UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

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

For the fiscal year ended February28, 2005

Commission file number: 0-3579974

| Delaware      (State of incorporation) | 13-3579974      (I.R.S. Employer Identification No.) |
|----------------------------------------|------------------------------------------------------|

----

Securities registered pursuant toSection 12(g) of the Act:

Common Stock, $.001 par value

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes(x)  No( )

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, tothe best of registrant's knowledge in definitive proxy or information statements incorporated by referencein Part III of this Form 10-K or any amendment to this Form 10-K. (x)

| Aggregate market value    of the voting stock held by non-affiliates of the    registrant as of May 20, 2005 |   | $1,200,078 |
|--------------------------------------------------------------------------------------------------------------|--------|------------|
| Number of shares outstanding    of the registrant's Common Stock    as of May 20, 2005                   |   | 1,775,053  |

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of this Report,to the extent not set forth herein, is incorporated by reference from the Registrant's definitive proxystatement relating to the annual meeting of stockholders to be held in July 2005, which definitive proxystatement will be filed with the Securities and Exchange Commission within 120 days after the closeof the year ended February 28, 2005.

----

# TABLE OF CONTENTS

- PART I
-    - ITEM 1. BUSINESS
  - ITEM 2. PROPERTIES
  - ITEM 3. LEGAL PROCEEDINGS
  - ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS AND OTHER INFORMATION 
-  
- PART II
-    - ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
  - ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
  - ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  - ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
  - ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  - ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  - ITEM 9A. CONTROLS AND PROCEDURES 
-  
- PART III
-    - ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  - ITEM 11. EXECUTIVE COMPENSATION
  - ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
  - ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  - ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES 
-  
- PART IV
-    - ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K 
-  
- SIGNATURES

----

# PART I

## ITEM 1. BUSINESS

### General

MFC DEVELOPMENT CORP. (the "Company" or "MFC") was incorporated in the State of Delawareon May 18, 1990 under the name of PSI Food Services Corp., which had been a wholly-owned subsidiaryof FRMO Corp., formerly FRM Nexus, Inc., a Delaware corporation ("FRM"), since November 1993. All ofFRM's assets and liabilities were transferred to MFC on August 31, 2000, except for $10,000. Becausesuch entities were under common control, this transaction was accounted for in a manner similar to apooling of interests on MFC's books. On January 23, 2001, all of the outstanding shares of MFC weredistributed to shareholders of FRM, which no longer owns any shares of MFC.

### Business Description

MFC is engaged in the business of developing real estateand liquidating the discontinued operations of the Medical Division.

#### Real Estate Division

The Real Estate Division of the Company presently owns the interestsin parcels of real estate described below. For the fiscal year ended February28, 2005, the total revenues derived from the Real Estate Division were $1,776,877, constituting100%of the total revenues from continuing operations of MFC. A brief description of each parcel follows:

##### East Granby,Connecticut

The Company owned a partially built two-story office building located at 2 GatewayBoulevard in East Granby, Connecticut which was carried at the value of $900,000 on February 28, 1995.In the fiscal year ended February 29, 1996, the Company spent approximately $1,300,000 in developing the siteand improving a portion of the building. In February 1996, the property was sold to Gateway Granby,LLC. ("Gateway"), a limited liability company of which certain members are shareholders of MFC, for$4,800,000, of which $3,853,268 has been paid and $946,732  was due to the Company as of February28, 2005, pursuant to a purchase money second mortgage. The gain on the sale of this property was recognizedon the accrual method in prior years, except for a reserve of $850,000 which was recognized in January2003 upon the release of the Company from a contingent liability for certain rental payments.On May 17, 2005, the $946,732 second mortgage was exchanged for a $1,000,000equity investment in Granby.

