================================================================================

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

                                   Form 1O-KSB

               [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2001

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                        For the transition period from to

                         Commission File Number: 0-25974

                         CAPITAL DEVELOPMENT GROUP, INC.
                 (Name of small business issuer in its charter)

             OREGON                                           93-1113777
------------------------------------------         -----------------------------
    (State or other jurisdiction                   (IRS Employer Identification
        of incorporation or                        No.)
           organization)


  4333 Orange Street, Suite 3600                       Riverside, CA 92501-3839
------------------------------------------         -----------------------------
  (Address of principal administrative               (City, State, Zip Code)
                offices)

                                 (909) 276-0873
                       -----------------------------------
                         (Registrants telephone number)

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

         Securities registered under Section 12(g) of the Exchange Act:
                         Common Stock, par value $0.0001
                                (Title of Class)

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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B 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 the Form 10-KSB or any
amendment to this Form 10-KSB. [ X ]

Issuer's revenues for its most recent fiscal year were $0. The aggregate market
value of voting stock held by non-affiliates of the registrant was $1,462,500 as
of March 29, 2002, based upon the last sales price as reported on the Nasdaq OTC
Bulletin Board.

The number of shares outstanding of the Registrant's Common Stock as of March
29, 2002 was 15,005,000.

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

                       Documents Incorporated by Reference
                                     None.

================================================================================
<PAGE>
                         CAPITAL DEVELOPMENT GROUP, INC.
                                FORM 10-KSB INDEX



                                     PART I
                                                                         Page

Item 1.      Description of Business                                       3

Item 2.      Description of Property                                       4

Item 3.      Legal Proceedings                                             4

Item 4.      Submission of Matters to a Vote of Security Holders           4

                              PART II

Item 5.      Market for Common Equity and Related Stockholder Matters      4

Item 6.      Management's Discussion and Analysis or Plan of Operation     5

Item 7.      Financial Statements                                          7

Item 8.      Changes in and Disagreements with Accountants on Accounting
             and Financial Disclosure                                      7

                             PART III

Item 9.      Directors, Executive Officers, Promoters and Control Persons;
             Compliance with Section 16(a) of the Exchange Act             7

Item 10.     Executive Compensation                                        7

Item 11.     Security Ownership of Certain Beneficial Owners and
             Management                                                    8

Item 12.     Certain Relationships and Related Transactions                8

Item 13.     Exhibits and Reports on Form 8-K                              9

             Signatures                                                    9




                                       2
<PAGE>
                                     PART I

Note Regarding Forward-Looking Statements. This report includes "forward-looking
statements." Forward looking statements contained in this report are based on
our beliefs and assumptions and on information currently available to our
management. Forward-looking statements include statements in which words such as
"expect, " "anticipate," "intend," "plan," "believe," "estimate," "consider," or
similar expressions are used. You should not construe any forward-looking
statement as a guarantee of future performance. These predictions inherently
involve risks, uncertainties and assumptions. Our future results and stockholder
values will differ from those expressed in these forward-looking statements, and
those variations may be material and adverse. Many of the factors that will
affect these results and values are beyond our ability to control or predict. A
partial list of the factors that may cause our actual results to vary from our
expectations is set forth in the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

ITEM 1.  DESCRIPTION OF BUSINESS

(a)      Business Development

         Capital Development Group, Inc. ("CDG") was incorporated in Oregon on
         May 19, 1993. From inception through the date of certain acquisitions,
         (see below) CDG was primarily engaged in the business of purchasing
         healthcare receivables from hospitals and other healthcare institutions
         at a discount and administering the collection process of such
         receivables. During 2000, CDG acquired IntraMed Corporation
         ("IntraMed") and Health Source Financial ("HFA") (hereinafter, CDG,
         IntraMed and HFA are collectively referred to as the "Company").
         IntraMed is a developer of an Internet based referrals, scheduling,
         billings and claims processing software for the health care industry
         and HFA is a provider of healthcare consulting services.

         On September 28, 2001, the Company transferred substantially all of the
         assets and liabilities of IntraMed and HFA into a private company owned
         by the same shareholders of the Company. At the date of transfer, the
         liabilities of IntraMed and HFA were in excess of the assets in the
         amount of $217,993. The Company accounted for the transfer of the net
         liability of $217,993 as a non-cash contribution by the shareholders
         and was recorded as an increase to additional paid in capital. As of
         December 31, 2001, the Company is a public shell with no continuing
         operations. As a result of the transfer of the assets and liabilities,
         the Company's statements of operations for fiscal 2000 have been
         restated from what was reported in the Company's annual report filed on
         May 22, 2001 to segregate amounts pertaining to the discontinued
         operations.

         As of December 31, 2001, the Company had redirected its efforts and has
         become primarily focused on searching for a suitable reverse merger
         candidate.

         The Company is publicly traded on the Over the Counter Bulletin Board
         ("OTCBB") under the symbol "CDVG". The Company did not file a Form 8-K
         in connection with either of the acquisitions discussed above. Such
         filings are required under the 1934 Act of the Securities and Exchange
         Commission ("SEC"). The Company did disclose such acquisitions in its
         quarterly reports filed for the quarterly periods ended June 30, 2000
         and September 30, 2000 and in its annual report on Form 10-KSB filed
         with the SEC on May 22, 2001.

                                       3
<PAGE>
         CDG has never been the subject of a bankruptcy or receivership.
         However, in late 1998 and early 1999, we resolved and settled claims
         with a number of our creditors by exchanging creditors' claims totaling
         approximately $460,000 for cash amounting to approximately $15,000 and
         144,600 shares of our common stock. We were unable to locate
         approximately 14 creditors holding claims totaling, in the aggregate,
         approximately $90,000 (with no individual claim larger than $20,000).
         To our best knowledge, none of these latter creditors have actively
         pursued their claims since 1995, and none have contacted us since early
         1996. Therefore, we do not plan to pursue the creditors or pay any
         claims they might assert.


(b)      Business of Issuer

         As discussed in (a) above, as of December 31, 2001, the Company had
         redirected its efforts and has become primarily focused on searching
         for a suitable reverse merger candidate.

         We have no employees. Our president, Mr. Michael P. Vahl, receives no
         salary or other benefits, but bills us for his services at the rate of
         $100 per hour.


ITEM 2.  DESCRIPTION OF PROPERTY

         The Registrant does not currently own or lease any real property.

ITEM 3.  LEGAL PROCEEDINGS

         The Registrant is not currently involved in any legal proceedings.

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

         No matters were submitted to a vote of the Company's shareholders
         during the fourth quarter of fiscal 2001.

                                     PART II


ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Market Information

         The common stock of Capital Development Group, Inc. is currently traded
         on the NASDAQ Over the Counter Bulletin Board under the symbol CDVG.
         The stock has traded regularly over the past year. Over the most recent
         52-week period the stock has traded in a range of $0.03 (low) and $0.75
         (high) per share. The trading history of the stock for the past two
         years is summarized below.

                                       4
<PAGE>
          ---------- ------------ ------------
          QUARTER    LOW TRADE    HIGH TRADE
          Q4 2001    1/32          1/16
          ---------- ------------ ------------
          Q3 2001    1/16          7/16
          ---------- ------------ ------------
          Q2 2001    1/4           13/32
          ---------- ------------ ------------
          Q1 2001    3/16           3/4
          ---------- ------------ ------------
          Q4 2000    1/4          1 14/16
          ---------- ------------ ------------
          Q3 2000    1 13/16      2 11/16
          ---------- ------------ ------------
          Q2 2000    3/16         3
          ---------- ------------ ------------
          Q1 2000    5/16            3/4
          ---------- ------------ ------------

         The quotations reflect reported inter-dealer prices, without retail
         markup, markdown or commission and may not represent actual
         transactions.

