UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-KSB

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

                   For the fiscal year ended December 31, 2003
                        Commission file number 000-31713

                                 RAPIDTRON, INC
                 (Name of small business issuer in its charter)

                 Nevada                              88-0455472
     (State or other jurisdiction                  (IRS Employer
           of incorporation)                     Identification No.)

          3151 Airway Avenue, Building Q
              Costa Mesa, California                   92626
      (Address of principal executive offices)       (Zip Code)

                     Issuers telephone number  949-798-0652

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

   Securities registered pursuant to Section 12(g) of the Exchange Act:  Common
                                      Stock

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

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

Issuer's revenues for its most recent fiscal year:  $945,605.

The aggregate market value of the Common Stock held by nonaffiliates of the
Registrant as of March 25, 2004, was approximately $17,447,000 based upon the
closing price of the Registrant's Common Stock on such date.

There were  20,269,514 shares of Common Stock outstanding as of March 25, 2004.

Documents incorporated by reference.  Our annual, preliminary proxy solicitation
on Schedule 14A is incorporated herein by reference in Items 5, 9, 10, 11, 12,
13 and 14.
Transitional Small Business Disclosure Format (Check one): Yes     ; No   X
                                                              -----     -----


<PAGE>
TABLE OF CONTENTS

Item 1.    Description Of Business . . . . . . . . . . . . . . . . . . . . . . 2

Item 2.    Description Of Property . . . . . . . . . . . . . . . . . . . . . . 8

Item 3.    Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 8

Item 4.    Submission of Matters to a Vote of Security Holders . . . . . . . . 8

Item 5.    Market For Common Equity, Related Stockholder Matters and Small
           Business Issuer Purchases of Equity Securities . . . . .. . . . . . 8

Item 6.    Management's Discussion And Analysis or Plan of Operations. . . . . 9

Item 7.    Financial Statements. . . . . . . . . . . . . . . . . . . . . . . .23

Item 8.    Changes In And Disagreements With Accountants On Accounting And
           Financial Disclosure. . . . . . . . . . . . . . . . . . . . . . . .25

Item 8a    Controls And Procedures . . . . . . . . . . . . . . . . . . . . . .25

Item 9     Directors And Executive Officers of the Registrant. . . . . . . . .25

Item 10.   Executive Compensation. . . . . . . . . . . . . . . . . . . . . . .25

Item 11    Security Ownership Of Certain Beneficial Owners And
           Management And Related Stockholder Matters. . . . . . . . . . . . .25

Item 12    Certain Relationships And Related Transactions. . . . . . . . . . .25

Item 13.   Exhibits And Reports On Form 8-K. . . . . . . . . . . . . . . . . .26

Item 14.   Principal Accountant Fees And Services. . . . . . . . . . . . . . .26

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26



                                        i
<PAGE>
ITEM 1.     DESCRIPTION OF BUSINESS

OVERVIEW

We are headquartered in Costa Mesa, California, and we intend to become the
leading provider of Radio Frequency ("RF") smart card access control and
ticketing/membership systems by providing the premier technology for
operator-free entry and exit turnstiles.

We are currently the exclusive North American distributor for Axess AG, an
Austrian developer and manufacturer of software and equipment for entry and exit
control utilizing bar code and Smart chip technology.  The equipment consists of
cards, card readers, turnstiles, radio frequency emitters and other equipment
which may be identified as useful in a particular market.  Axess AG manufactures
some of the equipment components and assembles others manufactured by various
European vendors.  Axess AG has installed its RF smart card technology in over
2,000 smart access gates and 1,000 point-of-sale systems to transit companies
and vacation resorts in Europe.

We provide a portion of our own marketing research and contract additional
marketing research from Equus Marketing (a related party), sales, installation,
software integration and customer service for products purchased from Axess AG
and sold under the Rapidtron brand name.  We have sold turnstiles with readers,
door, counter and handheld readers manufactured by Axess AG to the fitness,
university, and winter resorts industries in North America utilizing two
technologies, RF smart chip (ISO standard smart cards, key cards and ID
bracelets) and bar code tickets.  The RF smart cards are contactless with
multilevel read/write capabilities for debit/credit, affinity/loyalty programs,
access, parking, and doors.  The bar code tickets are an inexpensive, read only
medium for access operations.

In Europe, Axess AG provides a complete software package as part of the system
it sells.  In North America the resort, fitness and university markets prefer to
buy their software solutions separately and do not purchase turnkey solutions as
they often customize the software for their individual enterprises.  We develop
the interface software and own the rights to these interfaces.

We are currently selling the access products to fitness clubs, winter resorts
and universities.  We continue to work with Axess AG to research and develop new
products for these industries and other markets in North America.

Principal products and services and their markets

We distribute the access control systems manufactured by or on behalf of Axess
AG.  We have an exclusive distribution agreement for the North American market
with Axess AG.  We sell, install and service all North American installations
for Axess AG.  Axess AG developed and manufactured these systems based in part
on our market research completed over the past six years.  These systems are
versatile and read either bar code or RF smart cards and other media (tags, ID
bracelets, etc.).  This dual capability allows a venue to issue and re-issue
numerous types and durations of access privilege cards.

Bar code tickets and cards are commonly found in grocery stores where they are
read at check-out counters. Bar code tickets and cards are also common at
fitness clubs where they are checked by operator-assisted manual scanning done
at front desk entry, and athletic and amusement venues where tickets are
manually checked, or manually scanned by staff members at entry to the arena or
amusement park.

RF smart cards, a technology that has been in existence since 1988, but
primarily in Europe, incorporate an antenna and a 2K memory chip and
microprocessor laminated between two plastic sheets.  Our RF smart cards provide
passive contact-less identification technology.  These cards require no
electrical contacts, or


                                        2
<PAGE>
visual contact. Our RF smart cards operate in harsh environmental conditions
such as skiing at winter resorts in extreme temperatures. They also provide
hands- free operation at the turnstile, as the long range antennas can read the
cards in the pockets of the skier without being removed and placed near the
reader. Our RF smart cards have read/write memory, which means the card, when
read by one of our RF ID readers, can read the data on the card, debit (points
or cash) and write new data in addition to the value stored on the card.

Our RF smart card is passive, which means it is powered by the reader field,
unlike an active card (transponder) with a battery.  Our card and reader has a
reading range of 10 to 120 centimeters. This allows the card to be utilized for
hands-free operation.  The range of 10 to 120 centimeters is totally dependent
on the size of the antenna.  Our indoor system of satellite readers provides
proximity reading of smart cards at a range of up to 10 centimeters, and our
resort systems with long range antennas can read cards at a range of up to 120
centimeters for hands free operation. The Rapidtron smart Card utilizes a 13.56
MHZ transponder for fast communication speed. We currently utilize the ISO 15693
standard chip.

Our automated system allows a fitness club to use its existing bar code
membership cards to start and upgrade to smart cards at any time.  We can
incorporate smart card debit/credit technology for retail purchases for a
wallet-less workout or visit.  Our system offers a variety of read/write smart
media: cards, key fobs, ID bracelets, for multifunctional capabilities including
access, debit/credit and affinity/loyalty programs, parking and other uses.  Our
unique printers can issue both bar code tickets and smart cards.  Our smart
cards come with four color printing on the front with the client's design.
Utilizing our Thermo printer, the reverse side can be printed on site with
photos and copy that can be removed and reprinted when re-programming the smart
cards on the printer.  As a result, our Thermo read/write smart cards are 100%
recyclable.

Our proven technology has been in operation for five years with approximately
2,500 access and 1,500 point of sale systems in Europe and North America.  The
European installations were sold, installed and serviced by Axess AG.

The products sold by Axess AG in Europe include a "turnkey" software solution
that integrates the access control equipment with the home office software used
by the customer to manage its consumer information.  In North America, our Axess
AG products include an open architecture software that allows us to customize
the integration software that communicates between the access control equipment
and the customer's home office.  We recently acquired a COM DLL integration
software developed exclusively for us by a Canadian software company, and  we
intend to sell this, together with the Axess AG equipment, in all of our
markets.  This integration software makes it easy for our customers to integrate
their existing operating software with the software used in the smart card
turnstile system.  This will allow them to begin using the turnstiles to
automatically communicate to their main computer program they used prior to
purchasing our system.  Because it is a COM DLL software, the customer can
change parts of its operating software or update the software used in the smart
card turnstile system without requiring a reconfiguration of either software.

We have and continue to research the North American market for applications of
the Axess systems and report back to Axess AG's research and development
department regarding what changes in software and equipment are required to met
the needs of specific industries.  We have defined the following three
industries that we are currently targeting: (1) fitness, (2) winter resorts, and
(3) universities.

We have established a presence in the North American marketplace by providing
the smart card access control systems manufactured by Axess AG to Copper
Mountain in Colorado and Park City Resort in Utah, and the bar code system to
the University of California, Berkeley, and several leading fitness clubs. We
anticipate to have additional orders from Park City, Copper Mountain, UC
Berkeley, and several other winter resorts and fitness clubs in 2004.


                                        3
<PAGE>
Axess AG has developed a prototype for us to sell in these markets.  Rapidtron
and Axess AG selected Beta sites to test the new product under agreements with
Rapidtron.  We strive to contract with industry leaders to perform the Beta
testing.  Concurrently with the testing of the Beta sites, Rapidtron markets the
new product to key players in the market, identified by Rapidtron during its
market research phase.  Rapidtron sells the products and provides customer
service support for both the equipment and the software, some of which is
provided through its distribution agreement with Axess AG, and some of which
Rapidtron provides directly.

We develop and provide a software interface between the entry and exit equipment
and the customer's back office software.  Historically, we provided the
interface software through third-party vendors under contract with Rapidtron.
Recently, we acquired a COM DLL software interface from a Canadian company that
developed the COM DLL exclusively for Rapidtron.  The COM DLL can be used for
integration in the fitness industry.

After successfully testing in the market at the Beta sites mutually agreed upon
by Rapidtron and Axess AG, we launch our marketing programs at the next major
trade show.  Prior to the trade show, we provide information to the market
through advertising, public relations programs and our web site.  We develop and
publish marketing materials such as brochures and manuals specific to each
industry.  We train sales representatives working directly with Rapidtron or
through agreements with outside agencies.  We educate the sales representatives
about our product benefits and the estimated return on investment based upon our
market research.

We then sell the products and provide customer service support for both the
equipment and the software, some of which is provided through our distribution
agreement with Axess AG, and some of which Rapidtron provides directly.  We also
plan to sell service contracts in the future to large customers with several
options including full service with parts, software support and yearly visits.

Distribution methods of the products or services

All our products and services are currently sold through commissioned sales
representatives or direct selling.  We currently have 26 commissioned
independent sales representatives.

We issue purchase orders to Axess AG, which delivers the equipment FOB place of
shipment.  We generate our orders based upon the orders generated and sales
forecasts that are made based on leads generated at trade shows and mailers.
Our orders are updated monthly.

We receive shipments from Axess AG, assemble them with addresses and make other
modifications as required by each order.  We then ship the products to the
customer with an accompanying packing slip and invoice to each location as
specified.  We coordinate and provide installation of the equipment and software
for a fee, or for large clients, we provide the integration software and
training so the customer can provide their own installation service.

As part of our distribution process, we develop plans for software (firmware)
and equipment and the manufacturing of smart cards and assembly of the access
control products, primarily indoor and outdoor turnstiles and bar code and smart
card readers.

New product or service development

Our product and service development strategy is to present solutions and
programs that create new functionality and revenue opportunities for us and our
customers.  We recently developed and installed our new automatic ADA (Americans
with Disabilities Act) gate and automatic, drop arm (panic) release turnstile at
the University of California, Berkeley.


                                        4
<PAGE>
We are in the process of developing a platform that may create new revenue
opportunities to fitness centers and other potential industries by using our
smart card with an e-purse and debit back office system.  Our secure smart card
technology could be programmed to act as a debit card, which allows members to
use their admittance card for purchases at health clubs.  We have presented our
smart card platform to four large fitness chains in the past four months, and
plan to evaluate and test the concept in one or more health clubs.  To be
successful, we will need to demonstrate that the benefits of our smart card
platform, including data management, revenue potential and member acceptance,
outweigh the cost associated with switching from an inexpensive bar code card
legacy systems.

Since September 11th, there has been renewed interest in biometric technology
for admittance and other uses.  We are currently testing both finger scanning
and face recognition for use in tandem with smart cards.  This could increase
processing speed and the accuracy of the biometric technology, the primary
barriers for commercializing this technology.  Our system is designed and
engineered to accommodate new advances and additions such as biometrics to help
mitigate this problem and allow our clientele to constantly upgrade as required
or desired.

Competition

We have focused on two main niche markets in lifestyle, and active sports,
namely Fitness and Winter Resorts. We know of only one competitor in the winter
resort market, Ski Data. As of the date of this annual report, we believe that
Ski Data has not successfully interfaced with any of the ski slope software
providers in North America. We have successfully interfaced with all three
providers (Comptrol, Siriusware and RTP), which resulted in the sale to Copper
Mountain (Siriusware) and Park City (RTP).

We believe we offer the broadest range of products with access readers and
turnstiles offering both smart and Bar Code technology in the North American
fitness market. We also believe that we are the only company in the fitness
market that has developed a product that successfully interfaces with the seven
leading software management providers in the fitness industry, Aphelion, ASF,
CSI, Check Free, Twin Oaks, Computer Outfitters and CSI.

The transit industry has several large access system providers, who are
primarily magnetic stripe based but are now offering smart Card systems as well.

Our partner, Axess AG, has been successful in installing its access platform in
most of the large winter resorts in Europe over the past five years and has
approximately 2,000 access systems and 1,000 POS (point of sale) stations in
operation.

Principal supplier and sources and availability of raw materials

We sell, install and service all North American installations for Axess AG.
Axess AG boxes and ships the products according to orders placed by Rapidtron.
We have an exclusive agreement with Axess AG for North America in the markets we
service and the option for additional markets as the opportunities arise.  Our
agreement with Axess AG expires upon the last day of April following at least
12-months advance written notice.  No notice to terminate has been delivered by
either party to date. Axess AG has its own printing and assembly plant for four
color bar code tickets and RF smart cards.  Axess AG orders RF chips primarily
from Texas instruments (ISO 15963) and laminates them to a special plastic that
will not delaminate at extreme temperatures for the winter resort industry.
Axess AG can print four colors on both sides and have a special coating on the
reverse side to accept thermo printing so that the client can erase printing
while reprogramming the smart card using the Axess AG printer.


                                        5
<PAGE>
Axess AG has the manufacturing capabilities to meet the growth projected over
the next five years and has not experienced problems in sourcing raw materials
in five years of production.  Rapidtron has additional resources available to
meet other product needs as the markets develop.

Dependence on one or a few major customers

During the year ended December 31, 2003, approximately 54% of our sales were
derived from sales to two major customers, Bally Total Fitness and Park City.
Our strategy is to develop a mix of markets and clients that will reduce our
dependence on any one major customer.

Distribution Agreement

Rapidtron Delaware entered into an exclusive distribution agreement dated May 6,
2000 with Axess AG.  The term of the agreement is open-ended, but either party
may terminate the agreement at the end of April of any year following at least
12-months advance written notice.  We had the following minimum purchase
obligations under the agreement, which have been met or waived:

May 2000 - April 2001     $500,000

May 2001 - April 2002     $2,000,000

May 2002 - April 2003     $3,000,000

Under the terms of the distribution agreement, we have the exclusive right to
market Axess AG access control systems in North America to the transportation,
fitness club, amusement park and ski resort industries and to universities and
colleges.  Axess AG agreed to assist us with our marketing efforts and to
provide us with technical assistance and support.

Government approval of principal product

Axess AG supplies Rapidtron its Radio Frequency (RF) readers and long-range
antennas (AX400 series). As part of our agreement and contract with Axess AG,
they are responsible for passing all standards required by the Federal
Communications Commission (FCC).

The FCC regulates our RF readers and long-range antennas for health and safety
issues and to prevent interference with other radio frequency uses such as
airports, cell phones and traditional radios.  Testing laboratories (sometimes
referred to as underwriting laboratories) are accredited by the FCC to conduct
tests required for FCC approval, and to grant the approval subject to FCC
review.  Axess AG is preparing test equipment for Rapidtron to submit to a local
accredited underwriter laboratory for review and documentation including
pictures. Our personnel with technical support from Axess AG will be on hand
through the testing process until final approval is reached (a process of one to
two days). We will receive this equipment in the next two months. The required
equipment we will submit for testing is our long-range radio frequency antenna
with accompanying reader.  Austria and the European Union have similar
regulations.  Axess AG has passed all European standards with an accredited
testing laboratory in Vienna.  We expect to receive approval in the United
States in about four months.

