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                     U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB

                    ANNUAL REPORT UNDER SECTION 13 or 15 (d)

                       THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended                              Commission file number
March 31, 2004                                                0-16819
--------------                                                -------

                             FRAGRANCENET.COM, INC.
                             ----------------------
             (Exact name of Registrant as specified in its charter)

          Delaware                                         94-3054267
----------------------------                       ----------------------------
  (State of incorporation)                           (IRS Employer ID Number)

      909 Motor Parkway, Hauppauge, New York           11788
     ----------------------------------------          -----
     (Address of principal executive offices)        (Zip Code)

Registrant's telephone number, including area code:  (631) 582-5204

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

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

                                                   Number of Shares Outstanding
       Title of Class                                  as of March 31, 2004
----------------------------                           --------------------
Common Stock, $.01 par value                                17,468,330

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days
YES  X    NO____
    ---

Check if 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:  $14,705,427
The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the Registrant, based on the closing price for such common
equity on June 25, 2003 is approximately $2,529,832.

The number of shares outstanding of the Issuer's common stock, as of June 25,
2004:

                                17,468,330 shares





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Forward-Looking Statements

Certain statements within this Form 10-KSB constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of FragranceNet.com, Inc. to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. These forward-looking statements are based on our
current expectations and are subject to a number of risks, uncertainties and
assumptions relating to our operations, financial condition and results of
operations, including, among others, rapid technological and other changes in
the market we serve, our numerous competitors and the few barriers to entry for
potential competitors, the short-term nature of many of our contracts, the
seasonality and quarterly variations we experience in our revenue, our uncertain
revenue growth, our ability to attract and retain qualified personnel, our
ability to expand our infrastructure and manage our growth, and our ability to
identify, finance and integrate acquisitions, among others. If any of these
risks or uncertainties materialize, or if any of the underlying assumptions
prove incorrect, actual results may differ significantly from results expressed
or implied in any forward-looking statements made by us. These and other risks
are detailed in this Annual Report on Form 10-KSB and in other documents filed
by us with the Securities and Exchange Commission. FragranceNet.com, Inc.
undertakes no obligation to update publicly any forward-looking statements for
any reason, even if new information becomes available or other events occur in
the future.

                                     PART I

Item 1.           Business

         FragranceNet.com, Inc. ("FragranceNet" or the "Company") operates one
of the world's largest Internet discount fragrance store offering more than
6,000 brand-name fragrances, scented candles, aromatherapy and hair care
products at the lowest prices. By combining an extensive selection with free
U.S. shipping and handling on orders over $60, FragranceNet customers are
treated to a unique and easy shopping experience. FragranceNet recently formed a
new entity, which is wholly-owned, under the name of FragranceNet Wholesales,
Inc. to pursue the wholesale sale of fragrances and related products. The
wholesale business is in its infancy and generated sales during the fiscal year
ended March 31, 2004 of approximately $1.5 million. FragranceNet performs
fulfillment services for companies who pay a fee for the Company to fulfill
orders from other websites. These fees represent incremental income to the
Company performed within our current warehouse space, with our current
employees.

         On July 28, 1999, the Company, then known as National Capital
Management Corporation ("NCMC"), a publicly held company with no substantial
business operations, entered into an Agreement and Plan of Merger (the "Merger
Agreement") by and among the Company, FAC, Inc., a Delaware corporation and
wholly-owned subsidiary of NCMC ("Merger Sub"), Telescents, Inc., a New York
corporation ("Telescents"), and Dennis M. Apfel, Jason S. Apfel and Growth
Capital Partners, L.L.C., a Delaware limited liability company ("GCP"), the
holders of all of the outstanding capital stock of Telescents (the "Telescents
Shareholders"). Pursuant to the terms of the Merger Agreement, Merger Sub merged
with and into Telescents (the "Merger") in accordance with the provisions of the
Delaware General Corporation Law and the New York Business Corporation Law
effective as of July 28, 1999, whereupon the separate corporate existence of
Merger Sub ceased and Telescents continued as the surviving corporation





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(the "Surviving Corporation"). Pursuant to the Merger Agreement, the Company
issued to the Telescents Shareholders an aggregate of 4,900,000 shares of common
stock of NCMC ("Common Stock") and an aggregate of 1,029,514 shares of Preferred
Stock of NCMC ("Preferred Stock") in exchange for all the outstanding shares of
TeleScents. The preferred stock had voting privileges on an "as converted"
basis. The Preferred Stock was convertible into Common Stock on a 1-for-10 basis
at such time as the Certificate of Incorporation of the Company was amended to
increase the authorized shares of Common Stock to a number of shares of Common
Stock sufficient to effect the conversion. Such conversion took place in
November 1999 immediately following the 1999 Annual Meeting of Stockholders of
the Company. Accordingly, upon consummation of the Merger the Telescents
Shareholders, in the aggregate, held approximately 89.55% of the total voting
power of the Company's voting stock.

         As of March 31, 2004, 17,4689,330 shares of Common Stock were issued
and outstanding.

              The Online Store

         The Company operates an online store that specializes in the sale of
brand-name fragrances, bath and body products, gels, candles, hair care
products, powders and soaps directly to the consumer. The Company sells women's
and men's products and does not sell any imitations or knock-offs. FragranceNet
now offers its customers over 6,000 products at discounts of up to 60%. In
addition, FragranceNet offers free shipping within the United States on all
orders over $60. The products sold by the Company include major brands,
hard-to-find and discontinued items. Visitors to the FragranceNet site find a
user-friendly vehicle for purchase of products. The online store has search
capability by price, name and type of scent. There is a reminder club that users
may register with to be reminded by e-mail 2 weeks before any birthday or
anniversary. The site was redesigned for the Christmas 2003 quarter and added
many additional user-friendly features including online tracking of products.

         Within seconds following every order placed with FragranceNet, the
Company sends an e-mail confirmation detailing all aspects of the customer's
order. The Company has available live customer service representatives to answer
questions a consumer may have either about their order or about a particular
fragrance.

         The Company has integrated over 85 suppliers into its business that
allows for availability of over 6,000 items on a daily basis and, due to the
many sources of merchandise, contributes to the high gross profit percentage
FragranceNet enjoys. The inventory is real time and can be adjusted many times
each day if necessary. Approximately 75% of sales is made with inventory
purchased in advance of sales and 25% of sales is made with inventory purchased
by the Company when a consumer buys it and has paid for it. Customer payment is
made by check or credit card and the goods are not shipped to the customer until
the check clears or authorization from the credit card company is obtained. A
small number of wholesale customers are on credit. Therefore, accounts
receivable balances represent payments due from credit card companies and
wholesale customers. The Company has provided an allowance for product returns,
which have been minimal. Certain accounts receivable are also from companies for
which FragranceNet does fulfillment. This past December 2003, the Company began
selling its fragrance products on Amazon.com.

         FragranceNet's online store provides its customers with superior
features, pricing and convenience. The online store offers consumers over 6,000
fragrances and related products.





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They are displayed in a framed format, which allows for easy and simple
navigation with one button click. There are special sections of the store
offering gift sets and specials, women's fragrances, men's fragrances, scented
candles, aromatherapy, hair care products and customer service. The online store
features the ability to search for any fragrance by name, price and/or type of
scent such as fruity, oriental and/or spicy. The online store features a simple
click of a button to add items to the customer's shopping cart and to check out
on a secure server. The site also permits the addition and subtraction of items
with a simple click of a button. When the customer is finished shopping,
clicking on the checkout button allows for easy checkout with the customer
having three options of payment. The customer can pay by credit card over a
secure server; they can fill out all information and send a check, or they can
call or fax their credit card information to customer service.

              Market Opportunity

         The worldwide fragrance market is estimated to be in excess of $20
billion of which approximately $6 billion are U.S. sales. Approximately five
percent of FragranceNet's sales for fiscal 2004 were to international customers.
However, there is no assurance the Company can maintain its market share.
FragranceNet is recognized as a market leader in the sale of fragrances over the
Internet.

              Strategy

         FragranceNet's strategy is based upon the belief that if you provide
brand-name fragrances and related products at discount prices and add to that
free U.S. shipping on orders over $60, and live customer service representatives
who are knowledgeable in the fragrance industry, the Company should be able to
continue to attract new customers and grow. The Company has added hair care
products to its online offerings in the belief that this product category would
require more frequent visits to the online store for replenishment than
fragrance products. Each such visit is an opportunity for the Company to market
to these frequently returning customers. FragranceNet believes there is strong
demand for its products, delivery system and discounts. The Company also
believes that it has the ability to combine its expertise in marketing, unique
supplier arrangements and overall strategy to become the most dominant player in
its marketplace. The same strategy is employed in the wholesale business.

              Partnerships

         FragranceNet is featured in major search engines, such as Yahoo!,
Google, Overture, AOL, Findwhat, BizRate, Shopping.com., Frugal, and MySimon. In
addition, the Company has established increased exposure through today's top
online communities and malls, including placements within Buy.com, Ebates and
MyPoints, and Upromise. The Company has fulfillment arrangements with other
sites and features it's products on Amazon.com.

              Competition

         FragranceNet's online store competes against a number of retailers
within different channels of distribution. Its competition includes (1)
traditional department stores and perfume retailers such as Macy's and
Bloomingdale's, (2) nationally known discount perfume retailers that seek to
purchase high-demand or limited-supply products, (3) websites maintained by
online retailers of fragrance and fragrance products, such as perfumania.com and
sephora.com (4) catalog retailers of fragrance and fragrance-related products,
(5) Internet portals and online





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service providers that feature shopping services, such as America Online,
Yahoo!, Excite and Lycos and (6) mass market retailers such as Wal-Mart.

         Online fragrance competitors include:

         (1)  Department stores' Websites;

         (2)  Specialty stores' Websites;

         (3)  Companies with little name recognition or, in many cases, little
              access to capital; and

         (4)  Mass merchandisers.

         Many department stores and mass merchandisers carry tens of thousands
of different items and the Company believes that it cannot compete favorably
with FragranceNet. The department stores (Bloomingdales, Macy's, Nordstrom, Saks
Fifth Avenue, etc.) and specialty stores sell products using full retail price
models. The e-tailers that are fragrance and beauty sites, such as sephora.com
are also full retail models and include cosmetics as a major component of their
product mix. FragranceNet believes that it has a rapidly emerging brand-name,
has established industry relationships, a convenient shopping experience, an
extensive product selection and competitively priced products.

              The Fragrance Industry. The traditional retail fragrance industry
is fragmented with different competitive strategies used throughout. The
industry includes upscale department stores that compete based not on price, but
on advertising and promotions, specialty retailers which compete based on
pricing, and mass-market retailers and drug stores which emphasize convenience
purchasing.

         Management believes that traditional fragrance retailers face a number
of challenges in providing a satisfying shopping experience for consumers:

              o  The number of SKUs and the amount of product inventory that a
                 traditional retailer can carry in a store is constrained by the
                 store's physical space, thereby limiting selection.

              o  Limited shelf space and store layout constraints limit the
                 merchandising flexibility of traditional retailers.

              o  Due to the significant costs of carrying inventory in multiple
                 store locations, traditional retailers focus their product
                 selection on the most popular products that produce the highest
                 inventory turns, thereby further limiting consumer selection.