         Approximately 825,000 of the Registrant's shares are held in street
         name. Approximately 50 individual shareholders hold the remaining
         shares of common stock. We have not paid dividends on our common stock
         and do not anticipate paying dividends in the future.

ITEM 6.  MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

(a)      Plan of Operation

         On September 28, 2001, the Company transferred substantially all of the
         assets and liabilities of IntraMed and HFA into a private company owned
         by the same shareholders of the Company. At the date of transfer, the
         liabilities of IntraMed and HFA were in excess of the assets in the
         amount of $217,993. The Company accounted for the transfer of the net
         liability of $217,993 as a non-cash contribution by the shareholders
         and is recorded as an increase to additional paid in capital. As of
         December 31, 2001, the Company is a public shell with no continuing
         operations. As a result of the transfer of the assets and liabilities,
         the Company's statements of operations for fiscal 2000 have been
         restated from what was reported in the Company's annual report filed on
         May 22, 2001 to segregate amounts pertaining to the discontinued
         operations.

         As of December 31, 2001, the Company had redirected its efforts and has
         become primarily focused on searching for a suitable reverse merger
         candidate.

(b)      Management's Discussion and Analysis of Financial Condition and Results
         of Operations


         Mr. Vahl, CDG's current president, has indicated a willingness to
         continue to loan money to CDG until we become operational and
         profitable, but he is under no obligation to do so, and he may
         therefore withdraw his lending commitment and demand payment of
         outstanding debts at any time. As mentioned above, the company is
         actively seeking a merger partner at this time.

         In August of 2001, the company determined that it would not have the
         resources to repay the Convertible Notes Payable that were due in
         November 2001. As a

                                       5
<PAGE>
         result we were able to convert all of the debt at fifteen cents per
         share ($0.15). We also were able to convert the accounts payable for 4
         of 6 vendors that the company owed money to.


During the year the Company had a number of equity transactions.

         Preferred Stock

         In fiscal 2001, all Series A preferred stock holders agreed to convert
         157,867 shares into 249,990 shares of common stock. No shares of
         preferred shares are outstanding as of December 31, 2001.

         Common Stock

         The Company issued 180,000 shares of common stock, valued at $36,000
         (based on the market value on the date of grant) to ex-employees in
         accordance with severance package agreements.

         The Company issued 2,651,738 shares of restricted common stock pursuant
         to the conversion of various notes payable and accrued interest with a
         principal amount of $360,686 and accrued interest of $39,031.

         The Company issued 400,000 shares of common stock, valued at $80,000
         (based on the market value on the date of grant) to third parties in
         accordance with agreements which the third parties agreed to surrender
         common stock of an unrelated company.

         The Company issued 100,000 shares of common stock, valued at $20,000
         (based on the market value on the date of grant) to third parties as
         consideration for notes payable totaling $20,000

         The Company issued 54,000 shares of common stock, valued at $10,800
         (based on the market value on the date of grant) to various third
         parties for services rendered.

         The Company converted advances/payables to related parties into
         1,285,337 shares of common stock at $0.15 per share.

         The Company cancelled 200,000 shares of common stock due to lack of
         performance.

ABANDONED ACQUISITIONS

         On April 11, 2001, the Company entered into a non-binding letter of
         intent agreement to acquire all of the outstanding common stock of
         MedTel Centers, Inc. ("MedTel"), a company engaged primarily in the
         business of network management of medical facilities and physicians.
         However, in July 2001, the Company and MedTel decided that the
         acquisition was not in the best interest of all parties and agreed to
         rescind the transaction. MedTel was compensated 120,000 shares of the
         Company's restricted common stock valued at $18,000.


THE COMPANY HAD A SIGNIFICANT LOSS IN 2001.

         The Company had a net loss of $685,353 in 2001. This was due primarily
         due to stock issuances and other costs associated with the business.
         The loss from

                                       6
<PAGE>
         continuing operations in 2001 was $659,095 and the loss from
         discontinued operations was $26,258. As noted in Item 1 above, as of
         December 31, 2001, the Company had redirected its efforts and has
         become primarily focused on searching for a suitable reverse merger
         candidate.


ITEM 7.  FINANCIAL STATEMENTS

         The financial statements are displayed at the end of this report.

ITEM 8.  CHANGES WITH AND DISAGREEMENTS WITH ACCOUNTANTS

         On March 23, 2001, the Company engaged Squar, Milner, Reehl &
         Williamson LLP as its principal accountants. There were no
         disagreements with the former accountants on any matter of accounting
         principles or practices, financial statement disclosure or auditing
         scope or procedure of any reportable events. The former accountants
         resignation became effective on May 15, 2000.


PART III


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

         Michael P. Vahl, age 44, is the President, Secretary and a director of
         CDG. Mr. Vahl's one-year term as a director has been renewed annually
         at each of the last three shareholder meetings. Mr. Vahl is compensated
         on an hourly basis as an independent contractor for his activities on
         behalf of CDG. CDG has no other employees. Mr. Vahl has been with the
         Registrant since its inception in 1993. From its inception until
         January 1996, he was the Executive Vice president and Chief Operating
         Officer. In January of 1996, he became the Registrant's President and
         Chief Executive Officer. Since 1988, Mr. Vahl has also owned and
         operated The Vahl Software Group, a sole proprietorship that provides
         software development and consulting services. Mr. Vahl is not an
         officer or director of any other entities, and has never been involved
         in any bankruptcies or criminal matters.

         Gordon C. Root, age 42 is a director of CDG. Mr. Root has been a
         shareholder of CDG since 1994.

         Based upon a review of forms submitted to the registrant, neither Mr.
         Vahl nor Mr. Root has timely filed all reports required to be filed
         pursuant to Section 16(a) of the Exchange Act.

ITEM 10. EXECUTIVE COMPENSATION



                                       7
<PAGE>
         Michael P. Vahl is the President of CDG, but he currently receives no
         salary or other benefits. He bills CDG on an hourly basis of $100 per
         hour for time he spends on behalf of CDG. In the last six years, CDG
         has paid the following amounts to Mr. Vahl: 1999 - $40,100, 2000 -
         $178,434, 2001 - $113,750. In addition, in December 1996, CDG issued
         151,542 shares of preferred stock to Mr. Vahl in exchange for unpaid
         salary and accrued benefits of $530,396 that dated from 1992. This
         preferred stock was converted to 497,946 shares of CDG common stock in
         December 1998. In September 2001, CDG issued 1,285,337 shares of
         restricted common stock in exchange for accrued services and expenses.

         The Company has not established and does not anticipate establishing
         any benefit plans, option plans or other forms of alternate executive
         compensation.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


--------------- ------------------ ------------------ -----------------------
                                   Amount and Nature
                                     of Beneficial
                Name of Beneficial     Ownership
Title of Class       Owner                            Percent of Class
--------------- ------------------ ------------------ -----------------------
Common Stock    Gordon Root        1,146,800                 7.64%
--------------- ------------------ ------------------ -----------------------
Common Stock    Michael Vahl       8,008,145                53.39%
--------------- ------------------ ------------------ -----------------------


         No arrangement known to the registrant would reasonably be expected to
         result in a change in control of the registrant.

