital  Group,  the  general  partner of Boca First
         Capital LLLP. Mr. Richardson also has a beneficial  interest in 200,000
         shares owned by Jack, Inc., of which Mr.  Richardson is the controlling
         shareholder.



                                       37

<PAGE>


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

SERVICES PROVIDED BY AFFILIATED COMPANIES

         The Company has paid fees or expects to pay fees to certain  affiliated
companies  for  various  types of  services,  and will  continue to do so in the
future. These arrangements are summarized below.

         MAUMELLE ENTERPRISES, INC. AGREEMENT. The Company has an oral agreement
with  Maumelle  Enterprises,  Inc.  to  provide  management  and  administrative
services for the Maumelle Property.  Currently, Maumelle Enterprises manages the
Company's  inventory  of property,  oversees  any sale of property,  and manages
administrative  matters such as ensuring  payment of taxes,  mortgages and other
expenditures  incurred in management of the property.  Maumelle Enterprises also
represents the Company at local and state hearings that may affect the Company's
property.  David Paes and Mary Peyton each owns 50% of the outstanding shares of
Maumelle Enterprises,  as of the date of this Report. Mary Peyton, the President
of the Home Construction  Subsidiary,  received a salary of $24,000 per annum as
an officer of  Maumelle  Enterprises.  David  Paes,  an officer of the  Company,
received a salary of $58,800 per annum for a portion of the year and $84,000 for
a portion of the year, as an officer of Maumelle Enterprises.

         Maumelle Enterprises also represents West Maumelle Limited Partnership,
an  Arkansas  limited  partnership  that  purchased  289  acres of the  Maumelle
Property on March 26, 2002.  West  Maumelle LP is controlled by John W. DeHaven,
who through his beneficial interest in Charlie Corporation, was an affiliate and
controlling shareholder of the Company until March, 1999.

         Under  the  oral  management  and  administrative  services  agreement,
payment to Maumelle  Enterprises for management services depends upon the actual
services rendered in a given month and the current liquidity of the Company.  If
funds are not available, Maumelle Enterprises has agreed to defer payment of its
management fees to the extent possible.  For the fiscal year ended September 30,
2002, the Company paid Maumelle Enterprises $22,173 in expenses,  which included
overhead  expenses,  and salaries.  No management  fees were accrued  during the
fiscal year ended September 30, 2002. The Company entered into an agreement with
Maumelle  Enterprises  on September  12,  2002,  to pay a  pre-petition  debt of
$66,000 for  previous  management  fees and  overhead  expenses  due to Maumelle
Enterprises.  The agreement  designates that Maumelle  Enterprises  will receive
$11,000  a month,  commencing  September  13,  2002,  for a total  of six  equal
payments  with  payments  due on the 15th of each  month.  The  Company had paid
Maumelle  Enterprises $11,000 as September 30, 2002, and $33,000, as of December
15, 2002.

         CENTURY  21 METRO,  INC.  Century 21 Metro,  Inc.  ("Century  21"),  an
Arkansas  corporation,  is a real estate  agency  wholly-owned  by Mary  Peyton,
president  of the  Home  Construction  Subsidiary.  The  Company,  under an oral
agreement,  has  allowed  Century 21 to offer the  Maumelle  Property  for sale.
During the fiscal year ended  September  30,  2002,  the Company paid Century 21
$110,000  in  listing  commission  for the  sale of 451  acres  of the  Maumelle
Property to Maumelle Valley,  LLC, and $10,000 listing commission on the sale of
289 acres of the Maumelle  Property to West Maumelle L.P. See discussion  above,
"- - Maumelle Enterprises Inc."

         SUBLEASING OF OFFICE SPACE. The Company  subleased its principal office
space in Torrance, California from DTC, a California partnership, until July 22,
2002,  when as part of the change of control,  the Company  moved its  principal


                                       38

<PAGE>

place of business from  Torrance,  California to 900 N. Federal  Highway,  Suite
410, Boca Raton,  Florida 33432.  The Company paid DTC the total of $24,506 from
October 1, 2001  through  July 21, 2002.  The Company  subleases  the Boca Raton
office  from  B&G  Acceptance  Corp.,  a  Florida  corporation  controlled  by a
beneficial  owner of Boca First.  The Company pays $2,200 a month for the office
space and has paid a total of  $18,000  for  office  space and  expenses,  as of
September 30, 2002.

         The  majority of the  disinterested  board of  directors  on October 1,
1995,  voted to approve the oral  agreement  between the Company and DTC for the
subleasing of office space from DTC to the Company.

         The Company  plans to continue  to sublease  its office  space from B&G
Acceptance Corp., on a month to month basis.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

         (a) FINANCIAL STATEMENTS AND EXHIBITS

         FINANCIAL STATEMENTS


CAPITOL COMMUNITIES CORPORATION, INCLUDING PREDECESSOR CORPORATION AND
SUBSIDIARIES.

Report of Independent Auditors.............................................. F-1

Balance Sheet as of September 30, 2002...................................... F-2

Statements of Operations for the Years Ended
September 30, 2002 and 2001................................................. F-3

Statements of Changes in Shareholders' Equity
September 30, 2002.......................................................... F-4

Statements of Cash Flows for the Years Ended
September 30, 2002 and 2001................................................. F-5

Notes to Financial Statements............................................... F-6













                                       39


<PAGE>


                              BAUM & COMPANY, P.A.
                          CERTIFIED PUBLIC ACCOUNTANTS
                        1515 UNIVERSITY DRIVE - SUITE 209
                          CORAL SPRINGS, FLORIDA 33071





                          INDEPENDENT AUDITOR'S REPORT



Board of Directors and Stockholders
Capitol Communities Corporation, Inc. and Subsidiaries
Boca Raton, Florida

We  have  audited  the  accompanying   consolidated  balance  sheet  of  Capitol
Communities Corporation,  Inc. and subsidiaries as of September 30, 2002 and the
related  consolidated  statements of operations,  stockholders'  equity and cash
flows for the  years  ended  September  30,  2002,  and  2001.  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 financial statements referred to in the first paragraph above
present  fairly,  in all material  respects,  the financial  position of Capitol
Communities Corporation,  Inc. and subsidiaries as of September 30, 2002 and the
results of its operations  and its cash flows for the years ended  September 30,
2002 and 2001 in conformity with accounting principles generally accepted in the
United States of America.