         The unique characteristics of the Internet provide a number of
advantages for retail sellers. Online sellers are able to display a larger
number of products than traditional store-based or catalog sellers at a lower
cost. In addition, online sellers are able to frequently adjust their featured
selections, editorial content and pricing, providing significant merchandising
flexibility. Online sellers also benefit from the minimal cost to conduct
business on the Internet, the ability to reach a large group of customers from a
central location, and the potential for low-cost customer interaction. Unlike
traditional channels, online sellers do not have the burdensome





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costs of managing and maintaining a retail store infrastructure or the
significant printing and mailing costs of catalogs. Online sellers can also
easily obtain demographic and behavioral data about customers, increasing
opportunities for direct marketing and personalized services. Because brand
loyalty is a primary factor influencing a fragrance purchase, a customer's
presence at the point-of-sale and ability to physically sense the fragrance
product are not critical to the purchasing decision.

              Usage. The number of customers who visit the site has grown
consistently, increasing from 2,000 per month during 1997 to over 1.5 million
during the month of December 2003.

              Marketing and Advertising

         FragranceNet has established a variety of relationships with several
Internet sites to build traffic and attract customers, which is done on a cost
per click basis on search engines such as Overture, Google and Findwhat.
FragranceNet intends to expand its use of these kinds of alliances in the
future. FragranceNet strives to ensure that future alliances are cost-effective
in terms of the potential customers to be acquired, potential revenue to be
generated, level of exclusivity and brand exposure. FragranceNet sends e-mails
to its customers advising them of its promotions and other pricing specials for
their favorite fragrances. FragranceNet intends to continue to advertise in
whichever forms of media prove most effective.

              Fulfillment and Inventory Management

         FragranceNet offers over 6,000 fragrances and fragrance-related
products, which it believes is a wider selection of products than offered by
most traditional fragrance sellers. FragranceNet may obtain inventory directly
from any number of suppliers depending on which offers the most favorable
selection, pricing, quality and quantity terms. FragranceNet performs
fulfillment for third parties as an additional source of revenue and since
December 2003, features its products on Amazon.com.

              Technology

         FragranceNet uses an advanced software platform that allows it to grow
rapidly while providing reliable, secure and cost-effective e-commerce
solutions. Using a MY-SQL database, FragranceNet displays extensive data on its
over 6,000 brand-name fragrances. An application server dramatically improves a
Website's interactive characteristics by monitoring transactions, creating and
managing content published on the site and storing data, among other things.
This technology offers Web shoppers a host of leading-edge features, including
real time inventory updates, the reminder club system, an online shipping
calculator for orders originating outside the U.S., extensive product searching
options and electronic gift certificates and coupons. With MY-SQL, FragranceNet
has been able to enhance the store and expand its customer services enormously.
The MY-SQL platform provides FragranceNet with a level of stability, flexibility
and scalability, which provides major assistance in driving its current growth.
With a MY-SQL database FragranceNet displays a wealth of data for its 6,000
fragrances.

         Using its system, FragranceNet has taken steps to prevent the failure
of its mission-critical business applications. While no system is foolproof, the
Company has taken reasonable steps to provide a secure site. Routers, switches,
firewalls and servers associated with its Website are all deployed with backup
or stand-by components. The security architecture is specially designed and
built to deliver Web-enabled enterprise applications and ensures that





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customer information is protected and that transactions are conducted securely
over the Internet. The security architecture is a layered approach that
addresses security at every layer and ensures that the primary aspects of
security - confidentiality, integrity and availability -- are addressed and that
customer information is secure.

         FragranceNet uses its software package to fulfill orders and conduct
general business activities. Scanning technology is also used. The system will
print packing slips and shipping labels, and direct the fulfillment team to
conduct efficient product picking and packing. Once the order is fulfilled and
shipped, the database is updated with the new shipping status. The software
package is capable of very high scaling, allowing for growth. In summary,
management believes that FragranceNet's technology infrastructure provides the
highest customer-centric, complete and reliable shopping experience currently
available.

         Using FragranceNet's software package, orders are tracked and each
customer receives a unique identifying number. All aspects of the business are
conducted through computer programs that are backed up at least three times
daily. Scanning technology is used for inventory control and order shipping
information, which makes these processes more accurate and efficient. The system
automatically prints all purchase orders, packing lists and shipping labels. The
software packages used by FragranceNet are capable of running businesses much
larger with significant scalability.

         Credit cards are authorized and processed securely using Web Authorize
software. The authorizations are done in batches and upon each successful
authorization, the product is ordered from the suppliers or taken from inventory
and shipped to consumers.

              Employees

         As of March 31, 2004, FragranceNet employed 40 individuals and
considers its relationship with its employees to be excellent. None of
FragranceNet's employees are represented by unions. FragranceNet believes that
success is dependent on its ability to attract and retain qualified personnel in
numerous areas, including software development.



              Risk Factors Related to Fragrancenet's Business

         The management of FragranceNet is aware of the risk factors facing the
Company as it strives to grow from its current stage. In this regard, management
has carefully analyzed the risks facing FragranceNet in its efforts to achieve
the objectives as described herein and the steps it must take to lessen these
risks. An examination of these risk factors follows:

         MANAGEMENT OF GROWTH

         FragranceNet's success will depend on its ability to effectively manage
its future growth. As its sales continue to grow, it will incur increases in
expenses and its managerial and operational resources could become severely
strained. To manage its future growth effectively, it must do the following:

         o    implement its business model;

         o    anticipate and adapt to rapid changes in its markets;





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         o    retain existing customers, attract new customers and maintain
              customer satisfaction;

         o    introduce new and enhanced services, products and alliances;

         o    maintain its profit margins notwithstanding price competition or
              rising wholesale prices;

         o    minimize technical difficulties, system downtime and the effect of
              Internet brownouts; and

         o    manage the timing of promotions and sales programs.

         If FragranceNet does not effectively manage its future growth, its
revenues and operating results could be materially adversely affected and it
could fail to maintain profitability.

         RECRUITMENT AND RETENTION OF PROFESSIONALS

         FragranceNet's success depends on the expertise of its key technical,
sales and senior management personnel. FragranceNet's senior management has
approximately six years' experience operating and managing an online store
engaged in the sale of fragrance-related products. FragranceNet depends heavily
on the continuing service of its management and on their ability to retain
further expertise in all aspects of the business. The loss of Dennis Apfel,
Jason Apfel, Eric Apfel or other key employees would hurt the business.
FragranceNet anticipates hiring additional persons to serve on its management
team. Its success depends on its ability to continue to attract, retain and
motivate skilled employees who can effectively manage an online fragrance
business. FragranceNet may be unable to retain its present key employees or to
attract, assimilate or retain other qualified employees in the future. It may
experience difficulty in hiring and retaining skilled employees with appropriate
qualifications. The business will be harmed if FragranceNet fails to attract and
retain key employees.

         COMPETITION

         FragranceNet believes that its ability to compete depends upon many
factors, including:

         o    the market acceptance of its Website and online services;

         o    the success of its sales and marketing efforts;

         o    the performance and reliability of its services;

         o    the price of its products; and

         o    the effectiveness of its customer service and support efforts.

         FragranceNet's competitors may be larger and may have substantially
greater financial and marketing resources. In addition, its competitors may be
able to secure products from vendors on more favorable terms, fulfill customer
orders more efficiently and adopt more aggressive pricing or inventory
availability policies than we can. Traditional store-based retailers also enable
customers to see, feel, and smell products in a manner that is not possible over
the Internet. Some online competitors may be able to use the Internet as a
marketing medium to reach significant numbers of potential customers more
effectively than FragranceNet.





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         FragranceNet intends to maintain detailed awareness of all its
competitors, many of which are public companies with information readily
available. FragranceNet will strive to develop market share through its
marketing and sales plan, the development of enhanced services, an effective
pricing schedule, the continual outstanding quality and performance of its
services, and the professionalism and competency of its personnel. Management of
FragranceNet intends to make the mark, "FragranceNet", a nationally recognized
brand that will provide FragranceNet with a distinct competitive advantage.
However, there is no assurance that the mark will become nationally recognized.

         POTENTIAL FLUCTUATIONS IN QUARTERLY PERFORMANCE

         FragranceNet's revenues and operating results may vary significantly
from quarter to quarter due to a number of factors. Many of these factors are
outside of its control and include:

         o    seasonal fluctuations in consumer purchasing patterns and
              advertising expenses;

         o    changes in the growth rate of Internet usage and online user
              traffic levels;

         o    actions of competitors;

         o    the timing and amount of costs relating to the expansion of
              operations and acquisitions of technology or businesses; and

         o    general economic and market conditions.

         Because FragranceNet has a limited operating history, its future
revenues are difficult to forecast. A shortfall in revenues will damage its
business and would likely affect the market price of the Common Stock. Fragrance
sales are generally lower in the first half of each fiscal year and increase
substantially during the Christmas purchasing season and other holidays.
FragranceNet expects to experience similar seasonality in its business. It is
possible that in some future periods, results of operations may be below the
expectations of public market analysts and investors. In this event, the price
of the Common Stock may fall.

         To minimize quarterly fluctuations in operating results, FragranceNet
will attempt to (i) coordinate all service offerings between in-house personnel,
vendors and partners, (ii) maintain close awareness of all competitors' services
activities, (iii) use advisors, input from partners and customers to determine
sales status, (iv) closely monitor the performance level of all employees, (v)
constantly review the acceptability, demand and quality and type of the services
offered and (vi) rigidly adhere to a level of expenditures consistent with
ongoing sales.

         RAPID TECHNOLOGY CHANGE

         The Internet is changing very rapidly and the skills of FragranceNet
employees could become obsolete quickly. Success will depend, in part, on its
ability to improve its existing services, and develop new services and solutions
that address the increasingly sophisticated and varied needs of its current and
prospective customers. The Company must also respond to technological advances,
competitive service offerings, and emerging Internet standards and practices.

         DEPENDENCE ON OTHERS





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         FragranceNet is wholly reliant upon a number of third parties to
deliver goods and services to it and its customers. Unlike many other e-commerce
retail and wholesale businesses, it has no ability or resources to obtain or
deliver merchandise on its own. The business cannot operate unless carriers such
as the United States Postal Service, United Parcel Service, Airborne Express and
Federal Express deliver inventory and ship merchandise to customers. Strikes or
other service interruptions will affect FragranceNet more severely than an
e-commerce business with internal delivery capabilities. Those events would
impair our ability to deliver merchandise on a timely basis and may result in
lost revenue. FragranceNet and Internet users also depend on communications
providers to provide Internet users with access to FragranceNet's online store.
The store and its users would experience disruptions or interruptions in service
due to failures by these providers. These types of occurrences could cause users
to perceive the online store as not functioning properly and therefore cause
them to stop using FragranceNet's services. These risks pose a greater threat to
FragranceNet than to traditional "bricks and mortar" fragrance sellers whose
operations can continue despite a communications systems failure. Unlike those
competitors, FragranceNet is virtually certain to lose sales as a result of a
systems failure.