Item 12. Certain Relationships and Related Transactions

         In December 1996, CDG issued 151,542 shares of preferred stock to our
         President, Michael P. Vahl, in return for unpaid salary and accrued
         benefits of $530,396 that dated from 1992. Mr. Vahl, as the sole
         director of CDG, independently approved this transaction by making the
         determination that the conversion would benefit CDG by reducing the
         debt on CDG's balance sheet.

         Mr. Vahl has also advanced approximately $133,000 to CDG that also
         bears interest at 0% to pay current operating expenses, and he may, but
         is not required to, continue to do so until CDG becomes operational and
         profitable. These advances are reflected in the accrued salary and
         expense obligations described under "Executive Compensation" above. CDG
         may borrow additional funds from Mr. Vahl during the remainder of 2000,
         but Mr. Vahl is not obligated to make such loans. These loans, if made,
         will be payable on demand.

         In December 1998, Mr. Gordon Root, a shareholder of the Company, loaned
         CDG $20,000 to facilitate the payment of creditors and provide
         short-term working capital. The loan is a demand loan that bears
         interest at 8.5% and which Mr. Root may call at any time. Mr. Root is
         not obligated to loan any additional funds to CDG.

                                       8
<PAGE>
         On June 30, 2000, the Company converted $117,250 in accrued salary to
         Mr. Vahl into 234,500 shares of the Company's common stock. The stock
         was restricted under Rule 144. On the same date the Company converted
         the $20,000 note plus accrued interest, owed to Mr. Root, into 45,100
         shares of the Company's common stock. The stock was restricted under
         Rule 144.

         In September 2001, CDG issued 1,285,337 shares of restricted common
         stock in exchange for accrued services and expenses.

         Except for the relationships disclosed above, we do not anticipate
         entering into any contracts or arrangements with officers, directors or
         other affiliates of CDG.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

None.


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, hereunto duly
authorized.


                                                CAPITAL DEVELOPMENT GROUP, INC.

                                                By:/s/MICHAEL P. VAHL
                                                   ----------------------------
                                                Michael P. Vahl, President
                                                Principal Executive Officer
                                                April 15, 2002


                                                By:/s/MICHAEL P. VAHL
                                                   ----------------------------
                                                Michael P. Vahl, President
                                                Principal Financial Officer
                                                April 15, 2002

                                       9
<PAGE>                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2001 and 2000

















<PAGE>









                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS





Independent Auditors' Report.............................................. 1

Consolidated Balance Sheet................................................ 2

Consolidated Statements of Operations..................................... 3

Consolidated Statements of Stockholders' Deficit.......................... 4

Consolidated Statements of Cash Flows..................................... 7

Notes to Consolidated Financial Statements................................ 9


<PAGE>
                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders
Capital Development Group, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheet of Capital
Development Group, Inc. and Subsidiaries (collectively referred to as
the "Company"), as of December 31, 2001, and the related consolidated
statements of operations, stockholders' deficit and cash flows for each
of the years in the two-year period ended December 31, 2001. These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Capital Development Group, Inc. and Subsidiaries as of
December 31, 2001, and the consolidated results of its operations and
its cash flows for each of the years in the two-year period ended
December 31, 2001 in conformity with accounting principles generally
accepted in the United States.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As of
December 31, 2001, the Company has negative working capital of $59,527,
an accumulated stockholders' deficit of $59,527, losses from
operations, lack of operational history and discontinued operations.
These factors, among others, raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in
regard to these matters are described in Note 1. The consolidated
financial statements do not include any adjustments that may result
from the outcome of this uncertainty.


/s/SQUAR, MILNER REEHL & WILLIAMSON, LLP
----------------------------------------
Squar, Milner Reehl & Williamson, LLP
April 10, 2002
Newport Beach, California


                                       1
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                December 31, 2001
--------------------------------------------------------------------------------
                                                  ASSETS

Current Assets
     Cash                                                  $             529
                                                           ===================


         LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities
     Accounts payable and accrued liabilities              $          60,056
                                                           -------------------

Commitments and Contingencies

Stockholders' Deficit
     Convertible Series A preferred stock; $0.0001
          par value; 1,000,000 shares authorized; no
          shares issued and outstanding                                    -
     Common stock; $0.0001 par value; 30,000,000 shares
         authorized; 15,005,000 shares issued
         and outstanding                                               1,500
     Additional paid-in capital                                    6,594,945
     Accumulated deficit                                          (6,655,972)
                                                           -------------------
                                                                     (59,527)
                                                           -------------------

                                                           $             529
                                                           ===================















   The accompanying notes are an integral part of these financial statements.

                                       2
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 For the Years Ended December 31, 2001 and 2000
--------------------------------------------------------------------------------

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

REVENUES                                     $          -   $      4,849

OPERATING EXPENSES
     Depreciation and amortization                128,573        319,461
     Payroll expenses                                   -        122,886
     Management fees                              113,750        165,142
     Impairment loss                               80,607        964,158
     Other                                        198,740        168,396
                                             ------------   -------------
                                                  521,670      1,740,043
                                             ------------   -------------

LOSS FROM OPERATIONS                             (521,670)    (1,735,194)

OTHER EXPENSES
     Stock promotion expenses                           -      1,564,000
     Interest expense                             137,425        255,270
     Other                                              -        141,500
                                             ------------   -------------
                                                  137,425      1,960,770
                                             ------------   -------------

LOSS FROM CONTINUING OPERATIONS
     BEFORE DISCONTINUED OPERATIONS              (659,095)  $ (3,695,964)
                                             ------------   -------------

DISCONTINUED OPERATIONS
     Loss from discontinued operations            (26,258)      (115,379)
                                             ------------   -------------

NET LOSS                                     $   (685,353)  $ (3,811,343)
                                             =============  =============

BASIC AND DILUTED LOSS PER COMMON
     SHARE FROM:
         CONTINTINUING OPERATIONS            $     (0.06)   $      (0.42)
         DISCONTINUED OPERATIONS                       -           (0.01)
                                             -------------- --------------
                  NET LOSS PER COMMON SHARE  $     (0.06)   $      (0.43)
                                             =============  =============

WEIGHTED AVERAGE NUMBER OF
     COMMON SHARES OUTSTANDING                 11,443,335      8,845,968
                                             =============  =============







   The accompanying notes are an integral part of these financial statements.

                                       3
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                 For the Years Ended December 31, 2001 and 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                       Preferred Stock       Common Stock      Additional
                                      -----------------  -------------------     Paid-in      Accumulated
                                       Shares    Amount     Shares    Amount     Capital        Deficit        Total
                                      -------- --------  -----------  ------  -------------  ------------  -------------
<S>                                   <C>       <C>       <C>         <C>      <C>           <C>           <C>
January 1, 2000                              -  $     -    7,158,535  $  716   $  2,040,925  $ (2,159,276) $   (117,635)

Issuance of common stock in
     connection with the
     acquisition of IntraMed                 -        -    1,540,000     154        388,346             -       388,500
Issuance of common stock and
     preferred stock in connection
     with the acquisition of HFA       157,867       16      350,800      35      1,184,999             -     1,185,050
Conversion of debt due to related
     parties to common stock at
     $0.50 per share                         -        -      279,600      28        139,772             -       139,800
Beneficial conversion feature of
     convertible notes payable               -        -            -       -         93,674             -        93,674
Estimated fair market value of
     warrants issued in connection
     with issuance of convertible
     notes payable and notes
     payable                                 -        -            -       -        143,470             -       143,470
Modification of warrants in
     connection with issuance of
     convertible notes payable               -        -            -       -        211,000             -       211,000

   The accompanying notes are an integral part of these financial statements.