We must also meet governmental standards applicable to general consumer and
industrial products covering issues such as what temperature does a product
become combustible (fire) and if the product can explode if dropped from a set
minimum height.  There is a common standard acceptable by all European agencies.
Our complete system of turnstile, reader, power supply and antenna is also in
the process of passing the underwriter laboratory's standards for fire,
explosion and drop damage in Austria.  This


                                        6
<PAGE>
underwriter laboratory has been accredited by the U.S. government for testing,
documenting and issuing approvals for regulations set by the government. When
approved, our test results are forwarded to the respective governmental agency
and is automatically approved unless notified of a problem. Canada and the U.S.
have reciprocal agreements that will accept the results of the underwriter
laboratory, and therefore, our products will meet the government requirements
once we have met the standards set by the underwriter laboratory.

Most of the equipment we have sold to date utilizes the bar code scanner and not
the RF reader, and therefore is not subject to FCC regulations.  We have very
few RF antennas in operation unlike Europe that is almost completely RF. If the
RF products cannot pass the tests after all changes have been tried, we will
have to cease and desist from selling the RF product and remove all current
products in use until we can produce a new unit that can pass.  Rapidtron has
sold only 23 long-range RF antennas to date and will not be selling more until
October 2004, when we will have passed all tests.  If we had to remove and
change the current antennas the costs to replace and re-install would be about
$23,000. Axess AG would participate in the cost, depending upon the problem.

The equipment we sell has been in use for nine years in Europe without any
problems arising from customers and employees passing through the entries and
exits where the equipment and specifically the RF antennas are placed.  As a
result, we do not anticipate any problem with meeting the U.S. government
standards for safety.

Research and development

We have spent approximately $207,000 for software development and $8,000 for
product development since our inception in January 2000, none of which are
directly or indirectly borne by any existing or future clients.  We hope to be
able to allocate up to 5% of our operating expenses to additional software
development and interface expenses with outside software suppliers over the next
12 months.

We continue product review and research through the year and report our findings
to Axess AG for review and implementation.  Rapidtron's management makes
quarterly visits to Axess AG  to promote efficiency and coordinate all programs
of marketing, product development, pricing and manufacturing.

Axess AG's process starts with product specification, development and testing.
Our product development process also includes styling and manufacturing cost
analysis.  After considerable testing and analysis, we order the various
components that have been successfully tested.  An outside vendor under contract
with Axess AG mills the turnstile and reader heads.  Axess AG then assembles all
components for a finished product and quality control tests every order before
shipping to Rapidtron.

The software development is an on-going process, and Rapidtron tests the
software with the equipment on a regularly scheduled basis.

Employees

We currently have 9 full time, 4 part time employees and 26 commissioned sales
representatives.  We anticipate the need to hire additional staff, continue
development and refinement of its operations to meet customer needs. We may hire
between three to five new employees, a CFO, a software and hardware support
technician and one to three software engineers during the next 12 months.


                                        7
<PAGE>
ITEM 2.     DESCRIPTION OF PROPERTY

We  lease  our  principal corporate and executive offices at 3151 Airway Avenue,
Building  Q, Costa Mesa, CA 92626.  We do not currently maintain any investments
in real estate, real estate mortgages or securities of persons primarily engaged
in  real estate activities, nor do we expect to do so in the foreseeable future.

ITEM 3.     LEGAL PROCEEDINGS

Neither we nor any of our property are currently subject to any  material  legal
proceedings  or  other  regulatory  proceedings.

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

The  Company  did  not submit any matters to a vote of securities holders during
the  Fourth  quarter.

ITEM 5.     MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
            BUSINESS ISSUER PURCHASES OF EQUITY SECUTITIES

Our common stock is quoted  on the OTC Bulletin Board which is sponsored by the
National Association of Securities Dealers (NASD). The OTC Bulletin Board is a
network of security dealers who buy and sell stock. The dealers are connected by
a computer network which provides information on current "bids" and "asks" as
well as volume information.  Our common shares commenced trading in April 2001.

The high and low bid quotations of our common stock on the OTC Bulletin Board as
reported by the NASD were as follows:

        PERIOD                          HIGH    LOW

        2003
        First Quarter
        Second Quarter                  $2.08  $1.38
        Third Quarter                    2.10   1.83
        Fourth Quarter                   2.12   1.30
                                         1.62   1.21

        2002
        First Quarter                    0.81   0.60
        Second Quarter                   0.93   0.60
        Third Quarter                    1.33   0.54
        Fourth Quarter                   1.33   0.77


The above quotations reflect inter-dealer prices, without retail mark-up,
markdown or commission and may not necessarily represent actual transactions.

As of March 26, 2004, we had 20,819,514 shares of common stock issued and
outstanding, held by 124 registered shareholders.

The declaration of dividends on our shares is within the discretion of our board
of directors and will depend upon the assessment of, among other factors,
results of operations, capital requirements and the operating


                                        8
<PAGE>
and financial condition of Rapidtron. The Board has never declared a dividend.
At the present time, we anticipate that all available funds will be invested to
finance the growth of our business.

<TABLE>
<CAPTION>
                               Equity Compensation Plan Information
-------------------------------------------------------------------------------------------------
                                                                           Number of securities
                                                                         remaining available for
                                                                          future issuance under
                       Number of securities to      Weighted-average       equity compensation
                       be issued upon exercise     exercise price of         plans (excluding
                       of outstanding options,    outstanding options,   securities reflected in
      category           warrants and rights      warrants and rights          column (a))
                                 (a)                      (b)                      (c)
=====================  ========================  ======================  ========================
<S>                    <C>                       <C>                     <C>
Equity compensation
plans approved by                             0                    n/a                       n/a
security holders
---------------------  ------------------------  ----------------------  ------------------------
Equity compensation
plans not approved by                 2,382,000  $                 1.16                11,090,000
security holder
-------------------------------------------------------------------------------------------------
</TABLE>

As a result of current trading prices, our common stock may be subject to the
penny stock rules under the Securities Exchange Act of 1934. Unless an exemption
from those rules is available, broker-dealers making a market in the common
stock will be required to provide disclosure to their customers on the risks
associated with the common stock, its investment suitability for the customer,
information on bid and ask prices for the common stock and information about any
compensation the broker-dealer will receive for a transaction in the common
stock. The application of these rules will likely reduce market-making
activities in the common stock by impairing its liquidity.

Information  regarding  our  existing  securities  authorized for issuance under
equity  compensation plans is set forth in our Preliminary Proxy Solicitation on
Schedule  14A,  filed  with the Securities and Exchange Commission on March 30,
2004,  which  is  hereby  incorporated  by  reference.

Information regarding the unregistered sale of securities during the three-month
period  ended  December  31,  2003,  is set forth in Item 15 of our Registration
Statement  on Form SB-2, filed with the SEC on February 5, 2004, which is hereby
incorporated  by  reference.


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

CAUTIONARY STATEMENTS

This year-end Report on Form 10-K contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934.  We intend that such forward-looking
statements be subject to the safe harbors created by such statutes.  The
forward-looking statements included herein are based on current expectations
that involve a number of risks and uncertainties.  Accordingly, to the extent
that this Year-end Report contains forward-looking statements regarding the
financial condition, operating results, business prospects or any other aspect
of our Company, please be advised that our actual financial condition, operating
results and business performance may differ materially from that projected or
estimated by us in forward-looking statements.  The differences may be caused by
a variety of factors, including but not limited to adverse economic conditions
and intense competition, including intensification of price competition and the
expansion of competition in providing end-to-end product and system solutions as
more fully described in management discussion in


                                        9
<PAGE>
this report. This report on Form 10-K contains, in addition to historical
information, forward-looking statements that involve substantial risks and
uncertainties. Our actual results could differ materially from the results
anticipated by us and discussed in the forward-looking statements.

CORPORATE HISTORY

Rapidtron, Inc., a Nevada corporation, was formerly known as The Furnishings
Club and was formed March 22, 2000, with the intent to be an online retailer of
furniture and home accessories.  However, as a result of the difficulty in
raising additional working capital to execute the business plan, the company
abandoned its plan of operation and sought to acquire another business.

On September 30, 2002, we changed our name to Rapidtron, Inc., a Nevada
corporation, in anticipation of a merger with Rapidtron, Inc., a Delaware
corporation ("Rapidtron Delaware").  We closed the acquisition of Rapidtron
Delaware on May 8, 2003.  Immediately prior to the acquisition, we had
20,000,000 shares authorized and 19,993,752 shares of common stock issued and
outstanding.  Pursuant to the acquisition, all of the 10,052,000 issued and
outstanding shares of Rapidtron Delaware (including 128,000 shares for the
settlement of accrued salaries) were exchanged for 9,600,000 shares of our
company on a 0.955 to 1 basis.  Concurrent with our acquisition of Rapidtron
Delaware, 13,943,750 shares of our common stock were cancelled.  As a result,
immediately after the acquisition, we had 15,650,002 shares of common stock
issued and outstanding.

Immediately after the acquisition, the officers and directors of the Company
resigned and management of Rapidtron Delaware took control of such positions,
therefore effecting a change of control.  As a result, the transaction was
recorded as a "reverse merger" whereby Rapidtron Delaware was considered the
accounting acquirer as it retained control of the company after the merger.
However, legally Rapidtron Delaware became a wholly-owned subsidiary of the
company after the acquisition.  Since The Furnishings Club's continuing
operations and balance sheet are insignificant, all financial data and
management, discussion and analysis are those of Rapidtron Delaware, before and
after the acquisition.

OVERVIEW

We, through our wholly-owned operating company, Rapidtron Delaware, specialize
in providing solutions for Automated Access.  We provide access control and
ticketing/membership systems to the fitness, winter resort, amusement, transit
industries and universities in North America. Our system facilitates rapid
operator-free customer or member entry and exit through automated turnstiles or
portals and optional hands-free entry. This means our unique system provides
customers and members automated access control to enter and exit facilities such
as fitness clubs, university recreational centers, or access to a ski lift.

Our system and readers have open architecture, which allows for an easy
interface with the existing back-office computer software of the targeted venues
and marketplaces in which we sell and serve. Our readers communicate data to and
from the computer software existing in the customer's back office for managing
information related to membership validation required for access, and other
information desired by the client.  We have accomplished interface solutions
with many major software providers to the venues in which we sell and service
(for example, in Fitness - Aphelion, CSI, Check Free, Twin Oaks, ASF and
Computer Outfitters; and in Resorts - the three major providers, Comptrol, RTP
and Siriusware).  We have completed a new software interface, COMdll that
provides the software provider a faster and easier interface than before and are
continuing to invest and accomplish interface solutions with software providers
through investment in software programming with software provider companies to
allow our system to be compatible with a large customer base.

Our system is versatile and reads either bar code or RF Smart cards or other
media (tags, ID bracelets, etc.).  This dual capability allows a venue to issue
and re-issue numerous types and durations of access privilege


                                       10
<PAGE>
cards. Bar code tickets and cards are commonly found in grocery stores where
they are read at check-out counters. Bar code tickets and cards are also common
at fitness clubs where they are checked by operator assisted manual scanning
done at front desk entry, and athletic and amusement venues where tickets are
manually checked, or manually scanned by staff members at entry to the arena or
amusement park. RF Smart cards, a technology that has been in existence since
1988, primarily in Europe, incorporate an antenna and a 2K memory chip and
microprocessor laminated between two plastic sheets. Our RF Smart cards provide
passive contactless identification technology. These cards require no electrical
contacts, or visual contact. Our RF smart cards operate in harsh environmental
conditions such as skiing at winter resorts in extreme temperatures with hands-
free operation at the turnstile, as the long range antennas can read the cards
in the pockets of the skier without being removed and placed near the reader.
Our RF Smart cards have read/write memory, which means the card, when read by
one of our RF ID readers, can read the data on the card, debit (points or cash)
and write new data in addition to the value stored on the card.

Our RF Smart card is passive, which means it is powered by the reader field
unlike an active card (transponder) with a battery. Our card and reader has a
reading range of 10 to 120 centimeters. This allows the card to be utilized for
hands-free operation.  The range of 10 to 120 centimeters is totally dependent
on the size of the antenna.  Our indoor system of satellite readers provide
proximity reading of Smart cards at a range of up to 10 centimeters, and our
resort systems with long range antennas can read cards at a range of up to 120
centimeters for hands free operation. The Rapidtron Smart Card utilizes a 13.56
MHZ transponder for fast communication speed. We currently utilize the ISO 15693
standard chip.

Our automated system allows a fitness club to use its existing bar code
membership cards to start and upgrade to Smart cards at any time.  We can
incorporate Smart card debit/credit technology for retail purchases for a
wallet-less workout or visit.  Our system offers a variety of read/write Smart
media: cards, key fobs, ID bracelets, for multifunctional capabilities including
access, debit/credit and affinity/loyalty programs, parking and other uses.  Our
unique printers can issue both bar code tickets and Smart cards.  Our Smart
cards come with four color printing on the front with the client's design.
Utilizing our Thermo printer, the reverse side can be printed on site with
photos and copy that can be removed and reprinted when re-programming the Smart
cards on the printer.  As a result, our Thermo read/write Smart cards are 100%
recyclable.

Our technology has been in operation for five years with over 2,500 access and
1,500 point of sale systems in Europe and North America.  The European
installations were sold, installed and serviced by AXESS AG, our supplier.  We
have an exclusive Distribution Agreement for the North American market with
AXESS AG.  We sell, install and service all North American installations for
Axess AG.

The following analysis of our operations refers primarily to those in the
fitness, winter resort, amusement, and universities, which constitute the
majority of our business activities.

CRITICAL ACCOUNTING POLICIES:

Our significant accounting policies are outlined within Note 1 to our December
31, 2003 and 2002 Financial Statements contained elsewhere in this annual
report. Our financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue and
expenses and the related disclosures of contingent assets and liabilities.

We base our estimates on historical experience and on various assumptions that
we believe to be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
materially differ from these estimates under different assumptions or
conditions.


                                       11
<PAGE>
REVENUE RECOGNITION POLICY

We recognize revenues when all of the following criteria have been met:

     -     persuasive evidence of an arrangement exists,

     -     delivery has occurred,

     -     the fee is fixed or determinable, and

     -     collectibility is reasonably assured.

Generally, these criteria are met when we deliver our products to our customer.

In accordance with Statement of Financial Accounting Standards ('SFAS") No. 48,
"Revenue Recognition when Right of Return Exists," revenue is recorded net of an
estimate of markdowns, price concessions and warranty costs.  Such reserve is
based on management's evaluation of historical experience and current industry
trends and estimated costs.  Such reserve was immaterial to the operations of
the Company.

The Company accounts for shipping and handling fees and costs in accordance with
EITF 00-10 "Accounting for Shipping and Handling Fees and Costs."  Such costs
incurred by the Company are immaterial to the operations of the Company.

     Foreign Currency Transactions

We record all transactions with our foreign supplier, Axess AG, in accordance
with SFAS No. 52, "Foreign Currency Translation."  All invoices received from
Axess AG are denominated in Euros.  When an invoice is received, we translate
these amounts to US Dollars at the exchange rate effective on the invoice date.
If the exchange rate changes between the time of purchase and the time actual
payment is made, a foreign exchange gain or loss results.

Additionally, we compute a foreign exchange gain or loss at each balance sheet
date on all recorded foreign transactions that have not been settled.  The
difference between the exchange rate that could have been used to settle the
transaction at the date it occurred (the invoice date), and the exchange rate at
the balance sheet date, is the unrealized gain or loss recognized in current
operations.

     Accounts Receivable

We periodically review the collectability of our accounts receivable balances.
Where significant doubt exists with regard to the collection of a certain
receivable balance, an allowance and a charge to the statement of operations is
recorded. Allowances for doubtful accounts are based on estimates of management.
At December 31, 2003, we had allowances for doubtful accounts of approximately
$20,000.