##### Hunter,New York

MFC's wholly-owned subsidiary, Yolo Equities Corp. owns the fee interest in propertiesin Hunter, New York, along with co-investors. The co-investors are entitled to receive 35%of the cash proceeds of the sales of Hunter Properties made after June 30, 2000, after deducting thenet costs of carrying the properties after June 30, 2000 and the costs of the sales (the "net proceeds").Yolo Equities Corp. is entitled to receive 65% of the said net proceeds. As ofFebruary 28, 2005, the properties consisted of acreagein an area known as Hunter Highlands, which is adjacent to the Hunter Mountain Ski Slopes in the Townof Hunter, Greene County, New York. The undeveloped portion of the acreage, which Yolo Equities Corp.plans to sell or develop, is available for single family residences, townhouses,and condominium units. The developed portion, consisting of (i) a waste water treatment plant owned by HighlandsPollution Control Corp. (a wholly-owned subsidiary of the Yolo Equities Corp.),and (ii) a Clubhouse with swimming pool and six tennis courts, were sold in May2005. A small office buildingwas renovated and converted into three townhouse units. One of thetownhouse units was sold in February 2004, and the remaining two units were soldin the fiscal year ended February 28, 2005. Adjoining the undeveloped portion ofthe acreage are 200 condominiumunits owned by unrelated persons.

The waste water treatment plant was upgraded in the fiscal year ended February 28,2003, under an agreement with the City of New York. Prior to the sale of theplant on May 10, 2005, the City of New Yorkwas reimbursing the Company for all costs incurred with the upgrade of the facility. See Note 4 of Notesto Consolidated Financial Statements.

The Company completed a sale of the Clubhouse on May 17,2005. 

The hotel site, consisting of 10 plus acres, was sold onSeptember 23, 2004. See Note 4 of Notes to Consolidated Financial.

After the sales in May 2005, Yolo Equities Corp. continues toretain about 65 acres of land for development or sale.The future development of this acreage will require an increase in the capacity of the waste water treatment plant, for which State permits already exist,and which Yolo Equities Corp. has the right to obtain by participating in thefinancing of the expansion.

##### OtherProperties

The Company, alone or with co-investors and joint ventures,may acquire otherreal property for development of residential, commercial and office structures, when management identifies opportunitiesfor enhancement of shareholder values.

#### Medical Division (Discontinued)

On February 4, 2004, the Company instituted a plan to restructure the medical  financing segment. The plan of restructuring called for the Company to sell the assets of the  three subsidiaries that were formed to provide additional management services to certain medical  practices. On August 26, 2004 the Company sold its continuing service obligations and the related  future revenue rights of its medical financing business in exchange for preferential collection  rates on the receivables that are expected to be collected. As part of the terms of the sale, the  Company will retain half of the interest paid by insurance companies on late payments from  improperly denied receivables. The Company expects that the interest income it receives will be  great enough to cover the additional costs that will be due when the existing receivables are  collected. The Company still expects to incur certain additional costs related to its  discontinued operation, until all of the receivables are collected. The medical financing  business was conducted through Medical Financial Corp., a wholly owned subsidiary, which (i)  purchased insurance claims receivables from medical practices and provided certain services to  those practices; and (ii) three other subsidiaries, which were formed to provide additional  management services to certain medical practices. Accordingly, the operating results of the  medical financing segment for each of the three years ended February 28, 2005 has  been presented as "(Loss) income from discontinued operations, net of income taxes".  Net assets and liabilities to be disposed of or liquidated, at their book value, have been  separately classified in the accompanying balance sheets at February 28, 2005 and February 29,  2004. See Note 11 of Notes to Consolidated Financial Statements.

### Marketing

The Company's marketing in its real estate activities is limited to working withreal estate brokers in New York and Connecticut.

### Competition

#### Real Estate Division

The Company's presently owned acreage held for developmentor sale is locatedin Hunter, New York. The real estate market for second homes in this resort communityis presently experiencingimproved demand. The Company will be competing with many owners and developers in the locale in connectionwith the development and sale of this land. After May 17, 2005, the Company hasa 49% equity interest in Gateway Granby, LLC, which owns an office building,subject to a first mortgage of $2,200,000. The building is currently 93%occupied by unrelated tenants. Gateway competes with many owners of officebuildings in the Northern Hartford, Connecticut area for leasing and leaserenewals.

### Trademarks

None.

### Employees

As of February 28, 2005, the Company had 7 employees. None of the Company's employeesare represented by a labor union. MFC considers its relationship with its employees to be good.

### Regulatory Laws

The Company is in compliance with all environmental laws relating to hazardous substancesin real property. Future compliance with environmental laws is not expected to have a material effecton its business.