         FragranceNet's business depends on the ability of third-party vendors
to provide it with popular, high-demand fragrances at competitive prices and in
sufficient quantities. FragranceNet in fiscal 2004 purchased more than 80% of
its merchandise from 22 vendors. Many of the smaller suppliers used by
FragranceNet have limited resources, production capacities and operating
histories. FragranceNet's success depends on its ability to obtain products to
satisfy customer demand and the business could be harmed if the ability to
procure products were limited.

         ADEQUACY OF WORKING CAPITAL

         FragranceNet is expected to have sufficient capital to implement its
operating plan. However, FragranceNet may have to curtail some of its immediate
plans or attempt to obtain financing from other sources if expenses increase or
revenues decline. FragranceNet is in a highly competitive business that may
require additional capital for marketing, services development, human resources
and working capital in order to generate growth. In this regard, the expansion
of FragranceNet's business may depend on its ability to locate capital resources
to finance its working capital, additions to personnel and other requirements.
No assurance can be given that additional financing will be available to
FragranceNet at any time in the future, or that if financing is available at
all, it will be available on reasonable and satisfactory terms.

         NO ASSURANCE OF AVAILABILITY OF PERSONNEL

         FragranceNet is dependent upon its ability to attract and retain
qualified personnel. There is intense competition for qualified personnel in its
business. Although FragranceNet believes that such personnel will be available
and attainable at reasonable compensation levels, no assurance can be given that
FragranceNet will be able to attract and retain the qualified personnel
necessary for the development of our business.

         FUTURE GOVERNMENT REGULATIONS AFFECTING THE INTERNET

         With the exception of regulations applicable to businesses generally,
FragranceNet is not currently subject to direct regulation by any government
agency. Due to increasing popularity and use of the Internet, however, it is
possible in the future that a number of laws may be adopted with respect to the
Internet, covering issues such as user privacy, pricing of goods and services,
and types of products and services offered. One example of this is the





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Telecommunications Act of 1996. The Telecommunications Act prohibited the
transmission over the Internet of certain types of information. Although certain
provisions of the Telecommunications Act were held unconstitutional, similar
laws may be enacted in the future. Other nations, including Germany, have taken
similar actions to restrict the free flow of information deemed to be
objectionable on the Internet. Additionally, certain telecommunications carriers
continue to advocate that telecommunications over the Internet should be
regulated by the Federal Communications Commission in the same manner as other
telecommunications services. These telecommunications carriers want to see the
government eliminate the current exemption from payment of telecommunications
access charges for Internet service providers.

         If the government adopts any additional laws or regulations covering
the use of the Internet, such actions could decrease the growth of the Internet.
Any such reduction in the growth of the Internet may negatively impact the
customers that use our services. This could cause the demand for our services to
be significantly reduced and raise the cost of providing those services.
Decrease in growth could also result if existing U.S. state and federal laws and
foreign laws governing issues such as commerce, taxation, property ownership,
defamation and personal privacy are increasingly applied to the Internet.

         INTERNET SECURITY RISKS

         The secure transmission of confidential information over public
telecommunications facilities is a significant barrier to electronic commerce
and communications on the Internet. Many factors may cause compromises or
breaches of security systems used by the Company and other Internet sites to
protect proprietary information. A compromise of security on the Internet would
materially negatively affect the use of the Internet for commerce and
communications. This in turn would negatively affect our business. Circumvention
of FragranceNet's security measures could result in misappropriation of our
proprietary information or cause interruptions of FragranceNet's operations.
Protecting against the threat of such security breaches may require us to expend
significant amounts of capital and other resources. There can be no assurance
that FragranceNet's security measures will prevent security breaches.

         INFRASTRUCTURE OF THE INTERNET

         The success of commercial use of the Internet depends in large part
upon the development and maintenance of the Internet's infrastructure, including
the development of complementary products such as various broadband
technologies. The number of users of the Internet and the amount of traffic on
the Internet have grown significantly and are expected to continue to grow,
placing greater demands on the Internet's infrastructure. This infrastructure
may not be able to support the demands placed on it by this continued growth
without its performance or reliability being decreased. Any outages or delays in
services could lower the level of Internet usage. In addition, the
infrastructure and complementary products and services necessary to make the
Internet a viable commercial marketplace may not develop. If usage of the
Internet is curtailed due to infrastructure constraints or lack of complementary
products, FragranceNet expects an adverse impact on its business and revenues.
Even if such infrastructure and complementary products and services do develop,
there can be no guarantee that the Internet will become a viable commercial
marketplace for products and services such as those offered by FragranceNet.





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Item 2.       Properties

         FragranceNet's administration and warehouse facilities are located in
an 8,000 square foot facility in Hauppauge, New York. The lease for this
facility expires on May 31, 2006. The Company moved into this facility during
September 2000 and believes that it will be adequate for its current operations
and contemplated growth during this fiscal year.

Item 3.       Legal Proceedings

         FragranceNet is not a party to any material legal proceedings.

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

         None.







<PAGE>


                                     PART II

Item 5.       Market for Common Equity and Related Stockholder Matters

a.       Market Information

         The Company's Common Stock trades on the OTC Bulletin Board under the
symbol FRGN.

         The high and low bid prices for shares of Common Stock of the Company
for each quarter during the years ended March 31, 2004 and March 31, 2003 are as
follows:

                                                  Bid Price
                                             High            Low

         For the Quarter Ended

         March 31, 2004                       .52            .25
         December 31, 2003                    .30            .20
         September 30, 2003                   .25            .15
         June 30, 2003                        .20            .08

         March 31, 2003                       .16            .09
         December 31, 2002                    .25            .05
         September 30, 2002                   .15            .12
         June 30, 2002                        .44            .14

         The quotations represent interdealer quotations without retail mark-up,
mark-down or commission, and do not necessarily represent actual transactions.
The last reported sales price per share of the Company's Common Stock on March
31, 2004 was $.55.

b.       Number of Holders of Common Stock at March 31, 2004:

         Authorized Shares:                   50 million
         Shares Outstanding:                  17,468,330
         Number of holders of record          769
         of shares of Common Stock



              Dividends on Common Stock

         The Company did not pay any dividends to its stockholders in fiscal
2004 and does not anticipate paying any dividends in the foreseeable future.





<PAGE>


Item 6.       Management's Discussion and Analysis

         The following discussion may contain forward-looking statements. The
Company's actual results could differ materially from those discussed in such
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below and elsewhere in this Annual Report on
Form 10-KSB. The following discussion and analysis should be read in conjunction
with the Consolidated Financial Statements and the Notes thereto which appear
elsewhere in this Annual Report on Form 10-KSB.

         The Company sells brand name fragrances and related products over the
Internet through a Website located at www.fragrancenet.com. The Company
purchases products from over 85 different suppliers and 25% of the time does not
purchase the products until they are ordered and paid for by the consumer.
Payment in the case of retail sales is made by credit card or by check and goods
are not shipped to the customer until the check clears and/or authorization from
the credit card company is obtained. Approximately 75% of sales are made with
inventory purchased in advance of sales. A small number of wholesale customers
are on credit. Therefore, accounts receivable balances represent payments due
from credit card companies and wholesale customers

         Results of Operations


         FISCAL YEAR ENDED MARCH 31, 2004 COMPARED
         TO THE FISCAL YEAR ENDED MARCH 31, 2003

         Net sales. Net sales primarily includes the sale of our fragrances and
fragrance-related products, net of discounts, coupons and returns. Net sales for
the fiscal year ended March 31, 2004 were $14,705,427 and were $10,499,441 for
the year ended March 31, 2003. The increase resulted from a more effective
advertising campaign with lower prices which resulted in greater conversion of
sales from the visitors to the website.

         Cost of sales. Cost of sales consists primarily of the cost of
merchandise sold plus freight-in. Cost of sales for the fiscal year ended March
31, 2004 was $9,339,031. Cost of sales was $6,834,672 for the year ended March
31, 2003. The increase was due to greater sales volume and therefore greater
purchases.

         Gross profit. For the fiscal year ended March 31, 2004, gross profit
was $5,366,396 or 36% of net sales compared to gross profit of $3,664,769 or 35%
for fiscal 2003. The increase in gross profit percentage was primarily due to
better purchasing of products by the Company.

         Selling and marketing expenses. Selling and marketing expenses consist
of expenditures related to advertising and promotion and shipping. Selling and
marketing expenses for the fiscal year ended March 31, 2004 increased to
$2,520,123 from $1,703,963 for the 2003 fiscal year. The increase was due to
increased advertising by the Company on search engines and placing greater
emphasis on the affiliate program.

         General and administrative expenses. General and administrative
expenses consist of payroll and related expenses for executive, accounting and
administrative personnel, professional fees and other general corporate
expenses. General and administrative expenses for the fiscal year ended March
31, 2004 increased to $2,517,649 from $1,903,986 for fiscal 2003. The increase
was attributable to the general increase in expenses to support the increased
sales





<PAGE>


and future growth of the Company. The Company believes general and
administrative expenses will continue to increase in fiscal 2005, to support the
anticipated additional growth of the Company.

         Other income and expense. Interest expense decreased to $17,390 in
fiscal 2004 from $18,640 in fiscal 2003. Other income of $5,760 and $15,200 in
fiscal 2004 and 2003, respectively, consists primarily of sublease rental income
related to a portion of the Company's administrative and warehouse facility
rented to an entity in which the Chief Executive Officer is a partner.

         Net Income. As a result of the factors discussed above, the net income
for the fiscal year ended March 31, 2004 was $407,777 compared to $57,496 for
the 2003 fiscal year.

         Liquidity and Capital Resources

         At March 31, 2004, FragranceNet had cash and cash equivalents of
$678,251 compared to $355,251 at March 31, 2003.

         Net cash provided by operating activities was $480,747 for the fiscal
year ended March 31, 2004, compared to net cash used of $30,122 for the fiscal
year ended March 31, 2003. The increase was primarily due to the purchase of
inventory on credit in fiscal 2004.

         Net cash used in investing activities was $177,482 for the fiscal year
ended March 31, 2004, compared to $0 used for the fiscal year ended March 31,
2003. The Company believes capital expenditures in fiscal 2005 will be less than
the fiscal 2004 level. The expenditures in fiscal 2004 were primarily for the
up-grading of the website and software related to the up-grade.

         Net cash provided by financing activities was $19,735 for the year
ended March 31, 2004 compared to $4,068 used in the 2003 fiscal year.

         FragranceNet's principal capital and operating requirements are to
acquire merchandise, maintain and improve our online store and engage in
advertising and promotional activities. FragranceNet's long-term capital
requirements will depend on numerous factors, including, but not limited to, the
following:

         o    the rate of market acceptance of the online store;

         o    the ability to expand our customer base;

         o    the cost of upgrades to our online store; and

         o    the level of expenditures for sales and marketing.