                                       4
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (CONTINUED)
                 For the Years Ended December 31, 2001 and 2000
--------------------------------------------------------------------------------

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

Estimated fair market value of
     warrants issued for services            -        -            -       -        353,000             -       353,000
Estimated fair market value of
     stock issued for services at
     $1.67 per share                         -        -      600,000      60        999,940             -     1,000,000
Estimated fair market value of
     stock issued for services at
     $0.50 per share                         -        -       25,000       3         12,497             -        12,500
Exercise of warrants at $0.25 per
     share                                   -        -      210,000      21         52,479             -        52,500
Net loss                                     -        -            -       -              -    (3,811,343)   (3,811,343)
                                      -------- --------  -----------  ------  -------------  ------------  -------------
BALANCE -                              157,867
     December 31, 2000                               16   10,163,935   1,017      5,620,102    (5,970,619)     (349,484)

Issuance of restricted common stock
     for conversion of notes payable         -        -    3,937,075     393        592,124             -       592,517
Issuance of common stock in
     connection with severance
     package                                 -        -      180,000      18         35,982             -        36,000
Issuance of common stock for the
     relinquishment of common stock
     of an unrelated party                   -        -      400,000      40         79,960             -        80,000

   The accompanying notes are an integral part of these financial statements.

                                       5
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                 For the Years Ended December 31, 2001 and 2000
--------------------------------------------------------------------------------

                                       Preferred Stock       Common Stock      Additional
                                      -----------------  -------------------     Paid-in      Accumulated
                                       Shares    Amount     Shares    Amount     Capital        Deficit        Total
                                      -------- --------  -----------  ------  -------------  ------------  -------------
Issuance of common stock related to          -        -      120,000      12         17,988             -        18,000
     the rescission of the
     acquisition of MedTel
Issuance of common stock in
     connection with notes payable           -        -      100,000      10         19,990             -        20,000
Issuance of common stock for
     services rendered                       -        -       54,000       5         10,795             -        10,800
Conversion of Series A Preferred
     Stock into common stock          (157,867)     (16)     249,990      25             (9)            -             -
Cancellation of stock for lack of
     performance                             -        -     (200,000)    (20)            20             -             -
Contribution                                 -        -            -       -        217,993             -       217,993
Net loss                                     -        -            -       -              -      (685,353)     (685,353)
                                      -------- --------  -----------  ------  -------------  ------------  -------------
BALANCE -                                    -  $     -   15,005,000  $1,500   $  6,594,945  $ (6,655,972)  $   (59,527)
     December 31, 2001
                                      ======== ========  ===========  ======  =============  ============  =============
</TABLE>






   The accompanying notes are an integral part of these financial statements.

                                       6
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 For the Years Ended December 31, 2001 and 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                          2001         2000
                                                                     ------------  ------------
<S>                                                                  <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                             $   (685,353) $ (3,811,343)
Adjustments to reconcile net loss to net cash used in
     operating activities:
         Depreciation and amortization expense                            128,573       319,461
         Impairment of goodwill                                            80,607       964,158
         Issuance of warrants for services                                      -       353,000
         Extension of warrant agreements                                        -       211,000
         Issuance of stock for services                                   164,800     1,012,500
         Interest expense related to discount on notes payable                  -       253,173
         Changes in operating assets and liabilities:
              Accounts receivable                                         (23,696)      (13,603)
              Other current assets                                          2,242         4,830
              Accounts payable and accrued liabilities                     86,580        73,574
              Due to related parties                                      186,986       247,276
                                                                     ------------  ------------
Net cash used in operating activities                                     (59,261)     (385,974)
                                                                     ------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture and equipment                                             -       (24,856)
                                                                     ------------  ------------
Net cash used in investing activities                                           -       (24,856)
                                                                     ------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable                                    40,000       310,000
Net increase in amounts due to related parties                                  -        68,120
Proceeds from exercise of warrants                                              -        52,500
                                                                     ------------  ------------
Net cash provided by financing activities                                  40,000       430,620
                                                                     ------------  ------------

NET INCREASE (DECREASE) IN CASH                                           (19,261)       19,790

CASH - beginning of year                                                   19,790             -
                                                                     ------------  ------------

CASH - end of year                                                   $        529  $     19,790
                                                                     ============  ============


   The accompanying notes are an integral part of these financial statements.

                                       7
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                 For the Years Ended December 31, 2001 and 2000
--------------------------------------------------------------------------------



SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the year for:

     Interest                                                        $          -  $          -
                                                                     ============  ============

     Income taxes                                                    $        800  $        800
                                                                     ============  ============
</TABLE>

See accompanying notes to the consolidated financial statements for additional
information relating to non-cash investing and financing activities during the
years ended December 31, 2001 and 2000.




































   The accompanying notes are an integral part of these financial statements.

                                       8
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000
--------------------------------------------------------------------------------

1. ORGANIZATION

Nature of Business

Capital Development Group, Inc. (the "CDG") was incorporated in Oregon on May
19, 1993. From inception through the date of certain acquisitions, (see Note 3)
CDG was primarily engaged in the business of purchasing healthcare receivables
from hospitals and other healthcare institutions at a discount and administering
the collection process of such receivables. During 2000, CDG acquired IntraMed
Corporation ("IntraMed") and Health Source Financial ("HFA") (hereinafter, CDG,
IntraMed and HFA are collectively referred to as the "Company"). IntraMed is a
developer of an Internet-based referrals, scheduling, billings and claims
processing software for the health care industry and HFA is a provider of
healthcare consulting services.

On September 28, 2001, the Company transferred substantially all of the assets
and liabilities of IntraMed and HFA into a private company owned by the same
shareholders of the Company. At the date of transfer, the liabilities of
IntraMed and HFA were in excess of the assets in the amount of $217,993. The
Company accounted for the transfer of the net liability of $217,993 as a
non-cash contribution by the shareholders and is recorded as an increase to
additional paid in capital in the accompanying statements of stockholders'
deficit (see Note 4). As of December 31, 2001, the Company is a public shell
with no continuing operations (see Notes 4 and 11). As a result of the transfer
of the assets and liabilities, the Company's statements of operations for fiscal
2000 have been restated from what was reported in the Company's annual report
filed on May 22, 2001 to segregate amounts pertaining to the discontinued
operations.

As of December 31, 2001, the Company had redirected its efforts and has become
primarily focused on searching for a suitable reverse merger candidate (see Note
11).

The Company is publicly traded on the Over the Counter Bulletin Board ("OTCBB")
under the symbol "CDVG". As discussed in Note 10, the Company did not timely
file several required SEC filings.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the
CDG and its wholly owned subsidiaries IntraMed and HFA. All significant
intercompany balances and transactions have been eliminated in consolidation.