## ITEM 2. PROPERTIES

In addition to the real property as set forth in Item1 above, MFC leases its offices in New Rochelle, New York, under a lease expiring on February 28, 2007.All of the space leased by the Company is leased from an unaffiliated third party.

## ITEM 3. LEGAL PROCEEDINGS

MFC is not presently a party to any material litigation,except (i) a lawsuit relating to the title issue on the sale of the hotel siteset forth in Note 4 of the Notes to the Consolidated Financial Statements, whichinvolves $125,000 for which the Company has taken a 100% valuation allowance,and (ii) a lawsuit by the co-investors of the Hunter property set forth in Note8 of Notes to the Consolidated Financial Statements, which has been deferredpending review of the recent accounting given to the co-investors as of February28, 2005.

## ITEM 4. SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS AND OTHER INFORMATION

None, other than the election of directors on July 15, 2004.

### Other Information

#### Cautionary Statement

In connection with the "safe harbor" provisions of the Private Securities LitigationReform Act of 1995, the Company is hereby filing cautionary statements identifying important risk factorsthat could cause the Company's actual results to differ materially from those projected in forward lookingstatements of the Company made by or on behalf of the Company.

Such statements may relate, but are not limited, to projections of revenues, earnings,capital expenditures, plans for growth and future operations, and  competition, as well as assumptions relatingto the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, manyof which cannot be predicted or quantified.

When the Company uses the words "estimates," "expects," "anticipates," "believes,""plans," "intends," and variations of such words or similar expressions, they are intended to identifyforward-looking statements that involve risks and uncertainties. Future events and actual results coulddiffer materially from those underlying the forward-looking statements. The factors that could causeactual results to differ materially from those suggested by any such statements include, but are notlimited to, those discussed or identified from time to time in the Company's public filings, includinggeneral economic and market conditions, changes in domestic laws, regulations and taxes, changes incompetition and pricing environments, and regional or general changes in real estate values.

Undue reliance should not be placed on these forward-looking statements, which areapplicable only as of the date they are made. The Company undertakes no obligation to revise or updatethese forward-looking statements to reflect events or circumstances that arise after that date or toreflect the occurrence of anticipated events.

----

# PART II

## ITEM 5. MARKET FOR REGISTRANT'SCOMMON EQUITY AND RELATED STOCKHOLDER MATTERS

### Registration and Market Prices of CommonStock

The Form 10 Registration of the common stock of MFC Development Corp. pursuant toSection 12(g) of the Securities Exchange Act of 1934 as finally amended on January 17, 2001 was effectiveas of November 30, 2000 and MFC has been a reporting company since that date, filing its first quarterlystatement for the nine months ended November 30, 2000, on January 16, 2001.

The Company's common stock was distributed on January 23, 2001 in a spin-off fromFRM. Shareholders' basis in the Company's shares is equal to the market value when distributed, whichwas $1.00 per share based on its trading on the NASDAQ Bulletin Board under the symbol MFCD. The followingtable sets forth the range of high and low bid quotations of the Company's common stock for the periodsset forth below, as reported by the National Quotation Bureau, Inc. Such quotations represent inter-dealerquotations, without adjustment for retail markets, markdowns or commissions, and do not necessarilyrepresent actual transactions.

| **Fiscal Period** |                  | High Bid |   | Low Bid |
|-------------------|-----------------------|----------|--------|---------|
|                   |                  |     |   |    |
| **2004**          |                  |     |   |    |
| Quarter 1         | (03/01/03 - 05/31/03) | $1.85    |   | $1.55   |
| Quarter 2         | (06/01/03 - 08/31/03) | $1.90    |   | $1.31   |
| Quarter 3         | (09/01/03 - 11/30/03) | $1.85    |   | $1.35   |
| Quarter 4         | (12/01/03 - 02/29/04) | $1.30    |   | $0.60   |
|                   |                  |     |   |    |
| **2005**          |                  |     |   |    |
| Quarter 1         | (03/01/04 - 05/31/04) | $3.50    |   | $1.02   |
| Quarter 2         | (06/01/04 - 08/31/04) | $3.10    |   | $1.35   |
| Quarter 3         | (09/01/04 - 11/30/04) | $2.80    |   | $1.45   |
| Quarter 4         | (12/01/04 - 02/28/05) | $2.10    |   | $1.00   |

The last trade on May20, 2005 was $1.05

### Dividends

No cash dividend has been paid by MFC since its inception. The Company has no presentintention of paying any cash dividends on its common stock.