     Product Warranties

We warrant our access systems for a period of one to two years for all hardware
and 1 year for readers and scanners.  Axess AG warrants our equipment for one
year.  We have seen no significant product warranty issues to date.   As the
types of services or replacements provided during the warranty period may vary,
costs related to our warranties may exceed the amount of our reserve.


                                       12
<PAGE>
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

SFAS No. 146, "Accounting for Costs Associated with Exit and Disposal
Activities," was issued in June 2002 and is effective for exit and disposal
activities initiated after December 31, 2002.  The Company is complying with
SFAS No. 146.

SFAS No. 147 relates exclusively to certain financial institutions, and thus
does not apply to the Company.

In November 2002, the Financial Accounting Standards Board (the "FASB") issued
FASB Interpretation ("FIN") No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others."  FIN No. 45 clarifies that a guarantor is required to recognize, at the
inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee.  The initial recognition and measurement
provisions of FIN No. 45 are applicable on a prospective basis to guarantees
issued or modified after December 31, 2002, while the disclosure requirements
became applicable in 2002.  The Company is complying with the disclosure
requirements of FIN No. 45.  The other requirements of this pronouncement did
not materially affect the Company's consolidated financial statements.

SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure, an amendment of FASB Statement No. 123," was issued in December 2002
and is effective for fiscal years ending after December 15, 2002.  SFAS 148
provides alternative methods of transition for a voluntary change to the fair
value method of accounting for stock-based employee compensation.  In addition,
this pronouncement amends the disclosure requirements of SFAS 123 to require
more prominent disclosure in both annual and interim financial statements about
the method of accounting for stock-based employee compensation and the effect of
the method used on reported results.  The Company is complying with the
disclosure requirements of SFAS No. 148.

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities, an Interpretation of ARB 51." The primary objectives of FIN No. 46 are
to provide guidance on the identification of entities for which control is
achieved through means other than voting rights ("variable interest entities" or
"VIEs") and how to determine when and which business enterprise should
consolidate the VIE. This new model for consolidation applies to an entity for
which either: (1) the equity investors do not have a controlling financial
interest; or (2) the equity investment at risk is insufficient to finance that
entity's activities without receiving additional subordinated financial support
from other parties. In addition, FIN No. 46 requires that both the primary
beneficiary and all other enterprises with a significant variable interest in a
VIE make additional disclosures. As amended in December 2003, the effective
dates of FIN No. 46 for public entities that are small business issuers, as
defined ("SBIs"), are as follows: (a) For interests in special-purpose entities
("SPEs"): periods ended after December 15, 2003; and (b) For all other VIEs:
periods ending after December 15, 2004. The December 2003 amendment of FIN No.
46 also includes transition provisions that govern how an SBI which previously
adopted the pronouncement (as it was originally issued) must account for
consolidated VIEs. The Company has determined that it does not have any
interests in any SPEs, and management is currently evaluating the other effects
of FIN No. 46 (as amended) on its consolidated financial statements.

In April 2003, the FASB issued SFAS No. 149, "Amendments of Statement 133 on
Derivative Instruments and Hedging Activities," which amends and clarifies
financial accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities
under SFAS No. 133.  This pronouncement is effective for contracts entered into
or modified after June 30, 2003 (with certain exceptions), and for hedging
relationships designated after June 30, 2003.  The adoption of SFAS No. 149 did
not have a material impact on the Company's consolidated financial statements.

In  May  2003,  the  FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments  with Characteristics of both Liabilities and Equity."  SFAS No. 150
establishes  standards  for  how  a  company  classifies  and  measures  certain
financial  instruments  with characteristics of both liabilities and equity, and
is  effective  for  public  companies as follows: (i) in November 2003, the FASB
issued  FASB  Staff  Position  ("FSP")  FAS  150-3  ("FSP  150-3"), which defers
indefinitely (a) the measurement and classification guidance of SFAS No. 150 for
all  mandatorily  redeemable  non-controlling  interests  in  (and  issued  by)
limited-life  consolidated  subsidiaries,  and  (b)  SFAS  No. 150's measurement
guidance  for  other  types of mandatorily redeemable non-controlling interests,
provided  they  were  created  before  November  5,  2003;  (ii)  for  financial
instruments  entered  into  or  modified after May 31, 2003 that are outside the
scope  of  FSP 150-3; and (iii) otherwise, at the beginning of the first interim
period  beginning  after  June  15,  2003.  The Company adopted SFAS No. 150 (as
amended)  on  the  aforementioned  effective  dates.  The  adoption  of  this
pronouncement  did  not  have  a  material  impact  on  the Company's results of
operations  or  financial  condition.


                                       13
<PAGE>
Other recent accounting pronouncements issued by the FASB (including its
Emerging Issues Task Force), the American Institute of Certified Public
Accountants, and the Securities and Exchange Commission did not or are not
believed by management to have a material impact on the Company's present or
future consolidated financial statements.

RESULTS OF OPERATIONS

THE TWELVE MONTHS ENDED DECEMBER 31, 2003 COMPARED TO THE TWELVE MONTHS ENDED
DECEMBER 31, 2002.

     Revenue

During the twelve months ending December 31, 2003, we had revenues of $945,605,
a decrease of $739,661 (43%) from the $1,685,266 for the same period in fiscal
year 2002.

For the twelve month period ended December 31, 2003, the $739,661 decrease in
our sales revenue was due entirely to the lack of sales in 2003 from the transit
market, specifically the Las Vegas Monorail Project, more fully described below.
The Las Vegas Monorail Company has chosen to go to magnetic stripe technologies
to integrate with the existing system in place with the RTP bus transit system,
and will consider an upgrade to smart card systems in the future.

Bombardier is the supplier of the monorail and fare box collection system to the
Las Vegas Monorail Company (LVMC).  Bombardier conducted 1 1/2 years of due
diligence on our equipment and system and awarded us the contract for a smart
card only Fare Collection System in December 2001.  The Las Vegas Monorail
Company decided to integrate with the Rapid Transit Company, the bus line in Las
Vegas, which then required the fare system to utilize a magnetic stripe rather
than a smart card in order to integrate their existing system.  We fulfilled all
the requirements of the first phase of the contract resulting in earning the
revenue in 2002 of approximately $1,350,000, but with the change to magnetic
stripe, Bombardier was forced to cancel the contract with Rapidtron.  We still
have an opportunity to provide our RF smart card in the future as an upgrade to
the LVMC.  The decrease in transit sales in 2003 is related to the loss of the
LVM contract which was partially offset by the increase in fitness sales of
approximately $600,000.

We have chosen to focus our sales efforts on fitness clubs, winter resorts, and
universities and colleges, niche markets where our system has penetrated key
venues with notable installations such as two national fitness club chains, Park
City Resort, Utah and Copper Mountain, Colorado, well-known four-season resorts,
University of California, Berkeley and University of California, Los Angeles,
two leading United States universities.  We targeted these specific customers
due to their leadership position in each of their industries and the potential
for sizeable revenues related to their individual contracts and future
contracts.  We have structured our sales, marketing and service around these 3
markets - fitness clubs, universities, and winter resorts, while continuing to
explore opportunities in amusement such as auto racing and sports arenas.  In
this regard, we increased our focus in selling to the leading fitness chains in
the third and fourth quarter of 2003.  We had follow-up meetings in the fourth
quarter of 2003, resulting in the order for 125 installations described below,
and we are scheduled to have additional meetings in 2004 with national fitness
chains.  Following our installation at UCLA John Wooden Center, we will increase
our presence and contact to universities in presentations to a combined targeted
group of approximately 350 universities.  In the winter resort market, we have
expanded our presence with more installations at Park City, Utah, and


                                       14
<PAGE>
plan to intensify our selling effort with focused selling efforts in early 2004,
trade-show attendance in the East and West United States followed by face to
face selling in the first and second quarters of 2004 for the 2004/2005 season.
As of December 2003, we have recruited and hired Chris Perkins as Vice President
of Winter Resort Sales to intensify our selling efforts to ski resorts in North
America. For the past 14 years, Chris worked as the lead sales executive for
Bombardier, selling to and developing strong relationships with ski resort
management in North America. We expect increased sales in each of the three
targeted venues of fitness clubs, universities, and winter resorts throughout
2004.

We expect to modestly increase our revenues in the targeted venues of fitness
clubs, winter resorts, and universities in the first quarter of 2004, and to
significantly increase our revenues in the targeted venues in the upcoming 12
months.  We base these revenue growth expectations on the assumption that the
successful sales, installations, and operation of our Rapidtron systems to date
with industry leading customers in targeted venues will result in other
customers within each venue emulating the leader in making their purchase
decisions.  For example, our Rapidtron system has now been operational in 50
locations with a national fitness club with 80 more scheduled over the next
three months, and we expect to continue to expand in the club's other locations
over the next 12 months.  In the twelve months of 2003, we received
approximately forty percent (40%) of our gross revenue from this single fitness
club chain.  We expect to continue sales to this club in 2004, and we have
meetings scheduled during the first quarter of 2004 with five other leading
companies in the fitness industry. As a result of these meetings, we hope to
increase and diversify our gross revenue received through sales in the fitness
industry.  As of December 31, 2003, we have finalized and signed purchase orders
with a major national fitness chain and another leading fitness chain to
purchase and install a total of 125 Rapidtron systems in the first five months
of 2004.  In addition, one of the chains has agreed to move forward with 25
installations and a beta testing of the smart card in one of their clubs early
in 2004.  These commitments will result in gross revenue of approximately $1.5
million for the five-month period ending May 31, 2004.  Some locations require
platforms, an automated rather than our standard manual Americans with
Disability Act (ADA) gate and multiple readers due to the size of the club. Our
equipment offerings are flexible, allowing us to handle different club needs and
configurations.

Our Rapidtron system has been operational at Copper Mountain since November 2001
and Park City, Utah since November 2002, with an expansion scheduled for the
2004/2005 season. In the twelve months of 2003, we received 17% of our gross
revenue from sales to one winter resort. We expect continued sales to Park City
in 2004, and we are in discussions with Copper Mountain for additional orders in
the second quarter of 2004. We are in discussions with several other major
winter resorts that we hope will result in increased sales in the winter resort
industry. Our Rapidtron system has been operational at University of California,
Berkeley since May 2002 and UCLA since October 2003. In the twelve months of
2003, we received less than ten percent (10%) of our gross revenue from sales to
these universities. Historically, we provided the interface software through
third-party vendors under contract with Rapidtron. Recently, we acquired a COM
DLL software interface from a Canadian company that developed a COM DLL software
interface exclusively for Rapidtron. This COM DLL can be used to integrate our
systems with back-end office platforms used in the fitness industry.

Actual results may differ from our expectations as a result of delay in sales to
the customers in the targeted venues.

     Gross Profit

For the twelve months ending December 31, 2003, our gross profit for the period
was $143,944, compared to gross profit of $913,583 for the same period of the
preceding year.  This represents a decrease of $769,639 from the same period of
the preceding year.  The decrease in gross profit is primarily due to the result
of the drop in sales resulting from the cancellation of the Las Vegas monorail
project and the unfavorable foreign currency exchange rate of the euro to the
dollar.


                                       15
<PAGE>
We expect to improve our gross profit through increased sales in the targeted
venues of fitness clubs, winter resorts, and universities in the targeted venues
in the coming 12 months based on the same assumptions identified in our
discussion of revenues above.  In the first and second quarter of 2004, the
majority of our sales will be generated from fitness accounts with resort sales
increasing with third and fourth quarter installations at winter resorts.  The
unfavorable currency variance of the US Dollar to the Euro continues to
negatively impact gross profit margins in 2003 due to our purchasing from a
European supplier.  We expect the unfavorable currency variance of the US Dollar
to the Euro to continue in 2004, and to continue to negatively impact gross
profit margins due to our plan to continue purchasing equipment, readers, and
cards from our European supplier.   Research and development and re-engineering
of our equipment with Axess AG are currently underway to enhance our system.  We
expect these enhancements to reduce our costs and thereby improve margins.  We
expect to see the benefits of these enhancements in 2004.

Actual results may differ from our expectations as a result of delay in sales
revenues, and gross profit from those revenues to the customers in the targeted
venues.

     Operating Expenses

For the twelve months ending December 31, 2003, our selling, general &
administrative expenses totaled $2,903,853, an increase of $1,555,105, or 115%,
from the $1,348,748 incurred during the same period of the preceding year. The
majority of the increased expenses is related to increases in professional fees
related to the reverse merger, financing, and new accounting and legal
requirements related to public reporting. The professional fees increased from
$371,000 in 2002 to $1,619,000 in 2003, an increase of $1,248,000. The increased
professional fees are due to the following: 1) $500,000 increase in financing
commissions, 2) $54,000 increase in accounting fees, 3) $184,000 increase in
legal fees, 4) $233,000 increase in investor and public relations, 5) $60,000
increase in outside marketing services, and 6) $94,000 increase in other
professional fees. A majority of the increased professional fees in 2003 were
related to one time expenses for the reverse merger and financing activities.

We expect operating expenses in the ordinary course of business (not taking into
consideration the one time expenses related to the reverse merger and financing
of approximately $1,000,000) to increase modestly over the next 12 months as a
result of operating, marketing, selling, service and sales commission expenses
related to increased revenues in the fitness club, winter resort, and
university. The commissions paid to independent sales representatives are less
than 1% of selling, general and administrative expenses during the year ended
December 31, 2003; however, they will increase as a percentage of sales in the
coming quarter, and 12 months.

Actual results may differ from our expectations, and operating expenses will
continue to secure and may precede sales to the customers in the targeted
venues.

     Loss From Operations

The loss from operations for the twelve months of fiscal 2003 was $2,759,909
compared to a loss from operations of $435,165 in the same period in the prior
year.

The loss from operations for the twelve months ended December 31, 2003, was
primarily the result of the following (a) reduction in transit sales, (b) a
delay in roll-out of fitness club sales caused by our customers' software
suppliers delaying the completion and implementation of the software interface
that allows our system to work effectively with the customers back office
software, and (c) increase in professional fees and salary costs.  Software
interfaces with all major software providers in the fitness and resort
industries have now been completed.


                                       16
<PAGE>
We expect the overall loss from operations to decrease over the next 12 months
as a result of increases in revenues and gross margin related to those sales.
Actual results may differ from our expectations if we experience delays in sales
revenues from installation as we expect to continue to incur operating expenses
related to marketing to customers in the targeted venues.

     Interest Expense

Our interest expense for the twelve-month period was $80,801.  In the same
period of the preceding year, our interest expense was $32,677.

The increase in interest expense in the twelve months was primarily the result
of higher debt to related parties.  At December 31, 2003, we owed $324,269 on
notes due to related parties, compared to $820,923 at December 31, 2002.

Additionally, we borrowed approximately $1,780,000 during the twelve months
ended December 31, 2003, and made re-payments through cash and equity instrument
issuances of approximately $2,280,000 during such period. We expect interest
expense to decrease over the twelve-months as a result of debt repayments and
conversion of debt to equity. Actual results may differ from our expectations as
a result of taking on additional debt necessary to finance operations, if we do
not meet sales expectations.

     Assets and Liabilities

At December 31, 2003, we had total assets of $1,055,243 compared to total assets
of $443,312 at December 31, 2002. Cash was $84,256 as of December 31, 2003, up
from the $10,835 cash balance as of December 31, 2002.  For the twelve-months
ended December 31, 2003, cash used in operations was $2,698,712; cash used in
investing activities was $3,941; and cash provided by financing activities was
$2,776,074, with net increase in cash during the current period being $73,421.

Our net accounts receivable were $317,387 at December 31, 2003, an increase of
$238,228 (300%) from the $79,159 at December 31, 2002.  The increase in accounts
receivable is primarily due to new customers in the fitness club industry that
began doing business with us in July 2002.

Our net inventories increased $305,766 (121%) during the twelve-months ended
December 31, 2003, to $558,202, from the $252,436 at December 31, 2002.  A
majority of the increase in inventory is due to purchases to support shipments
scheduled to fitness customers.

Our net fixed assets totaled $15,342 at December 31, 2003, compared to $13,070
at December 31, 2002.  Our purchases of fixed assets totaled $10,026 during the
current period, while our depreciation totaled $7,754 resulting in a net
increase in fixed assets of $2,272.   The majority of fixed asset purchases were
related to computer equipment purchases.