 /s/  Baum & Company, P.A.
---------------------------
      Baum & Company, P.A.


Coral Springs, Florida
January 10, 2003




                                      F-1

<PAGE>

<TABLE>

<CAPTION>

CAPITOL COMMUNITIES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
as of September 30, 2002


<S>                                                                           <C>

Current Assets
       Cash                                                                               $ 16,981
       Accrued Interest Receivable                                                           5,463
       Notes receivable-Current                                                            500,000
       Other Current Assets                                                                  2,631
                                                                              ---------------------
                Total Current Assets                                                       525,075
                                                                              ---------------------

Property and equipment
       Furniture and Equipment, net of accumulated depreciation of $11,818                   4,441
                                                                              ---------------------


Other Assets
       Land and Real Estate Holdings                                                     1,300,140
       Accrued Interest Receivable-Non-Current                                              78,434
       Notes receivable-Non-Current                                                      1,570,000
       Investment in Trade Ark Properties                                                2,291,089
       Deferred Tax Benefit                                                              1,203,000
                                                                              ---------------------
                Total Other Assets                                                       6,442,663
                                                                              ---------------------

                Total Assets                                                           $ 6,972,179
                                                                              =====================




Current Liabilities
       Notes Payable                                                                   $ 2,029,168
       Note Payable- Related Party                                                       1,216,000
       Accounts Payable & Accrued Expenses                                                 995,045
       Accrued Expenses- Related Parties                                                    50,794
                                                                              ---------------------
                Total Current Liabilities                                                4,291,007
                                                                              ---------------------

                Total Liabilities                                                        4,291,007
                                                                              ---------------------

Stockholders' Equity

       Preferred Stock-$.01 par value, 10,000,000 shares                                    38,437
                authorized; 3,843,698 shares issued and outstanding
       Common Stock-$.01 par value, 40,000,000 shares                                      290,900
                authorized; 29,090,050 shares issued and outstanding
       Additional Paid in Capital                                                       13,869,932
       Preferred Stock Dividend                                                           (199,463)
       Note Receivable for Class A Common Stock-Related Party                             (300,000)
       Treasury Stock; 3,539,689 shares                                                 (4,805,229)
       Accumulated Deficit                                                              (6,213,405)
                                                                              ---------------------

                Total Stockholders' Equity                                               2,681,172
                                                                              ---------------------

                Total Liabilities and
                Stockholders' Equity                                                   $ 6,972,179
                                                                              =====================
</TABLE>


See Accountant's Report and Supplemental Footnotes

                                      F-2

<PAGE>

<TABLE>

<CAPTION>


Capitol Communities Corporation and Subsidiaries
Consolidated Statements of Operations
For the Fiscal Years Ended September 30, 2002 and 2001


                                                                             2002                      2001
<S>                                                                    <C>                      <C>

Revenues:
        Sales                                                                 $8,500,000                   $75,000
        Miscellaneous Income                                                       4,740                     8,625
        Recognition of Deferred Land Sale Profit                                       -                   118,726
                                                                       ------------------       -------------------

        Total Revenues                                                        $8,504,740                  $202,351

        Cost of Sales                                                          4,256,899                    10,278
        Cost of Sales- Related Party Commissions                                 120,000                         -
                                                                       ------------------       -------------------
                 Total Cost of Sales                                           4,376,899                   102,783

Gross Profit                                                                  $4,127,841                  $192,073

Operating Expenses:
        General & Administrative Expenses                                      1,474,880                   431,278
        General & Administrative Expenses- Related Parties                     1,185,173                    73,618
                                                                       ------------------       -------------------
                 Total Operating Expenses                                      2,660,053                   504,896
                                                                       ------------------       -------------------

Net Income (Loss) Before
        Other Income/(Expense)                                                 1,467,788                  (312,823)

Other Income and (Expense)
        Operations of Unconsolidated Investments                                (325,791)                 (240,657)
        Director's Fees                                                                                     56,500
        Interest Income                                                           83,897                     1,164
        Interest Expense                                                        (595,854)               (1,619,187)
        Interest Expense- Related Parties                                        (20,339)
                                                                       ------------------       -------------------
                 Total Other Income and (Expense)                               (858,087)               (1,802,180)
                                                                       ------------------       -------------------

Net Income (Loss) from continuing operations                                   $ 609,701               ($2,115,003)

Income Tax Expense (Benefit)
        Current                                                                   74,183                         -
        Deferred                                                              (1,203,000)                        -
                                                                       ------------------       -------------------
                 Total Income Tax Expense (Benefit)                           (1,128,817)                        -
                                                                       ------------------       -------------------

Net Income (Loss) before Extraordinary Items                                 $ 1,738,518               ($2,115,003)

Extraordinary Items
        Gain from retirement of debt at a discount,
           net of income tax provision of $24,807                             $2,508,195                         -
                                                                       ------------------       -------------------

Net Income (Loss)                                                             $4,246,713               ($2,115,003)
                                                                       ==================       ===================

Basic Income (Loss) per share
        Income (Loss) before extraordinary item                                    $0.06                    ($0.50)
        Extraordinary Item
          Gain from retirement of debt at a discount                                0.10                      0.00
                                                                       ------------------       -------------------

        Net Income (Loss)                                                          $0.16                    ($0.50)
                                                                       ==================       ===================

                                                                       ------------------       -------------------
Weighted average shares outstanding:                                          24,754,197                 4,230,361
                                                                       ==================       ===================
</TABLE>


See Accountant's Report and Supplemental Footnotes


                                   F-3

<PAGE>

<TABLE>

<CAPTION>


Capitol Communities Corporation and Subsidiaries
Consolidated Statement of Changes in Stockholder's Equity
For the Two Years Ended September 30, 2002



                            Peferred     Preferred         Common       Common        Additional         Treasury      Accumulated
                             Shares        Stock           Shares       Stock       Paid in Capital       Stock          Deficit
------------------------------------------------------------------------------------------------------------------------------------
<S>                        <C>           <C>              <C>          <C>          <C>                <C>             <C>

Balance at 9/30/00                 0     $        -       7,770,050    $ 77,700       $ 7,504,513      $(4,795,852)    $ (8,345,115)

Net Income (Loss) for
the Year Ended 9/30/01                                                                                                 $ (2,115,003)
                           ---------------------------------------------------------------------------------------------------------