### Holders

As of May 1, 2005, there were approximately1,000 holders of record of MFC commonstock representing about 2,100 beneficial owners of its shares. There are no options or warrants topurchase common stock of the Company outstanding except for options to purchase a total of(i) 4,500 sharesheld by Allan Kornfeld, former Chairman of the Company, (ii) 4,500 shares held by David Michael,a former Director, (iii) 6,000 shares held by AndersSterner, presently a Director of the Company, and (iv) 1,500 shares each held byJay Hirschson and Steven Kevorkian, both presently Directors of the Company. The Company does not know of any shares of common stock of MFC thatare held by any director, officer or holder of as much as 5% of the outstanding stock for sale pursuantto a filing under Rule 144 of the Securities Act. The Company has not agreed to register any commonstock for sale under the Securities Act by any shareholder or the Company, the offering of which couldhave a material effect on the market price of the Company's common equity.

## ITEM 6. SELECTED CONSOLIDATED FINANCIALDATA

    			Fiscal Year Ended			February 28, 			February 29, 			February 28, 			February 28, 			February 28,			2005 			2004 			2003 			2002 			2001**Income Statement Data:**         			Total revenue			 $  1,776,877  			 $     619,114  			 $ 1,036,962  			 $ 1,116,723  			 $    304,260 			Costs and expenses			     2,055,314  			        782,857  			       564,519  			       558,327  			       791,014          			Income (loss) from operations 			       (278,437) 			       (163,743) 			       472,443  			       558,396  			     (486,754)			Other (expenses) net of other income			         (86,950) 			         (80,140) 			       (11,483) 			           2,778  			     (198,040)         			(Loss) income from continuing         			operations before provision for         			income taxes			       (365,387) 			       (243,883) 			       460,960  			       561,174  			     (684,794)			Provision (benefit) for income taxes			            3,795  			            6,378  			       (75,838) 			         12,390  			         10,556          			(Loss) income from continuing operations			       (369,182) 			       (250,261) 			       536,798  			       548,784  			     (695,350)			(Loss) income from discontinued operations, net         			of taxes (including impairment & disposal losses        			of $489,000 in 2005 and $229,000 in 2004, and         			gain on sale of subsidiary of $381,000 in 2001)			    (2,122,721) 			    (1,182,763) 			       428,287  			       259,601  			       (54,945)         			Net income (loss)			 $ (2,491,903) 			 $ (1,433,024) 			 $    965,085  			 $    808,385  			 $  (750,295)         			(Loss) earnings per common share:                  			(Loss) earnings from continuing operations			 $          (0.21) 			 $          (0.14) 			 $          0.30  			 $          0.31  			 $        (0.39)			(Loss) earnings from discontinued operations			             (1.19) 			             (0.67) 			             0.24  			             0.14  			           (0.03)			Basic and diluted (loss) earnings         			per common share			 $          (1.40) 			 $          (0.81) 			 $          0.54  			 $          0.45  			 $        (0.42)         			Number of shares used in computation of         			basic and diluted earnings per share			     1,775,053  			     1,775,053  			    1,787,350  			    1,792,662  			    1,807,261          			As of			February 28, 			February 29, 			February 28, 			February 28, 			February 28,			2005 			2004 			2003 			2002 			2001**Balance Sheet Data:**         			Working Capital			 $     338,609  			 $  2,070,863  			 $ 3,873,448  			 $ 3,975,608  			 $ 1,952,829          			Total assets			 $  3,781,556  			 $  5,903,032  			 $ 7,075,843  			 $ 6,277,489  			 $ 7,222,100          			Long-term debt			 $     158,344  			 $     242,760  			 $    233,560  			 $      45,000  			 $                -          			Common Shareholders' equity			 $  1,715,187  			 $  4,207,090  			 $ 5,640,114  			 $ 4,702,368  			 $ 3,907,282          			Book value per share			 $           0.97  			 $           2.37  			 $          3.18  			 $          2.63  			 $          2.17          			Common shares outstanding			     1,775,053  			     1,775,053  			    1,775,053  			    1,790,000  			    1,800,000 
    	(a) During the year ended February 28, 2001, the  Company disposed of its interest in Wendcello Corp.