Our total liabilities at December 31, 2003 were $1,423,636, a decrease of
$611,632 (30%) from the $2,035,268 at December 31, 2002.  Our accounts payable
and accrued liabilities totaled $1,004,511 at December 31, 2003, a decrease of
$38,100 (4%) from the $1,042,611 at December 31, 2002.  There was a decrease in
accounts payable of $59,137 and an increase in accrued liabilities of $21,037.
Our payables decreased as a result of paying vendors for products purchased to
support sales and inventory for fitness clubs from the proceeds of debt
financing, and the accrued liabilities increased as a result of establishing a
warranty reserve and increased customer deposits, netted against accrued salary
repayments.

Our accrued payroll totaled $96,164 at December 31, 2003, compared to $135,687
at December 31, 2002. On December 31, 2003, $126,750 of the accrued salaries was
paid in kind with common stock at $1.00 per


                                       17
<PAGE>
share, reducing total accrued salaries at year-end 2003 to $96,164. Our accrued
interest payable, which is included in accounts payable and accrued liabilities,
was $6,674 at December 31, 2003, a decrease of $3,232 from the $9,906 at
December 31, 2002.

Our notes payable and other debt totaled $331,780 at December 31, 2003, a
decrease of $492,702 (60%) from the $824,482 at December 31, 2002. Our total
notes payable were reduced by the conversion of several notes payable to equity
at the close of the merger in May 2003. Prior to year end and as a condition to
the amended Unit Purchase Agreement (see discussion below), related parties and
employees were required to accept a total of 348,334 shares of restricted common
stock in exchange for $348,334 of outstanding payables and debt. As a result, we
issued an additional 348,334 new shares of restricted common stock on or about
December 31, 2003, in satisfaction of $348,334 of payables and debt, of which
4,500 shares were issued to Ceres Financial Limited for $4,500 of accrued
interest and 8,200 shares were issued to Corvus Holdings Ltd. for $8,200 of
accrued interest.

During the twelve-month period ended December 31, 2003, the Company borrowed
approximately $1,780,,000 from related parties.  Such notes bore interest at
rates ranging from 6% to 10%, were secured by substantially all assets of the
Company, were convertible into the Company's restricted common stock at
approximately $1.00 per share, and all principal and interest was due within one
year.  Management does not believe that the conversion option of these notes was
considered a beneficial conversion feature at the time such option was granted.

Immediately after the Merger (see Note 2 to our financial statements), loans
approximating $1,648,000 were converted to the Company's restricted common stock
at approximately $1.00 per share.  During the twelve-month period ended December
31, 2003, principal payments approximating $322,000 were made on certain other
loans due to related parties.

     Stockholder's Deficit

Our stockholder's deficit was $368,393 at December 31, 2003, an improvement of
$1,223,563 from the $1,591,956 deficit at December 31, 2002.  The changes in
stockholder's deficit were as follows:


     Balance  as  of  December  31,  2002               ($1,591,956)
     Net Loss                                           ($2,904,304)
     Increase of Additional  Paid  in  Capital           $4,457,479
     Issuance of Common  Stock                                9,693
     Stock Subscription Receivable                         (535,305)
     Retirement of Treasury Stock                           196,000
                                                      --------------
     Balance  as  of  December 31,  2003                  ($368,393)

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2002, we had $443,312 in total assets, including $10,835 in
cash, $79,159 in accounts receivable, $252,436 in inventories, and $73,911 in
prepaid expenses and other current assets.  As of December 31, 2003, we had
$1,055,243 in total assets, including $84,256 in cash, $317,387 in accounts
receivable, $558,202 in inventories, and $67,676 in prepaid expenses and other
current assets.  We consider the accounts receivable to have a high probability
of collection, as a majority of the receivables are from large customers in the
fitness club industry.


                                       18
<PAGE>
Our inventories consist primarily of readers, turnstiles and equipment.  We
intend to use our inventory as current product models during 2004.  We will
acquire additional inventory for fitness club, university, and winter resort
sales in 2004.

Our fixed assets consist primarily of computers, office furniture and equipment,
software, and test equipment.  Due to the age and proprietary nature of most of
the fixed assets, these assets probably have limited value to third parties.

At December 31, 2003, our total liabilities were $1,423,636, including accounts
payable and accrued liabilities of $1,004,511, and obligations to related
parties of $411,614. Loans from related parties included $142,259 payable to
John Creel and Steve Meineke, directors and executive officers of our company at
December 31, 2003. Steve Meineke has since resigned as an executive officer.

We had a working capital deficit of $396,115 at December 31, 2003. Our negative
cash flow from operations resulted primarily from our losses, our increased
receivables and inventory along with the pay down of payables to key vendors in
order to support growth in the fitness category. Our cash flow needs were met
for the December 31, 2003 quarter through sales revenues and the proceeds of
convertible loans and private equity placements. During the three month period
ended December 31, 2003, we sold a total of 182,500 shares of restricted common
stock to three accredited investors for total consideration of $193,673. We paid
total commissions of $13,367 in connection with the sale of our common stock.

We expect to continue operating at a negative cash flow through at least the
first quarter of fiscal year 2004 as we continue our efforts to develop our
business.  Thus, our success, including our ability to fund future operations,
depends largely on our ability to secure additional funding. We cannot assure
you that we will be able to consummate debt or equity financings in a timely
manner, on a basis favorable to the Company, or at all.

     Cash Flow

We need cash flow of approximately $125,000 per month during the first quarter
of 2004 to pay for our rent, salary, marketing, services, software interface,
inventory, and receivables, excluding the anticipated increase in expenses
related to sales and marketing efforts and new business development.  We expect
to receive cash flow from revenues averaging at least approximately $700,000 to
$1,250,000 per month during 2004.

During 2004, we expect to need cash flow of approximately $2,000,000 for
operating expenses, new business development, potential merger opportunities,
marketing, services, and software development for interface with business
systems in targeted industries, inventory and receivables.   We anticipate that
we will receive cash flow from operating revenues totaling approximately
$8,400,000 to $15,000,000 in 2004.

Historically, we have financed our operations through cash flow from operations,
debt proceeds and the sale of equity securities.  It is anticipated that we may
be required to sell additional equity securities and/or incur additional debt
until such time as we can generate sufficient revenues from our operations to
cover operating expenses.  We currently have no external sources of liquidity.
The allocation of cash flow in operating the business will be dictated by where
those resources can optimize results through the production of sustained revenue
growth.  If we do not raise the necessary capital or earn sufficient revenue to
cover the foregoing expenses, we will reduce variable overhead, such as
marketing expenses, travel and entertainment, software development, and
reduction of personnel as feasible.  In the event we are unable to generate
capital from loans, the sale of stock, or revenues, we will be forced to sell
our assets or curtail operations until additional capital is available.


                                       19
<PAGE>
     Financing Activities Subsequent to September 30, 2003

As of December 31, 2003, we sold a total of 1,472,000 Units for proceeds of
$1,600,000 in cash, and $240,000 in satisfaction of debt , pursuant to a unit
purchase agreement, as amended, with Ceres Financial Limited, Corvus Holdings,
Ltd. and A Mari Usque Ad Mare Ltd. in four separate tranches, as follows:

     -    Tranche 1 on or about November 12, 2003, for 576,000 Units for
          proceeds of $720,000;
     -    Tranche 2 on or about December 18, 2003, for 416,000 Units for
          proceeds of $520,000;

     -    Tranche 3 on December 31, 2003 for 288,000 Units for proceeds of
          $360,000; and

     -    Tranche 4 on December 31, 2003 for 192,000 Units in satisfaction of
          $240,000 of existing debt.

Each Unit consists of one share of our common stock, and one warrant for the
purchase of one share of common stock for a purchase price of $1.25, through the
first anniversary of the date of issuance, and $1.50 up to the second
anniversary of the date of issuance, upon which the warrant will expire.  We are
required to register the resale of the common stock issued as part of the Units,
and if available, keep a shelf-registration statement effective for such resale
for a period of 2 years following the issuance of the Units.  We are required to
pay all costs and expenses associated with the registration.  We were required
to allocate $50,000 of the proceeds from the sale of the Units to cover the
investor's legal expenses related to the private placement and their cost
associated with the registration.  If Ceres Financial's legal fees exceed
$50,000, we anticipate selling additional Units under the same terms and
conditions to finance these fees.

We must use the proceeds from the sale of the Units in the following manner:

Tranche 1 for proceeds of $720,000:
----------------------------------
$400,000 payable to Axess AG for equipment and products;
$150,000 payable for certain marketing and publication services;
$20,000 payable to Mark Adair for accrued compensation;
$125,000 for operating expenses; and
$25,000 for preparation of documents related to the sale of the Units and legal
expenses related to the preparation of the registration statement.

Tranche 2 for proceeds of $520,000:
----------------------------------
$200,000 payable to Axess AG for equipment and products;
$150,000 payable for certain marketing and publication services;
$20,000 payable to Mark Adair for accrued compensation;
$25,000 payable for legal expenses related to the preparation of the
registration statement; and
$125,000 for operating expenses.

Tranche 3 for proceeds of $360,000:
----------------------------------
$150,000 payable for certain marketing and publication services;
$25,000 payable to the Company's legal counsel;
$50,000 for marketing materials and activities; and
$135,000 for operating expenses.

Tranche 4 for proceeds of $240,000.
----------------------------------
The satisfaction of $240,000 of debt owed to us by the purchasers.
------------------------------------------------------------------


                                       20
<PAGE>
In addition, we cannot use any of the proceeds to pay debt to related-parties.
As a condition to the foregoing proceeds, related parties and employees were
required to accept a total of 348,334 shares of restricted common stock in
exchange for $348,334 of outstanding debt.  As a result, we issued an additional
348,334 new shares of restricted common stock on or about December 31, 2003, as
satisfaction of $348,334 of debt, of which 4,500 shares were issued to Ceres
Financial Limited for $4,500 of debt and 8,200 shares were issued to Corvus
Holdings Ltd. for $8,200 of debt.  The $348,334 is made up of the following:
$163,353 in accrued salaries; $102,250 of debt to related party; $27,389 of
accrued interest to related parties; $4,342 in partial payment of a note to a
related party; and $51,000 for expenses related to professional services and
finders fees.

     Contractual Obligations

As of December 31, 2003, we had the following contractual obligations and
commercial commitments:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
CONTRACTS WITH CONSULTANTS
-----------------------------------------------------------------------------------------------------------
Name                              Termination Date                         Payment Terms
-----------------------------  -----------------------  ---------------------------------------------------
<S>                            <C>                      <C>
Lee Guthrie                    June 2, 2005             $ 4,000 per month
-----------------------------  -----------------------  ---------------------------------------------------
                                                        $ 6,000 per month in January and February, 2004,
Pioneering Innovation          March 31, 2004           plus $7,000 in March, 2004
-----------------------------  -----------------------  ---------------------------------------------------
                                                        $ 2,778 per month plus ten  shares of common
Pioneering Innovation Com Dll  Dec 31, 2006             stock per satellite installed, up to 40,000 shares
-----------------------------  -----------------------  ---------------------------------------------------
Equus Marketing Services       Dec 31, 2004             $ 5,000 per month, month-to-month
-----------------------------  -----------------------  ---------------------------------------------------
Meineke LLC                                             $ 37,500 one time fee
-----------------------------  -----------------------  ---------------------------------------------------
Mark Adair Financial
Consulting                     Dec 31, 2004             $ 150,000/year
-----------------------------  -----------------------  ---------------------------------------------------
                               Ending upon completion
                               of services rendered
Market Street Publishing       under contract           450,000 for services rendered
-----------------------------------------------------------------------------------------------------------
NOTES PAYABLE
-----------------------------------------------------------------------------------------------------------
                                                        Balance as of December 31, 2003, and Payment
Payee                          Maturity                 Terms
-----------------------------  -----------------------  ---------------------------------------------------
Comerica/John Creel and        Ending upon payment      7,500 per month; balance due of $85,000 +
Steve Meineke                  per agreement            interest
-----------------------------  -----------------------  ---------------------------------------------------
Equus/Vineyard Bank            On demand                $150,000 + interest
-----------------------------  -----------------------  ---------------------------------------------------
Larry Williams                 October 31, 2004         $32,010 + interest
-----------------------------  -----------------------  ---------------------------------------------------
Steve Meineke                  On demand                $15,000 + interest
-----------------------------  -----------------------  ---------------------------------------------------
John Creel                     On demand                $26,000 + interest
-----------------------------  -----------------------  ---------------------------------------------------
John Creel                     On demand                $16,259 + interest
-----------------------------------------------------------------------------------------------------------
CAPITAL LEASES
-----------------------------------------------------------------------------------------------------------
Lessor                         Lease Term               Payment Terms
-----------------------------  -----------------------  ---------------------------------------------------
                               Between 14 to 35 months
6 Computer Leases              left on leases           $ 436 per month for all six leases
-----------------------------------------------------------------------------------------------------------
</TABLE>

Our agreement with Market Street Publishing Ltd. requires us to pay Market
Street all cost related to the creation of marketing and advertising materials
and the dissemination of such materials to at least 500,000 recipients.  We paid
Market Street a total of $450,000 during the fourth quarter of 2003 in
accordance with the use of proceeds terms under the Unit Purchase Agreement.


                                       21
<PAGE>
Currently, our total contractual obligations related to long-term debt, capital
leases, and certain contracts (see details of employment contracts in "Executive
Compensation.") is approximately $1,251,000 arising out of obligations related
to employment and consulting agreements.  In addition, we have approximately
$350,000 due under notes payable on demand or in the next twelve months.

We anticipate that we will have to raise capital during the next 12 months to
meet our current obligations including trade accounts payable and liabilities to
related parties.  We intend to raise the capital required to fund our financing
needs by issuance of debt and equity.  We cannot assure you that financing will
be available or accessible on reasonable terms.

     Inflation

We do not believe that inflation has had a significant impact on our
consolidated results of operations or financial condition.



                                       22
<PAGE>
ITEM 7.     FINANCIAL STATEMENTS



                                 RAPIDTRON, INC.
                         (FORMERLY THE FURNISHING CLUB)
                        CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002




                                       23
<PAGE>
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . F-1

Consolidated Balance Sheet as of December 31, 2003 . . . . . . . . . . . . . F-3

Consolidated Statements of Operations for the Years Ended December 31,
    2003 and 2002. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4

Consolidated Statements of Stockholders' Deficit for the Years Ended
    December 31, 2003 and 2002 . . . . . . . . . . . . . . . . . . . . . . . F-5

Consolidated Statements of Cash Flows for the Years Ended December
    31, 2003 and 2002. . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7

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




                                       24
<PAGE>
                          INDEPENDENT AUDITORS' REPORT



To the Board of Directors and Stockholders
Rapidtron, Inc. (formerly The Furnishing Club)

We  have  audited the accompanying consolidated balance sheet of Rapidtron, Inc.
and  subsidiary  (the  "Company")  as  of  December  31,  2003,  and the related
consolidated statements of operations, stockholders' deficit, and cash flows for
the  years ended December 31, 2003 and 2002.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion  on  these  financial  statements  based  on  our  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  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
Rapidtron, Inc. as of December 31, 2003, and the results of their operations and
their  cash  flows  for the years ended December 31, 2003 and 2002 in conformity
with  accounting  principles generally accepted in the United States of America.



Page F-1
<PAGE>

The  accompanying  consolidated financial statements have been prepared assuming
that the Company will continue as a going concern.  As of December 31, 2003, the
Company  has  a  working  capital  deficit  of approximately $396,000, recurring
losses  from  operations, an accumulated deficit of approximately $4,385,000 and
has generated an operating cash flow deficit of approximately $2,700,000 for the
year then ended.  As discussed in Note 1 to the financial statements, additional
capital  will  be  necessary  to fund the Company's long-term operations.  These
conditions, among others, raise substantial doubt about the Company's ability to
continue  as  a  going  concern.  Management's plans regarding these matters are
also described in Note 1.  The accompanying consolidated financial statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.