                                       9
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000
--------------------------------------------------------------------------------

1. ORGANIZATION (continued)

Going Concern

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern, which contemplates among
other things, the realization of assets and satisfaction of liabilities in the
normal course of business. As of December 31, 2001, the Company has negative
working capital of $59,527, an accumulated stockholders' deficit of $59,527,
losses from operations, lack of operating history and discontinued operations.
These factors, among others, raise substantial doubt about the Company's ability
to continue as a going concern. The Company intends to be a target in a reverse
merger acquisition in which they will receive shares in the newly formed Company
and resign from management and the Board of Directors (see Note 11). The
successful outcome of future activities cannot be determined at this time and
there is no assurance that if not achieved, the Company will have sufficient
funds to execute an alternate business plan or generate positive operating
results.

The consolidated financial statements do not include any adjustments related to
recoverability and classification of assets' carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.

Abandoned Acquisitions

On April 11, 2001, the Company entered into a non-binding letter of intent
agreement to acquire all of the outstanding common stock of MedTel Centers, Inc.
("MedTel"), a company engaged primarily in the business of network management of
medical facilities and physicians. However, in July 2001, the Company and MedTel
decided that the acquisition was not in the best interest of all parties and
agreed to rescind the transaction. MedTel was compensated 120,000 shares of the
Company's restricted common stock valued at $18,000, which was recorded under
operating expenses in the accompanying statements of operations as of December
31, 2001.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The summary of significant accounting policies of the Company presented below is
designed to assist the reader in understanding the Company's consolidated
financial statements. Such consolidated financial statements and these notes are
the representations of Company management, which is responsible for their
integrity and objectivity. These accounting policies conform to accounting
principles generally accepted in the United States of America ("GAAP") in all
material respects, and have been consistently applied in preparing the
accompanying consolidated financial statements.



                                       10
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000
--------------------------------------------------------------------------------

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Use of Estimates

The Company prepares its consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America, which
require management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and reported
amounts of revenues and expenses during the reporting period. Significant
estimates made by management include, among others, valuation on deferred taxes.
Actual results could differ from those estimates.

Risks and Uncertainties

From time to time, the Company maintains cash balances at certain institutions
in excess of the FDIC limit of $100,000.

Furniture and Equipment

Furniture and equipment was stated at cost. Major renewals and improvements were
capitalized, while replacements, maintenance and repairs which do not
significantly improve or extend the useful life of the asset were expensed when
incurred. During 2001, the Company transferred all fixed assets in connection
with the reorganization of the Company (see Note 4).

Depreciation of furniture and equipment was computed using the straight-line
method over the estimated useful lives of the assets, typically five years.
Depreciation expense totaled approximately $4,000 and $5,000 for the years ended
December 31, 2001 and 2000, respectively.

Intangible Assets

Intangible assets included completed technology, customer relationships and
goodwill, which represented the excess of the purchase price over the estimated
fair value of the net assets acquired (see Note 3). The intangible assets were
being amortized using the straight-line method over three years. Regularly, the
Company assesses the intangible assets for impairment based on the
recoverability of the balances from expected future operations and cash flows,
on an undiscounted basis. During fiscal 2001 and 2000, the Company assessed an
impairment of approximately $80,000 and $964,000 related to goodwill,
respectively (see below).



                                       11
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000
--------------------------------------------------------------------------------

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Impairment of Long-Lived Assets

The Company evaluates the recoverability of long-lived assets in accordance with
Statement of Financial Accounting Standards No. 121 ("SFAS No. 121"),
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
be Disposed of." SFAS No. 121 requires recognition of impairment of long-lived
assets in the event the net book value of such assets exceeds the future
undiscounted cash flows attributable to such assets. At December 31, 2001 and
2000, management determined that the Company's long-lived assets have been
impaired as follows:

     o   In fiscal 2000, management wrote down the value of goodwill obtained in
         connection with the acquisition of HFA (see Note 3). Due to the
         goodwill associated with the acquisition being impaired and the change
         in market conditions for the related assets, the Company recognized an
         impairment loss of approximately $964,000 on the related goodwill in
         the accompanying consolidated statements of operations.

     o   In fiscal 2001, management wrote down the value of goodwill obtained in
         connection with the acquisition of IntraMed Corporation (see Note 3).
         Due to the goodwill associated with the acquisition being impaired and
         the change in market conditions for the related assets, the Company
         recognized an impairment loss of approximately $80,000 on the related
         goodwill in the accompanying consolidated statements of operations.

Management believes that the impairment losses recognized on long-lived assets,
including intangible assets and other assets, are adequate as there are no
remaining asset balances.

Revenue Recognition

Revenue is recognized when the Company's services are provided.

In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin 101 ("SAB 101"), "Revenue Recognition," which outlines the
basic criteria that must be met to recognize revenue and provides guidance for
presentation of revenue and for disclosures related to revenue recognition
policies in financial statements filed with the SEC. The effective date of this
pronouncement was the fourth quarter of the fiscal year beginning after December
15, 1999. The adoption of SAB 101 did not have a material impact on the
Company's financial position and results of operations.




                                       12
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000
--------------------------------------------------------------------------------

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income Taxes

The Company uses the liability method required by Statement of Financial
Accounting Standards No. 109 ("SFAS 109") "Accounting for Income Taxes". SFAS
109 requires that the estimated tax effects of temporary differences between
financial and income tax reporting to be recorded in the period in which the
events occur. Such differences between the financial and tax bases of assets and
liabilities result in future tax deductions or taxable income.

The Company records a valuation allowance for deferred income tax assets when,
based on management's best estimate of taxable income in the foreseeable future,
it is more likely than not that some portion of the deferred income tax asset
may not be realized. It is the Company's intent to file consolidated federal and
state income tax returns.

Stock Based Compensation

The Company accounts for non-employee stock-based compensation under Statement
of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock
Based Compensation." SFAS 123 defines a fair value based method of accounting
for stock-based compensation. However, SFAS 123 allows an entity to continue to
measure compensation cost related to stock and stock options issued to employees
using the intrinsic method of accounting prescribed by Accounting Principles
Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees."
Under APB 25, compensation cost, if any, is recognized over the respective
vesting period based on the difference, on the date grant, between the fair
value of the Company's common stock and the exercise price. Entities electing to
remain with the accounting method of APB 25 must make pro forma disclosures of
net income and earnings per share, as if the fair value method of accounting
defined in SFAS 123 had been applied. The Company had no employee options issued
or outstanding during the two-year period ended December 31, 2001.

In March 2000, the FASB issued Interpretation No. 44 ("FIN 44"), "Accounting for
Certain Transactions Involving Stock Compensation," an interpretation of APB 25.
FIN 44 clarifies the application of APB 25 for (a) the definition of employee
for purposes of applying APB 25 (b) the criteria for determining whether a plan
qualifies as a non-compensatory plan, (c) the accounting consequence for various
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange of stock compensation awards in a business
combination. FIN 44 is effective July 1, 2000, but certain provisions cover
specific events that occur after either December 15, 1998, or January 12, 2000.
The adoption of FIN 44 did not have a material effect on the financial
statements.


                                       13
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000
--------------------------------------------------------------------------------

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Loss per Common Share

Loss per common share is based on the weighted average number of shares of
common stock and common stock equivalents outstanding during the year in
accordance with Statement of Financial Accounting Standards No. 128, "Earnings
per Share."

As discussed in Notes 6 and 7, securities that could potentially dilute basic
loss per share (prior to their conversion, exercise or redemption) were not
included in the diluted-loss-per-share computation because their effect is
anti-dilutive.