Balance at 9/30/01                 0     $        -       7,770,050    $ 77,700       $ 7,504,513      $(4,795,852)    $(10,460,118)

Common Stock issued 10/18/01
   for Services                                           9,895,100      98,951         1,392,378
   for Accrued Expenses                                   4,104,900      41,049           577,622
   for Note Receivable                                    2,000,000      20,000           280,000
   Sold for cash                                            100,000       1,000             4,000

Common Stock issued 2/25/02
   for Services                                           3,473,260      34,733           182,593
   for Accrued Expenses                                     726,740       7,267            65,407

Common Stock issued 3/26/02
   for Services                                               5,000          50               263
   for Accrued Expenses                                     140,000       1,400             7,350

Common Stock issued 3/29/02
   for Services                                              75,000         750             3,000

Exercise of  Stock Options
  authorized April 18, 2002                                                                19,545
  issued August 12, 2002
     for Services                                           600,000       6,000            21,000
     for Accrued Expenses                                   200,000       2,000             7,000

Preferred Stock Issued
  on August 12, 2002       3,135,714           31,357                                   3,104,357
  on September 9, 2002       569,027            5,690                                     563,337
  on September 27, 2002      138,957            1,390                                     137,567

Common Stock Repurchase                                                                                     (9,377)

Net Income (Loss) for
the Year Ended 9/30/02                                                                                                    4,246,713
                           ---------------------------------------------------------------------------------------------------------


Balance at 9/30/02         3,843,698         $ 38,437    29,090,050   $ 290,900      $ 13,869,932      $(4,805,229)    $ (6,213,405)
                           =========================================================================================================
</TABLE>



See Accountant's Report and Supplemental Footnotes



                                      F-4

<PAGE>

<TABLE>

<CAPTION>


CAPITOL COMMUNITIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 2002 AND 2001


                                                                               2002              2001
                                                                               ----              ----
<S>                                                                       <C>               <C>

Cash Flows from Operating Activities:
      Net Income (Loss)                                                   $     4,246,713   $    (2,115,003)
      Amortization                                                                      -                 -
      Depreciation                                                                  1,823             2,179
      Common Stock Issued for Services                                          1,739,718                 -
      Common Stock Options Issued for Services                                     19,545                 -
      Adjustments to Reconcile Income
      to Net Cash Used for Operating Activities
           (Increase) Decrease in Accrued Interest Receivable                     (83,897)                -
           (Increase) Decrease in Other Current Assets                             (1,688)            5,915
           (Increase) Decrease in Real Estate Holdings                          4,057,370            10,278
           (Increase) Decrease in Investments                                     325,791           121,931
           Increase (Decrease) in Accrued Expenses                             (1,420,509)        1,787,698
           Increase (Decrease) in Accrued Expenses- Related Parties               (15,535)                -
           (Increase) Decrease in Deferred Tax Asset                           (1,203,000)                -
                                                                          ----------------  ----------------


      Net Cash Used for Operations                                              7,666,331          (187,002)


Cash Flows from Investing Activities:
      Collections of Notes Receivable                                                   -           457,520
      Increase in Notes Receivable                                             (2,070,000)                -
                                                                          ----------------  ----------------

      Net Cash Provided (Used) in Financing Activities                         (2,070,000)          457,520


Cash Flows from Financing Activities:
      Proceeds from sale of Common Stock                                            5,000                 -
      Proceeds from Notes Payable                                               1,216,000             2,516
      Payment of Notes Payable                                                 (6,591,844)         (324,832)
      Payment of Preferred Dividends                                             (199,463)                -
      Acquisition of Treasury Stock                                                (9,377)                -
                                                                          ----------------  ----------------

      Net Cash Provided (Used) in Investing Activities                         (5,579,684)         (322,316)


Net Increase (Decrease) in Cash                                                    16,847           (51,798)

Beginning Cash                                                                        134            51,932
                                                                          ----------------  ----------------

Ending Cash                                                               $        16,781   $           134
                                                                          ================  ================


Supplemental Information:

Schedule of Noncash Financing Activities
      Common Stock Issued for Accrued Expenses                            $       709,095   $             -
      Common Stock Issued for Note Receivable                                     300,000                 -
      Preferred Stock Issued for Debt                                           3,843,698                 -

Supplemental Information:
Operating cash  flows  from  reorganization  items:
      Professional fees paid for services rendered in connection
      with the Chapter 11 proceeding, included in net cash used
      in operating activities                                             $        28,746   $        15,000

Interest paid, net of 2002 payoff discount of $1,462,363                  $       794,385   $        84,011

</TABLE>

See Accountant's Report and Supplemental Footnotes

                                      F-5

<PAGE>

                CAPITOL COMMUNITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2002 AND 2001

NOTE 1 -SIGNIFICANT ACCOUNTING POLICIES
        -------------------------------

A.       BACKGROUND
         ----------

         The Company  was  originally  incorporated  in the State of New York on
         November 8, 1968 under the name of Century Cinema Corporation. In 1983,
         the Company merged with a privately owned company,  Diagnostic  Medical
         Equipment  Corp.  and as a  result  changed  its  name  to  that of the
         acquired  company.  By 1990, the Company was an inactive  publicly held
         corporation.  In 1993, the Company  changed its name to AWEC Resources,
         Inc. and commenced operations.  On February 11, 1994 the Company formed
         a  wholly  owned   subsidiary  AWEC   Development   Corp,  an  Arkansas
         corporation,  which later  changed its name to Capitol  Development  of
         Arkansas.

         In  February,  1994 Petro Source  Energy  Corporation  transferred  the
         majority  of its  holdings  in the  common  shares  of the  predecessor
         corporation,  AWEC Resources, Inc., to Charlie Corporation and Prescott
         Investments  Limited  Partnership,  a beneficial  owner of the Company.
         These shares were  transferred in  consideration  for public  relations
         services   provided  by  Prescott   Limited   Partnership  and  Charlie
         Corporation to Petro Source.  Such services were deemed by Petro Source
         to be integral  and  indispensable  to the  concurrent  acquisition  of
         approximately  2,041  acres  of  land  in  Maumelle,  Arkansas  by  the
         Company's  Operating  Subsidiary.  The  Company  was not a party to the
         transfer of shares.  The Company did not issue any new shares  pursuant
         to the acquisition of the land. Accordingly, the transfer of shares did
         not affect the  capitalization of the Company,  and was non-dilutive to
         all other shareholders.

