<PAGE>
                     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, 2002                                            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, 2002
---------------------------                      ------------------------------
Common Stock, $.01 par value                              16,968,330

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: $7,502,186 The aggregate
market value of the voting and non-voting common equity held by non-affiliates
of the Registrant, based on the average of the bid and asked prices for such
common equity on June 12, 2002 is approximately $379,638.

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.
<PAGE>

                                     PART I

Item 1. Business

     FragranceNet.com, Inc. ("FragranceNet" or the "Company") operates the
world's largest internet discount fragrance store offering more than 3,000
brand-name fragrances 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 no sales during
the fiscal year ended March 31, 2002. FragranceNet has commenced performing
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 (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.

     In connection with the Merger Agreement, the Telescents Shareholders
entered into a Shareholders Agreement dated as of July 28, 1999 (the
"Shareholders Agreement"). Pursuant to the Shareholders Agreement, during the
period commencing July 28, 1999 and continuing until the first to occur of (a)
July 31, 2002 or (b) the date on which GCP beneficially owns (within the meaning
of Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) shares of Common Stock and/or Preferred Stock of the Company
representing less than ten percent (10%) of the aggregate voting power of the
outstanding capital stock of the Company, the Telescents Shareholders have
agreed that each of them shall use his or her best efforts to cause the Board of
Directors of the Company to nominate such of Philip D. Gunn or Theodore V.
Buerger, who is also a principal of GCP, as shall be designated by GCP (the "GCP
Director") for election as a director of the Company, and shall vote all shares
of Common Stock and Preferred Stock beneficially owned by such Telescents
Shareholders for election of the GCP Director as a director of the Company, at
each annual meeting of the Company's stockholders.

         As of March 31, 2002, 16,968,330 shares of Common Stock were issued and
outstanding.



<PAGE>


The Online Store

         The Company operates an online store that specializes in the sale of
brand-name fragrances, bath and body products, gels, 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 3,000
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 and 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.

         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 10 suppliers into its business that
allows for availability of over 3,000 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. Generally, inventory is not purchased by the Company
until a consumer buys it and has paid for it, so the Company carries no
significant inventory. 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. Therefore, accounts receivable
balances represent payments due from credit card companies. The Company has
provided an allowance for product returns, which have been minimal.

         FragranceNet's online store provides its retail customers with superior
features, pricing and convenience. The online store offers consumers over 3,000
fragrances and related products. 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 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. They 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 2002 were to international customers.
There is no assurance the Company can maintain its market share. FragranceNet is
recognized as the leader in the sale of fragrances over the Internet. Forrester
Research estimates that e-tailing will increase from $20 billion in the U.S. to
over $184 billion by the year 2004, reaching 7% of total retail sales.


<PAGE>

Strategy

FragranceNet's strategy is based upon the belief that if you provide brand-name
fragrances 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. 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.

Partnerships

         FragranceNet is featured in major search engines such as Yahoo!,
Google, Hotbot, GoTo and AOL Netfind. In addition, the Company has established
increased exposure through today's top communities and malls including
placements within Visa Shopping Offers, Excite Shopping Guide, Prodigy Shopping,
First USA Online Deals, Coolsavings, Ebates and MyPoints.

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 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 they 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
and Gloss.com, are also full retail models and include cosmetics as a major
component of their product mix. The Company believes that none of the possible
competition has the breadth of inventory that the Company carries. 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 which 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.

<PAGE>

     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 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 750,000 per month during the
month of December 2001.

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, Findwhat and Sprinks.
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 3,000 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.

<PAGE>

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 3,000 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 3,000
fragrances.

     Using its system, FragranceNet has taken steps to prevent the failure of
its mission-critical business applications. While no system is fool-proof 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 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 prints
automatically 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 and shipped to
consumers.

Employees

     As of March 31, 2002, FragranceNet employed 20 individuals. None of
FragranceNet's employees are represented by unions and FragranceNet considers
its relationship with its employees to be excellent. FragranceNet believes that
success is dependent on its ability to attract and retain qualified personnel in
numerous areas, including software development.


<PAGE>

         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;

     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 five 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 or
Jason 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;

<PAGE>

     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.

     FragranceNet intends to maintain detailed awareness of all its competitors,
many of whom 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 which
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
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. Its limited operating
history and the new and rapidly evolving Internet market make it difficult to
ascertain the effects of seasonality on the business. If seasonal and cyclical
patterns emerge in Internet purchasing, the results of operations from quarter
to quarter may vary greatly and may cause the business to suffer. 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.

<PAGE>

         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

     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 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 the 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 2002 purchased more than 90% of
its merchandise from 10 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.


<PAGE>

         FRAGRANCENET BUSINESS MODEL IS UNPROVEN

     FragranceNet's strategy is based on an unproven business model. Its
business model depends on the acceptance of the Internet for
business-to-consumer transactions and the ability of FragranceNet's technology
to continue evolving and gain widespread acceptance.

         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
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
which 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.


<PAGE>

         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. To the extent the
number of users of the Internet and the amount of traffic on the Internet
continue to increase there will be greater demands placed 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.

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, 2005. The Company moved into this facility during September
2000 and believes that it will be adequate for its current operations and
contemplated growth.

Item 3. Legal Proceedings

     FragranceNet is not a party to any legal proceedings.

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

     FragranceNet did not submit any matter for the vote of security holders in
the fourth quarter of the last fiscal year.


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, 2002 and March 31,
         2001 are as follows:

                                              Bid Price
                                              High              Low

       For the Quarter Ended

         March 31, 2002                         .34             .16
         December 31, 2001                      .50             .17
         September 30, 2001                     .53             .35
         June 30, 2001                          .53             .15
         March 31, 2001                         .56             .25
         December 31, 2000                     1.13             .38
         September 30, 2000                    1.75             .96
         June 30, 2000                         1.80            1.50


<PAGE>

         The quotations represent inter dealer 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, 2002 was $.30

b. Number of Holders of Common Stock at March 31, 2002

Authorized Shares:                           50 million
Shares Outstanding:                          16,968,330
Number of holders of record                  680
of shares of Common Stock



                  Dividends on Common Stock

         The Company did not pay any dividends to its stockholders in fiscal
2002 and does not anticipate paying any dividends in the foreseeable future.