Derivative Instruments and Hedging Activities

The Company has adopted Statement of Financial Accounting Standards No. 133
("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities."
SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities on the balance sheet at their fair
value. This statement, as amended by SFAS 137 and 138, is effective for
financial statements for all fiscal quarters of fiscal years beginning after
June 15, 2000. The adoption of this standard did not have a material impact on
the Company's results of operations, financial position or cash flows, as it
currently does not engage in any derivative or hedging activities.

Comprehensive Income

The Company has adopted statement of Financial Accounting Standards No. 130
("SFAS 130") "Reporting Comprehensive Income". SFAS 130 established the
standards for reporting and display of comprehensive income and its components
in a full set of general-purpose financial statements. The adoption of SFAS 130
has not materially impacted the Company's financial position or results of
operations.

Segments

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

                                       14
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000
--------------------------------------------------------------------------------

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board issued Statements No.
141, "Business Combinations" ("SFAS 141") and No. 142 "Goodwill and Other
Intangible Assets" ("SFAS 142"). SFAS 141 supersedes APB Opinion No. 16,
"Business Combinations" and SFAS No. 38, "Accounting for Pre-acquisition
Contingencies of Purchased Enterprises". SFAS 141 is effective for fiscal years
beginning after June 30, 2001 and requires that all business combinations be
accounted for by the purchase method. SFAS 142 supersedes APB Opinion No. 17,
"Intangible Assets". SFAS 142 is effective for fiscal years beginning after
December 15, 2001 and provides that all existing and newly acquired goodwill and
intangible assets will no longer be amortized but will be tested for impairment
at least annually and written down only when impaired. Management does not
believe that the requirements of such pronouncements will have a significant
impact on the Company's future financial statements.

Additionally, the Financial Accounting Standards Board has recently issued
Statements No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143")
and No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144"). SFAS 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs, and is effective for financial statements
issued for fiscal years beginning after June 15, 2002. SFAS 144 supersedes
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", and addresses financial accounting and
reporting for the impairment or disposal of long-lived assets, including
accounting for a segment of a business accounted for as a discontinued
operation. SFAS 144 is effective for financial statements issued for fiscal
years beginning after December 15, 2001. Management has not yet determined
exactly how the requirements of such pronouncements will affect the Company's
future financial statements.

Reclassifications

Certain reclassifications have been made to the 2000 financial statement
presentation to correspond to the 2001 format. Additionally, as discussed in
Note 1, the Company's statements of operations for fiscal 2000 have been
restated to segregate amounts pertaining to discontinued operations (see Note
4).




                                       15
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000
--------------------------------------------------------------------------------

3. ACQUISITION OF SUBSIDIARIES

Acquisition of IntraMed

On April 29, 2000, the Company acquired 100% of IntraMed in exchange for
restricted common stock. The transaction was intended to qualify as a tax free
purchase under Section 368 (a)(1)(b) of the 1986 Internal Revenue Code, as
amended. In accordance with the Purchase Agreement, the Company was required to
issue restricted common stock, subject to certain conditions, to the owners of
IntraMed as follows:

     o   900,000 shares of restricted common stock at closing of the
         transaction;

     o   500,000 shares of restricted common stock to be issued upon completion
         of certain software enhancements, provided that the enhancements are
         completed within three years of the closing date;

     o   28,572 shares of restricted common stock if IntraMed's revenues exceed
         certain thresholds during the first year of operations; and

     o   140,000 shares of restricted stock if the Company fails to raise the
         minimum stipulated amount of capital of $250,000 within 90 days of
         closing.

As of December 31, 2000, the performance requirements on IntraMed relating to
the software enhancements and earnings thresholds were not met, however, the
Company issued in advance, during fiscal 2000, the 500,000 shares of restricted
common stock relating to the software enhancements, without contingencies.

Also as of December 31, 2000, the Company did not raise the minimum stipulated
capital and, accordingly, issued, during fiscal 2000, the identified 140,000
shares of restricted stock.

The Company accounted for the acquisition of IntraMed using the purchase method
of accounting. The total purchase consideration of approximately $388,500 was
allocated as follows, based on an April 29, 2000 estimated fair value of the net
assets acquired as determined by an independent third party valuation:

Completed technology                            $ 270,000
Customer relationships                             74,000
Goodwill                                           24,211
Current assets                                     24,199
Current liabilities                                (3,910)
                                                ---------

                                                $ 388,500
                                                =========

During fiscal 2001, substantially all of these assets were transferred to a
private company owned by the same shareholders of the Company (see Note 4).


                                       16
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000
--------------------------------------------------------------------------------

3. ACQUISITION OF SUBSIDIARIES (continued)

Acquisition of HFA

On May 31, 2000, the Company issued 350,800 shares of restricted common stock,
157,867 shares of convertible Series A preferred stock, in exchange for all of
the outstanding shares of HFA's common stock. An additional 7,159 shares of
restricted common stock and an additional 3,222 shares of convertible Series A
preferred stock were to be issued by the Company if HFA's revenues exceed
certain thresholds during the year ended December 31, 2001. Since HFA ceased
operations, it is unlikely such shares will be issued. The acquisition was
intended to qualify as a tax-free transaction under Section 368 (a)(1)(B) of the
1986 Internal Revenue Code, as amended. Thereupon, HFA became a wholly owned
subsidiary of the Company.

The Company accounted for the acquisition of HFA using the purchase method of
accounting. The total purchase consideration of approximately $1,185,050 was
entirely allocated to goodwill, based on the May 31, 2000 estimated fair value
of the net assets acquired. As discussed above, HFA ceased operations and
accordingly the Company recorded approximately $946,000 of impairment expenses
(equal to the unamortized goodwill balance) for the year ended December 31,
2000.

Other Matters

The purchase price allocations set forth above for both acquisitions are based
in part on an independent third-party valuation of the estimated fair value of
the Company's restricted common stock issued in the acquisitions. Such value was
estimated at $0.188 per share for the acquisition of IntraMed and $0.338 for the
acquisition of HFA, considering blockage and restrictions on the sale of such
stock.

The Company accounted for the convertible Series A preferred stock issued in
connection with the acquisition of HFA at the estimated value of the common
stock as if the shares of preferred stock were converted into common stock.







                                       17
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000
--------------------------------------------------------------------------------

3. ACQUISITION OF SUBSIDIARIES (continued)

Pro Forma Information

The table below reflects certain pro forma information as though the IntraMed
and HFA acquisitions occurred at the beginning of the Company's 2000 fiscal
year:

                                                      Year Ended
                                                  December 31, 2000
                                                     (Unaudited)
                                                  -----------------

Revenues                                          $        116,777
                                                  =================

Net Loss                                          $     (3,839,600)
                                                  =================

Loss per common share, basic and diluted          $          (0.43)
                                                  =================

4. TRANSFER OF ASSETS AND LIABILITIES

On September 28, 2001, the Company transferred substantially all of the assets
and liabilities of IntraMed and HFA into a private company owned by the same
shareholders of the Company. The Company accounted for the transfer of the net
liability of $217,993 as a non-cash contribution by the shareholders and is
recorded as an increase to additional paid-in capital in the related statements
of stockholders' deficit. The losses from the discontinued operations for 2001
and 2000, through the date of the transfer, were $26,258 and $115,379,
respectively, and are included in the statements of operations.

Management of the Company believes that all liabilities transferred to the
private company are without recourse and are properly assumed by such entity.
There can be no assurances however, that the creditors of such liabilities
cannot require the Company to settle such obligations if the private company
defaults under such obligations.