March  17,  2004
Newport  Beach,  California



Page F-2
<PAGE>
<TABLE>
<CAPTION>
==============================================================================================

                                         RAPIDTRON, INC.
                                   CONSOLIDATED BALANCE SHEET
                                     AS OF DECEMBER 31, 2003

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


                           ASSETS
                           ------

<S>                                                                               <C>
CURRENT ASSETS
   Cash                                                                           $    84,256
   Accounts receivable, net                                                           317,387
   Inventory, net                                                                     558,202
   Prepaid expenses and other current assets                                           67,676
                                                                                  ------------
                                                                                    1,027,521

PROPERTY AND EQUIPMENT, NET                                                            15,342

DEPOSITS AND OTHER ASSETS                                                              12,380
                                                                                  ------------

                                                                                  $ 1,055,243
                                                                                  ============


              LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
   Accounts payable                                                               $   807,271
   Accrued liabilities                                                                197,240
   Due to related party                                                                87,345
   Loans due to related parties                                                       324,269
   Obligations under capital leases                                                     7,511
                                                                                  ------------
                                                                                    1,423,636

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT
   Preferred stock, par value $0.001 per share; 5,000,000
      shares authorized; no shares issued or outstanding                                    -
   Common stock, par value $0.001 per share; 100,000,000
      shares authorized; 19,812,851 shares issued and
      outstanding                                                                      19,813
   Additional paid-in capital                                                       4,532,344
   Stock subscription receivable                                                     (535,305)
   Accumulated deficit                                                             (4,385,245)
                                                                                  ------------
                                                                                     (368,393)
                                                                                  ------------

                                                                                  $ 1,055,243
                                                                                  ============




===================================================================================================
Page F-3    The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
==========================================================================================

                                 RAPIDTRON, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

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

                                                                    2003          2002
                                                                ------------  ------------
<S>                                                             <C>           <C>

NET SALES                                                       $   945,605   $ 1,685,266

COST OF GOODS SOLD                                                  801,661       771,683
                                                                ------------  ------------

GROSS PROFIT                                                        143,944       913,583

SELLING, GENERAL AND ADMINISTRATIVE
   EXPENSES                                                       2,903,853     1,348,748
                                                                ------------  ------------

LOSS FROM OPERATIONS                                             (2,759,909)     (435,165)

OTHER INCOME (EXPENSE)
   Interest income                                                        -         6,854
   Interest expense                                                 (80,801)      (32,677)
   Foreign exchange loss                                            (62,794)      (25,448)
                                                                ------------  ------------
                                                                   (143,595)      (51,271)
                                                                ------------  ------------

LOSS BEFORE PROVISION FOR INCOME TAXES                           (2,903,504)     (486,436)

PROVISION FOR INCOME TAXES                                              800         1,662
                                                                ------------  ------------

NET LOSS                                                        $(2,904,304)  $  (488,098)
                                                                ============  ============

BASIC AND DILUTED LOSS PER COMMON
   SHARE                                                        $     (0.19)  $     (0.05)
                                                                ============  ============

BASIC AND DILUTED WEIGHTED AVERAGE
   NUMBER OF COMMON SHARES
   OUTSTANDING                                                   15,106,000    10,118,000
                                                                ============  ============




===================================================================================================
Page F-4    The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================

                                                         RAPIDTRON, INC.
                                        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                                         FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

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


                                  COMMON STOCK          TREASURY STOCK      ADDITIONAL     STOCK
                              ---------------------  ---------------------   PAID-IN    SUBSCRIPTIONS  ACCUMULATED
                                SHARES      AMOUNT    SHARES      AMOUNT      CAPITAL    RECEIVABLE     DEFICIT        TOTAL
                              -----------  --------  ---------  ----------  -----------  -----------  ------------  ------------
<S>                           <C>          <C>       <C>        <C>         <C>          <C>          <C>           <C>
BALANCE -
   DECEMBER 31, 2001          10,120,000   $10,120          -   $       -   $   74,865   $         -  $  (992,843)  $  (907,858)
Shares returned to
   Company to settle note
   receivable from
   stockholder at $1.00 per
   share                        (196,000)        -    196,000    (196,000)           -             -            -      (196,000)
Net loss                               -         -          -           -            -             -     (488,098)     (488,098)
                              -----------  --------  ---------  ----------  -----------  -----------  ------------  ------------
BALANCE -
   DECEMBER 31, 2002           9,924,000    10,120    196,000    (196,000)      74,865             -   (1,480,941)   (1,591,956)
Shares issued to settle
   accrued salaries at
   $0.50 per share               128,000       128          -           -       63,872             -            -        64,000
Effects of reverse merger      5,598,002     5,598          -           -       (5,598)            -            -             -
Treasury shares retired in
   connection with reverse
   merger                              -      (196)  (196,000)    196,000     (195,804)            -            -             -
Debt converted to equity
   at approximately $1.00
   per share, in connection
   with reverse merger         1,599,000     1,599          -           -    1,646,425             -            -     1,648,024
Shares issued for services
   at $1.00, in connection
   with reverse merger           400,000       400          -           -      399,600             -            -       400,000
Shares sold at
   approximately $1.00
   per share                     245,700       246          -           -      257,568             -            -       257,814
Shares issued for services
   at $1.19 per share             37,815        38          -           -       44,962             -            -        45,000
Debt converted to
   common shares at
   $1.00 per share                60,000        60          -           -       59,940             -            -        60,000

                                                           (continued)


================================================================================================================================
Page F-5                                 The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
=====================================================================================================================

                                                   RAPIDTRON, INC.
                                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                                    FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

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


                              COMMON STOCK      TREASURY STOCK   ADDITIONAL     STOCK
                           -------------------  ----------------  PAID-IN   SUBSCRIPTIONS  ACCUMULATED
                             SHARES    AMOUNT   SHARES  AMOUNT    CAPITAL     RECEIVABLE     DEFICIT        TOTAL
                           ----------  -------  ------  -------  ----------  ------------  ------------  ------------
<S>                        <C>         <C>      <C>     <C>      <C>         <C>           <C>           <C>

Shares and warrants
   issued at $1.25 per
   share in connection
   with Unit Purchase
   Agreement                1,280,000  $ 1,280       -  $     -  $1,598,720  $  (535,305)  $         -   $ 1,064,695
Debt and payables
   converted to equity at
   $1.00 per share, in
   connection with Unit
   Purchase Agreement         348,334      348       -        -     347,986            -             -       348,334
Debt converted to stock
   and warrants at $1.25
   per share, in
   connection with Unit
   Purchase Agreement         192,000      192       -        -     239,808            -             -       240,000
Net loss                            -        -       -        -           -            -    (2,904,304)   (2,904,304)
                           ----------  -------  ------  -------  ----------  ------------  ------------  ------------

BALANCE -
   DECEMBER 31, 2003       19,812,851  $19,813       -  $     -  $4,532,344  $  (535,305)  $(4,385,245)  $  (368,393)
                           ==========  =======  ======  =======  ==========  ============  ============  ============




=====================================================================================================================
Page F-6                      The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
=================================================================================================

                                         RAPIDTRON, INC.
                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                          FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

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


                                                                             2003         2002
                                                                         ------------  ----------
<S>                                                                      <C>           <C>

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                                 $(2,904,304)  $(488,098)
Adjustments to reconcile net loss to net cash used in operating
    activities:
        Depreciation                                                           7,754       6,060
        Provision for bad debts                                               15,000           -
        Common stock issued for services                                     445,000           -
        Unrealized foreign exchange loss                                      19,909      22,663
        Changes in operating assets and liabilities:
            Accounts receivable                                             (253,228)    (76,624)
            Inventory                                                       (305,766)   (208,974)
            Prepaid expenses and other current assets                          6,235     (50,523)
            Deposits and other assets                                          1,521      (1,521)
            Accounts payable                                                 (79,046)    608,641
            Accrued liabilities                                              429,043     112,209
            Due to related party                                             (80,830)   (472,599)
                                                                         ------------  ----------
NET CASH USED IN OPERATING ACTIVITIES                                     (2,698,712)   (548,766)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment                                           (3,941)    (13,613)
                                                                         ------------  ----------
NET CASH USED IN INVESTING ACTIVITIES                                         (3,941)    (13,613)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans due to related parties                                 1,777,910     603,100
Principal payment of loans due to related parties                           (322,212)    (35,542)
Principal payment of capital lease obligations                                (2,133)       (869)
Proceeds from issuance of common stock                                       257,814           -
Proceeds from issuance of common stock with warrants                       1,064,695           -
                                                                         ------------  ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                  2,776,074     566,689
                                                                         ------------  ----------

NET INCREASE IN CASH                                                          73,421       4,310

CASH - beginning of period                                                    10,835       6,525
                                                                         ------------  ----------

CASH - end of period                                                     $    84,256   $  10,835
                                                                         ============  ==========

                                           (continued)



=========================================================================================================
Page F-7          The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
=====================================================================================================

                                           RAPIDTRON, INC.
                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                           FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

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


                                                                                    2003       2002
                                                                                 ----------  --------
<S>                                                                              <C>         <C>

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
   INFORMATION
Cash paid during the period for:
   Income taxes                                                                  $      800  $  1,662
                                                                                 ==========  ========
   Interest                                                                      $   42,431  $  9,891
                                                                                 ==========  ========

Non-cash investing and financing activities:
   Treasury stock received to settle loan to stockholder                         $        -  $196,000
                                                                                 ==========  ========
   Retirement of treasury stock                                                  $  196,000  $      -
                                                                                 ==========  ========
   Equipment acquired via capital lease                                          $    6,085  $      -
                                                                                 ==========  ========
   Effects of reverse merger on common stock                                     $    5,598  $      -
                                                                                 ==========  ========
   Common stock issued to retire debt                                            $1,712,352  $      -
                                                                                 ==========  ========
   Common stock and warrants issued to retire debt                               $  240,000  $      -
                                                                                 ==========  ========





=========================================================================================================
Page F-8          The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


<PAGE>
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

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

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

Rapidtron, Inc. (formerly The Furnishing Club, the "Parent") was incorporated in
the  State  of  Nevada  in March 2000. The Parent's wholly owed subsidiary, also
named  Rapidtron,  Inc.,  was  incorporated  in the State of Delaware in January
2000.  The  Parent and its wholly owned subsidiary (collectively, the "Company")
are  headquartered in Costa Mesa, California and provides Radio Frequency ("RF")
smart  access  control  and  ticketing/membership  systems (the "System") to the
fitness,  winter  resort, entertainment and university markets in North America.
The  System  facilitates  rapid  operator-free  entry and exit through automated
turnstiles  or  portals  and optional hands-free entry. The Company incorporates
"smart  card"  debit/credit  technology  for  retail  purchases  and
promotional/loyalty  programs.  The  System  is  versatile  and  utilizes either
read-write RF smart cards or bar code paper tickets. This dual capability allows
a  venue  to issue and re-issue numerous types and durations of access privilege
cards.  Its  open  architecture  allows for an easy interface with existing back
office  software.

During  the year ended December 31, 2003, the Company completed a reverse merger
(see  Note  2).  Effective May 8, 2003, the common stock of the merged entity is
quoted  on  the  Over  the  Counter  Bulletin  Board under the symbol "RPDT.OB".

GOING  CONCERN  AND  LIQUIDITY  CONSIDERATIONS

The  accompanying  consolidated financial statements have been prepared assuming
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, 2003, the Company has a working capital
deficit  of  approximately  $396,000,  recurring  losses  from  operations,  an
accumulated  deficit  of approximately $4,385,000 and has generated an operating
cash  flow  deficit  of  approximately  $2,700,000 for the year then ended.  The
Company  intends  to fund operations through increased sales and debt and equity
financing  arrangements,  which  may  be  insufficient  to  fund  its  capital
expenditures,  working  capital  and other cash requirements for the year ending
December  31,  2004.

Thereafter, the Company will be required to seek additional funds to finance its
long-term  operations.  The  successful  outcome  of future activities cannot be
determined at this time, and there is no assurance that if achieved, the Company
will  have  sufficient  funds  to execute its intended business plan or generate
positive  operating  results.

GOING  CONCERN  AND  LIQUIDITY  CONSIDERATIONS  (continued)

In  response  to  these  problems, management has planned the following actions:
     -    Management  intends  to  raise additional funds through future private
          placement  offerings.
     -    Management expects its increased marketing efforts to result in future
          sales  increases.  There  can  be  no  assurances,  however,  that
          management's  expectations  of  future  sales  will  be  realized.

These factors, among others, raise substantial doubt about the Company's ability
to  continue  as  a  going  concern.  The  accompanying  consolidated  financial
statements  do not include any adjustments that might result from the outcome of
this  uncertainty.

PRINCIPLES  OF  CONSOLIDATION

The  accompanying  consolidated  financial  statements  have  been  prepared  in
accordance with accounting principles generally accepted in the United States of
America  and include the accounts of the Parent and its wholly owned subsidiary.
All  significant  intercompany accounts and transactions have been eliminated in
consolidation.

USE  OF  ESTIMATES

The  preparation  of  consolidated  financial  statements  in  conformity  with
accounting  principles  generally  accepted  in  the  United  States  of America
requires  management  to make estimates and assumptions that affect the reported


================================================================================
Page F-9
<PAGE>
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

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

1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

USE  OF  ESTIMATES  (continued)

amounts  of  assets  and  liabilities  and  disclosure  of contingent assets and
liabilities  at  the  date  of  the  consolidated  financial  statements and the
reported  amounts  of  revenues  and  expenses  during  the  reporting  years.
Significant  estimates  made  by management include, among others, provision for
losses  on  accounts receivable, realization of inventory and long-lived assets,
warranty  reserves  and the valuation allowance for deferred tax assets.  Actual
results  materially  could  differ  from  those  estimates.

CONCENTRATIONS

Financial  instruments  that  may  subject  the  Company  to credit risk include
uninsured  cash-in-bank  balances.  At  times,  the  Company's  bank balance may
exceed  the  amount  insured  by  the  Federal  Deposit  Insurance  Corporation
(generally  $100,000  per  institution).

The Company grants credit to customers and requires collateral on a case-by-case
basis.  The  Company's  ability  to  collect receivables is affected by economic
fluctuations  in  the  geographic  areas served by the Company. An allowance for
uncollectible  amounts  is  provided,  based  on  past experience and a specific
analysis  of  the accounts, which management believes are sufficient. Management
has provided an allowance for doubtful accounts of $20,000 at December 31, 2003.
Although  management  expects  to  collect  amounts  due, actual collections may
differ  from  the  estimated  amounts.

At  December  31,  2003,  four  customers accounted for approximately 51% of net
accounts receivable.  Two customers accounted for approximately 54% of net sales
during  the  year  ended  December 31, 2003, and no other customer accounted for
more than 10% of net sales for the year then ended.  For the year ended December
31,  2002,  one  customer  accounted  for  approximately  81%  of  net  sales.

Effective  May  1,  2000,  the  Company  entered  into an exclusive distribution
agreement  with Axess AG ("Axess"), an Austrian company, where the Company would
sell,  primarily  to the North American market, access control devices developed
and  manufactured  by  Axess.  The  Company  purchases  substantially all of its
inventory  from  Axess.

RISKS  AND  UNCERTAINTIES

The  Company  operates  in  an  emerging  industry  that  is  subject  to market
acceptance  and  technological  change.  The Company's operations are subject to
significant  risks  and  uncertainties,  including  financial,  operational,
technological  and  other  risks associated with operating an emerging business,
including  the  potential  risk  of  business  failure.

INVENTORY

Inventory  is  stated  at  the  lower of cost (first-in, first-out) or estimated
market  and  is  primarily comprised of finished goods.  Market is determined by
comparison with recent sales or net realizable value.  Such net realizable value
is  based  on  management's  forecasts  for  sales  of the Company's products or
services  in  the  ensuing  years.  Should the demand for the Company's products
prove  to  be significantly less than anticipated, the ultimate realizable value
of the Company's inventory could be substantially less than amounts shown in the
accompanying  consolidated  balance  sheet.

PROPERTY  AND  EQUIPMENT

Property  and  equipment  are  stated  at  cost  less  accumulated depreciation.
Depreciation  is  provided on the straight-line method over the estimated useful
lives  of  the respective assets, generally three years. Equipment under capital
lease  obligations  is  capitalized  at  the lesser of its estimated fair market
value  or  the  present  value of the minimum lease payments, and is depreciated
over  the  shorter  of  the  estimated  useful life or the remaining term of the
related  lease. Betterments, renewals, and extraordinary repairs that extend the
lives  of  the  assets  are  capitalized;


================================================================================
Page F-10
<PAGE>
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

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

1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

PROPERTY  AND  EQUIPMENT  (continued)

other  repairs  and  maintenance  charges are expensed as incurred. The cost and
related  accumulated  depreciation  applicable  to  assets  sold  or retired are
removed  from the accounts, and the gain or loss on disposition is recognized in
current  operations.