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.

         Results of Operations

       FISCAL YEAR ENDED MARCH 31, 2002 COMPARED TO THE FISCAL YEAR ENDED
                                 MARCH 31, 2001

     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 ten different suppliers and generally does not
purchase the products until they are ordered and paid for by the consumer.
Payment 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. The Company does not carry any significant level of
inventory and its accounts receivable are primarily from credit card companies.

<PAGE>

     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, 2001 were $7,923,347 and were $7,502,186 for the
year ended March 31, 2002. The decrease resulted from a lower number of customer
orders.

     Cost of sales. Cost of sales consists primarily of the cost of merchandise
sold plus freight-in and the cost of bonus gifts included in shipments to
customers. Cost of sales for the fiscal year ended March 31, 2001 was
$4,961,062. Cost of sales was $4,515,079 for the year ended March 31, 2002. The
decrease was due to lower sales volume and better buying by the Company.

     Gross profit. For the fiscal year ended March 31, 2001, gross profit was
$2,962,285 or 37% of net sales compared to gross profit of $2,987,107 or 40% for
fiscal 2002. The increase in gross profit percentage was primarily due to
improved purchasing prices from the Company's suppliers.

     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, 2001 was $1,594,692 and
decreased to $1,278,891 for the 2002 fiscal year. The decrease was due to
increased efforts by the Company to use more cost-effective methods of
advertising based upon performance and reduced shipping costs.

     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, 2001 was $1,491,598 and increased to $1,532,618 for fiscal 2002. The
increase was attributable to the general increase in expenses to support the
future growth of the Company. The Company believes general and administrative
expenses will continue to increase in fiscal 2003, to support the anticipated
additional growth of the Company.

     Other income and expense. Interest expense increased to $22,461 in fiscal
2002 compared to $12,265 in fiscal 2001 primarily due to interest costs incurred
on deferred bonus payments. Other income of $20,400 and $21,558 in fiscal 2002
and 2001, 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 one of the Company's shareholders is a partner.

     Net Income. As a result of the factors discussed above, the net income for
the fiscal year ended March 31, 2002 was $177,151 compared to a loss of $105,512
for the 2001 fiscal year.

         Liquidity and Capital Resources

     At March 31, 2002, FragranceNet had cash and cash equivalents of $389,441
compared to $184,437 at March 31, 2001.

     Net cash provided by operating activities was $230,413 for the fiscal year
ended March 31, 2002, compared to $27,506 for the fiscal year ended March 31,
2001. The increase was primarily due to the net income generated in fiscal 2002.

     Net cash used in investing activities for the fiscal year ended March 31,
2002 was $21,312. These expenditures are primarily related to the purchase of
computer equipment and software. The Company believes capital expenditures in
fiscal 2003 will be approximately the same as the fiscal 2002 level.

<PAGE>

     Net cash used in financing activities was $4,097 for the year ended March
31, 2002, compared to $303 used in the 2001 fiscal year. In July 1999,
Fragrancenet completed the Merger and received $437,703 net of the costs of the
Merger. FragranceNet has invested the remaining net proceeds from the fiscal
2000 Merger in an interest-bearing money market account at Prudential
Securities.

     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;

     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.

     New Accounting Pronouncements

     During the period ended March 31, 2001, the Company adopted SFAS No. 133,
     "Accounting for Derivative Instruments and Hedging Activities". SFAS No.
     133 establishes accounting and reporting standards for derivative
     instruments, including certain derivative instruments embedded in other
     contracts (collectively referred to as derivatives), and for hedging
     activities. This Statement requires that an entity recognize all
     derivatives as either assets or liabilities in the consolidated balance
     sheets and measure those instruments at fair value. The accounting for
     changes in the fair value of a derivative instrument depends on its
     intended use and the resulting designation. Implementation of SFAS No. 133
     did not have any material impact on the financial statements of the
     Company.

     In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
     No. 141 "Business Combinations" and SFAS No. 142, "Goodwill and Other
     Intangible Assets". SFAS 141 provides guidance on the accounting for a
     business combination at the date a business combination is completed. The
     statement requires the use of the purchase method of accounting for all
     business combinations initiated after June 30, 2001, thereby eliminating
     use of the pooling-of-interests method. SFAS 142 provides guidance on how
     to account for goodwill and intangible assets after an acquisition is
     completed. The most substantive change is that goodwill will no longer be
     amortized, but instead will be tested for impairment periodically. This
     statement will apply to existing goodwill and intangible assets, beginning
     in fiscal 2003, and is not expected to have a material impact on the
     financial statements of the Company.

<PAGE>

     In October 2001, the FASB issued SFAS No. 144, "Accounting for the
     Impairment or Disposal of Long-Lived Assets". SFAS 144 addresses the
     accounting model for long-lived assets to be disposed of by sale and
     resulting implementation issues. This statement requires that those
     long-lived assets be measured at the lower of carrying amount or fair value
     less cost to sell, whether reported in continuing operations or in
     discontinued operations. Therefore, discontinued operations will no longer
     be measured at net realizable value or include amounts for operating losses
     that have not occurred. It also broadens the reporting of discontinued
     operations to include all components of an entity with operations that can
     be distinguished from the rest of the entity and that will be eliminated
     from the ongoing operations of the entity in a disposal transaction. The
     adoption of SFAS 144 is not expected to have a material impact on the
     financial statements of the Company.

         Seasonality

     FragranceNet's operations are expected to fluctuate according to the retail
industry 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-17.