         FragranceNet's principal capital requirements are to:

         o    Build up our technical infrastructure so that we can rapidly
              fulfill future customer requirements and increase our development
              efficiency;

         o    Continue to expand development of new technologies so that we can
              increase our competitiveness and gross margins;





<PAGE>


         o    Extend and intensify our marketing efforts so that we can achieve
              a leading position in the fragrance e-commerce industry and
              achieve our revenue growth objectives;

         o    Fund future strategic acquisitions, if any; and

         o    Provide working capital in order to achieve our business
              objectives.

         Off-Balance Sheet Arrangements

         None.

         New Accounting Pronouncements

         In January 2003 and amended in December 2003, the FASB issued
Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"),
an interpretation of Accounting Research Bulletin No. 51. FIN 46 expands upon
and strengthens existing accounting guidance that addresses when a company
should include in its financial statements the assets, liabilities and
activities of another entity. A variable interest entity is any legal structure
used for business purposes that either does not have equity investors with
voting rights or has equity investors that do not provide sufficient financial
resources for the entity to support its activities. FIN 46 requires a variable
interest entity to be consolidated by a company if that company is subject to a
majority of the risk of loss from the variable interest entity's activities or
entitled to receive a majority of the entity's residual returns or both. The
consolidation requirements of FIN 46 apply immediately to variable interest
entities created after January 31, 2003. For older entities, FIN 46 is
applicable to the first interim or annual reporting period ended after December
15, 2004. The effect of the adoption of this new accounting pronouncement is not
expected to have a significant impact on the Company's consolidated financial
statements.

         Seasonality

         FragranceNet's operations are expected to fluctuate according to the
retail industry's seasonalities.

         Impact of Inflation

         The primary inflationary factor affecting our operations is increased
labor costs. Competition for qualified personnel could increase labor costs for
the Company in the future.

Item 7.       Financial Statements.

         The consolidated financial statements for the Company are included in
this Annual Report on Form 10-KSB at pages F-1 to F-20.

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

         During the fiscal years ended March 31, 2004 and 2003, there were no
(i) disagreements between Marcum & Kleigman LLP and the Registrant on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of Marcum & Kleigman LLP, would have caused it to make a





<PAGE>


reference to the subject matter of the disagreement in connection with its
reports on the Registrant's financial statements, or (ii) "reportable events"
within the meaning of Item 304(a)(1)(v) of Regulation S-K promulgated under the
Securities Act of 1933, as amended.

Item 8A.      Controls and Procedures.

         Disclosure Controls and Procedures. As of the end of the registrant's
fiscal year ended March 31, 2004, an evaluation of the effectiveness of the
registrant's "disclosure controls and procedures" (as such term is defined in
Rules 13a-15(e) and 15d-15(e) of the Exchange Act) was carried out by the
registrant's principal executive officer and principal financial officer. Based
upon that evaluation, the registrant's principal executive officer and principal
financial officer has concluded that as of the end of that fiscal year, the
registrant's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the registrant in reports that it files
or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange Commission
rules and forms.

         It should be noted that while the registrant's principal executive
officer and principal financial officer believes that the registrant's
disclosure controls and procedures provide a reasonable level of assurance that
they are effective, they do not expect that the registrant's disclosure controls
and procedures or internal control over financial reporting will prevent all
errors and fraud. A control system, no matter how well conceived or operated,
can provide only reasonable, not absolute, assurance that the objectives of the
control system are met.

         Changes in Internal Control Over Financial Reporting. During the fiscal
year ended March 31, 2004, there were no changes in the registrant's internal
control over financial reporting that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control over
financial reporting.

                                    PART III

Item 9.       Directors and Executive Officers of the Registrant.

         The Directors and Executive Officers of FragranceNet are as follows:


Name                           Age    Position
----                           ---    --------

Dennis M. Apfel                58     Chairman of the Board of Directors, Chief
                                      Executive Officer and Chief Financial
                                      Officer

Jason S. Apfel                 31     President, Chief Operating Officer and
                                      Director

Eric J. Apfel                  29     Vice President, Secretary and Director


         Jason S. Apfel, age 31. Mr. Apfel has been President of the Company
since July 1999 and was Chief Executive Officer of the Company from July 1999 to
December 2002. He has been the Chief Operating Officer of the Company since
December 2002. He has been President of TeleScents since April 1998. Mr. Apfel
was Vice President of TeleScents from April 1997 to





<PAGE>


April 1998 and from 1995 to April 1997 he was Vice President of a predecessor
company of TeleScents which sold fragrances through a toll-free telephone
number.

         Dennis M. Apfel, age 58. Mr. Apfel has been Chairman of the Company
since May 14, 2001 and Chief Financial Officer since July 1999. He was President
and Chief Executive Officer of TeleScents from April 1997 to April 1998 and
Chairman and Chief Executive Officer of TeleScents from April 1998 to July 1999.
In December 2002, Mr. Apfel became Chief Executive Officer of the Company. Mr.
Apfel is a partner in the law firm of Miller & Apfel in Hauppauge, New York and
has been a practicing attorney since 1972.

         Eric J. Apfel, age 29. Mr. Apfel joined the Company during fiscal year
2003. He is presently Vice-President and Secretary of the Company. From July
1998 to November 2001, prior to joining FragranceNet.com, he was a research
analyst covering Food, Beverage and Media companies at Dresdner Kleinwort
Wasserstein. From July 1997 to June 1998, Mr. Apfel was an Associate Portfolio
Manager at Sanford C.Bernstein & Co. Mr. Apfel is a Chartered Financial Analyst.

         During the fiscal year ended March 31, 2004, the Board of Directors of
the Company met one time, on August 14, 2003. All of the directors attended such
meeting of the Board of Directors. The Board of Directors does not have an audit
committee or any other committees and does not have an audit committee financial
expert.

         Dennis Apfel and Jason Apfel are father and son; Dennis Apfel and Eric
Apfel are father and son; and Jason Apfel and Eric Apfel are brothers.

Section 16(a) Beneficial Ownership Reporting Compliance

         Under Section 16(a) of the Securities Exchange Act of 1934, directors
and officers of the Company, and persons who own more than ten percent of the
Common Stock, are required to file reports concerning their beneficial ownership
of securities of the Company with the Securities and Exchange Commission.
Directors, officers and greater than ten percent stockholders are required by
regulations of the Commission to furnish the Company with copies of all Section
16(a) reports they file.

         To the Company's knowledge, based solely on a review of copies of such
reports furnished to the Company and confirmations that no other reports were
required during the fiscal year ended March 31, 2004, its directors, officers
and greater than ten percent stockholders complied with all Section 16(a) filing
requirements.

Item 10.      Executive Compensation

         The following table sets forth information for the fiscal years ended
March 31, 2004 and 2003 concerning the compensation of the Chief Executive
Officer of the Company, and the three other most highly compensated executive
officers of the Company whose total annual salary and bonus exceeded $100,000.





<PAGE>


                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
                                       Annual Compensation                             Long-Term Compensation
--------------------------------------------------------------------------------------------------------------------------------
                                                                                   Awards               Payouts
--------------------------------------------------------------------------------------------------------------------------------
                                                               Other                      Securities
                                                               Annual     Restricted      Underlying                  All Other
  Name and Principal                                           Compen-       Stock         Options/       LTIP         Compen-
        Position             Year      Salary      Bonus       sation       Award(s)         SARs        Payouts       sation
--------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------
<S>                          <C>      <C>         <C>           <C>            <C>            <C>          <C>           <C>
Jason S. Apfel
  Chief Operating
  Officer (1)                2004     $290,000    $40,000        -              -              -            -             -
--------------------------------------------------------------------------------------------------------------------------------
                             2003     $250,000     50,000        -              -              -            -             -
--------------------------------------------------------------------------------------------------------------------------------
                             2002     $250,000       -           -              -              -            -             -
--------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------
Dennis M. Apfel
  Chairman of the Board,
  Chief Executive
  Officer Chief
  Financial Officer and
  Vice President (2)         2004     $175,000    $40,000        -              -              -            -             -
--------------------------------------------------------------------------------------------------------------------------------
                             2003     $125,000     25,000        -              -              -            -             -
--------------------------------------------------------------------------------------------------------------------------------
                             2002     $125,000       -           -              -              -            -             -
--------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------
Eric J. Apfel
Vice President and
Secretary (3)                2004     $132,250    $40,000        -              -              -            -             -
--------------------------------------------------------------------------------------------------------------------------------
                             2003     $104,000       -           -         $50,000 (4)         -            -             -
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)    Jason Apfel was Chief Executive Officer of the Company until December
       2002, when he became Chief Operating Officer.
(2)    Dennis Apfel became Chief Executive Officer of the Company in December
       2002.
(3)    Eric Apfel joined the Company during the 2003 fiscal year.
(4)    Restricted stock award consisting of 500,000 shares of Common Stock, of
       which 333,333 shares became vested in January 2003 and 166,667 shares
       became vested in January 2004.

         None of the persons named above were granted options for Common Stock
during the fiscal year ended March 31, 2004.

         Employment Agreements with Executive Officers

         In August 2003, the Company entered into employment agreements with its
Chief Executive Officer, Chief Operating Officer and Vice President that include
annual base salaries of $175,000, $290,000 and $125,000, respectively. In
January 2004, the annual base salary of the Vice President was increased to
$175,000. In addition, each executive is entitled to an incentive bonus equal to
one percent (1%) of the Company's sales in excess of target sales, as defined.
For the fiscal year ending March 31, 2004, target sales are $10,000,000. The
base salaries identified above shall be increased annually by an amount equal to
the incentive bonuses earned by the executives in the prior fiscal year. These
employment agreements terminate upon the executive's separation from the Company
at which time certain amounts may be paid, as defined, to the executive or
designated beneficiaries. In addition, upon termination of the Chief Executive
Officers' Employment Agreement, the Company will be obligated to that executive





<PAGE>


under a Consulting Agreement for a period of ten (10) years. Annual compensation
under the Consulting Agreement shall be equal to the sum of 75% of the
executive's highest rate of salary with the Company in effect during the
one-year period ending on the date of termination plus 50% of the executive's
average incentive bonus with respect to the last five (5) completed fiscal years
of the Company preceding the date of termination, payable in equal monthly
installments in advance on the first day of each month during the consulting
period.

         Compensation of Directors

         The Company does not pay its directors any fees. Any future directors
will be paid as determined by the Board.

         Compensation Committee
         Interlocks and Insider Participation

         The Board of Directors of the Company does not have a Compensation
Committee. Compensation decisions are made by the Board of Directors, with each
of Dennis M. Apfel, Jason Apfel and Eric J. Apfel abstaining on decisions
relating to his compensation.


Item 11.      Security Ownership of Certain Beneficial Owners and Management and
              Related Stockholder Matters

         The stockholders (including any "group," as that term is used in
Section 13(d)(3) of the Exchange Act) who, to the knowledge of the Board of
Directors of the Company beneficially owned more than five percent of the Common
Stock as of March 31, 2004, and their respective shareholdings as of such date
(according to information furnished by them to the Company), are set forth in
the following table. Except as indicated in the footnotes to the table, all of
such shares are owned with sole voting and investment power.