         In order to effectuate a change in domicile and name change approved by
         a majority of the Predecessor Corporation shareholders, the Predecessor
         Corporation   merged,   effective   January  30,  1996,   into  Capitol
         Communities  Corporation,  a Nevada  corporation  formed in August 1995
         solely for the purpose of the merger.  The Company is  currently in the
         business of developing and selling real estate properties.

         On July 21, 2000, the Operating Subsidiary,  a wholly-owned  subsidiary
         of the Company which holds  substantially  all of the Company's assets,
         filed a voluntary  petition for relief  under  Chapter 11 of the United
         States Bankruptcy Code in the United States  Bankruptcy Court,  Eastern
         District of Arkansas.  The Company continued to operate its business as
         a debtor-in-possession  until September 6, 2002, when the United States
         Bankruptcy  Court,  Eastern District of Arkansas,  Little Rock Division
         entered an Order  Dismissing  the  Chapter 11  Proceedings  against the
         Operating Company. The Company filed a Motion to Dismiss the Bankruptcy
         Proceedings  instead  of a Plan of  Reorganization,  as all  claims  of
         non-insiders of the Operating  Subsidiary,  except for the claim of the
         Arkansas Department of Finance and Administration had been satisfied or
         released.

         On July 17, 2002, Boca First Capital, LLLP, a Florida limited liability
         limited partnership acquired control of Capitol Communities Corporation
         in an exchange of 16 million shares of Common Stock of the Company held


                                      F-6

<PAGE>



                CAPITOL COMMUNITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2002 AND 2001

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
         -------------------------------------------

         by the Company's president,  and Prescott  Investments,  L.P., a Nevada
         limited partnership  beneficially owned by the Company's president, for
         a combined 33% interest in Boca First Capital LLLP.  Boca First Capital
         LLLP is controlled by its general partner, Addison Capital Group LLC, a
         Nevada limited liability company.  As of the date of this Report,  Boca
         First Capital LLLP owns 62.84% of the Company's  issued and outstanding
         shares.

         By reason of the  exchange of  securities,  Addison  Capital  LLC,  the
         general  partner  of Boca  First  Capital  LLLP,  may be deemed to have
         voting power and/or  dispositive  power with respect to the  16,000,000
         shares of Common Stock owned by Boca First Capital LLLP.

         As part of the change of control,  the Company has moved its  principal
         place of business from  Torrance,  California  to Boca Raton,  Florida,
         effective July 22, 2002.

B.       PRINCIPLES OF CONSOLIDATION
         ---------------------------

         The  Consolidated   financial   statements   include  accounts  of  its
         wholly-owned subsidiaries.  All material intercompany transactions have
         been eliminated.

C.       REAL ESTATE HOLDINGS
         --------------------

         Real  estate  investments  are  stated at the lower of cost or  market.
         Acquisition  costs are  allocated  to  respective  properties  based on
         appraisals of the various properties acquired in the acquisition.

D.       INCOME TAXES
         ------------

         In February  1992,  the  Financial  Accounting  Standards  Board issued
         Statement on Financial  Accounting  standards  109 of  "Accounting  for
         Income Taxes." Under Statement 109, deferred tax assets and liabilities
         are recognized for the estimated future tax  consequences  attributable
         to  differences  between the financial  statement  carrying  amounts of
         existing  assets and liabilities  and their  respective tax bases.  The
         Company has net operating  losses (NOL's) of  approximately  $8,300,000
         expiring in the years 2009 through 2021.

            Deferred tax benefit (34% statutory rate)        $   2,822,000
            Valuation allowance                                  1,619,000
                                                             -------------
                    Net Benefit                              $   1,203,000
                                                             -------------

         Due to the  uncertainty  of  utilizing  the  NOL  and  recognizing  the
         deferred  tax  benefit,  an  offsetting  valuation  allowance  has been
         provided.



                                      F-7

<PAGE>



                CAPITOL COMMUNITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2002 AND 2001

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
         -------------------------------------------

E.       REVENUE RECOGNITION
         -------------------

         Revenue is recognized  under the full accrual method of accounting upon
         the completed sale of real property held for  development and sale. All
         costs  incurred  directly or indirectly in acquiring and developing the
         real property are capitalized.

F.       USE OF ESTIMATES
         ----------------

         The  preparation of financial  statements in conformity  with generally
         accepted  accounting  principles  requires management to make estimates
         and  assumptions  that  affect  the  reported  amounts  of  assets  and
         liabilities and disclosures of contingent assets and liabilities at the
         date of the financial  statements and the reported  amounts of revenues
         and expenses during the period.  Actual results could differ from those
         estimates.

G.       CASH AND CASH EQUIVALENTS
         -------------------------

         Cash and cash equivalents  include cash on hand, cash in banks, and any
         highly  liquid  investments  with a maturity of three months or less at
         the time of purchase.

         The  Company and its  Subsidiaries  maintain  cash and cash  equivalent
         balances  at several  financial  institutions  which are insured by the
         Federal Deposit Insurance  Corporation up to $100,000. At September 30,
         2002,  the company had less than  $100,000 on deposit  resulting  in no
         concentration of credit risk from uninsured bank balances.

H.       EARNINGS/LOSS PER SHARE
         -----------------------

         Primary  earnings  per common  share are  computed by dividing  the net
         income (loss) by the weighted  average number of shares of common stock
         and common stock equivalents outstanding during the year. The number of
         shares used for the fiscal years ended September 30, 2002 and 2001 were
         24,742,859 and 4,230,361, respectively.

NOTE 2 - RELATED PARTY TRANSACTIONS
         --------------------------

         Currently  the  Company  has  an  informal   agreement   with  Maumelle
         Enterprise,  Inc.  (Maumelle).  A  business  owned by an officer of the
         Company, to provide management,  sales and administrative  services for
         the Company. Under this informal agreement payment to Maumelle for such
         services depends upon the actual services rendered in a given month and
         the  current  liquidity  of the  Company.  During the fiscal year ended
         September  30, 2002,  the Company paid  Maumelle a total of $22,173 and
         owes $55,329 for accrued fees from a prior fiscal year.

         The Company is subleasing  office space from B & G Acceptance  Corp., a
         company  controlled by a beneficial  owner of the Company.  The Company
         pays $2,200 a month for the office  space and $3,800 a month for office
         expenses.  The monthly  lease  payment  commenced on August 1, 2002 and
         continues on a month by month basis.