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


     On December 17, 2001, FragranceNet.com, Inc. (the "Registrant") dismissed
KPMG LLP ("KPMG") as its independent auditors and appointed Marcum and Kleigman,
LLP ("Marcum and Kleigman") as its independent auditors for the fiscal year
ending March 31, 2002. The decision to dismiss KPMG and to retain Marcum and
Kleigman was approved by the Board of Directors of the Registrant.

     The report of KPMG as of and for the fiscal years ended March 31, 2000 and
March 31, 2001 did not contain an adverse opinion or a disclaimer of opinion and
was not qualified or modified as to uncertainty, audit scope or accounting
principles. During the fiscal years ended December 31, 2000 and 2001, there were
no (i) disagreements between KPMG 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 KPMG,
would have caused it to make a 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.


<PAGE>

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        with Section16(a) of the Exchange Act.

The Directors and Executive Officers of FragranceNet are as follows:


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

Dennis M. Apfel   56    Chairman of the Board of Directors,  Chief  Financial
                        Officer and Secretary
Jason S. Apfel    29    President, Chief Executive Officer and  Director
Philip D. Gunn    50    Director

     Jason S. Apfel, age 29. Mr. Apfel has been President and Chief Executive
Officer of the Company since July 28, 1999. He has been President of TeleScents
since April 1998. Mr. Apfel was Vice President of TeleScents from April 1997 to
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 56. Mr. Apfel has been Chairman of the Company since
May 14, 2001 and Chief Financial Officer since July 28, 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 28,
1999. Mr. Apfel is a partner in the law firm of Miller & Apfel in Hauppauge, New
York and has been a practicing attorney since 1972.

     Philip D. Gunn, age 50. Mr. Gunn is a co-founder and Managing Director of
Growth Capital Partners, a private equity investor group. Since 1982, through
Growth Capital Partners and Phillip D. Gunn & Co., Mr. Gunn has assisted
numerous companies in the formation and execution of their corporate financial
strategies, particularly in the areas of acquisition, divestiture and capital
raising. Mr. Gunn also serves on the Board of Directors of eLOT, Inc., the
leading web-based service provider to government-based lotteries.

     During the fiscal year ended March 31, 2002, the Board of Directors of the
Company met twice. All of the directors attended the meeting of the Board of
Directors. The Board of Directors does not have any committees.

     Dennis M. Apfel and Jason S. Apfel are father and son. No other family
relationships exist between any of the directors and officers of the Company.

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, 2002, its directors, officers
and greater than ten percent stockholders complied with all Section 16(a) filing
requirements.


<PAGE>


Item 10. Executive Compensation

     The following table sets forth information for the fiscal years ended March
31, 2002 and 2001 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.

                           SUMMARY COMPENSATION TABLE

                                                    Annual Compensation
                                           ------------------------------------
                                Fiscal                              Long Term
Name and Principal Position      Year       Salary       Bonus    Compensation
---------------------------     ------     --------     -------   -------------

Jason S. Apfel                   2002      $250,000        -0-       - 0 -
 Chief Executive Officer         2001      $180,000      $70,000     - 0 -
                                 2000      $110,000      $70,000       0


Dennis M. Apfel                  2002      $125,000        -0-       - 0 -
 Chairman of the Board*,         2001      $125,000      $35,000     - 0 -
 Chief Financial Officer and     2000      $ 55,000**    $35,000
 Vice President



------------------------
*  Mr. Apfel was named Chairman of the Board of the Company on May 14, 2001.
** Mr. Apfel was an employee for only a part of fiscal 2000.

     None of the persons named above were granted stock options for Common
Stock during the fiscal year ended March 31, 2002, or exercised any stock
options during fiscal year ended March 31, 2002 or held any stock options as of
March 31, 2002.

Employment Agreements with Executive Officers

     The Company has entered into an Employment Agreement with Jason S. Apfel.
The term of the Employment Agreement commenced July 28, 1999 and continues until
terminated by Mr. Apfel or the Company upon 30 days' advance notice. The
Employment Agreement provides for an initial salary of $110,000 per annum, an
annual incentive bonus based on increases in sales over targeted sales and an
annual salary increase equal to the amount of the incentive bonus for the prior
year. No additional bonuses are due once $10 million in annual sales is reached.
The Employment Agreement provides that in the event that the employment of Mr.
Apfel is terminated by the Company without cause, the Company will continue to
pay his base salary for six months after termination and will pay his incentive
bonus for the year of termination. Under the Employment Agreement, Mr. Apfel is
prohibited from engaging in any business in competition with the Company during
the period of his employment with the Company and for one year thereafter.


<PAGE>

     The Company has entered into an Employment Agreement with Dennis M. Apfel.
The term of the Employment Agreement commenced July 28, 1999 and continues until
terminated by Mr. Apfel or the Company upon 30 days' advance notice. The
Employment Agreement provides for an initial salary of $55,000 per annum, an
annual incentive bonus based on increases in sales over targeted sales and an
annual salary increase equal to the amount of the incentive bonus for the prior
year. No additional bonuses are due once $10 million in annual sales is reached.
The Employment Agreement provides that in the event that the employment of Mr.
Apfel is terminated by the Company without cause, the Company will continue to
pay his base salary for six months after termination and will pay his incentive
bonus for the year of termination. Under the Employment Agreement, Mr. Apfel is
prohibited from engaging in any business in competition with the Company during
the period of his employment with the Company and for one year thereafter.

Bonus Deferrals

     Pursuant to the employment agreements with Dennis M. Apfel and Jason Apfel
and the consulting agreement with an affiliate of Philip D. Gunn, for the fiscal
year ended March 31, 2002, Jason Apfel was not entitled to a bonus, Dennis M.
Apfel was not entitled to a bonus, and the affiliate of Philip D. Gunn was not
entitled to a bonus. Messrs. Dennis Apfel, Jason Apfel and Philip D. Gunn agreed
to a deferral of the payment of bonuses for the 2000 and 2001 fiscal years until
June 30, 2002 and Messrs. Dennis Apfel and Jason Apfel will further agree to a
deferral of payment of those bonuses to a date not earlier than August 31, 2002.
The bonuses were included in accrued liabilities at March 31, 2001 and 2002.