IMPAIRMENT  OF  LONG-LIVED  ASSETS

In  July  2001,  the  Financial  Accounting  Statements  Board  ("FASB")  issued
Statement  of  Financial  Accounting Standards ("SFAS") No. 144, "Accounting for
the  Impairment  of  Long-Lived  Assets and for Long-Lived Assets to be Disposed
Of."  SFAS  No.  144  addresses  financial  accounting  and  reporting  for  the
impairment  or  disposal  of  long-lived  assets.  SFAS  No.  144  requires that
long-lived  assets  be  reviewed  for  impairment  whenever events or changes in
circumstances  indicate  that  their carrying amounts may not be recoverable. If
the  cost  basis  of  a  long-lived  asset  is greater than the projected future
undiscounted  net cash flows from such asset (excluding interest), an impairment
loss is recognized. Impairment losses are measured as the difference between the
cost  basis  of  an  asset  and  its  estimated  fair  value.

SFAS  No.  144  also  requires  companies  to  separately  report  discontinued
operations  and  extends  that reporting to a component of an entity that either
has  been  disposed  of  (by  sale,  abandonment,  or  in  a  distribution  to
stockholders)  or  is  classified  as  held  for sale. Assets to be disposed are
reported  at  the  lower of the carrying amount or the estimated fair value less
costs  to  sell.  The  Company  adopted  SFAS  No.  144  on January 1, 2002. The
provisions  of  this  statement  for  assets held for sale or other disposal are
generally  required  to  be applied prospectively after the adoption date to any
newly  initiated  commitment  to  a plan to sell such assets by management. As a
result, the Company cannot determine the potential effects that adoption of SFAS
No.  144  will  have on the financial statements with respect to future disposal
decisions,  if  any.  As of December 31, 2003, management has determined that no
such  impairment  exists  and  therefore,  no  adjustments have been made to the
carrying  values of long-lived assets.  There can be no assurance, however, that
market  conditions  will  not  change  or demand for the Company's products will
continue  which  could  result in impairment of long-lived assets in the future.

REVENUE  RECOGNITION

Revenues  are  recognized  when  all  of  the  following criteria have been met:
persuasive evidence for an arrangement exists; delivery has occurred; the fee is
fixed or determinable; and collectibility is reasonably assured. Generally, this
occurs  upon  delivery  of  product  to  customers.  Installation  is  an option
(installations can be done by the customer with minimal support by the Company),
and  such  revenues are provided and billed separate from product orders and are
generally  recorded  upon  completion  of  services.

FOREIGN  CURRENCY  TRANSACTIONS

The  Company  records  all  transactions  with  its foreign supplier, Axess (see
above),  in  accordance  with  SFAS No. 52, "Foreign Currency Translation."  All
invoices  received  from  Axess  are  denominated  in Euros.  When an invoice is
received,  the  Company  translates  these amounts to US Dollars at the exchange
rate  effective  on  the invoice date.  If the exchange rate changes between the
time of purchase and the time actual payment is made, a foreign exchange gain or
loss  results.  The  Company  recorded a realized exchange loss of approximately
$43,000 and $2,000 for the years ended December 31, 2003 and 2002, respectively.

Additionally,  the  Company  computes  a  foreign  exchange gain or loss at each
balance  sheet  date  on  all  recorded  foreign transactions that have not been
settled.  The  difference between the exchange rate that could have been used to
settle  the  transaction  at  the  date  it occurred (the invoice date), and the
exchange  rate  at  the  balance  sheet  date,  is  the  unrealized gain or loss
recognized  in  current operations.  The Company recorded an unrealized exchange
loss  of approximately $20,000 and $23,000 for the years ended December 31, 2003
and  2002,  respectively.


================================================================================
Page F-11
<PAGE>
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

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

1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

ADVERTISING

The  Company  expenses  the  cost  of  advertising  when  incurred.  Advertising
expenses  are  included  in  selling, general and administrative expenses in the
accompanying consolidated statements of operations and approximated $156,000 and
$82,000  for  the  years  ended  December  31,  2003  and  2002,  respectively.

SHIPPING  AND  HANDLING  COSTS

Shipping  and  handling  costs  are  included  in  cost  of  goods  sold  in the
accompanying  consolidated  statements of operations in accordance with Emerging
Issues Task Force ("EITF") No. 00-10, "Accounting for Shipping and Handling Fees
and  Costs."  Freight  costs for the years ended December 31, 2003 and 2002 were
approximately  $70,000  and  $17,000,  respectively.

SOFTWARE  DEVELOPMENT  COSTS

The  Company  develops software to allow its products to interface with existing
back  office  software  used  by  its customers.  Software development costs are
charged  to  expense as incurred in accordance with SFAS No. 86, "Accounting for
the  Costs  of  Computer  Software  to  Be Sold, Leased, or Otherwise Marketed."
Software development costs approximated $58,000 and $149,000 for the years ended
December  31,  2003 and 2002, respectively, and are included in selling, general
and  administrative  expenses  in  the  accompanying  consolidated statements of
operations.

INCOME  TAXES

Income  taxes  are  accounted for using the asset and liability method. Deferred
tax  assets  and  liabilities  are  recognized  for  the future tax consequences
attributable  to differences between the financial statement carrying amounts of
existing  assets  and  liabilities  and their respective tax bases and operating
loss  and  tax  credit  carryforwards.  Deferred  tax assets and liabilities are
measured  using  enacted  tax  rates  expected to apply to taxable income in the
years  in  which  those  temporary  differences  are expected to be recovered or
settled.  The  effect  on deferred tax assets and liabilities of a change in tax
rates  is  recognized  in  operations  in the period that includes the enactment
date. A valuation allowance is provided for significant deferred tax assets when
it  is  more  likely  than  not  that  such  assets  will  not  be  recovered.

STOCK-BASED  EMPLOYEE  COMPENSATION

The  Company accounts for stock-based compensation issued to employees using the
intrinsic  value method as prescribed by Accounting Principles Board Opinion No.
25  "Accounting  for  Stock Issued to Employees" ("APB 25"). Under the intrinsic
value method, compensation is the excess, if any, of the fair value of the stock
at the grant date or other measurement date over the amount an employee must pay
to  acquire  the  stock. Compensation, if any, is recognized over the applicable
service  period,  which  is usually the vesting period. The FASB has issued SFAS
No.  123  "Accounting for Stock-Based Compensation", as amended by SFAS No. 148,
"Accounting  for  Stock-Based  Compensation  -  Transition  and  Disclosure,  an
amendment  of  FASB  Statement  No.  123" and interpreted by FASB Interpretation
("FIN")  No.  44,  "Accounting  for  Certain  Transactions  Involving  Stock
Compensation,  an  Interpretation  of  APB 25." This standard, if fully adopted,
changes  the  method  of accounting for all stock-based compensation to the fair
value  method. For stock options and warrants, fair value is determined using an
option  pricing model that takes into account the stock price at the grant date,
the  exercise  price,  the expected life of the option or warrant and the annual
rate  of quarterly dividends. The adoption of the accounting methodology of SFAS
No.  123  for  employees  is  optional  and  the Company has elected to continue
accounting  for  stock-based  compensation  issued  to  employees  using APB 25;
however,  pro  forma disclosures, as if the Company adopted the cost recognition
requirements  under  SFAS  No.  123,  are  required  to  be  presented.


================================================================================
Page F-12
<PAGE>
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

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

1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

STOCK-BASED  EMPLOYEE  COMPENSATION  (continued)

As  of December 31, 2003, the Company has granted options to employees under one
stock-based compensation plan (see Note 7). The Company accounts for such grants
under  the  recognition  and  measurement  principles  of  APB  25,  and related
Interpretations.  No  stock-based employee compensation cost is reflected in net
loss,  as all options granted had an exercise price equal to or greater than the
estimated  market value of the underlying common stock on the date of grant. Had
the  Company  applied  the  fair value recognition provisions of SFAS No. 123 to
stock-based  employee  compensation, there would have been no material change to
net  loss  or  loss  per  common  share  at  December  31,  2003  and  2002.

COMPREHENSIVE  INCOME

SFAS  No.  130,  "Reporting  Comprehensive  Income,"  establishes  standards for
reporting  and  display of comprehensive income and its components in a full set
of  general-purpose  financial statements. For the years ended December 31, 2003
and  2002,  the  Company had no items of other comprehensive income.  Therefore,
net  loss  equals  comprehensive  loss for the years ended December 31, 2003 and
2002.

EARNINGS  (LOSS)  PER  SHARE

The  Company  computes  loss  per  common share using SFAS No. 128 "Earnings Per
Share."  Basic  loss  per common share is computed based on the weighted average
number  of shares outstanding for the period. Diluted loss per share is computed
by  dividing  net  loss  by the weighted average shares outstanding assuming all
dilutive  potential  common shares were issued. There were no dilutive potential
common  shares  at  December  31,  2003  and 2002 as all options and warrants to
acquire  common  stock  were deemed to be anti-dilutive. Because the Company has
incurred  net  losses  and  has no potentially dilutive common shares, basic and
diluted  loss  per  common  share  are  the  same. Additionally, for purposes of
calculating  diluted  loss  per  common  share, there were no adjustments to net
loss.

TREASURY  STOCK

The  Company  accounts for acquisitions of treasury stock under the cost method.
Treasury  stock  is recorded as a separate component of stockholders' deficit at
cost,  and  paid-in  capital  accounts  are not adjusted until the time of sale,
retirement  or  other  disposition.

SEGMENTS  OF  A  BUSINESS

SFAS  No.  131,  "Disclosures  about  Segments  of  an  Enterprise  and  Related
Information," changed the way public companies report information about segments
of  their  business  in  their  periodic  reports  filed with the Securities and
Exchange Commission  (the "SEC"). It also requires entity-wide disclosures about
the products and services an entity provides, the material countries in which it
holds assets and reports revenues and its major customers. The Company currently
operates  in  one  segment,  as  disclosed  in  the  accompanying  consolidated
statements  of  operations.

RECENT  ACCOUNTING  PRONOUNCEMENTS

SFAS  No.  146,  "Accounting  for  Costs  Associated  with  Exit  and  Disposal
Activities,"  was  issued  in  June  2002 and is effective for exit and disposal
activities  initiated  after  December  31, 2002.  The Company is complying with
SFAS  No.  146.

SFAS  No.  147  relates  exclusively to certain financial institutions, and thus
does  not  apply  to  the  Company.

In  November  2002,  the  FASB  issued  FIN  No. 45, "Guarantor's Accounting and
Disclosure  Requirements  for  Guarantees,  Including  Indirect  Guarantees  of
Indebtedness  of  Others."  FIN No. 45 clarifies that a guarantor is required to
recognize,  at  the inception of a guarantee, a liability for the estimated fair
value  of  the  obligation


================================================================================
Page F-13
<PAGE>
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

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

1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

RECENT  ACCOUNTING  PRONOUNCEMENTS  (continued)

undertaken  in  issuing  the guarantee.  The initial recognition and measurement
provisions  of  FIN  No.  45 are applicable on a prospective basis to guarantees
issued  or  modified  after December 31, 2002, while the disclosure requirements
became  applicable  in  2002.  The  Company  is  complying  with  the disclosure
requirements  of  FIN  No. 45.  The other requirements of this pronouncement did
not  materially  affect  the  Company's  consolidated  financial  statements.

SFAS  No.  148,  "Accounting  for  Stock-Based  Compensation  -  Transition  and
Disclosure, an amendment of FASB Statement No. 123," was issued in December 2002
and  is effective for fiscal years ending after December 15, 2002.  SFAS No. 148
provides  alternative  methods  of transition for a voluntary change to the fair
value  method of accounting for stock-based employee compensation.  In addition,
this pronouncement amends the disclosure requirements of SFAS No. 123 to require
more  prominent disclosure in both annual and interim financial statements about
the method of accounting for stock-based employee compensation and the effect of
the  method  used  on  reported  results.  The  Company  is  complying  with the
disclosure  requirements  of  SFAS  No.  148.

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities, an Interpretation of ARB 51." The primary objectives of FIN No. 46 are
to  provide  guidance  on  the  identification  of entities for which control is
achieved through means other than voting rights ("variable interest entities" or
"VIEs")  and  how  to  determine  when  and  which  business  enterprise  should
consolidate  the  VIE. This new model for consolidation applies to an entity for
which  either:  (1)  the  equity  investors  do not have a controlling financial
interest;  or  (2) the equity investment at risk is insufficient to finance that
entity's  activities without receiving additional subordinated financial support
from  other  parties.  In  addition,  FIN  No. 46 requires that both the primary
beneficiary  and all other enterprises with a significant variable interest in a
VIE  make  additional  disclosures.  As  amended in December 2003, the effective
dates  of  FIN  No.  46  for public entities that are small business issuers, as
defined  ("SBIs"), are as follows: (a) For interests in special-purpose entities
("SPEs"):  periods  ended  after  December 15, 2003; and (b) For all other VIEs:
periods  ending  after December 15, 2004. The December 2003 amendment of FIN No.
46  also  includes transition provisions that govern how an SBI which previously
adopted  the  pronouncement  (as  it  was  originally  issued)  must account for
consolidated  VIEs.  The  Company  has  determined  that  it  does  not have any
interests  in any SPEs, and management is currently evaluating the other effects
of  FIN  No.  46  (as  amended)  on  its  consolidated  financial  statements.

In  April  2003,  the  FASB issued SFAS No. 149, "Amendments of Statement 133 on
Derivative  Instruments  and  Hedging  Activities,"  which  amends and clarifies
financial accounting and reporting for derivative instruments, including certain
derivative  instruments  embedded  in other contracts and for hedging activities
under  SFAS No. 133.  This pronouncement is effective for contracts entered into
or  modified  after  June  30,  2003  (with certain exceptions), and for hedging
relationships  designated after June 30, 2003.  The adoption of SFAS No. 149 did
not  have  a material impact on the Company's consolidated financial statements.

In  May  2003,  the  FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments  with Characteristics of both Liabilities and Equity."  SFAS No. 150
establishes  standards  for  how  a  company  classifies  and  measures  certain
financial  instruments  with characteristics of both liabilities and equity, and
is  effective  for  public  companies as follows: (i) in November 2003, the FASB
issued  FASB  Staff  Position  ("FSP")  FAS  150-3  ("FSP  150-3"), which defers
indefinitely (a) the measurement and classification guidance of SFAS No. 150 for
all  mandatorily  redeemable  non-controlling  interests  in  (and  issued  by)
limited-life  consolidated  subsidiaries,  and  (b)  SFAS  No. 150's measurement
guidance  for  other  types of mandatorily redeemable non-controlling interests,
provided  they  were  created  before  November  5,  2003;  (ii)  for  financial
instruments  entered  into  or  modified after May 31, 2003 that are outside the
scope  of  FSP 150-3; and (iii) otherwise, at the beginning of the first interim
period  beginning  after  June  15,  2003.  The Company adopted SFAS No. 150 (as
amended)  on  the  aforementioned  effective  dates.  The  adoption  of  this
pronouncement  did  not  have  a  material  impact  on  the Company's results of
operations  or  financial  condition.

Other  recent  accounting  pronouncements  issued  by  the  FASB  (including its
Emerging  Issues  Task  Force),  the  American  Institute  of  Certified  Public
Accountants,  and  the  Securities  and  Exchange  Commission did not or are not
believed  by  management  to  have a material impact on the Company's present or
future  consolidated  financial  statements.

FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS

The  Company's financial instruments include cash, accounts receivable, accounts
payable,  accrued  liabilities,  and  capital  lease  obligations.  The  Company
believes  that  the  estimated  fair  value  of  these  financial  instruments


================================================================================
Page F-14
<PAGE>
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

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

1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

approximates  their carrying amounts based on current market indicators, such as
prevailing  market  rates  and  the  short-term  maturities  of  these financial
instruments.  It  is  not practical to estimate the fair value of amounts due to
related  party  and  loans  due  to  related  parties due to their related party
nature.

RECLASSIFICATIONS

Certain  reclassifications have been made to the prior year financial statements
in  order  for  them  to  conform  to  the  current  year  presentation.