                                       18
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000
--------------------------------------------------------------------------------

4. TRANSFER OF ASSETS AND LIABILITIES (continued)

Following is a summary of net liabilities transferred and results of operations
of the discontinued operations as of December 31, 2000 and September 28, 2001
and for the periods then ended.
<TABLE>
<CAPTION>
                                             At September 28,            At December 31,
                                                   2001                         2000
                                          ---------------------     ----------------------

<S>                                              <C>                        <C>
       Receivables                               $      29,300             $          100
       Other current assets                              2,153                      9,999
       Fixed assets                                     16,967                          -
       Intangible assets                               181,556                          -
                                          ---------------------     ----------------------
         Total assets                                  229,976                     10,099

       Accounts payable and accrued
          expenses                                     133,848                     30,704
       Related party payables                          304,121                          -
       Notes payable                                    10,000                     83,776
                                          ---------------------     ----------------------
         Net liabilities                         $     217,993             $      104,381
                                          =====================     ======================


                                           For the Period from      For the Period of Date
                                             January 1, 2001             Acquisition
                                          Through September 28,      Through  December 31,
                                                  2001                       2000
                                          ---------------------     ----------------------
       Sales and other revenue                   $      92,925             $       58,237
       Expenses                                        119,183                    173,616
                                          ---------------------     ----------------------
       Net loss from operations                  $      26,258             $      115,379
                                          =====================     ======================

</TABLE>




                                       19
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000
--------------------------------------------------------------------------------

5. INTANGIBLE ASSETS

Intangible assets consisted of completed technology, customer relationships and
goodwill associated with the acquisition of the Company's subsidiaries (see Note
3). The Company assessed the intangible assets for impairment in September 2001
based on the recoverability of the balances from expected future operating cash
flows on an undiscounted cash flow basis. As of December 31, 2001, the Company's
intangible assets balance was as follows:

  Goodwill                                              $ 152,011
  Completed technology                                    270,000
  Customer relations                                       74,000
                                                        ----------
                                                          496,011
  Accumulated amortization                               (229,648)
  Less impairment                                         (80,607)
  Less discontinued operations                           (185,756)
                                                        ----------

                                                        $       -
                                                        ==========

Total amortization expense related to intangible assets was approximately
$125,000 and $315,000 for the years ended December 31, 2001 and 2000,
respectively.

6. NOTES PAYABLE

In May 2000, the Company issued convertible notes payable totaling $235,000
("Note Payable I"), bearing interest at 10% per annum, with principal and
accrued interest due on November 30, 2001 and subordinated by all current and
future obligations of the Company. Such notes require no payment of principal or
interest during the term; all such amounts are due at maturity. In connection
with the issuance of Note Payable I, the Company issued a total of 470,000
warrants to purchase common stock for no additional consideration, with an
exercise price of $0.50 per share expiring in November 2000. All warrants were
exercisable upon issuance. On November 30, 2000, the Company extended the life
of the warrants by one month and modified the strike price to $0.25 per share.
In December 2000, a total of 210,000 warrants were exercised at $0.25 per share
for a total of $52,500 and are included in common stock in the accompanying
consolidated financial statements. All other unexercised warrants associated
with the issuance of convertible notes payable expired as of December 31, 2000.
The proportional fair value of warrants upon issuance in connection with Note
Payable I was approximately $100,000, which the Company amortized to interest
expense as of December 31, 2000.



                                       20
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000
--------------------------------------------------------------------------------

6. NOTES PAYABLE (continued)

The number of common shares that can be issued upon conversion shall be equal to
the total amount of principal and unpaid interest on Note Payable I as of the
date of conversion, divided by the Conversion Price. The Conversion Price per
share shall be equal to the lesser of (a) the lowest per-share price at which
common stock has been sold to any person (other than pursuant to exercise of
stock options or warrants) at any time after the issuance and before the date of
conversion; or (b) $0.50. During fiscal year 2001, $265,529 (including $30,529
of interest) was converted into common stock. The convertible feature of Note
Payable I provided for a rate of conversion that is below market value. Such
feature is normally characterized as a "beneficial conversion feature". Pursuant
to Emerging Issues Task Force No. 98-5 ("EITF 98-5"), "Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios" and EITF 00-27, "Application of EITF Issue No.
98-5 to Certain Convertible Instruments", the Company has determined the value
of the beneficial conversion feature ("BCF") of one such convertible note to be
approximately $100,000. Accordingly, the relative fair value of the BCF has been
recorded in the financial statements as a discount from the face value of the
notes. Such discount is amortized as a note issuance cost over the term of the
related debt obligations using the effective yield method. Amortization related
to note issuance costs totaled $20,000 for the year ended December 31, 2000.
Management determined that due to the uncertainty of the Company continuing as a
going concern and the likelihood that the Company cannot retire such debt as it
becomes due, the remaining unamortized balance of note issuance costs should be
expensed at December 31, 2000. Accordingly, the accompanying consolidated
statements of operations for the year ended December 31, 2000 includes a charge
of approximately $80,000 to reflect the impairment loss.

In August 2000, the Company issued a note payable totaling $75,000 ("Note
Payable II"), bearing interest at 10% per annum, with principal and accrued
interest due on December 20, 2000 and subordinated by all current and future
obligations of the Company. During fiscal year 2001, $81,473 (including $6,473
of interest) was converted into common stock.

In connection with the issuance of Note Payable II, the Company issued a total
of 50,000 warrants to purchase Company common stock at no additional fees with a
strike price of $0.50 per share, which expired in September 2001. All warrants
were exercisable upon issuance. The proportional fair value of the warrants upon
issuance of Note Payable II was approximately $35,000, which the Company
amortized to interest expense as of December 31, 2000.



                                       21
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000
--------------------------------------------------------------------------------

7. STOCKHOLDERS' DEFICIT

Preferred Stock

The Company's convertible Series A preferred stock is convertible into common
stock at a ratio of twenty to one, and the holder may convert one-third of its
Series A preferred stock on December 31, 2001 and two-thirds on December 31,
2002.

In fiscal 2001, contrary to the original agreement, all Series A preferred stock
holders agreed to convert 157,867 shares into 249,990 shares of common stock. No
shares of preferred shares are outstanding as of December 31, 2001.

Common Stock

In fiscal 2000, the Company issued 625,000 shares of common stock for marketing
services, including investment banking consulting, valued at approximately
$1,012,500.

In fiscal 2000, the Company issued 210,000 shares of common stock in connection
with the exercise of warrants for $52,500.

In fiscal year 2001, the Company issued 180,000 shares of common stock, valued
at $36,000 (based on the market value on the date of grant) to ex-employees in
accordance with severance package agreements.

During fiscal year 2001, the Company issued 2,651,738 shares of restricted
common stock pursuant to the conversion of various notes payable and accrued
interest with a principal amount of $360,686 and accrued interest of $39,031.

In fiscal year 2001, the Company issued 400,000 shares of common stock, valued
at $80,000 (based on the market value on the date of grant) to third parties in
accordance with agreements which the third parties agreed to surrender common
stock of an unrelated company.















                                       22
<PAGE>
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                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000
--------------------------------------------------------------------------------

7. STOCKHOLDERS' DEFICIT (continued)

In fiscal year 2001, the Company issued 100,000 shares of common stock, valued
at $20,000 (based on the market value on the date of grant) to third parties as
consideration for notes payable totaling $20,000 (such amounts were converted to
common stock - see above).