## ITEM 7. MANAGEMENT'S DISCUSSIONAND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

All statements contained herein that are not historical facts, including but not limited to, statements regardingfuture operations, financial condition and liquidity, expenditures to develop real estate owned by the Company, future borrowing,capital requirements, and the Company's future development plans, are based on current expectations. These statements are forward-looking in nature and involve a number of risks and uncertainties. Actual results may differ materially. Among the factors thatcould cause actual results to differ materially are the following: changesaffecting the business of the Company's medical service organization and medical provider clients,a legislative change in insurance regulations affecting the future collections of medical receivables, changes in the real estateand financial markets, adverse arbitration or court decisions on collectibilityof purchased receivables, environmental action by governments affectingdevelopment of real estate, and other risk factors described herein and in theCompany's reports filed and to be filed from time to time with the Commission. The discussion and analysis below is based on the Company's Consolidated Financial Statementsand related Notes thereto included herein and incorporated herein by reference.

### Overview

Through August 26, 2004, the Company operated in two distinct industries  consisting of real estate and medical financing. The medical financing business was conducted through Medical Financial Corp., a wholly  owned subsidiary, which (i) purchased insurance claims receivables from medical practices and  provided certain services to those practices; and (ii) three other subsidiaries, which were  formed to provide additional management services to certain medical practices. On February 4,  2004, the Company decided to restructure the medical financing segment. The plan of restructuring  called for (i) the purchase of insurance claims receivables from medical practices to be  discontinued, (ii) the sale of the assets of the three subsidiaries that were formed to provide  additional management services to certain medical practices, and (iii) focus the operations of  the medical segment on collections and other services. On August 26, 2004 the	Company sold its continuing service obligations and the related future	revenue rights of its medical financing business. As a result of the restructuring on  February 4, 2004, and the sale of its continuing service obligations on August 26, 2004, the  medical financing segment has been reclassified as discontinued operations and prior periods have  been restated.

The real estate segment consists of parcels of real estate in Hunter, New York,  held for future development or sale, and of mortgage  notes receivable on properties that were previously sold. Both the properties	and mortgage  notes receivable are subject to the interest of co-investors. Revenues in the real estate division vary  substantially from period to period depending on when a particular transaction closes and  depending on whether the closed transaction is recognized for accounting purposes as a sale, or  is reflected as a financing, or is deferred to a future period.

In February 2003, the Company was released from a rental obligationto a related party arising fromthe sale of real estate in a prior period. The obligation was to a limitedliability company, 24% owned by Lester Tanner's daughter. Lester Tanner is ashareholder, director and president of the Company. As a result of the termination of the contingent obligation,the Company recorded a gain of $850,000 during the year ended February 28, 2003.

**Critical Accounting Policies**

Management's discussion and analysis of its financial position and results of operations are based upon the Company'sconsolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the UnitedStates of America. The preparation of these financial statements requires management to make estimates and judgments that affectthe reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities.Actual results could differ from those estimates. Management believes that the critical accounting policies and areas that requirethe most significant judgments and estimates to be used in the preparation of the consolidated financial statements are allowancefor doubtful accounts and the valuation allowance against its deferred tax asset,and revenue recognition.

**Allowance for Doubtful Accounts**

*Mortgage and note receivable:* The Company evaluates the credit  positions on its notes receivable and the value of the related collateral on an ongoing basis.  The Company estimates that all of its notes receivable are fully collectible and the value of the  collateral is in excess of the related receivables. The Company continually evaluates its notes  receivable that are past due as to the collectibility of principal and interest. The Company  considers the financial condition of the debtor, the outlook of the debtor's industry,  decrease in the ratio of collateral values to loans, and any prior write-downs on loans. The  above considerations are all used in determining whether the Company should suspend recording  interest income on any notes receivable or provide for any loss reserves.

*Finance receivables (discontinued assets):* Management's periodic  evaluation of the adequacy of the allowance for loan losses is based on the Company's past  loan loss experience, known and inherent risks in the portfolio, adverse situations that may  affect the customer's ability to repay, the estimated value of any underlying collateral, the  outlook of the debtor's industry, and current economic conditions. When the Company estimates  that it may be probable that a specific customer account may be uncollectible, that balance is  included in the reserve calculation. Actual results could differ from these estimates under  different assumptions.