2.  REVERSE  MERGER

On  May  8,  2003, The Furnishing Club and subsidiary ("TFC"), a publicly traded
"shell"  company  (the  previous  public registrant), completed a reverse merger
under  an  Agreement and Plan of Merger (the "Plan" or "Merger") with Rapidtron,
Inc.,  a  Delaware  corporation  (the  "Private  Company"),  in a tax-free share
exchange  under  Section  368(a)(1)(B)  of the Internal Revenue Code of 1986, as
amended.  Immediately  prior  to  the  Merger,  TFC had 20,000,000 common shares
authorized  and  19,993,752  shares  of  common  stock  issued  and outstanding.
Pursuant  to  the Merger, all of the 10,052,000 issued and outstanding shares of
common stock of the Private Company (including 128,000 shares for the settlement
of accrued salaries, as discussed in Note 6) were exchanged for 9,600,000 common
shares of TFC, on a 0.955 to 1 basis. Concurrent with the closing of the Merger,
13,943,750  shares of common stock of TFC were canceled, and the Private Company
issued  5,598,002  shares  of  restricted common stock. As a result, immediately
after  the Merger 15,650,002 shares of common stock were issued and outstanding.
As  discussed  in  Note  6, the Company also issued 400,000 shares of restricted
common  stock  to  two  finders  associated  with  the  Merger.

Immediately after the Merger, the officers and directors of TFC resigned and the
management  of  the  Private  Company  took  control  of such positions, thereby
effecting  a  change  of control. As a result, the transaction was recorded as a
"reverse  merger"  whereby  the  Private  Company  was considered the accounting
acquirer  as  it  retained control of TFC after the merger, however, legally the
Private  Company  became  a  wholly owned subsidiary of TFC after the Merger. In
connection  with the Merger, TFC changed its name to Rapidtron, Inc. Since TFC's
continuing  operations  and  balance  sheet  are  insignificant,  a  pro  forma
consolidated  balance  sheet  at December 31, 2002 and consolidated statement of
operations  for  the  year  then  ended  are  not  presented  herein.

All  information  herein regarding common stock, equity instruments, and related
per-share amounts has been retroactively restated for the exchange ratio in the
Merger.


3.  PROPERTY  AND  EQUIPMENT

Property and Equipment consist of the following at December 31, 2003:

Furniture and fixtures                              $  5,339
Computer equipment (see Note 5)                       24,239
                                                    ---------
                                                      29,578
Less accumulated depreciation                        (14,236)
                                                    ---------

                                                    $ 15,342
                                                    =========


================================================================================
Page F-15
<PAGE>
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

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

4.  RELATED  PARTY  TRANSACTIONS

DUE  TO  RELATED  PARTY

Equus  Marketing  and  Design,  Inc. ("Equus") is related to the Company through
commonality  of  ownership.  The  Company  shares  a  facility  and  certain
administrative  personnel  with  Equus  (Equus is the lessee of the property and
employer  of  certain  personnel).  Additionally,  as  described  below,  Equus
provides  marketing  services  to  the  Company.

On  January  1,  2002,  the  Company  entered  into  an  administrative expenses
agreement  and  a  marketing  services  agreement  with  Equus.  Such agreements
expired  on  December  31,  2003; however, as of January 1, 2004, they have been
extended  on  a  month-to-month  basis.  Under  the  administrative  expenses
agreement,  the Company is to reimburse Equus monthly for certain costs directly
attributable  to  the Company plus approximately 30% to 50% of shared costs such
as  rent, utilities, certain employees' payroll costs, etc.  Management believes
that  the  allocated  amounts are reasonable and at fair market values.  For the
years  ended December 31, 2003 and 2002, Equus charged the Company approximately
$277,000  and  $171,000,  respectively,  for  administrative  expenses.

During  the  year  ended  December  31,  2002,  the marketing services agreement
required  a  monthly  marketing  retainer  of  $10,000  to be paid to Equus.  In
January  2003,  the retainer was reduced to $2,500 per month.  Additionally, the
Company is billed for certain other direct advertising and marketing costs.  For
the  years  ended December 31, 2003 and 2002, marketing and advertising expenses
charged  to  the  Company  by  Equus  approximated  $207,000  and  $201,000,
respectively.

At  December  31,  2003, the Company owed Equus approximately $87,000 for unpaid
administrative and marketing expenses, which is included in due to related party
on  the  accompanying  consolidated  balance  sheet.

LOANS DUE TO RELATED PARTIES

The Company had the following loans due to related parties at December 31, 2003:

Loans due to stockholders, unsecured, accrue interest at the prime
    rate (4.0% at December 31, 2003), due on demand.                  $   89,269
Loan payable to stockholders, unsecured, accrues interest at the
    prime rate plus 2%, due on demand.                                    85,000
Loan payable to Equus, unsecured, accrues interest at the prime
    rate plus 1%, due on demand.                                         150,000
                                                                      ----------

                                                                      $  324,269
                                                                      ==========

During  the  year  ended  December  31, 2003, the Company borrowed approximately
$1,778,000  from related parties, and made repayments with cash and common stock
approximating  $322,000  and  $1,952,000,  respectively.  See  Note  6  for more
information  on  common  stock  issued  to  retire  debt.

MANAGEMENT  SERVICES  AGREEMENT

Effective  January  1,  2002,  the  Company  entered  into a management services
agreement  with  Meineke  Consulting, LLC ("Meineke"). The proprietor of Meineke
was  the  Secretary,  Treasurer,  General  Manager and a Director of the Company
during  the years ended December 31, 2003 and 2002. Under such agreement Meineke
is  to  provide  general  management  services to the Company until December 31,
2004,  unless  terminated  earlier. The Company is to pay Meineke an annual base
fee  in  monthly  installments.  Meineke  may  also  receive  incentive  bonus
compensation  if  certain  annual earnings increases are met. Fees for the years
ended  December  31,  2003  and  2002  approximated  $100,000  and  $75,000,
respectively.


================================================================================
Page F-16
<PAGE>
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

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

4.  RELATED  PARTY  TRANSACTIONS  (continued)

CONSULTING  AGREEMENT

The  Company  has entered into a 36-month consulting services agreement with Lee
Guthrie  &  Associates  ("LGA")  to  provide  sales, marketing, distribution and
business  development  strategies and assistance. Lee Guthrie, the owner of LGA,
is  the  Company's  Vice  President of Fitness Sales. The agreement commenced on
June  1,  2002,  and may be terminated by either party with 30 days notice. Such
agreement  requires  monthly  payments  of $6,000 plus annual bonuses if certain
targets  are  met.  In addition, the Company granted options to purchase 150,000
shares  of  the  Company's restricted common stock at an exercise price of $1.00
per  share  (see  Note  7). The Company incurred consulting fees related to this
contract  totaling  $48,000 and $28,000 during the years ended December 31, 2003
and  2002,  respectively. This agreement replaced a March 3, 2001 agreement with
LGA requiring payments of $10,000 per month. Consulting fees incurred related to
this  2001  agreement approximated $50,000 for the year ended December 31, 2002.

COMMITMENTS

Future minimum payments on the Meineke and LGA consulting agreements approximate
the  following  for  the  years  ending  December  31:

2004                    $   148,000
2005                         20,000
                        -----------

                        $   168,000
                        ===========

EMPLOYMENT  AGREEMENTS

During  the  year  ended  December 31, 2003, the Company entered into employment
agreements  with certain employees.  Such agreements expire on December 31, 2004
and  November  30,  2006 and can only be terminated prior to such date by either
party  for "cause", as defined. The agreements have provisions that include base
salary  amounts,  various  benefits, the granting of stock options (see Note 7),
and  covenants  not to compete. Upon a resignation with cause by the employee or
termination  without cause by the Company, the Company is to immediately pay all
accrued  compensation,  and  must  continue  paying  the base salary for 6 to 12
months  following termination. Total base salaries to be paid to these employees
are  as  follows  for  the  years  ending  December  31:

2004                    $   475,000
2005                        115,000
2006                        115,000
                        -----------

                        $   705,000
                        ===========

Other  related  party transactions are discussed elsewhere in these notes to the
consolidated  financial  statements.


5.  CAPITAL  LEASE  OBLIGATIONS

Included  in  property and equipment (see Note 3) are several computers acquired
under  capital  leases  with  costs  totaling  $10,637  and  related accumulated
depreciation  of  $3,577 at December 31, 2003.  The leases accrue interest at an
imputed  rate  of  19.99%, require principal and interest payments approximating
$350  per  month,  and  expire  on  various  dates  through  October  2006.


================================================================================
Page F-17
<PAGE>
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

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

5.  CAPITAL  LEASE  OBLIGATIONS  (continued)

Minimum  lease payments under these agreements approximate the following for the
years  ending  December  31:

2004                               $   4,200
2005                                   3,300
2006                                   2,000
                                   ----------
                                       9,500
Less imputed interest                 (2,000)
                                   ----------

                                   $   7,500
                                   ==========


6.  EQUITY  TRANSACTIONS

On  December  28,  2002,  the Board of Directors of the Company agreed to accept
196,000  shares  of  the Company's common stock as payment for a promissory note
receivable  plus  accrued  interest  due from an employee and stockholder of the
Company.  Principal  plus  interest  approximated  $196,000  at  the  time  of
settlement.  The  Company  has  recorded  the related treasury shares at cost of
$196,000 as a reduction to stockholders' equity in the accompanying consolidated
balance sheet and consolidated statement of stockholders' deficit. In connection
with  the  Merger (see Note 2), the Company retired all 196,000 treasury shares.

In  January  2003, the Company issued 128,000 shares of the Company's restricted
common stock to an employee to settle accrued salaries payable of $64,000.

Immediately  after  the  Merger,  the  Company  converted  loans  approximating
$1,648,000 into 1,599,000 shares of the Company's restricted common stock.

In  connection  with the Merger, the Company issued 400,000 shares of restricted
common stock as finder's fees to certain individuals. Such shares were valued at
$1  per share based on recent stock sales and conversions of debt to equity. The
Company  recorded  acquisition  costs  totaling  $400,000,  which is included in
selling,  general  and  administrative expenses in the accompanying consolidated
statements  of  operations.

In  July  2003, a convertible note payable holder converted $60,000 of principal
into  60,000  shares  of  the  Company's  restricted  common  stock.

During  the year ended December 31, 2003, the Company sold 245,700 shares of its
restricted  common stock at approximately $1.00 per share for cash approximating
$258,000.

On  August  29, 2003, the Company filed with the SEC Form S-8 to register 37,815
shares  of  the  Company's  restricted common stock pursuant to a legal services
agreement  with the Company's legal counsel. Under such agreement, legal counsel
may  convert  past due amounts due from the Company into registered common stock
at $1.19 per share (estimated to be the fair value of such shares on the date of
the  agreement). The Company issued all 37,815 shares registered under such Form
S-8.

UNIT  PURCHASE  AGREEMENT

On  November  12, 2003, the Company closed the unregistered sale of common stock
and warrants under a Unit Purchase Agreement, as more fully described below. The
Company  sold  1,472,000  "Units"  at  a  cash purchase price of $1,600,000 plus
satisfaction  of  existing  debt totaling $240,000 in four separate tranches, as
follows:
     -    Tranche 1 on or about November 12, 2003, for 576,000 Units for
          proceeds of $720,000;
     -    Tranche 2 on or about December 18, 2003, for 416,000 Units for
          proceeds of $520,000;
     -    Tranche 3 on December 31, 2003 for 288,000 Units for proceeds of
          $360,000; and


================================================================================
Page F-18
<PAGE>
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

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

6.   EQUITY TRANSACTIONS (continued)

UNIT PURCHASE AGREEMENT (continued)

     -    Tranche  4  on  December 31, 2003 for 192,000 Units in satisfaction of
          $240,000  of  existing  debt.

Each  "Unit" consists of one share of the Company's restricted common stock, and
one  warrant  for the purchase of one share of common stock for a purchase price
of $1.25, through the first anniversary of the date of issuance, and $1.50 up to
the  second  anniversary  of  the  date of issuance, upon which the warrant will
expire.

The  Company  is  required  to  register  the common stock issued as part of the
Units,  and  if  necessary,  keep a shelf-registration statement effective for a
period  of  2 years following the issuance of the Units. The Company is required
to  pay  all  costs  and  expenses  associated  with  the registration. Proceeds
approximating  $50,000  from  the sale of the Units have been set aside to cover
the  cost  of  the  registration.  The  Company anticipates that such costs will
exceed $125,000, depending upon the number of comments received from the SEC and
the  number  of  supplements  or  amendments that the Company may be required to
file. Additional costs must be paid from operating revenue or through additional
investments.

The  Company  is  required  to use the proceeds from the sale to satisfy certain
outstanding payables and future expenses related to registration  of securities,
with $385,000 set aside for paying general operating expenses.

In  addition,  the  Company  cannot  use  any  of  the  proceeds  to pay debt to
related-parties.  As  a  condition  of receiving the foregoing proceeds, related
parties  and  employees  were  required  to  accept a total of 348,334 shares of
restricted common stock in exchange for $348,334 of outstanding debt.

The  Company  did  not receive approximately $535,00 of the total proceeds under
the  Unit  Purchase Agreement as of December 31, 2003; therefore this amount has
been  recorded as stock subscription receivable on the accompanying consolidated
balance  sheet  and  consolidated  statements  for  stockholder's  deficit.

Prior to the Merger (see Note 2), Ceres Financial Limited acquired shares of the
Company's  restricted  common  stock  in another private placement. On March 31,
2003,  Rapidtron  Delaware  borrowed  $150,000  from  Ceres  Financial  Limited,
evidenced  by  a note with interest at 12% per annum, due September 30, 2003 and
payable  upon  demand  thereafter. On December 31, 2003, Ceres Financial Limited
tendered  the principal balance of $150,000 for 120,000 Units under the terms of
the Unit Purchase Agreement dated November 12, 2003, as amended.

On  July  17,  2003,  the  Company  borrowed  $150,000 from Corvus Holding Ltd.,
evidenced  by  a  promissory note with interest at 6% per annum, due October 17,
2003  and  payable upon demand thereafter. The Company agreed to convert $60,000
of  debt  into  60,000  shares of its restricted common stock on August 22, 2003
(as  noted  above).  On  December  31,  2003,  Corvus  Holding Ltd. tendered the
remaining  principal  balance of $90,000 for 72,000 Units under the terms of the
Unit  Purchase  Agreement  dated  November  12,  2003,  as  amended.

In  connection  with  the  Unit  Purchase  Agreement,  certain executives of the
Company  made certain representations and warranties to the investors related to
the Company's forecasted performance and agreed that such representations were a
material  inducement  to  the  investment  in the Units. In connection with such
forecasts,  the  executives,  as  principal  shareholders,  each entered into an
Escrow  and  Contribution Agreement under which they agree to place their common
shares  into  escrow  and  to  contribute  their pro rata share of such escrowed
shares  to  the  Company  in  the  event of a breach of such representations and
warranties  or  the  issuance  of  stock  or  stock options in excess of certain
limits.  The  executives placed 9,124,392 shares into escrow. Under the terms of
the  Escrow  and Contribution Agreement, these shareholders agreed to contribute
to  the  Company one share of common stock for (i) each $1.00 that the Company's
gross  revenue  for the 15 month period ending December 31, 2004 falls below the
gross revenue forecast of $10,880,000 for such period, (ii) each share of common
stock issued and each option (or other securities exercisable to acquire a share
of  common  stock)  granted  by  the  Company after November 12, 2003, under all
compensatory or other arrangements in excess of 400,000 shares in the aggregate,
and (iii) each share of common stock issued and each option (or other securities
exercisable  to  acquire  a  share  of  common  stock)  granted


================================================================================
Page F-19
<PAGE>
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

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

6. EQUITY TRANSACTIONS (continued)

UNIT PURCHASE AGREEMENT (continued)

by  the  Company  which  fails  to satisfy certain criteria, including a minimum
share  price  of  $1.25 per share and certain vesting requirements in connection
with  option  grants.


7.  STOCK  OPTIONS

The  Company  adopted  the  2003  Stock  Plan (the "Plan") during the year ended
December 31, 2003. The Plan permits the Company to issue up to 12 million shares
of  restricted common stock to employees and consultants, in the form of options
or  stock awards. The Plan is subject to stockholder approval at the next annual
meeting.  The  Company's  officers,  directors,  employees  and  consultants are
expected  to  participate  in  the  Plan.