In fiscal year 2001, the Company issued 54,000 shares of common stock, valued at
$10,800 (based on the market value on the date of grant) to various third
parties for services rendered.

In fiscal year 2001, the Company cancelled 200,000 shares of common stock due to
lack of performance.

Warrants

From time to time, the Company issues warrants pursuant to various consulting
and other agreements.

In 2000, the Company issued, to related parties, 200,000 warrants to purchase
Company common stock, in connection with agreements with stockholders to
exchange shares of restricted common stock for shares of freely tradable common
stock at a strike price of $0.50 per share, expiring in June 30, 2001. No
additional shares were issued related to these agreements.

The following represents a summary of warrants outstanding for the years ended
December 31, 2001 and 2000:
<TABLE>
<CAPTION>
                                                  Year Ended December 31,
                                   -------------------------------------------------
                                             2001                          2000
                                   ------------------------    ---------------------
                                      Options     Weighted      Options     Weighted
                                                   Average                   Average
                                                    Price                     Price
                                   -----------    ---------    ---------    --------
<S>                                <C>            <C>          <C>          <C>
Outstanding, beginning of year        250,000     $   0.50            -     $      -
      Granted                               -            -      720,000         0.34
      Exercised                             -            -     (210,000)        0.25
      Cancelled/Forfeited           (250,000)        (0.50)    (260,000)        0.25
                                   -----------    ---------    ---------    --------

Outstanding, end of year                    -     $      -      250,000     $   0.50
                                   ===========    =========    =========    ========

Exercisable, end of year                    -     $      -      250,000     $   0.50
                                                  $
                                                  -
                                   ===========    =========    =========    ========

Weighted average fair
  value of warrants granted                                                 $   0.69

                                                                            ========
</TABLE>



                                       23
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000
--------------------------------------------------------------------------------

7. STOCKHOLDERS' DEFICIT (continued)

The fair value of each warrant granted during 2000 for services is estimated
using the Black-Scholes pricing model on the date of grant using the following
assumptions: (i) no dividend yield, (ii) average volatility of 260%, (iii)
weighted average risk free interest rate of approximately 5.2%, and (iv) average
expected life of 3.4 months.

8. RELATED PARTY TRANSACTIONS

The Company's President/CEO, who is also approximately a 50% shareholder,
provided management services for a fee and is also reimbursed for expenses
incurred on behalf of the Company. In total, management fees and expenses
incurred by the Company by the President/CEO totaled approximately $113,750 and
$215,000 for the years ended December 31, 2001 and 2000, respectively. In 2001
and 2000, the President/CEO also advanced to the Company approximately $13,000
and $55,000, respectively, in cash that was used for short-term working capital.
These payables/advances are non-interest bearing and payable on demand. In 2001
and 2000, the Company converted approximately $190,000 and $140,000 of the
related advances/payables into 1,285,337 and 279,600 shares of common stock at
$0.15 and $0.50 per share, respectively (see Note 7).

In 2001 and 2000, a shareholder advanced the Company $10,000 and $15,000,
respectively. Such advances are non-interest bearing and payable on demand. The
related advances were transferred in connection with the transfer of assets and
liabilities (see Note 4).


All other related party transactions were discussed elsewhere in these notes to
the consolidated financial statements.















                                       24
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000
--------------------------------------------------------------------------------

9. INCOME TAXES

Income tax expense for the years ended December 31, 2001 and 2000 differed from
the amounts computed by applying the U.S. Federal income tax rate of 34 percent
to the income from continuing operations before provision for income taxes as a
result of the following:

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

Computed "expected" tax (benefit) expense      $  (233,000)      $(1,296,000)

Reduction in income taxes resulting from:
    Change in valuation allowance                    264,000         270,000
    Non-deductible expenses                                        1,278,000
    State and local income taxes,
      net of federal benefit                       (31,000)         (252,000)
                                                -----------       -----------

                                               $         -       $         -
                                                ===========       ===========

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets at December 31, 2001 are presented below:

Deferred tax assets:
    Goodwill, principally due to impairment                      $    33,000
    Net operating loss carryforwards                               1,021,000
                                                                  ----------

        Total gross deferred tax assets                            1,054,000

        Less valuation allowance                                  (1,054,000)
                                                                  -----------

        Net deferred tax assets                                  $         -
                                                                  ===========

The valuation allowance for deferred tax assets from continuing operations as of
January 1, 2001 was $790,000. The net change in the total valuation allowance
for the year ended December 31, 2001 was an increase of $264,000.

As of December 31, 2001, the Company had tax net operating loss carryforwards of
approximately $2,665,000 and $1,335,000 available to offset future taxable
Federal and state income, respectively. The carryforward amounts expire in
varying amounts between 2002 and 2022.

Due to the change in ownership provisions of the Tax Reform Act of 1986, net
operating loss carryforwards for Federal income tax reporting purposes are
subject to annual limitations. Should a change in ownership occur, net operating
loss carryforwards may be limited as to use in future years.



                                       25
<PAGE>
--------------------------------------------------------------------------------
                         CAPITAL DEVELOPMENT GROUP, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000
--------------------------------------------------------------------------------

10. SEC FILINGS

The Company did not file a Form 8-K in connection with either of the
acquisitions discussed in Note 3. Such filings are required under the 1934 Act
of the Securities and Exchange Commission ("SEC"). The Company did disclose such
acquisitions in its quarterly reports filed for the quarterly periods ended June
30, 2000 and September 30, 2000 and in its annual report on Form 10-KSB filed
with the SEC on May 22, 2001.

11. SUBSEQUENT EVENTS

In March 2002, the Company cancelled 5,000 common shares as a result of certain
certificates never being issued.

On April 1, 2002, G Society, Inc. ("G Society") entered into an Agreement and
Plan of Share Exchange (the "Plan of Exchange") with the "Reverse Split") of all
the outstanding shares of its common stock and issued one preferred share for
each share of common outstanding (post split), plus an additional 35,058 shares
of preferred to the President of the Company. Immediately following the Reverse
Split, the Company had 1,000,000 preferred shares authorized, 972,558 issued and
outstanding and 50,000,000 common shares authorized, 937,500 common shares
issued and outstanding. On April 1, 2001, the Plan of Exchange became effective
(the "Merger"). Under the Merger, the G Society merged with and into the
Company, with the Company as the surviving subsidiary of the Company. Pursuant
to the Plan of Exchange, all of the 972,558 preferred shares and all 937,500
common shares outstanding of the Company were exchanged for common shares of G
Society one for one on a post-split basis. All of the outstanding shares of G
Society were converted into shares of the Company as the surviving corporation,
with G Society as the sole holder of those shares. The transaction was regarded
as a reverse merger whereby the Company was considered to be the accounting
acquirer as it retained control of G Society after the Merger. The accompanying
consolidated financial statements have not been adjusted for the effects of the
aforementioned Reverse Split.

In April 2002, the Company's June 30, 2000, June 30, 2001, September 30, 2000
and September 30, 2001 Form 10-QSB's were reviewed by the Company's accountants
in accordance with Statement on Auditing Standards No. 71 ("SAS 71"), "Interim
Financial Information" and filed with the Securities and Exchange Commission.

In April 2002, the Company filed a Form 8-K with the Securities and Exchange
Commission in order to comply with disclosure requirements related to announce
the transfer of assets and liabilities of IntraMed and HFA.