Compensation of Directors

     The Company does not pays its directors any fees. Any future directors will
be paid as determined by the Board. The Company has entered into a Consulting
Agreement with an affiliate of Philip D. Gunn. The term of the Consulting
Agreement commenced on July 28, 1999 and expires on July 31, 2002. The
Consulting Agreement provides for an initial consulting fee of $2,300 per month,
an annual incentive bonus based on the performance of the Company and an annual
consulting fee increase equal to the amount of the incentive bonus for the prior
year. In the event that the Consulting Agreement is terminated by the Company
without cause, the Company will continue to pay the consulting fee until July
31, 2002. The agreement shall terminate by its terms on July 31, 2002.

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
Dennis M. Apfel and Jason Apfel abstaining on decisions relating to their
compensation.


Item 11. Security Ownership of Certain Beneficial Owners and Management

     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, 2002, 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.


<PAGE>

                                   Shares of Common Stock
Name and Address                     Owned Beneficially    Percent of Class (1)
---------------                    ----------------------- --------------------
Jason S. Apfel                        4,559,390                  27%
909 Motor Parkway
Hauppauge, New York 11788

Dennis M. Apfel                       6,076,360                  36%
909 Motor Parkway
Hauppauge, New York 11788

Growth Capital Partners, L.L.C.       4,434,390                  27%
c/o Growth Capital Partners, Inc.
520 Madison Avenue
New York, New York 10022


     The following table sets forth, as of March 31, 2002, the number of shares
of Common Stock of the Company beneficially owned by each of the 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 (1)   Percent of Class (1)
----------------             -----------------------   ---------------------

Jason S. Apfel                    4,559,390                   27%
President, Chief Executive
Officer and Director

Dennis M. Apfel                   6,076,360                   36%
Chairman of the Board (1),
Chief Financial Officer,
and Director

Philip D. Gunn (2)                4,434,390                   27%
Vice Chairman and Director


All directors and executive
officers as a group               15,070,140                  89%

-------------

(1)  Mr. Apfel was named Chairman of the Board of the Company on May 14, 2001.
(2)  Consists of shares of Common Stock owned by Growth Capital Partners,
     L.L.C., of which Mr. Gunn and Theodore V. Buerger are the principals.

Item 12. Certain Relationships and Related Transactions

         None

<PAGE>

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 July 23, 1999 between Telescents, Inc. and Jason
     Apfel (Incorporated herein by reference to Exhibit 10.3 to the Company's
     Annual Report on Form 10-K filed on July 5, 2000).+

10.4 Employment Agreement dated July 23, 1999 between Telescents, Inc. and
     Dennis M. Apfel (Incorporated herein by reference to Exhibit 10.4 to the
     Company's Annual Report on Form 10-K filed on July 5, 2000).+

10.5 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   List of Subsidiaries*


<PAGE>

*    Included with this Annual Report on Form 10-KSB.

+    Management Contract or Compensatory Plan

(b)   Current Reports on Form 8-K:

                  None.



<PAGE>


                                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.

                                   SIGNATURES

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

         Dated:  June 26, 2002

                                     FRAGRANCENET.COM, INC.


                                     By /s/Jason S. Apfel
                                        ---------------------------------------
                                        Jason S. Apfel
                                        President and Chief Executive Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934,
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 26, 2002               By /s/Jason S. Apfel
                                        ---------------------------------------
                                        Jason S. Apfel
                                        President, Chief Executive Officer
                                        and Director

Dated:   June 26, 20002              By /s/Dennis M. Apfel
                                        ---------------------------------------
                                        Dennis M. Apfel
                                        Chairman of the Board, Director, Chief
                                        Financial Officer, and Principal
                                        Accounting Officer

Dated:   June 26, 2002               By /s/Philip D. Gunn
                                        ---------------------------------------
                                        Philip D. Gunn
                                        Vice Chairman of the Board
                                        and Director


<PAGE>



                     FRAGRANCENET.COM, INC. AND SUBSIDIARY


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

<TABLE>
<CAPTION>

                                                                                      Page
                                                                                      ----
<S>                                                                             <C>
   INDEPENDENT AUDITORS' REPORTS                                                       F-1


   INDEPENDENT AUDITORS' REPORTS                                                       F-2


   FINANCIAL STATEMENTS

     Consolidated Balance Sheets as of March 31, 2002 and 2001 F-3 - F4
     Consolidated Statements of Operations for the years ended
       March 31, 2002 and 2001                                                         F-5
     Consolidated Statements of Stockholders' Equity (Deficit) for the
      years ended March 31, 2002 and 2001                                              F-6
     Consolidated Statements of Cash Flows for the years ended
      March 31, 2002 and 2001                                                    F-7 - F-8


   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                   F-9 - F-17

</TABLE>


<PAGE>


                          INDEPENDENT AUDITORS' REPORT


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


   We have audited the accompanying consolidated balance sheet of
   FragranceNet.com, Inc. and subsidiary as of March 31, 2002 and the related
   consolidated statements of operations, stockholders' equity (deficit) and
   cash flows for the year then ended. These consolidated financial statements
   are the responsibility of the Company's management. Our responsibility is to
   express an opinion on these consolidated financial statements based on our
   audit.

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

   In our opinion, the consolidated financial statements referred to above
   present fairly, in all material respects, the financial position of
   FragranceNet.com, Inc. as of March 31, 2002, and the results of its
   operations and its cash flows for the year then ended in conformity with
   accounting principles generally accepted in the United States of America.