                                      F-8

<PAGE>


                CAPITOL COMMUNITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2002 AND 2001

NOTE 2 - RELATED PARTY TRANSACTIONS (CONTINUED)
         --------------------------------------

         On July 17, 2002, Boca First Capital, LLLP, a Florida limited liability
         limited   partnership   acquired   control   of   Capitol   Communities
         Corporation.  The Company  entered into a Business Loan  Agreement with
         Boca First Capital LLLP dated April 26, 2002 to borrow up to the sum of
         $3,000,000  from Boca First Capital  LLLP.  On September 27, 2002,  the
         line of credit was increased from $3,000,000 to $4,000,000.

         As of September 30, 2002, the Company has been drawn  $1,216,000.00  on
         the $4,000,000.00 credit line from Boca First Capital LLLP evidenced by
         the  Boca  Note  secured  by  substantially  all of the  assets  of the
         Operating  Subsidiary.  As of December 15,  2002,  the Company has been
         drawn $1,491,000.00 on the line .The collateral securing the Boca Note,
         includes  a  mortgage  on the  remaining  696  acres  of  the  Maumelle
         Property,  1,000  shares of common  stock of the  Operating  Subsidiary
         owned by the Company,  representing  one hundred  percent of the issued
         and  outstanding   shares;  the  35.16  percent  interest  in  TradeArk
         Properties,  LLC,  a  Michigan  limited  liability  company  which owns
         viatical  life  settlement  contracts  and real  property in  Maumelle,
         Arkansas;  and two notes  receivable  payable on October  31,  2002 and
         March 26,  2005 with a face value of  $1,070,000.00  and  1,000,000.00,
         respectively, with an annual rate of interest of 6.25%. The Boca Credit
         Line matures on November 1, 2004,  and has an initial  interest rate of
         ten percent (10%) per annum and will, on a quarterly basis, adjust to a
         rate,  which is equal to the  greater of ten  percent  per annum or one
         percent (1%) above the prime rate, in effect on that date.

         The Company  entered  into an  agreement  with  Century 21 Metro,  Inc.
         ("Century 21") an Arkansas  corporation,  which is a real estate agency
         wholly-owned by an officer of Capitol Homes, Inc. The Company, under an
         oral agreement,  has allowed Century 21 to offer the Maumelle  Property
         for sale.  During the fiscal year ended September 30, 2002, the Company
         paid  Century 21  $110,000  in listing  commission  for the sale of 451
         acres of the  Maumelle  Property to Maumelle  Valley,  LLC, and $10,000
         listing commission on the sale of 289 acres of the Maumelle Property to
         West Maumelle L.P.

NOTE 3 - EXECUTIVE EMPLOYMENT AGREEMENT
         ------------------------------

         The Company has a five-year  written  agreement  with an  individual to
         perform the duties of  President.  Under the  agreement,  which  became
         effective  on  October 1, 2001,  he is to be  compensated  at a rate of
         $20,000.  per month. The employment agreement was modified on April 24,
         2002, to reduce the individual's salary to $10,000 per month due to the
         financial condition of the company. Notwithstanding,  the President has
         agreed,  as of  September  27,  2002,  to forego his  salary  until the
         Company is in a financial position to pay such expenses. The Company is
         not a party to any other employment agreements.

NOTE 4 - NOTES PAYABLE
         -------------

         Notes payable consist of the following:


                                      F-9

<PAGE>

<TABLE>

<CAPTION>


                CAPITOL COMMUNITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2002 AND 2001

NOTE 4 - NOTES PAYABLE (CONTINUED)
         -------------------------
<S>                                                                                  <C>

         Notes Payable - Various
                  Unsecured   notes,   interest   from  10.90%  to  14.00%  with
                  maturities  not in  excess  of nine  months  all of which  are
                  currently in default,
                                                                                     $2,029,168

         Note Payable - Boca First Capital, LLLP (Related Party)
                  Secured  Line of Credit.
                           The Boca Credit Line matures on November 1, 2004, and
                  has an initial  interest  rate of ten percent  (10%) per annum
                  and will,  on a  quarterly  basis,  adjust to a rate  which is
                  equal to the  greater of ten  percent per annum or one percent
                  (1%) above the prime rate, in effect on that date.

                  The collateral  securing the Boca Note, includes a mortgage on
                  the remaining 696 acres of the Maumelle Property, 1,000 shares
                  of  common  stock  of the  Operating  Subsidiary  owned by the
                  Company,  representing  one hundred  percent of the issued and
                  outstanding  shares;  the 35.16  percent  interest in TradeArk
                  Properties,  LLC, a Michigan limited  liability  company which
                  owns viatical life  settlement  contracts and real property in
                  Maumelle,  Arkansas;  and  two  notes  receivable  payable  on
                  October  31,  2002 and  March 26,  2005  with a face  value of
                  $1,070,000.00 and 1,000,000.00,  respectively,  with an annual
                  rate of interest of 6.25%.


                                                                                    $1,216,000
                                                                                    ----------



                  Total Current Maturities                                          $3,245,168


                  Total Non-Current Maturities                                            -
                                                                                    ----------

                  Total Notes Payable                                               $3,245,168
                                                                                    ==========

</TABLE>

NOTE 5 - UNCONSOLIDATED SUBSIDIARIES
         ---------------------------

         The Company holds a 35.16%  interest in TradeArk  Properties,  LLC. The
         investment in TradeArk Properties LLC is accounted for under the equity
         method. The Company reports its proportionate  share of the investments
         operating  income or loss and  increasing  or  decreasing  the carrying
         value of the investment accordingly. In the case of TradeArk,


                                      F-10

<PAGE>


                CAPITOL COMMUNITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2002 AND 2001

NOTE 5 - UNCONSOLIDATED SUBSIDIARIES (CONTINUED)
         ---------------------------------------

         Properties  LLC, the company also  decreased its carrying  value by the
         amount of the  unrecognized  land sales profit in accordance  with SFAS
         66. This  difference  between the carrying  value of the investment and
         the underlying  equity in the  investment  will be accounted for as the
         assets of TradeArk Properties LLC are sold or otherwise disposed.