*Deferred tax assets:* The Company records a valuation allowance to  reduce the carrying value of its deferred tax assets to an amount that is more likely than not to  be realized. While the Company has considered future taxable income and prudent and feasible tax  planning strategies in assessing the need for the valuation allowance, should the Company  determine that it would not be able to realize all or part of its net deferred tax assets in the  future, an adjustment to the valuation allowance would be charged to income in the period in  which such determination was made. A reduction in the valuation allowance and corresponding  credit to income may be required if the likelihood of realizing existing deferred tax assets were  to increase.

**Revenue Recognition**

*Real Estate:* The full accrual method is used on the sale of real  estate if the profit is determinable, the Company is not obligated to perform significant  activities after the sale to earn the profit, and there is no continuing involvement with the  property. If the buyer's initial and continuing investments are inadequate to demonstrate a  commitment to pay for the property, the installment method is used, resulting in the deferral of  income. If there is continuing involvement with the property by the Company, the financing method  is used.

*Purchase and Collection of Medical Insurance Claims Receivables  (discontinued operations):* A fee was charged to medical providers upon the purchase of their  accounts receivable by the Company. The fee was for the up-front payment that the Company paid  upon purchase of the receivables and for collection services rendered to collect the receivables.  This fee income was deferred and recognized over the contractual collection period in proportion  to the costs of collection. The deferred fee income is netted against finance receivables. The  Company is not entitled to interest on unpaid principal balances.

**Going Concern**

The accompanying consolidated financial statements have beenprepared assuming that the Company will continue as a going concern.  However,the Company incurred net losses of approximately $2,492,000 and $1,433,000during the years ended February 28, 2005 and February 29, 2004, respectively,principally from discontinued operations.  This factor raises substantial doubtabout the Company's ability to continue as a going concern.  

Management is making efforts to sell its real estate held fordevelopment or sale in the normal course of business and significantly reduceoperating expenses.  In addition, the Company is seeking to raise equity capitaland is considering business combinations with other entities. The consolidatedfinancial statements do not include any adjustments that might be necessaryshould the Company be unable to continue as a going concern.    

### Results of Operations

The following table summarizes the Company's changes in revenue from continuingoperations (in thousands) for the periods indicated:

|                                |  Year ended                                                |   |  Year ended                                     |
|--------------------------------|----------------------------------------------------------------------|--------|-----------------------------------------------------------|
|                                | **February 28/29**                                                   |   | **February 29/28**                                        |
|                                |                                                                 |   |                                                      |   | **Change** |   |   |   |   |   | **Change** |
|                                | **2005**                                                             |   | **2004**                                                  |   | **$** |   |  %  |   | **2004** |   | **2003** |   | **$** |   |  %  |
| **Revenues:**                  |                                                                 |   |                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Sale of real estate     |  $  1,583                                                  |   |  $     200                       |   |  $  1,383 |   |   |   |   |  $     200 |   |  $         - |   |  $     200 |   |   |   |
|   Other real estate       |             - |   |         250            |   |       (250) |   |   |   |   |         250 |   |        850 |   |        (600) |   |   |   |
|   Rental income           |         111                       |   |         103            |   |             8 |   |   |   |   |         103 |   |        103 |   |              - |   |   |   |
|   Interest from mortgages |           83            |   |           66 |   |           17 |   |   |   |   |           66 |   |          84 |   |          (18) |   |   |   |
|   Total revenue           |  $  1,777                                                  |   |  $     619                       |   |  $  1,158 |   |   187 |  %  |   |  $     619 |   |  $ 1,037 |   |  $    (418) |   |      (40) |  %  |

The Company's revenues from continuing operations for the year endedFebruary 28, 2005("2005") were $1,777,000, an increase of $1,158,000 or 187% as compared to theyear ended February 29, 2004 ("2004"). The Company's revenues fromcontinuing operations for the year endedFebruary 29, 2004 ("2004") were $619,000, a decrease of $418,000 or40% as compared to the yearended February 28, 2003 ("2003").