   May 6, 2002
   Woodbury, New York                              Marcum & Kleigman, LLP


                                                                            F-1
<PAGE>


                          INDEPENDENT AUDITORS' REPORT



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


   We have audited the accompanying consolidated balance sheet of
   FragranceNet.com, Inc. and subsidiary as of March 31, 2001, and the related
   consolidated statements of operations, stockholders' deficit and cash flows
   for the year then ended. These consolidated financial statements are the
   responsibility of the Company's management. Our responsibility is to express
   an opinion on these consolidated financial statements based on our audit.

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

   In our opinion, the consolidated financial statements referred to above
   present fairly, in all material respects, the financial position of
   FragranceNet.com, Inc. as of March 31, 2001, and the results of its
   operations and its cash flows for the year then ended in conformity with
   accounting principles generally accepted in the United States of America.




   June 4, 2001                                          KPMG LLP
   Melville, New York

                                                                            F-2

<PAGE>



                                          FRAGRANCENET.COM, INC. AND SUBSIDIARY

                                                    Consolidated Balance Sheets

                                                        March 31, 2002 and 2001
-------------------------------------------------------------------------------


                                     ASSETS



                                                               2002       2001
                                                            --------    --------
CURRENT ASSETS
  Cash and cash equivalents                                 $389,441    $184,437
  Accounts receivable, net of allowance for returns
   of $1,000 and $1,497                                       63,116      16,480
  Inventory                                                   78,150     175,000
  Prepaid expenses and other current assets                   74,912      28,256
                                                            --------    --------


Total Current Assets                                         605,619     404,173


PROPERTY AND EQUIPMENT, Net                                  103,159     145,784


INTANGIBLE ASSET, Net                                          5,875       6,375


OTHER ASSETS                                                  21,683      21,130
                                                            --------    --------


TOTAL ASSETS                                                $736,336    $577,462
                                                            ========    ========

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

                                                                            F-3


<PAGE>


                                          FRAGRANCENET.COM, INC. AND SUBSIDIARY

                                                    Consolidated Balance Sheets

                                                        March 31, 2002 and 2001
-------------------------------------------------------------------------------



                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)


<TABLE>
<CAPTION>

                                                                  2002         2001
                                                                ---------    ---------
<S>                                                             <C>          <C>
CURRENT LIABILITIES
  Accounts payable                                              $ 228,952    $ 297,244
  Accrued expenses                                                428,937      157,705
  Deferred revenue                                                 35,782        8,020
  Obligation under capital lease, current portion                   4,068        4,097
                                                                ---------    ---------

Total Current Liabilities                                         697,739      467,066

  Obligation under capital lease, net of current portion            3,613        7,681
  Accrued expenses                                                  6,305      251,187
                                                                ---------    ---------

TOTAL LIABILITIES                                                 707,657      725,934
                                                                ---------    ---------

STOCKHOLDERS' EQUITY (DEFICIT)
  Convertible Series A preferred stock - $.01 par value;
   3,000,000 shares authorized, none issued                            --           --
  Common stock, par value $.01; 50,000,000 shares authorized;
   16,968,330 shares issued and outstanding                       169,683      169,683
  Additional paid-in capital                                      368,020      368,020
  Accumulated deficit                                            (509,024)    (686,175)
                                                                ---------    ---------

TOTAL STOCKHOLDERS' EQUITY (DEFICIT)                               28,679     (148,472)
                                                                ---------    ---------

TOTAL LIABILITIES AND
  STOCKHOLDERS' EQUITY (DEFICIT)                                $ 736,336    $ 577,462
                                                                =========    =========

</TABLE>

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

                                                                            F-4

<PAGE>


                                          FRAGRANCENET.COM, INC. AND SUBSIDIARY

                                          CONSOLIDATED STATEMENTS OF OPERATIONS

                                    For the Years Ended March 31, 2002 and 2001
-------------------------------------------------------------------------------


                                                    2002            2001
                                                ------------    ------------
NET SALES                                       $  7,502,186    $  7,923,347

COST OF SALES                                      4,515,079       4,961,062
                                                ------------    ------------

GROSS PROFIT                                       2,987,107       2,962,285
                                                ------------    ------------

OPERATING EXPENSES
  Selling and marketing                            1,278,891       1,594,692
  General and administrative                       1,532,618       1,491,598
                                                ------------    ------------

TOTAL OPERATING EXPENSES                           2,811,509       3,086,290
                                                ------------    ------------

INCOME (LOSS) FROM OPERATIONS                        175,598        (124,005)

OTHER INCOME (EXPENSE)
  Interest expense                                   (22,461)        (12,265)
  Interest income                                      4,612          10,000
  Other income                                        20,400          21,558
                                                ------------    ------------

INCOME (LOSS) BEFORE PROVISION
  FOR INCOME TAXES                                   178,149        (104,712)

Provision for income taxes                               998             800
                                                ------------    ------------

NET INCOME (LOSS)                               $    177,151    $   (105,512)
                                                ============    ============

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

Weighted average number of common
  shares outstanding                              16,968,330      16,968,330
                                                ============    ============


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

                                                                            F-5



<PAGE>


                                          FRAGRANCENET.COM, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

                                    For the Years Ended March 31, 2002 and 2001
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                 Additional
                                                   Common Stock                    paid-in         Accumulated
                                             Shares             Amount             Capital            Deficit               Total
                                            --------------------------------------------------------------------------------------
<S>                                         <C>                <C>               <C>               <C>                 <C>
Balance - April 1, 2000                     16,968,330         $  169,683         $  368,020         $ (580,663)       $  (42,960)

  Net Loss                                          --                 --                 --           (105,512)         (105,512)
                                            ----------         ----------         ----------         ----------        ----------

Balance - March 31, 2001                    16,968,330            169,683            368,020           (686,175)         (148,472)

  Net Income                                        --                 --                 --            177,151           177,151
                                            ----------         ----------         ----------         ----------        ----------