         At September 30, 2002, TradeArk Properties LLC holds Real Estate valued
         at  $7,225,250,  viatical  contracts  valued  at  $8,208,553.  TradeArk
         Properties  LLC  liabilities  include a mortgage of  $3,541,029.96,  an
         operating loan for $1,334,100  from Trade  Partners,  Inc., and accrued
         interest payable of $144,566. Members Equity is $10,422,622.  Operating
         loss for the 12 months ended September 30, 2002 was $530,885.

NOTE 6 - EXTRAORDINARY ITEMS
         -------------------

         On December 20, 2001, the Operating Subsidiary and Resure, Inc. reached
         a settlement  agreement to resolve  payment on the  outstanding  Resure
         Note. The United States Bankruptcy Court entered an Order approving the
         2001 Settlement  Agreement and dismissed all pending motions by Resure,
         subject  to  the  Liquidator  for  Resure  receiving  approval  of  the
         agreement  by the Cook County  Court.  At a hearing on January 9, 2002,
         that approval was granted. On February 4, 2002, a payment of $3,850,000
         was made to

         Resure to under the terms of the 2001  Settlement  Agreement  to pay in
         full the Resure Mortgage. The Company had a liability accrued to Resure
         of   $5,034,497.   The   transaction  is  considered  a  Troubled  Debt
         Restructuring  under SFAS 15 and resulted in the Company recognizing an
         extraordinary gain of $1,184,497.

         As of  September  30, 2002,  the Company  negotiated  settlements  with
         certain existing promissory Note Holders for principal debt and accrued
         interest of $1,941,484 for cash settlements of $612,164.

NOTE 7 - CAPITAL TRANSACTIONS
         --------------------


         On October 18, 2001,  the Company issued 100,000 shares of common stock
         to a consultant of the Company,  in  consideration of cash at the price
         of  $0.05  per  share.  The  Company  relied  on  Section  4 (2) of the
         Securities Act of 1933, as amended  ("Securities  Act"), in agreeing to
         issue such securities.

         On October 18,  2001,  the Company  issued  6,000,000  shares of common
         stock to an  affiliated  company  beneficially  owned by the  Company's
         president,  for the purchase price of $0.05 per share payable in a note
         payable due September 30, 2002.  Additional  compensation  for services
         was  recognized at the rate of $0.10 per share.  The Company  relied on
         Section 4 (2) of the  Securities  Act of 1933 in agreeing to issue such
         securities.

         On October 18, 2001,  the Company  issued  10,000,000  shares of common
         stock to the Company's  president,  in  consideration of and in lieu of
         unpaid cash  compensation and benefits at the price of $0.05 per share.



                                      F-11

<PAGE>

                CAPITOL COMMUNITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2002 AND 2001

NOTE 7 - CAPITAL TRANSACTIONS (CONTINUED)
         --------------------------------

         Additional  compensation  for  services was  recognized  at the rate of
         $0.10 per share.  The Company relied on Section 4 (2) of the Securities
         Act of 1933 in agreeing to issue such securities.

         On February 25, 2002, the Company issued 500,000 shares of common stock
         to an advisor to the Company, in consideration of and in lieu of unpaid
         cash  compensation  at the price of $0.10 per share.  Such  shares were
         issued  pursuant  to  a   Non-Qualified   Employee  Stock  Option  Plan
         registered  on  March  6,  2002,   with  the  Securities  and  Exchange
         Commission.

         On February 25, 2002 the Company  issued 500,000 shares of common stock
         to an advisor to the Company, in consideration of and in lieu of unpaid
         cash compensation at the price of $0.10 per share. On March 29, 2002 an
         additional   75,000   shares   were  issued  in  lieu  of  unpaid  cash
         compensation  at the price of $0.05 per share.  Such shares were issued
         pursuant to a  Non-Qualified  Employee Stock Option Plan  registered on
         March 6, 2002, with the Securities and Exchange Commission.

         On February 25, 2002 the Company  issued 600,000 shares of common stock
         to a consultant  to the  Company,  in  consideration  of and in lieu of
         unpaid cash  compensation at the price of $0.10 per share.  Such shares
         were issued  pursuant to a  Non-Qualified  Employee  Stock  Option Plan
         registered  on  March  6,  2002,   with  the  Securities  and  Exchange
         Commission.

         On February 25, 2002 the Company issued  2,000,000 shares of restricted
         common stock to a director of the Company,  in  consideration of and in
         lieu of unpaid cash  compensation at the price of $0.05 per share.  The
         Company  relied  on  Section  4 (2) of the  Securities  Act of  1933 in
         agreeing to issue such securities.

         On February 25, 2002 the Company  issued  500,000  shares of restricted
         common stock to an advisor to the Company,  in  consideration of and in
         lieu of unpaid cash  compensation at the price of $0.05 per share.  The
         Company  relied  on  Section  4 (2) of the  Securities  Act of  1933 in
         agreeing to issue such securities.

         On February 25, 2002 the Company  issued  100,000  shares of restricted
         common stock to an advisor to the Company,  in  consideration of and in
         lieu of unpaid cash  compensation at the price of $0.05 per share.  The
         Company  relied  on  Section  4 (2) of the  Securities  Act of  1933 in
         agreeing to issue such securities.

         On March 26, 2002 the Company  issued,  5,000 shares of common stock to
         an advisor to the Company,  in  consideration  of and in lieu of unpaid
         cash compensation at the price of $0.0625 per share.

         On March 26, 2002 the Company  issued 140,000 shares of common stock to
         an advisor to the Company,  in  consideration  of and in lieu of unpaid
         cash compensation at the price of $0.0625 per share.


                                      F-12

<PAGE>


                CAPITOL COMMUNITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2002 AND 2001

NOTE 7 - CAPITAL TRANSACTIONS (CONTINUED)
         --------------------------------

         On  April  18,  2002  the  Company   issued   200,000   shares  of  the
         Corporation's   Common  Stock  to  the  president  of  the  Company  in
         consideration of and in lieu of unpaid  reimbursements  at the price of
         $0.045 per share.  Such shares were issued  pursuant to a Non-Qualified
         Employee  Stock  Option  Plan  registered  on March 6,  2002,  with the
         Securities and Exchange Commission.

         On  April  18,  2002  the  Company   issued   200,000   shares  of  the
         Corporation's  Common Stock to an  affiliate  and advisor of the of the
         Company in  consideration  of and in lieu of cash  compensation  at the
         price of $0.045  per share.  Such  shares  were  issued  pursuant  to a
         Non-Qualified  Employee Stock Option Plan  registered on March 6, 2002,
         with the Securities and Exchange Commission.