In 2005 the	Company sold the 10 acres of land for the hotel site ("Hotel Site") that was in the	beginning stages of development. The net sales price was $1,081,000 (gross	sales price of $1,250,000, less an allowance of  $125,000 and deferred	interest of $44,000). In 2005, the Company also completed the  renovation of the final two townhouse units that it owned at its Hunter, NY	property. The sales price for these units was $502,000 in 2005, as compared	to the one unit that was sold in 2004 for $200,000.

The decrease in  other real estate income was a result from net adjustments in 2004 to amounts that were due to co-investors of $250,000.  The Company paid $25,000 in settlement of a dispute with a  prior co-investor and reevaluated the balances owed to the current co-investors as a result of  the development at the Hunter property. The increase of rental income in 2005was a result of a rate increase for sewage charges to the condominiumdevelopment for the sewage treatment plant services. The $17,000 increase ininterest from mortgages in 2005 was a result of the mortgage on the propertythat was sold.

The increase in real estate sales of$200,000 in 2004 was a result of one townhouse unit being sold in 2004, comparedto none in 2003. The decrease in other real estate revenue in2004, reflects the 2003 recognition of $850,000 ofdeferred income attributable to the termination of a contingent obligationrelated to a sale-leaseback. In 2004, other real estate revenue consisted ofadjustments to amounts due to co-investors of $275,000, offset by $25,000 paidin settlement of a dispute with a prior co-investor. The decrease in interestfrom mortgages in 2004 was due to a temporary reduction of the interest ratefrom the Granby mortgage as consideration for the termination of the contingentobligation related to a sale-leaseback.

The following table summarizes the Company's changes in costs and expensesfrom continuing operations (in thousands) for the periods indicated:

|                                      |  Year ended                                                |   |  Year ended                                                |
|--------------------------------------|----------------------------------------------------------------------|--------|----------------------------------------------------------------------|
|                                      | **February 28/29**                                                   |   | **February 29/28**                                                   |
|                                      |                                                                 |   |                                                                 |   | **Change** |   |   |   |   |   | **Change** |
|                                      | **2005**                                                             |   | **2004**                                                             |   | **$** |   |  %  |   | **2004** |   | **2003** |   | **$** |   |  %  |
| **Costs and expenses:**              |                                                                 |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Real estate                   |  $  1,717                                                  |   |  $     387                                  |   |  $  1,330 |   |   344 |  %  |   |  $     387 |   |  $    204 |   |  $     183 |   |        90 |  %  |
|   Corporate expenses            |         334                       |   |         392                       |   |         (58) |   |   (15) |  %  |   |         392 |   |        356 |   |           36 |   |        10 |  %  |
|   Depreciation and amortization |             4 |   |             4 |   |             - |   |        - |  %  |   |             4 |   |            5 |   |            (1) |   |      (20) |  %  |
|   Total costs and expenses      |  $  2,055                                                  |   |  $     783                                  |   |  $  1,272 |   |   162 |  %  |   |  $     783 |   |  $    565 |   |  $     218 |   |        39 |  %  |

Costs and expenses from continuing operations increased by $1,272,000, to  $2,055,000 in 2005. The net increase in 2005 was due to an increase in real estateexpenses,	offset by a decrease in corporate expenses.  The increase in real estate expenses of $1,330,000 was primarily attributable to the cost of the properties that were sold during  2005 (Hotel Site and two townhouses), which was $1,308,000, compared to thecost of $182,000 for the one townhouse that was sold in 2004. In addition, theCompany incurred an additional cost of $143,000 in 2005 when amounts due toco-investors were adjusted to reflect the sales and cash flow in the currentyear.

The $58,000 decrease in corporate expensesin 2005 was attributable to (i) a $35,000	reimbursement by another company that was involved with the Company in apreviously disclosed proposed transaction, which has since been canceled, (ii)a reduction in the amount of accounting billing, and (iii) a decrease indirectors' fees due to fewer meetings.

Costs and expenses from continuing operations increased by $218,000, to  $783,000 in 2004. The net increase in 2004 was due to increases in real estateand corporate expenses,	offset by a decrease in depreciation and amortization. The increase in real estate expenses of $183,000was primarily attributable to the $182,000 cost of real estate sold in 2004compared to none being sold in 2003. 