                                     Shares of Common Stock
     Name and Address                  Owned Beneficially      Percent of Class
---------------------------------    ----------------------    ----------------
Jason S. Apfel                              4,559,390              26%
909 Motor Parkway
Hauppauge, New York 11788

Dennis M. Apfel                             6,076,360              35%
909 Motor Parkway
Hauppauge, New York 11788

Philip D. Gunn                              2,316,913              13%
c/o Growth Capital Partners, Inc.
520 Madison Avenue
New York, New York 10022

Theodore V. Buerger                         1,855,475              11%
394 Bedford Road
Pleasantville, New York


         The following table sets forth, as of March 31, 2004, the number of
shares of Common Stock of the Company beneficially owned by each of the





<PAGE>


Company's directors, each of the Company's executive officers named in the
Summary Compensation Table, and all directors and executive officers as a group,
based upon information provided by such persons to the Company.

                                     Shares of Common Stock
     Name and Address                  Owned Beneficially      Percent of Class
---------------------------------    ----------------------    ----------------
Jason S. Apfel                              4,559,390                 26%
President, Chief Operating Officer
and Director

Dennis M. Apfel                             6,076,360                 35%
Chairman of the Board, Chief
Executive Officer, Chief Financial
Officer and Director

Eric J. Apfel                               508,000                    3%
Vice President, Secretary and
Director

All directors and executive officers as     11,143,750                64%
a group


         The following table sets forth information, as of March 31, 2004, with
respect to compensation plans (including individual compensation arrangements)
under which equity securities of the registrant are authorized for issuance:


                         EQUITY COMPENSATION INFORMATION
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------

March 31, 2003                            (a)                        (b)                        (c)

Plan category                   Number of securities to       Weighted-average         Number of securities
                                be issued upon exercise       exercise price of       remaining available for
                                of outstanding options,     outstanding options,       future issuance under
                                  warrants and rights        warrants and rights     equity compensation plans
                                                                                       (excluding securities
                                                                                      reflected in column (a))
<S>                                    <C>                         <C>                       <C>

Equity compensation plans
approved by security                   500,000 (1)                   N/A
holders                                 20,000 (2)                  $.40                      980,000
                                -----------------------     --------------------     -------------------------

Equity compensation plans
not approved by security
holders                                   -0-                        -0-                        -0-
--------------------------      -----------------------     --------------------     -------------------------

Total                                  520,000                      $.40                      980,000
                                -----------------------     --------------------     -------------------------

</TABLE>
(1)    Restricted Stock Award
(2)    Options





<PAGE>


Item 12.      Certain Relationships and Related Transactions

         None.

Item 13.      Exhibits and Reports on Form 8-K

         (a)  Exhibits:

              2.1    Agreement and Plan of Merger dated as of July 28, 1999 by
                     and among National Capital Management Corporation, FAC,
                     Inc., Telescents, Inc., and Dennis M. Apfel, Jason Apfel
                     and Growth Capital Partners, L.L.C. (Incorporated herein by
                     reference to Exhibit 2.1 of the Company's Current Report on
                     Form 8-K filed on August 10, 1999).

              3.1    Articles of Incorporation and By-Laws of the Company
                     (Incorporated herein by reference from Schedule 4 to the
                     prospectus included in the Registration Statement on Form
                     S-4 of the Company (No. 33-19149) filed on December 18,
                     1987).

              3.2    Certificate of Amendment dated June 29, 1995 of Certificate
                     of Incorporation implementing a one-for-three reverse stock
                     split (Incorporated herein by reference to Exhibit 3.2 of
                     the Company's Annual Report on Form 10-KSB filed on April
                     15, 1999).

              3.3    Certificate of Amendment of Certificate of Incorporation
                     (Incorporated herein by reference to Exhibit 3.4 of the
                     Company's Current Report on Form 8-K filed on November 30,
                     1999).

              3.4    Certificate of Designations of Series A Preferred Stock
                     (Incorporated herein by reference to Exhibit 4.1 of the
                     Company's Current Report on Form 8-K filed on August 10,
                     1999).

              3.5   Resolution of Board of Directors dated April 12, 1995
                     amending the By-Laws (Incorporated herein by reference to
                     Exhibit 3(ii).1 of the Annual Report on Form 10-K of the
                     Company filed on April 17, 1995).

              10.1   Agreement regarding Certain Closing and Post Closing
                     Matters dated as of July 28, 1999 (Incorporated herein by
                     reference to Exhibit 10.1 to the Company's Current Report
                     on Form 8-K filed on August 10, 1999).

              10.2   Stock Purchase Agreement dated as of June 29, 1999 by and
                     among National Capital Management Corporation and Resource
                     Holdings Associates (Incorporated herein by reference to
                     Exhibit 2.1 to the Company's Current Report on Form 8-K
                     filed on July 20, 1999).

              10.3   Employment Agreement dated August 1, 2003 between the
                     Company and Jason Apfel (Incorporated herein by reference
                     to Exhibit 10.3 to the Company's Quarterly Report on Form
                     10-QSB filed on November 13, 2003).+





<PAGE>


              10.4   Employment Agreement dated August 1, 2003 between the
                     Company and Dennis M. Apfel (Incorporated herein by
                     reference to Exhibit 10.1 to the Company's Quarterly Report
                     on Form 10-QSB filed on November 13, 2003).+

              10.5   Employment Agreement dated August 1, 2003 between the
                     Company and Eric J. Apfel (Incorporated herein by reference
                     to Exhibit 10.2 to the Company's Quarterly Report on Form
                     10-QSB filed on November 13, 2003).+

              10.6   FragranceNet.com Inc. 1999 Long Term Incentive Plan
                     (Incorporated herein by reference to Exhibit A of the
                     Company's Proxy Statement filed on October 20, 1999).

              21.1   List of Subsidiaries*

              31.1*  Rule 13a-14(a)/15d-14(a) Certification

              32.1*  Section 1350 Certification
              --------------
              *     Included with this Annual Report on Form 10-KSB.
              +     Management Contract or Compensatory Plan



         (b) Current Reports on Form 8-K:

              None.

Item 14.      Principal Accountant Fees and Services

         The following table provides information about the fees billed to the
registrant for professional services rendered by Marcum & Kliegman LLP ("M&K")
during the fiscal years of the Company ending March 31, 2003 and March 31, 2004:

------------------------------------------------------------------------
                             Fiscal 2003              Fiscal 2004
------------------------------------------------------------------------
Audit Fees(1)                  $36,128                  $46,500
------------------------------------------------------------------------
Audit-Related Fees                  --                       --
------------------------------------------------------------------------
Tax Fees                            --                       --
------------------------------------------------------------------------
All Other Fees                      --                       --
------------------------------------------------------------------------
Total                          $36,128                  $46,500
========================================================================

(1)     Audit fees consist of aggregate fees billed for professional services
        rendered for the audit of our annual financial statements and review of
        the interim financial statements included in quarterly reports or
        services that are normally provided by the independent registered public
        accounting firm in connection with statutory and regulatory filings or
        engagements for the fiscal years ended March 31, 2003 and 2004.





<PAGE>


Pre-Approval Policies and Procedures.

         Before M&K was engaged by the Company to render audit or non-audit
services, the engagement was approved by the Board of Directors of the Company.






<PAGE>


                                   SIGNATURES

         In accordance with the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

         Dated:  June 28, 2004

                                        FRAGRANCENET.COM, INC.


                                        By /s/ Dennis M. Apfel
                                        ---------------------------------------
                                           Dennis M. Apfel
                                           Chief Executive Officer


                                POWER OF ATTORNEY

         The Registrant and each person whose signature appears below hereby
appoint each of Jason S. Apfel and Dennis M. Apfel as attorneys-in-fact with
full power of substitution, severally, to execute in the name and on behalf of
the Registrant and each such person, individually and in each capacity stated
below, one or more amendments to this Annual Report on Form 10-KSB, which
amendments may make such changes in this Report as the attorney-in-fact acting
in the premises deems appropriate and to file any such amendment to this Report
with the Securities and Exchange Commission.

         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.


Dated:   June 28, 2004                 By /s/Dennis M. Apfel
                                          -------------------------------------
                                          Dennis M. Apfel
                                          Chairman of the Board, Director,
                                          Chief Executive Officer, Chief
                                          Financial Officer and Principal
                                          Accounting Officer

Dated:   June 28, 2004                 By /s/Jason S. Apfel
                                          -------------------------------------
                                          Jason S. Apfel
                                          President, Chief Operating Officer
                                          and Director

Dated:   June 28, 2004                 By /s/Eric J. Apfel
                                          -------------------------------------
                                          Eric J. Apfel
                                          Vice President, Secretary and Director





<PAGE>



                                         FRAGRANCENET.COM, INC. AND SUBSIDIARIES

                                      Index to Consolidated Financial Statements
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                                                                                              Page
                                                                                              ----
<S>                                                                                              <C>
   REPORT OF INDEPENDENT REGISTERED
    PUBLIC ACCOUNTING FIRM                                                                     F-1


   FINANCIAL STATEMENTS

     Consolidated Balance Sheets as of March 31, 2004 and 2003                           F-2 - F-3
     Consolidated Statements of Income for the years ended
       March 31, 2004 and 2003                                                                 F-4
     Consolidated Statements of Stockholders' Equity for the
      years ended March 31, 2004 and 2003                                                      F-5
     Consolidated Statements of Cash Flows for the years ended
      March 31, 2004 and 2003                                                            F-6 - F-7


   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                           F-8 - F-19

</TABLE>








<PAGE>






                        REPORT OF INDEPENDENT REGISTERED
                             PUBLIC ACCOUNTING FIRM


The Board of Directors and Stockholders
FragranceNet.com, Inc.:


We have audited the accompanying consolidated balance sheets of
FragranceNet.com, Inc. and Subsidiaries (the "Company") as of March 31, 2004 and
2003 and the related consolidated statements of income, stockholders' equity and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
FragranceNet.com, Inc. and Subsidiaries as of March 31, 2004 and 2003, and the
results of their consolidated operations and their consolidated cash flows for
the years then ended in conformity with accounting principles generally accepted
in the United States of America.