         On  April  18,  2002  the  Company   issued   200,000   shares  of  the
         Corporation's  Common Stock an affiliate  and advisor of the Company in
         consideration  of and in lieu  of cash  compensation  at the  price  of
         $0.045 per share.  Such shares were issued  pursuant to a Non-Qualified
         Employee  Stock  Option  Plan  registered  on March 6,  2002,  with the
         Securities and Exchange Commission.

         On  April  18,  2002  the  Company   issued   200,000   shares  of  the
         Corporation's  Common Stock an advisor to the Company, in consideration
         of and in lieu of cash  compensation  at the price of $0.045 per share.
         Such shares were issued  pursuant  to a  Non-Qualified  Employee  Stock
         Option  Plan  registered  on March 6,  2002,  with the  Securities  and
         Exchange Commission.

         Effective   August  15,  2002,  the  Company  had  agreed  to  exchange
         $4,198,271 in debt,  including principal and interest,  with a group of
         existing   promissory  note  security   holders  ("Note  Holders")  for
         4,198,271 shares of Convertible  Preferred  Stock,  Series A Non-Voting
         stock (the "Series A Preferred Stock"), par value $0.01 per share. Each
         share of Series A Preferred  Stock bears a cumulative  dividend rate of
         5.25% per annum.  The  Series A  Preferred  Stock,  in the event of any
         liquidation, dissolution or winding up of the Company, is senior to the
         holders of Common Stock. The Company relied on Section 3(a)(9) and Rule
         145 of the Securities Act in agreeing to issue such  securities.  As of
         September 30, 2002 the Company had issued  3,843,698 shares of Series A
         Preferred Stock to Note Holders.

         On August  12,  2002 the  Company  repurchase  25,000 of the  Company's
         Common Stock at $0.1058 per share.

         On August  20,  2002 the  Company  repurchase  47,000 of the  Company's
         Common Stock at $0.1047 per share.

         On August 12, 2002 the Company repurchase 5,300 of the Company's Common
         Stock at $0.1068 per share.


                                      F-13

<PAGE>



                CAPITOL COMMUNITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2002 AND 2001

NOTE 8 - NON-QUALIFIED EMPLOYEE STOCK OPTION PLAN
         ----------------------------------------

         The Company has a Stock  Option Plan under which  directors,  officers,
         key  consultants  and other  persons  employed  by the  Company  may be
         granted  options to purchase  shares of the  Company's  authorized  but
         unissued or  reacquired  common  stock.  The  maximum  number of shares
         available  for  issuance  under  the Plan is  3,000,000  shares.  As of
         September  30, 2002 the maximum  number of shares  available for future
         grants  under the Plan is  525,000  shares.  Under the plan the  option
         exercise  price  shall  not be less than the Fair  Market  Value of the
         stock.  Options  currently expire no later than 10 years from the grant
         date.  Proceeds received by the Company from exercises of stock options
         are credited to common stock and additional paid-in capital. Additional
         information  with  respect to the Plan's  stock  option  activity is as
         follows:

                                                                Weighted
                                                                Average
                                                Number          Exercise
                                               of Shares          Price
--------------------------------------------------------------------------------
Outstanding at September 30, 2001                      0             $ 0
   Granted                                     2,475,000           $.081
   Exercised                                   2,475,000           $.081
   Cancelled                                           0              $0
--------------------------------------------------------------------------------

Outstanding at September 30, 2002                 0                   $0
--------------------------------------------------------------------------------

NOTE 9 - LEGAL PROCEEDINGS
         -----------------

         On July 21, 2000, the Operating Subsidiary,  a wholly-owned  subsidiary
         of the Company that holds  substantially  all of the Company's  assets,
         filed a voluntary  petition for relief  under  Chapter 11 of the United
         States Bankruptcy Code in the United States  Bankruptcy Court,  Eastern
         District of Arkansas.  Until  September 6, 2002, when the United States
         Bankruptcy  Court  dismissed  the  Chapter 11  proceedings  against the
         Operating Subsidiary,  the Company continued to operate its business as
         a   debtor-in-possession.   As  such,  the  Operating   Subsidiary  was
         authorized to operate its business in the ordinary  course of business,
         but could not engage in  transactions  outside the  ordinary  course of
         business  without the United  States  Bankruptcy  Court  approval.  See
         discussion below.

         As a  result  of the  Operating  Subsidiary's  bankruptcy,  all acts to
         collect  Pre-petition   Indebtedness  and  to  enforce  other  existing
         contractual obligations of the Operating Subsidiary were stayed.

         Upon filing the voluntary  petition for bankruptcy relief under Chapter
         11, the foreclosure  action  instituted by the Liquidator for Resure on
         April 19,  2000  against  the  Operating  Subsidiary  was  stayed.  The
         foreclosure  action was filed in the Chancery Court of Pulaski  County,
         Arkansas  (the  "Resure  lawsuit").  The  Resure  Liquidator  sought to
         foreclose  on  approximately  701  acres  of  residential  land  of the
         Maumelle  Property  securing a $3,500,000  loan ("Resure Note") owed by
         the Company.  The action also sought $2,000,000 in Development Fees the




                                      F-14

<PAGE>

                CAPITOL COMMUNITIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2002 AND 2001

NOTE 9 - LEGAL PROCEEDINGS (CONTINUED)
         -----------------------------

         Liquidator  claimed the Operating  Subsidiary  owed under the terms and
         conditions of the September 30, 1997, settlement  agreement,  which was
         secured by the same 701 acres as the Resure Note.

         On December 20, 2001,  the Operating  Subsidiary  and Resure  reached a
         settlement agreement (the "Settlement Agreement") to resolve payment on
         the  outstanding  Resure Note and the Resure Motions and competing Plan
         of Reorganization.  The Bankruptcy Court entered an Order approving the
         Settlement  Agreement on December 20, 2001,  and  dismissed all pending
         motions by Resure,  subject to the Resure Liquidator receiving approval
         of the  agreement  by the Cook County  Court.  The Cook County  Circuit
         Court entered an Order approving the Settlement Agreement on January 9,
         2002.

         Under the terms of the  Settlement  Agreement,  the  Resure  Liquidator
         agreed to accept  $3,850,000 in  satisfaction of all claims against the
         Operating  Subsidiary.  On February 4, 2002, the $3,850,000 was paid to
         the Resure  Liquidator  of Resure Inc.,  from the proceeds of a sale of
         451 single family acres of the Maumelle  Property,  to an  unaffiliated
         third party, for a total purchase price of $4,000,000.