Balance - March 31, 2002                    16,968,330         $  169,683         $  368,020         $ (509,024)       $   28,679
                                            ==========         ==========         ==========         ==========        ==========


</TABLE>


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

                                                                            F-6


<PAGE>


                                          FRAGRANCENET.COM, INC. AND SUBSIDIARY

                                          CONSOLIDATED STATEMENTS OF CASH FLOWS

                                    For the Years Ended March 31, 2002 and 2001
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                            2002               2001
                                                                          ---------          ---------
<S>                                                                       <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
 Net income (loss)                                                        $ 177,151          $(105,512)
                                                                          ---------          ---------
  Adjustments to reconcile net income (loss) to net cash provided
  by operating activities:
    Depreciation and amortization                                            64,438             21,513
  Changes in assets and liabilities:
    Accounts receivable                                                     (46,636)             5,569
    Inventory                                                                96,850           (120,104)
    Prepaid expenses and other assets                                       (47,209)           (12,632)
    Accounts payable and accrued expenses                                   (41,943)           251,039
    Deferred revenue                                                         27,762            (12,367)
                                                                          ---------          ---------


       TOTAL ADJUSTMENTS                                                     53,262            133,018
                                                                          ---------          ---------


       NET CASH PROVIDED BY OPERATING
        ACTIVITIES                                                          230,413             27,506
                                                                          ---------          ---------


CASH FLOWS FROM INVESTING ACTIVITIES
  Expenditures for property and equipment                                   (21,312)          (126,199)
                                                                          ---------          ---------


CASH FLOWS FROM FINANCING ACTIVITIES
  Principal payments on capital lease obligation                             (4,097)              (303)
                                                                          ---------          ---------


       NET INCREASE (DECREASE) IN CASH AND
        CASH EQUIVALENTS                                                    205,004            (98,996)


CASH AND CASH EQUIVALENTS - Beginning                                       184,437            283,433
                                                                          ---------          ---------


CASH AND CASH EQUIVALENTS - Ending                                        $ 389,441          $ 184,437
                                                                          =========          =========

</TABLE>

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

                                                                            F-7


<PAGE>


                                          FRAGRANCENET.COM, INC. AND SUBSIDIARY

                               CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued

                                    For the Years Ended March 31, 2002 and 2001
-------------------------------------------------------------------------------


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

                                                            2002      2001
                                                          --------  --------

       Cash paid during the year for income taxes         $   578    $   893
       Cash paid during the year for interest             $ 4,661    $ 3,760
       Acquisition of equipment under capital lease       $    --    $12,081


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

                                                                            F-8


<PAGE>


FRAGRANCENET.COM, INC. AND SUBSIDIARY NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2002


NOTE 1 - Nature of Business

       FragranceNet.com Inc. (the "Company") is engaged in the retail sale of
       brand name fragrances and related products over the Internet.
       Accordingly, the Company considers itself to be operating in a single
       industry segment.


NOTE 2 - Summary of Significant Accounting Policies

       Basis of Presentation
       The accompanying consolidated financial statements present the historical
       financial results of TeleScents, Inc. and include the net assets acquired
       in National Capital Management Corporation's ("NCMC") acquisition of
       TeleScents on July 28, 1999, which was accounted for as a reverse
       acquisition (see Note 3). NCMC had no operations subsequent to July 28,
       1999. In connection with the merger, NCMC changed its name to
       FragranceNet.com, Inc.

       Cash Equivalents
       The Company considers all highly liquid investments purchased with an
       original maturity of three months or less to be cash equivalents. Cash
       equivalents of $73,775 and $119,550 at March 31, 2002 and 2001 consisted
       of money market accounts and other highly liquid short-term investments.

       Accounts Receivable
       The Company generally purchases products only after they have been
       ordered and paid for by the customer. Payment is made by credit card or
       check and goods are not shipped to the customer until the check is
       cleared or authorization from the credit card company is obtained.
       Included in accounts receivable are payments due from credit card
       companies.

       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 generally does not charge its customers for shipping costs, which
       are included in selling and marketing expenses in the consolidated
       statements of operations. Outbound shipping costs for the shipment of
       product to customers amounted to $553,306 and $699,901 for the years
       ended March 31, 2002 and 2001, respectively. In the fourth quarter of
       fiscal 2000, the Company adopted 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 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.


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

                                                                            F-9

<PAGE>


NOTE 2 - Summary of Significant Accounting Policies, continued

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

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

       Intangible Asset
       The intangible asset consists of a purchased trade name that is amortized
       using the straight-line method 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.

       Earnings Per Share
       The Company displays earnings per share in accordance with Statement of
       Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share".
       SFAS No. 128 requires dual presentation of basic and diluted earnings per
       share. Basic earnings per share includes no dilution and is computed by
       dividing net income (loss) available to common stockholders by the
       weighted average number of common shares outstanding for the period.
       Diluted earnings per share include the potential dilution that could
       occur if securities or other contracts to issue common stock were
       exercised or converted into common stock. Outstanding stock options have
       not been considered in the computation of diluted earnings per share
       since the effect of their inclusion would be antidilutive.

       Accounting for Stock Options
       The Company applies the intrinsic value-based method of accounting
       prescribed by Accounting Principles Board (APB) Opinion No. 25,
       "Accounting for Stock Issued to Employees", and related interpretations,
       in accounting for its employee stock options. As such, compensation
       expense for fixed option awards is recorded only if the market price of
       the underlying common stock on the date of grant exceeded the exercise
       price. For disclosure purposes, pro forma net income (loss) and pro forma
       net income (loss) per common share information are provided in accordance
       with Statement of Financial Accounting Standards No. 123, "Accounting for
       Stock-Based Compensation", as if the fair value-based method had been
       applied.

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

                                                                           F-10

<PAGE>
NOTE 2 - Summary of Significant Accounting Policies, continued

       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, 2002
       and 2001, 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 by which the
       carrying amount of the assets exceeds the fair value of the assets.
       Assets to be disposed of are reported at the lower of the carrying amount
       or fair value less costs to sell.