                                                           Marcum & Kliegman LLP

June 4, 2004
Woodbury, New York



                                                                             F-1









<PAGE>




                                         FRAGRANCENET.COM, INC. AND SUBSIDIARIES

                                                     CONSOLIDATED BALANCE SHEETS

                                                         March 31, 2004 and 2003
--------------------------------------------------------------------------------


                                     ASSETS

<TABLE>
<CAPTION>

                                                                                          2004              2003
                                                                                       ---------------------------
<S>                                                                                     <C>               <C>
       CURRENT ASSETS
       Cash and cash equivalents                                                        $ 678,251         $ 355,251
       Accounts receivable, net of allowance for returns
         of $1,000 for both 2004 and 2003                                                 273,135           142,001

       Inventory                                                                          818,837           256,303
       Deferred tax asset                                                                 163,800                --
       Prepaid expenses and other current assets                                           54,574            19,770
                                                                                      -----------         ---------

       TOTAL CURRENT ASSETS                                                             1,988,597           773,325

       PROPERTY AND EQUIPMENT, Net                                                        147,170            44,767


       INTANGIBLE ASSET, Net                                                                4,875             5,375

       OTHER ASSETS                                                                        23,658            23,658
                                                                                      -----------         ---------

       TOTAL ASSETS                                                                   $ 2,164,300         $ 847,125
                                                                                      ===========         =========

</TABLE>



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


                                                                             F-2




<PAGE>




                                         FRAGRANCENET.COM, INC. AND SUBSIDIARIES

                                                     CONSOLIDATED BALANCE SHEETS

                                                         March 31, 2004 and 2003
--------------------------------------------------------------------------------



<TABLE>
<CAPTION>

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                                                                                         2004              2003
                                                                                       -----------------------------
<S>                                                                                    <C>                <C>
   CURRENT LIABILITIES
   Accounts payable                                                                    $  752,781         $ 213,558
   Accrued expenses                                                                       691,776           452,596
   Income taxes payable                                                                    72,850                --
   Current portion - long term debt                                                         8,367                --
   Deferred revenue                                                                        78,531            49,108
   Obligation under capital lease                                                              --             3,613
                                                                                       ----------         ---------

   TOTAL CURRENT LIABILITIES                                                            1,604,305           718,875

   Long-term debt                                                                          14,981                --
   Other liabilities                                                                        1,062             6,498
                                                                                       ----------         ---------

   TOTAL LIABILITIES                                                                    1,620,348           725,373
                                                                                       ----------         ---------

   COMMITMENTS

   STOCKHOLDERS' EQUITY
   Convertible Series A preferred stock - par value $.01;
     3,000,000 shares authorized, none issued                                                  --                --
   Common stock - par value $.01; 50,000,000 shares authorized;
     17,468,330 shares issued and outstanding, for both
     2004 and 2003                                                                        174,683           174,683
   Additional paid-in capital                                                             413,020           413,020
   Unearned compensation                                                                       --           (14,423)
   Accumulated deficit                                                                    (43,751)         (451,528)
                                                                                       ----------         ---------

   TOTAL STOCKHOLDERS' EQUITY                                                             543,952           121,752
                                                                                       ----------         ---------

   TOTAL LIABILITIES AND
   STOCKHOLDERS' EQUITY                                                                $2,164,300         $ 847,125
                                                                                       ==========         =========
</TABLE>




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


                                                                             F-3




<PAGE>




                                         FRAGRANCENET.COM, INC. AND SUBSIDIARIES

                                               CONSOLIDATED STATEMENTS OF INCOME

                                     For the Years Ended March 31, 2004 and 2003
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                                                                                          2004              2003
                                                                                      -------------------------------
<S>                                                                                   <C>                <C>
   NET SALES                                                                          $14,705,427        $10,499,441
                                                                                       ----------         ----------

   COST OF SALES                                                                        9,339,031          6,834,672
                                                                                       ----------         ----------

   GROSS PROFIT                                                                         5,366,396          3,664,769
                                                                                       ----------         ----------

   OPERATING EXPENSES
   Selling and marketing                                                                2,520,123          1,703,963
   General and administrative                                                           2,517,649          1,903,986
                                                                                       ----------         ----------

   TOTAL OPERATING EXPENSES                                                             5,037,772          3,607,949
                                                                                       ----------         ----------

   INCOME FROM OPERATIONS                                                                 328,624             56,820

   OTHER INCOME (EXPENSE)
   Interest expense                                                                       (17,390)           (18,640)
   Interest income                                                                          1,483              4,116
   Other income                                                                             5,760             15,200
                                                                                       ----------         ----------

   INCOME BEFORE INCOME TAX BENEFIT                                                       318,477             57,496

   INCOME TAX BENEFIT                                                                     (89,300)                --
                                                                                       ----------         ----------

         NET INCOME                                                                    $  407,777         $   57,496
                                                                                       ==========         ==========

         Basic and diluted net income per share                                            $0.02              $0.00
                                                                                           =====              =====

         Weighted average number of common shares outstanding                          17,468,330         17,116,556
                                                                                       ==========         ==========
</TABLE>







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


                                                                             F-4




<PAGE>





                                         FRAGRANCENET.COM, INC. AND SUBSIDIARIES

                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                     For the Years Ended March 31, 2004 and 2003
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                           Additional
                                    Common Stock             paid-in        Unearned      Accumulated
                                 Shares        Amount        Capital      Compensation      Deficit           Total
                            -------------------------------------------------------------------------------------------
<S>                             <C>            <C>           <C>             <C>            <C>              <C>
BALANCE -
 April 1, 2002                  16,968,330     $169,683      $368,020        $      --      $(509,024)       $ 28,679

Common stock issued
   for services                    500,000        5,000        45,000          (14,423)            --          35,577

Net Income                              --           --            --               --         57,496          57,496
                                ----------     --------     ---------         ---------      --------        --------
BALANCE -
 March 31, 2003                 17,468,330      174,683       413,020          (14,423)      (451,528)        121,752

  Amortization of stock
   issued for services                  --           --            --           14,423             --          14,423

Net Income                              --           --            --               --        407,777         407,777
                                ----------     --------     ---------         ---------      --------        --------

BALANCE -
 March 31, 2004                 17,468,330     $174,683      $413,020         $     --      $ (43,751)       $543,952
                                ==========     ========      ========         ==========     =========       =========

</TABLE>






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


                                                                             F-5




<PAGE>



                                         FRAGRANCENET.COM, INC. AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS

                                     For the Years Ended March 31, 2004 and 2003
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                                                                                          2004             2003
                                                                                        ---------        ---------
<S>                                                                                     <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
 Net income                                                                             $ 407,777        $  57,496
                                                                                        ---------        ---------
  Adjustments to reconcile net income to net cash provided by
   (used in) operating activities:
    Depreciation and amortization                                                          75,579           58,892
    Non-cash stock compensation expense                                                    14,423           35,577
    Deferred income taxes                                                                (163,800)              --
  Changes in operating assets and liabilities:
    Accounts receivable                                                                  (131,134)         (78,885)
    Inventory                                                                            (562,534)        (178,153)
    Prepaid expenses and other current assets                                             (34,804)          53,167
    Accounts payable, accrued expenses and other liabilities                              772,967            8,458
    Income taxes payable                                                                   72,850               --
    Deferred revenue                                                                       29,423           13,326
                                                                                        ---------        ---------

       TOTAL ADJUSTMENTS                                                                   72,970          (87,618)
                                                                                        ---------        ---------

       NET CASH PROVIDED BY (USED IN) OPERATING
        ACTIVITIES                                                                        480,747          (30,122)
                                                                                        ---------        ---------

CASH FLOWS USED IN INVESTING ACTIVITIES
  Expenditures for property and equipment                                                (177,482)              --
                                                                                        ---------        ---------

CASH FLOWS FROM FINANCING ACTIVITIES
  Principal repayments of capital lease obligation                                         (3,613)          (4,068)
  Proceed from long-term debt                                                              26,000               --
  Principal repayments of long-term debt                                                   (2,652)              --
                                                                                        ---------        ---------

       NET CASH PROVIDED BY (USED IN) INVESTING
        ACTIVITIES                                                                         19,735           (4,068)
                                                                                        ---------        ---------

       NET INCREASE (DECREASE) IN CASH AND
        CASH EQUIVALENTS                                                                  323,000          (34,190)

CASH AND CASH EQUIVALENTS - Beginning                                                     355,251          389,441
                                                                                        ---------        ---------

CASH AND CASH EQUIVALENTS - Ending                                                       $678,251         $355,251
                                                                                        =========        =========
</TABLE>






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


                                                                             F-6




<PAGE>




                                         FRAGRANCENET.COM, INC. AND SUBSIDIARIES

                                CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued

                                     For the Years Ended March 31, 2004 and 2003
--------------------------------------------------------------------------------





SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>

                                                                                           2004            2003
                                                                                        -------------------------
<S>                                                                                      <C>               <C>
       Cash paid during the year for interest                                            $15,589           $5,874
       Cash paid during the year for income taxes                                        $ 1,650           $  581

</TABLE>





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


                                                                             F-7




<PAGE>




                     FRAGRANCENET.COM, INC. AND SUBSIDIARIES

                        NOTES TO CONSOLIDATED STATEMENTS


NOTE 1 - Nature of Business

       FragranceNet.com, Inc. (the "Company") is primarily engaged in the retail
       sale of brand name fragrances and related products over the Internet.
       During fiscal 2003, the Company began selling its products on a wholesale
       basis, over the internet. Retail and wholesale customers normally utilize
       the Company's internet site to identify product pricing and place orders.
       The Company processes sale orders from retail and wholesale customers in
       a similar manner.

NOTE 2 - Summary of Significant Accounting Policies

       Basis of Presentation and Consolidation

       The accompanying consolidated financial statements include the accounts
       of FragranceNet Wholesales, Inc., a wholly owned subsidiary of the
       Company that was incorporated on March 14, 2002.

       The consolidated financial statements include the accounts of
       FragranceNet.com, Inc. and its subsidiaries. All significant intercompany
       transactions and balances have been eliminated in consolidation.

       Cash and Cash Equivalents

       The Company considers all highly liquid investments purchased with
       original maturities of three months or less to be cash equivalents.

       The Company has cash deposits in the bank in excess of the maximum amount
       insured by the FDIC at March 31, 2004 and 2003.

       Accounts Receivable

       Accounts receivable have been adjusted for all known uncollectible
       accounts. An allowance for doubtful accounts is not provided since, in
       the opinion of management, all accounts recorded on the books are deemed
       collectible.

       Revenue Recognition

       The Company recognizes revenue from product sales, net of any discounts
       and coupons, when the products are shipped to customers. The Company
       provides an allowance for sales returns. Revenue from the sale of gift
       certificates is deferred until the gift certificates are redeemed. The
       Company does not charge its customers for shipping if the total sale
       price exceeds a certain threshold. Shipping costs are included in selling
       and marketing expenses in the consolidated statements of income. Outbound
       shipping costs for the shipment of product to customers amounted to
       $1,110,539 and $758,244 for the years ended March 31, 2004 and 2003,
       respectively.

                                                                            F-8



<PAGE>



NOTE 2 - Summary of Significant Accounting Policies, continued

       The Company follows the provisions of EITF No. 00-14, "Accounting for
       Sales Incentives," and reflects its sales incentives as a reduction of
       sales.

       Inventory

       Inventory consists of fragrance products in retail packaging and is
       stated at the lower of cost or market. Cost is determined by using the
       first-in, first-out method and market represents the lower of replacement
       cost or estimated net realizable value.

       Property and Equipment

       Property and equipment are stated at cost. Depreciation of property and
       equipment is calculated on a straight-line basis over the estimated
       useful lives of the related assets as follows:

              Computer and office equipment                      5-7 years
              Computer software                                    3 years
              Vehicles                                             5 years
              Website                                              3 years

       Website Development Costs

       The Company capitalizes website development costs in accordance with the
       provisions of Emerging Issues Task Force ("EITF") No. 00-2, Accounting
       for Website Development Costs. Capitalized costs are amortized on a
       straight-line basis over the useful life of the website once it is
       available for use.