         As of September 6, 2002, all claims of the Operating Subsidiary,  other
         than those owed to affiliates and the Arkansas  Department of Finance &
         Administration  had  been  satisfied  or  released.   Accordingly,  the
         Operating  Subsidiary  filed a Motion to Dismiss  Chapter 11 Proceeding
         with the  Bankruptcy  Court  instead  of a Plan of  Reorganization.  On
         September 6, 2002, the Bankruptcy Court entered an Order Dismissing the
         Chapter 11 Proceedings against the Operating Company.

         The Company is not involved in any other  litigation,  other than those
         actions arising from the normal course of business. Management does not
         believe will have a material effect on the Company's operations.

NOTE 10 - SUBSEQUENT EVENTS
          -----------------

         On December 15, 2002,  the Company  executed a note extension with West
         Maumelle  to  extend  the  maturity  date  on Note 1 in the  amount  of
         $1,070,000  from December 15, 2002, to January 15, 2003.  West Maumelle
         paid an extension  fee of $11,000;  however,  the Company has agreed to
         credit the fee towards payment on Note 1 provided the entire  principal
         and accrued  interest on the note is paid in full on or before December
         31, 2002.

         On November 27, 2002, TradeArk Properties LLC entered into an agreement
         to sell Tract D, consisting of approximately 38.65 acres in the City of
         Maumelle to Kite Capital, LLC, for a purchase price of $4,545,703.  The
         closing shall be no later than 45 days after the  inspection  period of
         90 days from the date of execution of the agreement.  The purchaser has
         the right to terminate the  agreement if it determines  the property is
         not adequate for its purposes.

         As of December 1, 2002,  the Company has  negotiated  settlements  with
         certain  promissory note holders to exchange  $1,011,330.19 in debt and
         accrued interest of $301,709.95,  for $470,250.29 in cash and notes and




                                      F-15

<PAGE>

                CAPITOL COMMUNITIES CORPORATION AND SUBSIDIARIES
                    NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
                           SEPTEMBER 30, 2002 AND 2001

NOTE 10 - SUBSEQUENT EVENTS (CONTINUED)
          -----------------------------

         302,389  shares of  Series A  Preferred  Stock.  Of these  totals,  the
         Company,  as of December 15, 2002, closed settlements with note holders
         to exchange $381,330.19 in debt and accrued interest of $98,834.52, for
         $122,247.18  in cash and notes and 216,858 shares of Series A Preferred
         Stock.

         On October 18, 2001 the Company issued  6,000,000  shares of restricted
         common stock to Prescott  Investments LLC, a Nevada limited partnership
         beneficially  owned by Mike Todd,  for the purchase  price of $0.05 per
         share payable in a note for $300,000.00 payable due September 30, 2002.
         On October 15, 2002, Mr. Todd agreed to accept as partial satisfaction,
         offset and release of his claim for past due  compensation  and account
         payable due him in an amount of  $278,568.00 in  consideration  for the
         Company's  partial release of the Company's  claim against  Prescott on
         the promissory  note. The Company agreed to accept a Note dated October
         1,  2002 in the  amount  of  $38,692.27  which  represents  the  entire
         remaining  unpaid  balance  of the  Prescott  Note  and to  extend  the
         maturity date of the Note to September 30, 2003.

         On January  10,  2003,  West  Maumelle  L.P.,  retired  its debt to the
         Operating Subsidiary, comprised of a promissory note in the face amount
         of $1,070,000,  with a cash payment of $500,000.00 and an assignment of
         a $640,000 promissory note made by  Transcontinental  Realty Investors,
         Inc. (the "Transcontinental  Note"), a Nevada corporation,  and payable
         to West  Maumelle  L.P. The  $640,000  note is secured by a mortgage to
         certain property located in Maumelle,  Arkansas, and pays interest at a
         rate of 5.75% per annum with  interest  paid  monthly,  with a maturity
         date of July 10, 2004. The Company has agreed to allow West Maumelle to
         repurchase the Transcontinental  Note for a period of 90 days, from the
         date of  assignment,  at a discounted  rate that  increases each 30-day
         period.

         The Company  renewed Note 2 owed by West Maumelle L.P. to the Operating
         Subsidiary in the face amount of $1,030,000.00.  The new note ("Renewal
         Note"), with a face value of $1,000,000.00, bears interest at a rate of
         5.75% per annum with  interest due  annually,  with a maturity  date of
         January 10, 2006.  The Renewal Note is secured by a mortgage to certain
         property  located  in  Maumelle,  Arkansas,  and is  junior to a senior
         mortgage from Great  Southern  Bank.  West Maumelle  L.P.,  also made a
         unsecured note ("Differential Note) payable to the Operating Subsidiary
         in the amount of $46,170.00,  with the unpaid principal due and payable
         on April 10, 2003.

         The Renewal Note, the  Transcontinental  Note and the Differential Note
         have been pledged,  as substitute  collateral for Note 1 and Note 2, to
         Boca First Capital LLLP to secure its $4,000,000.00 line of credit.

                                      F-16

<PAGE>


     EXHIBITS

     The following Exhibits are filed as part of this Report.  (Exhibits numbers
correspond to the exhibits  required by Item 601 of Regulation S-B for an annual
report on Form 10-KSB,

11. Statement of Computation of Per Share Earnings.

          See Financial Statements starting at F-1.

(b) REPORTS ON FORM 8-K

          The following reports on Form 8-K were filed by the Company during the
fiscal quarter ended September 30,2002:

          8-K/A filed with the Securities  and Exchange  Commission on September
12, 2002, pertaining to the Order Dismissing the Bankruptcy Proceedings filed by
the Operating Subsidiary.

          8-K filed with the  Securities  and  Exchange  Commission  on July 30,
2002, reporting a change in control of the registrant.



                                   SIGNATURES

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

                                CAPITOL COMMUNITIES CORPORATION


Date: January 13, 2003          By: /s/ Michael G. Todd
                                    ---------------------------
                                    Michael G. Todd, Chairman,
                                    President and Chief
                                    Executive Officer

Date: January 13, 2003          By: /s/ David Paes
                                    ---------------------------
                                    David Paes, Treasurer












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