In  May  2001,  the  Company  granted  options  to acquire 150,000 shares of the
Company's  restricted  common  stock  in  connection with the March 3, 2001, LGA
consulting agreement described in Note 4. Such options were exercisable at $1.00
per  common  share and were canceled in connection with the Merger (see Note 2).
During  the  year  ended  December  31,  2003,  the  Company  granted to certain
employees,  in  connection  with  employment agreements and the Plan, options to
acquire  910,000  shares  of  the  Company's  restricted  common stock. Of these
options,  900,000  vest half on January 1, 2004 and half on January 1, 2005, and
have  an  exercise  price  of  $1.00  per share. The other 10,000 options vested
immediately and have an exercise price of $1.25 per share. All such options have
a  five  year  life.

A  summary  of  the aggregate stock option activity for the years ended December
31,  2003 and 2002 is presented below, as required by SFAS No. 123 (see Note 1):

<TABLE>
<CAPTION>
                                                          WEIGHTED AVERAGE
                                                         EXERCISE PRICE PER
                        SHARES    EXERCISE PRICE RANGE          SHARE
                       ---------  ---------------------  -------------------
<S>                    <C>        <C>                    <C>

Options outstanding -
   December 31, 2001    150,000   $                1.00  $              1.00
Options granted               -                       -  $                 -
Options exercised             -                       -  $                 -
Options expired or
   forfeited                  -                       -  $                 -
                       ---------
Options outstanding -
   December 31, 2002    150,000   $                1.00  $              1.00
Options granted         910,000   $       1.00 to $1.25  $              1.00
Options exercised             -                       -  $                 -
Options expired or
   forfeited           (150,000)  $                1.00  $              1.00
                       ---------
Options outstanding -
   December 31, 2003    910,000   $       1.00 to $1.25  $              1.00
                       =========

Options exercisable -
   December 31, 2003     10,000   $                1.25  $              1.25
                       =========
</TABLE>


================================================================================
Page F-20
<PAGE>
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

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

7. STOCK OPTIONS (continued)

The  weighted  average  life  of  options  outstanding  at December 31, 2003 was
approximately  five  years. The weighted average grant-date fair value per share
of options granted during 2003 was $0.43. Such fair value was estimated by using
the  Black-Scholes  stock  option  pricing model based on the exercise price per
share,  the  estimated  market  price  of  the  Company's  common stock, and the
assumptions  set  forth below for issuances in the year ended December 31, 2003:
Expected life                 5 Years
Estimated volatility          44%
Risk-free interest rate       3.4%
Dividends                     None


8.  WARRANTS

In  connection with the Unit Purchase Agreement (see Note 6), the Company issued
warrants  to  acquire  1,472,000  shares  of  the  Company's  common stock. Such
warrants have a purchase price of $1.25 per share, through the first anniversary
of  the  date of issuance, and $1.50 up to the second anniversary of the date of
issuance,  upon  which the warrants will expire. No warrants have been exercised
or  forfeited  as  of  December  31,  2003.

The  weighted  average  life  of  warrants  outstanding at December 31, 2003 was
approximately  two  years.  The weighted average grant-date fair value per share
of  warrants  granted  during  2003 was $0.34.  Such fair value was estimated by
using  the  Black-Scholes stock option pricing model based on the exercise price
per  share,  the  estimated  market price of the Company's common stock, and the
assumptions  set  forth below for issuances in the year ended December 31, 2003:

Expected life                 2 Years
Estimated volatility          44%
Risk-free interest rate       3.4%
Dividends                     None

Subsequent  to  December  31,  2003,  warrants  to acquire 320,000 shares of the
Company's  common  stock  were  exercised  at  $1.25  per  share.


9.  COMMITMENTS  AND  CONTINGENCIES

PURCHASE  COMMITMENTS

At  December 31, 2002, the Company was under a distribution agreement with Axess
AG  (its  principal  supplier),  to  purchase  a minimum of $3,000,000 of access
control  devices  through April 2003. On December 11, 2002, Axess AG agreed that
if  the  Company  made certain payments and met certain conditions, the purchase
commitment  would be released. As of December 31, 2003, management believes that
all  payments  have been made and conditions have been met, as required by Axess
AG.

To  obtain the release of inventory on orders from Axess AG, the Company filed a
UCC-1 Financing Statement on September 23, 2003, securing the related payable to
Axess  AG of approximately $100,000. Such payable is secured by certain accounts
receivable  totaling $100,000. Management believes that as of December 31, 2003,
the  Company  has  met  all  conditions and obligations required by the security
agreement.

CONSULTING  AGREEMENT

In  November  2003, the Company entered into a consulting agreement with Big Sky
Management  Ltd  ("Big  Sky").  Big Sky is to provide consulting services to the
Company  related  to  new business ventures, raising capital, strategic business
planning,  and other general consulting.  The Big Sky agreement has a term of 12
months  and  requires  total


================================================================================
Page F-21
<PAGE>
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

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

9.   COMMITMENTS AND CONTINGENCIES (continued)

CONSULTING  AGREEMENT  (continued)

compensation  of  $120,000  paid  through  the issuance of 160,000 shares of the
Company's restricted common stock and warrants to purchase an additional 160,000
restricted  shares  (collectively,  the  "Units").  Such  Units  were  issued in
February  2004.

LEGAL

The  Company  may  be  involved  from  time to time in various claims, lawsuits,
disputes with third parties, actions involving allegations and incriminations or
breach  of contract actions incidental to the normal operations of the business.
The  Company  is  currently  not involved in any such litigation that management
believes  could  have  a  material  adverse impact on its consolidated financial
position  or  consolidated  results  of  operations.


10.  INCOME  TAXES

There  is  no  material income tax expense recorded for the years ended December
31,  2003  and  2002,  due  to  the  Company's  net  losses.

Income  tax expense for the years ended December 31, 2003 and 2002 differed from
the  amounts computed by applying the U.S. federal income tax rate of 34 percent
for  the  following  reasons:

<TABLE>
<CAPTION>
                                                                   2003         2002
                                                                -----------  ----------
<S>                                                             <C>          <C>

Income tax benefit at U.S. federal statutory rates              $ (987,000)  $(165,000)
State income tax benefit                                          (174,000)    (29,000)
Valuation allowance                                              1,161,000     194,000
State and local income taxes, net of federal income tax effect         800       1,662
                                                                -----------  ----------

                                                                $      800   $   1,662
                                                                ===========  ==========
</TABLE>

The  Company  has a deferred tax asset and like amount of valuation allowance of
approximately  $1,760,000  at  December  31, 2003, relating primarily to tax net
operating  loss  carryforwards.  The  valuation  allowance  increased  by
approximately  $1,161,000 during the year ended December 31, 2003.  In assessing
the  realizability  of  deferred  tax assets, management considers whether it is
more  likely  than  not that some portion or all of the deferred tax assets will
not  be  realized.  The ultimate realization of deferred tax assets is dependent
upon  the  generation  of  future  taxable  income  during  the periods in which
temporary  differences  become deductible. Management considers projected future
taxable income and tax planning strategies in making this assessment. Based upon
the level of historical taxable losses and projections for future taxable income
(losses)  over  the  periods  which  the  deferred  tax  assets  are deductible,
management  believes it is more likely than not the Company will not realize the
benefits  of  these  deductible  differences.

As  of  December  31,  2003,  the  Company  had net operating loss carryforwards
("NOLs")  of approximately $4,400,000 available to offset future taxable income.
The federal and state carryforward amounts expire in varying years through 2023.

In  the  event  the  Company  were  to  experience  a greater than 50% change in
ownership,  as  defined  in  Section  382  of  the  Internal  Revenue  Code, the
utilization  of  the  Company's tax NOLs could be severely restricted.  Further,
utilization of the Company's state NOLs for tax years beginning in 2002 and 2003
will  be  suspended  under  provisions  of  California  law.


================================================================================
Page F-22
<PAGE>
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

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


11.  SUBSEQUENT  EVENTS  (Unaudited)

LIOLIOS  GROUP  AGREEMENT

On  January  1,  2004,  the  Company  entered  into a financial public relations
agreement  with Liolios Group, Inc., pursuant to which we will pay Liolios Group
$5,000  per month for six months, plus 50,000 shares of restricted common stock,
in  six equal monthly installments. The Company may terminate the agreement upon
30  days advance written notice, whereupon the obligation to issue the remaining
portion  of  the  50,000  shares  of  common  stock  will  terminate.

Effective on March 1, 2004, the Company entered into a termination of employment
agreement with Steve Meineke. The Company agreed to pay Meineke Consulting, LLC,
its 2002 accrued in the amount of $6,987 prior to paying any unpaid wages earned
by  any  employees  in  the year 2003 and when it pays all other wages remaining
unpaid  for  the year 2002, pro rata and in proportion to all other unpaid wages
earned in 2002 and remaining unpaid as of March 1, 2004. The Company also agreed
to  pay  to Steve Meineke his 2003 accrued salary in the amount of $38,959 after
all  wages  remaining  unpaid  for  the year 2002 are paid, and when it pays all
other  wages  remaining  unpaid for the year 2003, pro rata and in proportion to
all  other unpaid wages earned in 2003 and remaining unpaid as of March 1, 2004.
In  addition,  the  Company  delivered  a replacement promissory note payable on
demand to Steve Meineke in the principal amount of $15,000, which is convertible
into  common  stock  at  $1.25  per  share.

The  Company  has  agreed  in  principle  to  a  management consulting agreement
pursuant  to which the Company will issue warrants for up to 1,000,000 shares of
its restricted common stock, exercisable at the rate of $1.46 per share for five
years  from the date the warrants are vested. The warrants will vest as follows:
600,000  upon  execution  of the agreement (expected on or about April 1, 2004),
200,000  on  or about July 1, 2004, and 200,000 on or about October 1, 2004. The
agreement  is  subject to approval by the Lead Investor under the Company's Unit
Purchase  Agreement  with  Ceres  Financial  Ltd.,  dated  November  12,  2003.

The  Company  has  agreed  in  principle  to  sell  in a private placement to an
accredited investor 160,000 "Units" consisting of one share of restricted common
stock  and  one  warrant to purchase restricted common stock at a price of $1.46
for  up  to five years, for a total purchase price of $200,000. The agreement is
subject  to  approval  by  the  Lead  Investor under the Company's Unit Purchase
Agreement with Ceres Financial Ltd., dated November 12, 2003. Assuming that such
approval  is  granted,  the Company expects to close the transaction on or about
April  1,  2004.  The  Company  has agreed in principle to a one year consulting
agreement  with  Mark  Adair  Financial  Consulting  ("Adair").  Such  agreement
required  $150,000  to be paid to Adair during the year ended December 31, 2003,
plus  the  issuance  of  options  to acquire 250,000 shares of restricted common
stock  at  $1.25  per  share.


================================================================================
Page F-23
<PAGE>
ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE

Information contained in the section titled "Experts and Changes in and
Disagreements with Accountants on Accounting and Financial Matters" beginning on
page 56 of our Registration Statement on Form SB-2, filed with the SEC on
February 5, 2004, is hereby incorporated by reference.


ITEM 8A     CONTROLS AND PROCEDURES

We  maintain disclosure controls and procedures that are designed to ensure that
information  required  to  be disclosed in the periodic reports filed by us with
the  Securities  and  Exchange  Commission  (the  "SEC") is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
of  the  SEC  and  that  such information is accumulated and communicated to our
management.  Based  on  their most recent evaluation, which was completed during
the  period  covered  by  this  report,  our  Chief  Executive Officer and Chief
Financial  Officer  believe  that  our  disclosure  controls  and procedures (as
defined  in  Rules  13a-14 and 15d-14 of the Securities Exchange Act of 1934, as
amended)  were  effective  as  of  December  31, 2003. There were no significant
changes  in  our  internal controls or in other factors that could significantly
affect  these  internal  controls  subsequent  to  the  date  of the most recent
evaluation.

ITEM 9      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Information  regarding  the  name, age and position of each person who currently
serves  as a director and/or executive officer of our Company as of December 31,
2003,  is set forth in our preliminary proxy solicitation on Schedule 14A, filed
with  the  SEC  on  March  30,  2004, which is hereby incorporated by reference.

We  have not adopted a code of ethics as of the date of filing this report.  Our
board  of  directors has not had time to complete the code of ethics and intends
to  do  so  within  the  next  30  days.

ITEM 10.    EXECUTIVE COMPENSATION

Information regarding the executive compensation of our named executive officers
is  set  forth in our preliminary proxy solicitation on Schedule 14A, filed with
the  SEC  on  March  30,  2004,  which  is  hereby  incorporated  by  reference.


ITEM 11     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
            RELATED STOCKHOLDER MATTERS

Information  regarding  the  security ownership of certain beneficial owners and
management and related stockholder matters is set forth in our preliminary proxy
solicitation  on  Schedule  14A,  filed with the SEC on March 30, 2004, which is
hereby  incorporated  by  reference.


ITEM 12     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information  regarding  certain  relationships  and  related transactions is set
forth  in our preliminary proxy solicitation on Schedule 14A, filed with the SEC
on  March  30,  2004,  which  is  hereby  incorporated  by  reference.


                                       25
<PAGE>
<TABLE>
<CAPTION>
ITEM 13.     EXHIBITS AND REPORTS ON FORM 8-K


Exhibit
Number      Description
----------------------------------------------------------------------------------------------
<S>         <C>
   10.1     Unit Purchase Agreement dated November 12, 2003(1)
   10.2     Amended and Restated Amendment No. 1 to Unit Purchase Agreement dated November
            12, 2003(1)
   10.3     Registration Rights Agreement dated November 12, 2003(1)
   10.4     Escrow and Contribution Agreement dated November 12, 2003(1)
   10.5     Consulting Agreement with Big Sky Management Ltd dated November 12, 2003(1)
   10.6     Agreement between Rapidtron, Inc. and Market Street Publishing Ltd., dated November,
            2003(1)
   10.7     Release of Security Agreement with Axess AG dated November 24, 2003(1)
   10.8     Stock Plan(1)
   10.9     Agreement between Rapidtron and Pioneering Innovation Inc., dated January 13, 2004.
            (1)
  10.10     Purchase Order from National Fitness Club Chain (2)
  10.11     Letter Agreement with John Creel Regarding Repayment of Debt, dated December 29,
            2003 (1)
  10.12     Letter Agreement with Equus Marketing Regarding Repayment of Debt, dated December
            31, 2003 (1)
  10.13     Letter Agreement with Peter Dermutz Regarding Repayment of Debt, dated December 31,
            2003 (1)
  10.14     Letter Agreement with Steve Meineke Regarding Repayment of Debt, dated December
            31, 2003 (1)
  10.15     Employment Agreement with Chris Perkins, dated December 1, 2003, as amended (1)
   21.1     Subsidiaries (1)
   23.1     Consent of Squar, Milner, Reehl & Williamson, LLP
   31.1     Certification Of Chief Executive Officer Pursuant To 15d-14.
   31.2     Certification Of Chief Financial Officer Pursuant To 15d-14.
   32.1     Certification Of Chief Executive Officer Pursuant To 18 U.S.C. Sec.1350, As Adopted
            Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002.
   32.2     Certification Of Chief Financial Officer Pursuant To 18 U.S.C. Sec.1350, As Adopted
            Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002.
<FN>

(1)  Incorporated by reference to our Registration Statement on Form SB-2, filed with the
     Securities and Exchange Commission on February 5, 2004.
(2)  Incorporated by reference to our Form 8-K filed with the Securities and Exchange
     Commission on January 14, 2004.
</TABLE>



ITEM 14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information regarding our principal accountant fees and services is set forth in
our  preliminary  proxy  solicitation  on  Schedule  14A,  filed with the SEC on
_______,  which  is  hereby  incorporated  by  reference.


                                   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, thereunto duly
authorized.


                                       26
<PAGE>
RAPDITRON,  INC.


Date: March 30, 2004

By:  /s/ John Creel
---------------------------------------------
John Creel, Chairman, President and
Chief Executive Officer


In  accordance  with  the Exchange Act, this report has been signed below by the
following  persons  on behalf of the registrant and in the capacities and on the
dates  indicated.

Date: March 30, 2004

By:  /s/ John Creel
---------------------------------------------
John Creel, Chairman, President and
Chief Executive Officer

By:  /s/ Peter Dermutz
---------------------------------------------
Peter Dermutz, Chief Financial Officer
(Principal Financial Officer), Corporate Secretary,
Executive Vice President and Treasurer




                                       27
<PAGE>