       Intangible Asset

       The intangible asset consists of a purchased trade name that is amortized
       on a straight-line basis over its expected useful life of fifteen years.

       Income Taxes

       The Company accounts for income taxes using the liability method. The
       liability method requires the determination of deferred tax assets and
       liabilities based on the differences between the financial statement and
       income tax bases of assets and liabilities, using enacted tax rates.
       Additionally, net deferred tax assets are adjusted by a valuation
       allowance if, based on the weight of available evidence, it is more
       likely than not that some portion or all of the net deferred tax assets
       will not be realized. Income tax expense consists of the tax payable for
       the period and the change during the period in deferred tax assets and
       liabilities.

       Earnings Per Share

       Basic earnings per share is computed by dividing net income by the
       weighted average number of shares of common stock outstanding during the
       period. Diluted earnings per share reflects the amount of earnings for
       the period available to each share of common stock outstanding during the
       reporting period, giving effect to all potentially dilutive shares of
       common stock from the potential exercise of stock options and warrants.



                                                                             F-9




<PAGE>






NOTE 2 - Summary of Significant Accounting Policies, continued

       Earnings Per Share, continued

       The dilutive effect of outstanding options and warrants and their
       equivalents are reflected in dilutive earnings per share by the
       application of the treasury stock method. Options and warrants will have
       a dilutive effect only when the average market price of the common stock
       during the period exceeds the exercise price of the options or warrants.
       The Company had 20,000 potentially dilutive options and warrants
       outstanding during the years ended March 2004 and 2003, respectively,
       that have not been considered in the computation of diluted earnings per
       share since the effect of their inclusion would be anti-dilutive.

       Stock Options and Similar Equity Instruments

       At March 31, 2004, the Company had one stock-based employee plan, which
       is described more fully in Note 8. As permitted under Statement of
       Financial Accounting Standards ("SFAS") No. 148, "Accounting for
       Stock-Based Compensation - Transition and Disclosure," which amended SFAS
       No. 123, "Accounting for Stock-Based Compensation," the Company has
       elected to continue to follow the intrinsic value method in accounting
       for its stock-based employee compensation arrangements as defined by
       Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock
       Issued to Employees," and related interpretations including Financial
       Accounting Standards Board ("FASB") Interpretation No. 44, "Accounting
       for Certain Transactions Involving Stock Compensation," an interpretation
       of APB No. 25. No stock-based employee compensation cost is reflected in
       operations, as all options granted under those plans have an exercise
       price equal to the market value of the underlying common stock on the
       date of grant. The only options outstanding were granted and vested in
       fiscal 2000. Accordingly, pro forma financial information for fiscal 2004
       and 2003 is not required.

       Fair Value of Financial Instruments

       The fair value of financial instruments is determined by reference to
       market data and other valuation techniques as appropriate. The Company
       believes the fair value of its financial instruments at March 31, 2004
       and 2003, principally cash and cash equivalents, accounts receivable,
       accounts payable and accrued expenses, approximates their recorded values
       due to the short-term nature of the instruments.

       Impairment of Long-lived Assets

       Long-lived assets and certain identifiable intangibles are reviewed for
       impairment whenever events or changes in circumstances indicate that the
       carrying amount of an asset may not be fully recoverable. Recoverability
       of assets to be held and used is measured by a comparison of the carrying
       amount of an asset to future undiscounted net cash flows expected to be
       generated by the asset. If such assets are considered to be impaired, the
       impairment charge to be recognized is measured by the amount which the
       carrying amount of the assets exceeds the fair value of the assets.




                                                                           F-10




<PAGE>








NOTE 2 - Summary of Significant Accounting Policies, continued

       Advertising Costs

       Advertising costs are expensed as incurred. Advertising costs
       approximated $990,000 and $652,000 for the years ended March 31, 2004 and
       2003, respectively.

       Use of Estimates

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

       Commitments and Contingencies

       Liabilities for loss contingencies arising from claims, assessments,
       litigation, fines, and penalties and other sources are recorded when it
       is probable that a liability has been incurred and the amount of the
       assessment can be reasonably estimated.

       Recent Accounting Standards

       In January 2003 and amended in December 2003, the FASB issued
       Interpretation No. 46, "Consolidation of Variable Interest Entities"
       ("FIN 46"), an interpretation of Accounting Research Bulletin No. 51. FIN
       46 expands upon and strengthens existing accounting guidance that
       addresses when a company should include in its financial statements the
       assets, liabilities and activities of another entity. A variable interest
       entity is any legal structure used for business purposes that either does
       not have equity investors with voting rights or has equity investors that
       do not provide sufficient financial resources for the entity to support
       its activities. FIN 46 requires a variable interest entity to be
       consolidated by a company if that company is subject to a majority of the
       risk of loss from the variable interest entity's activities or entitled
       to receive a majority of the entity's residual returns or both. The
       consolidation requirements of FIN 46 apply immediately to variable
       interest entities created after January 31, 2003. For older entities, FIN
       46 is applicable to the first interim or annual reporting period ended
       after December 15, 2004. The effect of the adoption of this new
       accounting pronouncement is not expected to have a significant impact on
       the Company's consolidated financial statements.

       Comprehensive Income

       For each year presented comprehensive income equaled net income.



                                                                           F-11




<PAGE>






NOTE 3 - Property and Equipment

       Property and equipment at March 31, 2004 and 2003 consists of the
following:


<TABLE>
<CAPTION>

                                                                                           2004             2003
                                                                                       -----------------------------
<S>                                                                                     <C>               <C>
      Computer and office equipment                                                     $179,673          $164,798
      Computer software                                                                   24,676            24,676
      Vehicle                                                                             32,359                --
      Website                                                                            151,560            21,312
                                                                                       ---------          ---------

                                                                                         388,268           210,786

      Less: accumulated depreciation and amortization                                    241,098           166,019
                                                                                       ---------          --------

                                                                                        $147,170          $ 44,767
                                                                                       =========          ========
</TABLE>

       Depreciation and amortization expense amounted to $75,079 and $58,392 for
the years ended March 31, 2004 and 2003, respectively.


NOTE 4 - Leases

       The Company was obligated under a capital lease for certain office
       equipment. This lease bore interest at an effective rate of 7.23% per
       annum. During the year ended March 31, 2004, the lease was fully paid.


NOTE 5 - Notes Payable, Bank

       In September 2003, the Company entered into a credit facility agreement
       (the "Agreement") with Fleet National Bank ("Fleet") consisting of a
       $250,000 line of credit. Advances under the line of credit shall bear
       annual interest at a rate equal to Fleet's prime rate (4% at March 31,
       2004) plus 0.50% as defined. The Agreement requires monthly installments
       of interest only and principal advances are due and payable on demand. At
       March 31, 2004, the Company did not have any outstanding balance under
       the line of credit. The line of credit is collateralized by the Company's
       Fleet Money Market bank account and is personally guaranteed by the
       Company's Chief Executive Officer. In addition, the Company is required
       to maintain certain financial and other covenants.

       In October 2003, the Company entered into a term loan agreement with
       Fleet consisting of a $26,000 promissory note (the "Note"). Proceeds from
       the note were used to purchase a vehicle for use in the day to day
       operations of the Company. The Note bears interest at 5.13% per annum and
       is payable in 36 monthly installments of principal and interest. The Note
       is collateralized by the vehicle and is personally guaranteed by the
       Company's Chief Executive Officer. As of March 31, 2004, the Company owes
       approximately $23,400, of which approximately $8,400 is classified as a
       current liability and the balance is classified as a long-term liability.




                                                                           F-12




<PAGE>





NOTE 5 - Notes Payable, Bank, continued

       Annual maturities of the Note are as follows:
<TABLE>
<CAPTION>

                For the Year Ending
                     March 31,                       Amount
              ------------------------------------------------
<S>                         <C>                   <C>
                            2005                  $  8,367
                            2006                     8,807
                            2007                     6,174
                                                  --------

                                Total              $23,348
                                                  ========
</TABLE>

NOTE 6 - Employment Agreements

       In August 2003, the Company entered into employment agreements with its
       Chief Executive Officer, Chief Operating Officer and Vice President that
       include annual base salaries of $175,000, $290,000 and $125,000,
       respectively. In January 2004, the Board of Directors approved a salary
       increase of $50,000 for the Vice President bringing his annual base
       salary to $175,000. In addition, each executive is entitled to an
       incentive bonus equal to one percent (1%) of the Company's sales in
       excess of target sales, as defined. For the fiscal year ended March 31,
       2004, target sales were $10,000,000. The base salaries shall be increased
       annually by an amount equal to the incentive bonuses earned by the
       executives in the prior fiscal year. These employment agreements
       terminate upon the executive's separation from the Company at which time
       certain amounts may be paid, as defined, to the executive or designated
       beneficiaries. In addition, upon termination of the Chief Executive
       Officer's Employment Agreement, the Company will be obligated to retain
       that executive under a Consulting Agreement for a period of ten (10)
       years. Annual compensation under the Consulting Agreement shall be equal
       to the sum of 75% of the executive's highest rate of salary with the
       Company in effect during the one-year period ending on the date of
       termination plus 50% of the executive's average incentive bonus with
       respect to the last five (5) completed fiscal years of the Company
       preceding the date of termination, payable in equal monthly installments
       in advance on the first day of each month during the consulting period.

       Pursuant to these employment agreements these individuals were entitled
       to bonuses aggregating approximately $143,000 and $75,000 for the years
       ended March 31, 2004 and 2003, respectively. Accrued bonuses and accrued
       interest of approximately $470,000 and $325,000 were included in accrued
       expenses at March 31, 2004 and 2003, respectively.

       For the years ended March 31, 2004 and 2003, the Company has incurred
       interest at 7% per annum on the bonuses approximating $17,000 and $16,000
       respectively, which has been included in interest expense in the
       consolidated statements of income. In July 2003, $15,000 of the accrued
       interest was paid to an officer of the Company.





                                                                           F-13




<PAGE>




NOTE 7 - Related Party Transactions

       Office Space

       The Company subleases a portion of its office space in Hauppauge, New
       York to a professional services firm, which is owned by the Chief
       Executive Officer of the Company. Sublease rental income was $5,000 and
       $15,200 for the years ended March 31, 2004 and 2003, respectively, which
       is included in other income in the consolidated statements of income.


NOTE 8 - Stockholders' Equity

       Common Stock Split

       On November 25, 2002, the stockholders of the Company approved a one for
       ten reverse stock split. The reverse stock split has not yet been
       effected.

       Stock Options/Stock Issuance Plan

       On November 16, 1999, the Company's stockholders approved and adopted the
       1999 Long-Term Incentive Plan (the "Plan") under which the Company's
       Board of Directors may grant stock options or restricted securities to
       employees and directors. The Plan authorizes grants of options and
       restricted securities up to 1.5 million shares of common stock. The
       number of shares of common stock subject to all awards granted to any
       individual under the Plan in any one-year period shall not exceed 250,000
       shares.