       Advertising Costs
       Advertising costs are expensed as incurred. Advertising costs were
       $491,585 and $502,126 for the years ended March 31, 2002 and 2001,
       respectively.

       Use of Estimates
       The preparation of the consolidated financial statements in conformity
       with generally accepted accounting principles requires management to make
       estimates and assumptions that affect the reported amounts of assets and
       liabilities and 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
       During the period ended March 31, 2001, the Company adopted SFAS No. 133,
       "Accounting for Derivative Instruments and Hedging Activities". SFAS No.
       133 establishes accounting and reporting standards for derivative
       instruments, including certain derivative instruments embedded in other
       contracts (collectively referred to as derivatives), and for hedging
       activities. This Statement requires that an entity recognizes all
       derivatives as either assets or liabilities in the consolidated balance
       sheets and measure those instruments at fair value. The accounting for
       changes in the fair value of a derivative instrument depends on its
       intended use and the resulting designation. Implementation of SFAS No.
       133 did not have any material impact on the financial statements of the
       Company.



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

                                                                           F-11

<PAGE>


NOTE 2 - Summary of Significant Accounting Policies, continued

       In July 2001, the Financial Accounting Standards Board ("FASB") issued
       SFAS No. 141 "Business Combinations" and SFAS No. 142, "Goodwill and
       Other Intangible Assets". SFAS 141 provides guidance on the accounting
       for a business combination at the date a business combination is
       completed. The statement requires the use of the purchase method of
       accounting for all business combinations initiated after June 30, 2001,
       thereby eliminating use of the pooling-of-interests method. SFAS 142
       provides guidance on how to account for goodwill and intangible assets
       after an acquisition is completed. The most substantive change is that
       goodwill will no longer be amortized, but instead will be tested for
       impairment periodically. This statement will apply to existing goodwill
       and intangible assets, beginning in fiscal 2003, and is not expected to
       have a material impact on the financial statements of the Company.

       In October 2001, the FASB issued SFAS No. 144, "Accounting for the
       Impairment or Disposal of Long-Lived Assets". SFAS 144 addresses the
       accounting model for long-lived assets to be disposed of by sale and
       resulting implementation issues. This statement requires that those
       long-lived assets be measured at the lower of carrying amount or fair
       value less cost to sell, whether reported in continuing operations or in
       discontinued operations. Therefore, discontinued operations will no
       longer be measured at net realizable value or include amounts for
       operating losses that have not occurred. It also broadens the reporting
       of discontinued operations to include all components of an entity with
       operations that can be distinguished from the rest of the entity and that
       will be eliminated from the ongoing operations of the entity in a
       disposal transaction. The adoption of SFAS 144 is not expected to have a
       material impact on the financial statements of the Company.

       Comprehensive Loss
       For each year presented comprehensive income (loss) equaled net income
       (loss).


NOTE 3 - Merger of TeleScents and FragranceNet.com, Inc.

       The Company was formerly known as National Capital Management Corporation
       ("NCMC"), a publicly held shell company with no substantial business
       operations. On July 28, 1999, NCMC entered into an Agreement and Plan of
       Merger (the "Merger Agreement") to acquire TeleScents, Inc., a New York
       corporation ("TeleScents"). Pursuant to the Merger Agreement, NCMC issued
       to the shareholders of TeleScents an aggregate of 4,900,000 shares of its
       common stock and an aggregate of 1,029,514 shares of its Series A
       Preferred Stock (the "Preferred Stock") in exchange for all the
       outstanding shares of TeleScents. 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 sufficient to effect the
       conversion. The Preferred Stock had voting privileges on an "as
       converted" basis. Accordingly, after the merger the shareholders of
       TeleScents, in the aggregate, held approximately 90% of the total voting
       power of the Company's voting stock. The conversion of the Preferred
       Stock into 10,295,140 shares of common stock occurred subsequent to the
       Shareholders' meeting on November 16, 1999 where an amendment to the
       Company's Certificate of Incorporation was approved to increase the
       authorized shares of common stock from 6,666,666 to 50,000,000.

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

                                                                           F-12

<PAGE>
NOTE 3 - Merger of TeleScents and FragranceNet.com, Inc., continued

       In connection with the Merger, the Company changed its name to
       FragranceNet.com, Inc. and changed its ticker symbol to "FRGN".

       The Company's acquisition of TeleScents was accounted for as a reverse
       acquisition with TeleScents as the accounting acquirer, as the
       shareholders of TeleScents gained voting control of the Company pursuant
       to the Merger. The only asset remaining in NCMC at the time of the merger
       was $437,703 of cash. Accordingly, the reverse acquisition was in
       substance a recapitalization of TeleScents with the issuance of shares of
       common stock by TeleScents to the pre-transaction stockholders of
       FragranceNet.com in exchange for cash. For periods prior to the business
       combination, the equity of the combined enterprise is the historical
       equity of the accounting acquirer prior to the Merger retroactively
       restated to reflect the number of shares received in the business
       combination.

NOTE 4 - Property and Equipment

       Property and equipment consists of the following:

                                              2002              2001
                                            --------          --------
       Computer and office equipment        $164,798          $164,798
       Computer software                      45,988            24,676
                                           ---------         ---------
                                             210,786           189,474
       Less: accumulated depreciation        107,627            43,690
                                            --------         ---------

                                            $103,159          $145,784
                                            ========          ========

       Depreciation expense amounted to $63,938 and $21,013 the years ended
       March 31, 2002 and 2001, respectively.