       The exercise price per share of options may not be less than the fair
       market value of the common stock on the date of grant. The Board will
       generally fix the term of each option, except no incentive stock option
       may exceed a term of ten years. At the discretion of the Board, options
       may be exercised by payment of the exercise price in cash, stock,
       outstanding awards or other property having a fair market value equal to
       the exercise price.

       In fiscal 2000, the Company granted 20,000 immediately exercisable
       options to a director of the Company at an exercise price of $.40 per
       share, which was equal to the fair market value of the common stock on
       the date of grant. The options expire in July 2009. At March 31, 2004 and
       2003, these were the only options outstanding, all of which were
       exercisable.

       Common Stock

       In January 2003, the Company granted 333,000 restricted shares of common
       stock to its Vice President, valued at $33,300 and vesting immediately.
       In February 2003, the Company granted 167,000 restricted shares of common
       stock to its Vice President, valued at $16,700 and vesting in January
       2004. The Board of Directors resolved that the 250,000 share limitation
       set forth in the 1999 Long-Term Incentive Plan shall not be applicable to
       such award.



                                                                           F-14




<PAGE>






NOTE 9 - Income Taxes

       The following table summarizes components of the provision (benefit) for
       current and deferred income taxes for the years ended March 31, 2004 and
       2003. Due to the utilization of net operating loss carryforwards, no
       income taxes were provided for the year ended March 31, 2003. State
       minimum franchise taxes were included in general and administrative
       expenses in the consolidated statements of income for year ended March
       31, 2003.

<TABLE>
<CAPTION>

                                                                      For the Years Ended March 31,
                                                                         2004                2003
                                                                     ---------------------------------
<S>                                                                    <C>                <C>
      Current
        Federal                                                        $   43,200         $        --
        State and other                                                    31,300                  --
                                                                       ----------         -----------

             Total                                                         74,500                  --
                                                                       ----------         -----------

      Deferred
        Federal                                                          (124,330)                 --
        State and other                                                   (39,470)                 --
                                                                       ----------         -----------

               Total                                                     (163,800)                 --
                                                                        ---------         -----------

               Income tax benefit                                      $  (89,300)        $        --
                                                                       ==========         ===========
</TABLE>

       The following table summarizes the significant differences between the
       U.S. Federal statutory tax rate and the Company's effective tax rate for
       financial statement purposes for the years ended March 31, 2004 and 2003:

<TABLE>
<CAPTION>

                                                                      For the Years Ended March 31,
                                                                        2004                2003
                                                                     ---------------------------------
<S>                                                                    <C>                <C>
      U.S. Federal statutory tax rate                                      34%                  34%
      Accrued bonuses                                                      14                   24
      State income taxes                                                    5                   --
      Change in valuation allowance                                       (51)                  --
      Utilization of NOL                                                  (30)                 (58)
                                                                         ----                 ----

               Total                                                      (28)%                  0%
                                                                         ====                =====
</TABLE>




                                                                           F-15





<PAGE>



NOTE 9 - Income Taxes, continued

       The tax effects of temporary differences that give rise to deferred tax
assets and liabilities are summarized as follows:

<TABLE>
<CAPTION>

                                                                      For the Years Ended March 31,
                                                                           2004              2003
                                                                     --------------------------------
<S>                                                                      <C>                <C>
      Deferred tax assets
        Net operating loss carryforwards                                 $     --           $ 124,000
        Accrued officer bonuses                                           163,800             114,800
                                                                         --------           ---------

                                                                          163,800             238,800

        Valuation allowance                                                    --            (238,800)
                                                                         --------           ---------

               Total                                                     $163,800           $      --
                                                                         ========           =========

</TABLE>

       During the years ended March 31, 2004 and 2003, approximately $297,000
       and $123,000, respectively, of the net operating loss carryforwards were
       utilized to reduce the taxable income. 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
       those temporary differences become deductible or losses are carried
       forward. Management considers the scheduled reversal of deferred tax
       assets, projected future taxable income, and tax planning strategies in
       making this assessment. For fiscal 2004, management believes it will
       likely realize this benefit and has not established a valuation allowance
       at March 31, 2004.

NOTE 10 - Commitments

       The Company leased a building, commencing September 1, 2000, under a
       non-cancelable operating lease, which expires on May 31, 2006. The future
       annual minimum lease payments under the operating lease are as follows:

<TABLE>
<CAPTION>

                                    For the
                                  Year Ending
                                   March 31,                  Amount
                               --------------------------------------------
<S>                                  <C>                          <C>
                                     2005                      $  89,000
                                     2006                         92,000
                                     2007                         15,000
                                                               ---------

                                     Total                      $196,000
                                                               =========
</TABLE>


       Total rent expense for each of the years ended March 31, 2004 and 2003,
approximated $84,000.


                                                                            F-16




<PAGE>



NOTE 11 - Concentration with Suppliers

       During the year ended March 31, 2004, the Company purchased a substantial
       portion of its fragrances from two suppliers. Purchases from these
       suppliers amounted to 25% and 10% of total purchases. At March 31, 2004,
       amounts due to these suppliers included in accounts payable approximated
       $71,000 and $60,000.

       During the year ended March 31, 2003, the Company purchased a substantial
       portion of its fragrances from two suppliers. Purchases from these
       suppliers amounted to 37% and 11% of total purchases. At March 31, 2003,
       amounts due to these suppliers included in accounts payable approximated
       $45,000 and $22,000.

NOTE 12 - Products and Services

       The Company and its subsidiaries currently operate in one business
       segment and have, during the years ended March 31, 2004 and 2003 sold
       products to two separate types of customers, retail and wholesale
       customers.

<TABLE>
<CAPTION>

                                                                            For the Year Ended
                                                                                 March 31,
                                                                        2004                   2003
                                                                   ------------------------------------
<S>                                                                  <C>                    <C>
        Retail                                                       $13,172,392            $ 9,931,050
        Wholesale                                                      1,533,035                568,391
                                                                    ------------            -----------

                 Total Net Sales                                     $14,705,427            $10,499,441
                                                                     ===========            ===========
</TABLE>


NOTE 13 - Quarterly Results of Operations (Unaudited)

        The following is a summary of quarterly results for the years ended
March 31, 2004 and 2003:


<TABLE>
<CAPTION>

                                                            Quarter Ended

                                              June 30,         September 30,       December 31,          March 31,
                                                2003               2003                2003                2004
                                             ----------------------------------------------------------------------

<S>                                           <C>                 <C>                 <C>               <C>
      Net sales                               $2,512,975          $2,711,469          $5,582,058        $3,898,925
      Gross profit                               973,324             980,214           2,126,461         1,286,397
      Net income (loss)                       $   90,299          $   39,064          $  369,893        $  (91,479)

      Basic and diluted net income
      (loss) per share                        $     0.01          $     0.00          $     0.02        $    (0.01)

</TABLE>


                                                                            F-17





<PAGE>



NOTE 13 - Quarterly Results of Operations (Unaudited), continued

                                                                 Quarter Ended
<TABLE>
<CAPTION>

                                                            Quarter Ended

                                              June 30,         September 30,       December 31,          March 31,
                                                2002               2002                2002                2003
                                             ----------------------------------------------------------------------

<S>                                           <C>                 <C>                 <C>               <C>
      Net sales                               $1,970,869          $2,072,242          $4,132,261        $2,324,069
      Gross profit                               607,255             735,933           1,483,592           837,989
      Net income (loss)                       $  (76,722)         $   15,937          $  290,509        $ (172,228)

      Basic and diluted net income
      (loss) per share                        $    (0.00)         $     0.00          $     0.02        $    (0.02)

</TABLE>

       The unaudited interim financial information reflects all adjustments,
       which in the opinion of management are necessary to present a fair
       statement of the results of the interim periods presented and are of a
       normal recurring nature.

       The Company's business is subject to seasonal variations and results of
       operations for the interim periods are not necessarily indicative of
       results for a full year.




                                                                            F-18




<PAGE>





                                  EXHIBIT INDEX

2.2      Agreement and Plan of Merger dated as of July 28, 1999 by and among
         National Capital Management Corporation, FAC, Inc., Telescents, Inc.,
         and Dennis M. Apfel, Jason Apfel and Growth Capital Partners, L.L.C.
         (Incorporated herein by reference to Exhibit 2.1 of the Company's
         Current Report on Form 8-K filed on August 10, 1999).

3.1      Articles of Incorporation and By-Laws of the Company (Incorporated
         herein by reference from Schedule 4 to the prospectus included in the
         Registration Statement on Form S-4 of the Company (No. 33-19149) filed
         on December 18, 1987).

3.2      Certificate of Amendment dated June 29, 1995 of Certificate of
         Incorporation implementing a one-for-three reverse stock split
         (Incorporated herein by reference to Exhibit 3.2 of the Company's
         Annual Report on Form 10-KSB filed on April 15, 1999).

3.3      Certificate of Amendment of Certificate of Incorporation (Incorporated
         herein by reference to Exhibit 3.4 of the Company's Current Report on
         Form 8-K filed on November 30, 1999).

3.4      Certificate of Designations of Series A Preferred Stock (Incorporated
         herein by reference to Exhibit 4.1 of the Company's Current Report on
         Form 8-K filed on August 10, 1999).

3.5      Resolution of Board of Directors dated April 12, 1995 amending the
         By-Laws (Incorporated herein by reference to Exhibit 3(ii).1 of the
         Annual Report on Form 10-K of the Company filed on April 17, 1995).

10.1     Agreement regarding Certain Closing and Post Closing Matters dated as
         of July 28, 1999 (Incorporated herein by reference to Exhibit 10.1 to
         the Company's Current Report on Form 8-K filed on August 10, 1999).

10.2     Stock Purchase Agreement dated as of June 29, 1999 by and among
         National Capital Management Corporation and Resource Holdings
         Associates (Incorporated herein by reference to Exhibit 2.1 to the
         Company's Current Report on Form 8-K filed on July 20, 1999).

10.7     Employment Agreement dated August 1, 2003 between the Company and Jason
         Apfel (Incorporated herein by reference to Exhibit 10.3 to the
         Company's Quarterly Report on Form 10-QSB filed on November 13, 2003).+

10.8     Employment Agreement dated August 1, 2003 between the Company and
         Dennis M. Apfel (Incorporated herein by reference to Exhibit 10.1 to
         the Company's Quarterly Report on Form 10-QSB filed on November 13,
         2003).+

10.9     Employment Agreement dated August 1, 2003 between the Company and Eric
         J. Apfel (Incorporated herein by reference to Exhibit 10.2 to the
         Company's Quarterly Report on Form 10-QSB filed on November 13, 2003).+

10.10    FragranceNet.com Inc. 1999 Long Term Incentive Plan (Incorporated
         herein by reference to Exhibit A of the Company's Proxy Statement filed
         on October 20, 1999).+

21.2     List of Subsidiaries*







<PAGE>



31.1*    Rule 13a-14(a)/15d-14(a) Certification

32.1*    Certification of Chief Executive Officer and Chief Financial Officer


--------------
*   Included with this Annual Report on Form 10-KSB.
+   Management Contract or Compensatory Plan