NOTE 5 - Leases

       The Company entered into a capital lease during fiscal 2001 for the
       acquisition of certain office equipment. As of March 31, 2002, the future
       minimum lease payments under this lease are as follows:


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

                                                                           F-13

<PAGE>


NOTE 5 - Leases, continued

                               For the
                             Year Ending
                              March 31,                               Amount
            ----------------------------------------------------      ------
                                 2003                                 $4,476
                                 2004                                  3,731
                                                                      ------

            Total minimum lease payments                               8,207
            Less: amount representing interest at 7%                     526
                                                                     -------

            Present value of net minimum lease
             Payments                                                  7,681
            Less current portion                                       4,068
                                                                      ------

            Obligations under capital leases, excluding
            current portion                                           $3,613
                                                                      ======


NOTE 6 - 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 an executive of
       the Company. Sublease rental income was $20,400 and $11,050 for the years
       ended March 31, 2002 and 2001, respectively, which is included in other
       income in the consolidated statements of operations.

       Bonus Deferrals
       Pursuant to employment agreements of certain of the Company's executives
       and a consultant, these individuals were entitled to bonuses in the
       aggregate of approximately $123,400 and $122,500 for the years ended
       March 31, 2001 and 2000, respectively. All recipients agreed to defer
       these bonuses until June 30, 2002. The accrued bonuses of $245,900, were
       included in accrued expenses at March 31, 2002 and 2001.

       For the years ended March 31, 2002 and 2001, the Company has incurred
       interest at 7% on the bonuses approximating $17,800 and $8,575,
       respectively, which has been included in interest expense in the
       consolidated statements of operations.


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

                                                                           F-15

<PAGE>


NOTE 7 - Stock Options

       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 to employees and directors.
       The Plan authorizes grants of options to purchase 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 term of each
       option will generally be fixed by the Board, 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 value of the common stock on the date
       of grant. The options expire in July 2009. At March 31, 2002 and 2001,
       these were the only options outstanding, all of which were exercisable.
       Since these options were earned in fiscal 2000, pro forma financial
       information for fiscal 2002 or 2001 is not required.


NOTE 8 - Income Taxes

       The provision for income taxes in each of the two years ended March 31,
       2002 consisted of state minimum taxes.

       The tax effects of temporary differences that give rise to significant
       portions of the deferred tax assets and liabilities at March 31, 2002 and
       2001 are as follows:

                                                             2002        2001
                                                           --------    --------
      Deferred tax assets and liabilities:
        Accounts receivable (allowance for returns)        $    400    $    600
        Accrued expenses                                     98,400      98,400
        Fixed assets                                             --      (8,100)
        Net operating loss carryforwards                    167,900     246,000
                                                           --------    --------
                                                            266,700     336,900
      Less: valuation allowance                             266,700     336,900
                                                           --------    --------

             Deferred tax assets                           $     --    $     --
                                                           ========    ========


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

                                                                           F-15

<PAGE>


NOTE 8 - Income Taxes, continued

       During the year ended March 31, 2002, $177,000 of the net operating loss
       carryforwards were utilized to reduce the taxable income. At March 31,
       2002, the Company has a Federal net operating loss (NOL) carryforward of
       approximately $420,000 expiring in fiscal 2018 to 2021. In addition,
       certain of NCMC's NOL's may be utilizable by the Company, subject to an
       annual limitation imposed by Section 382 of the Internal Revenue Code for
       changes in ownership. 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. Although the Company generated taxable income in fiscal
       2002, due to the consistent taxable losses generated in previous years,
       management continues to believe it is more likely than not that the
       Company will not realize the benefits of these deductible differences and
       NOLs, and, accordingly, has established a valuation allowance at March
       31, 2002 and 2001.


NOTE 9 - Commitments and Contingencies

       The Company leased a building, commencing September 1, 2000, under a
       non-cancelable operating lease, which expires on May 31, 2005. The future
       lease payments under the operating lease are as follows:

                                     For the
                                   Year Ending
                                   March 31,                      Amount
                          ---------------------------------    -------------
                                     2003                      $  81,890
                                     2004                         85,165
                                     2005                         88,572
                                     2006                         14,857
                                                               ---------

                                     Total                     $ 270,484
                                                               =========

       Total rent expense for the years ended March 31, 2002 and 2001, was
       $78,462 and $57,825, respectively.



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

                                                                           F-16

<PAGE>


NOTE 10 - Concentration with Suppliers

       During the year ended March 31, 2002, the Company purchased a substantial
       portion of its fragrances from three suppliers. Purchases from these
       suppliers amounted to 44%, 12% and 11% of total purchases. During the
       year ended March 31, 2001, 40% of purchases were from one vendor.


NOTE 11 - Quarterly Results of Operations (Unaudited)

       The following is a summary of the quarterly results for the years ended
       March 31, 2002 and 2001.

<TABLE>
<CAPTION>

                                                      Quarter Ended

                                                 June 30,         September,     December         March 31,
                                                   2001           30, 2001       31, 2001          2002
                                                -----------      -----------     ----------      -----------
<S>                                             <C>              <C>             <C>             <C>
Net sales                                       $ 1,791,319      $ 1,390,583     $ 2,621,996     $ 1,698,288
Gross profit                                        659,812          633,467       1,061,383         632,445
Net income (loss)                                   (41,128)          76,249         225,339         (83,309)
Basic and diluted income (loss) per
share                                                 (0.00)            0.00            0.01           (0.00)


<CAPTION>

                                                      Quarter Ended

                                                 June 30,         September,     December         March 31,
                                                   2000           30, 2000       31, 2000          2001
                                                -----------      -----------     ----------      -----------
<S>                                             <C>              <C>             <C>             <C>
Net sales                                       $ 1,786,561      $ 1,505,508     $ 3,001,116     $ 1,630,162
Gross profit                                        614,712          654,561       1,162,930         530,082
Net income (loss)                                   (40,887)         121,791         240,412        (426,828)
Basic and diluted income (loss) per
share                                                 (0.00)            0.01            0.01           (0.03)

</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, all
       adjustments are of normal recurring nature.


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

                                                                           F-17