The $36,000 increase in corporate expenses in 2004 was due to (i) an increase of $17,000in accounting fees due to a billing adjustment for the prior year's annualaudit, (ii) an increase of $12,000 in directors' fees due to additional meetings, (iii) a $25,000 reallocation of administrative salaries from the real estatedivision, and (iv) anincrease in other various expenses, offset by a decrease in director and officerliability insurance of $34,000.

Net interest expense in 2005 was $87,000, compared  to $80,000 in 2004. Interest expense arises from the Company's obligations under its  outstanding Series A and Series B bonds. While the proceeds of these bonds were used to finance  the discontinued medical financing segment, the Company as guarantor, remains obligated as  to their repayment. As such, interest expense on these notes are classified as continuing  operations. The increase in 2005 was caused by additional borrowing due to  the amount of time insurance claims receivable are now remaining outstanding as a result of new  regulations that make the collection process more difficult. The collection delays, which the  Company believes are timing issues rather than credit issues of the insurance companies, have  caused the Company to increase its borrowings to finance the additional receivables.

Net interest expensein 2004 was $80,000, compared to $11,000 in 2003. The increase in 2004 wascaused by additional borrowing due to the amount of time insurance claims receivablewere remaining outstanding as a result of new regulations thatmade the collection process more difficult. The collection delays, which were timing issues rather than credit issues, have caused the Company to increaseits borrowings to finance the additional receivables.

Through 2005, the Company had accumulated net operating losses ("NOLs") of $7,396,000 availableto be carried forward through February 28, 2024. The Company did not generateany taxable income since February 28, 2003, and estimated that it would notderive any additional minimum future tax savings in addition to the $90,000 thatwas estimated in 2003. The Company has taken a 96% valuation allowance of$2,425,000 against the deferred tax asset of $2,515,000 that these NOLswould generate. In addition, the Company has also taken a 100% valuationallowance of $542,000 against other timing differences. The benefit for incometaxes of $76,000 in 2003 reflected the current year estimated benefit of$90,000. 

The following table summarizes the Company's changes indiscontinued operations (in thousands) for the periods indicated:

|                                                       |  Year ended                                                |   |  Year ended                                                      |
|-------------------------------------------------------|----------------------------------------------------------------------|--------|----------------------------------------------------------------------------|
|                                                       | **February 28/29**                                                   |   | **February 29/28**                                                         |
|                                                       |                                                                 |   |                                                                       |   | **Change** |   |   |   |   |   | **Change** |
|                                                       | **2005**                                                             |   | **2004**                                                                   |   | **$** |   |  %  |   | **2004** |   | **2003** |   | **$** |   |  %  |
| **Revenues:**                                         |                                                                 |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Income from the purchase and                   |                                                                 |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     collections of medical receivables |  $     175                                  |   |  $  1,443                                                        |   |  $(1,268) |   |   (88) |  %  |   |  $  1,443 |   |  $ 1,940 |   |  $    (497) |   |      (26) |  %  |
|   Medical management service fees                |           48            |   |      1,354                                             |   |    (1,306) |   |   (96) |  %  |   |      1,354 |   |     2,283 |   |        (929) |   |      (41) |  %  |
|   Total revenue                                  |         223                       |   |      2,797                                             |   |    (2,574) |   |   (92) |  %  |   |      2,797 |   |     4,223 |   |     (1,426) |   |      (34) |  %  |
|                                                       |                                                                 |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Costs and expenses:**                               |                                                                 |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Medical receivables                            |      1,024                                       |   |      1,763                                             |   |       (739) |   |   (42) |  %  |   |      1,763 |   |     1,720 |   |           43 |   |          3 |  %  |
|   Medical management services                    |         212                       |   |      1,198                                             |   |       (986) |   |   (82) |  %  |   |      1,198 |   |     1,902 |   |        (704) |   |      (37) |  %  |
|   Bad debt                                       |         454                       |   |         539                             |   |         (85) |   |   (16) |  %  |   |         539 |   |          15 |   |         524 |   |   3,493 |  %  |
|   Impairment loss                                |         271                       |   |         229                             |   |           42 |   |        - |  %  |   |         229 |   |             - |   |         229 |   |           - |  %  |
|   Loss on disposal of assets                     |         218                       |   |              - |   |         218 |   |        - |  %  |   |              - |   |             - |   |              - |   |           - |  %  |
|   Depreciation and amortization                  |         160                       |   |         230                             |   |         (70) |   |   (30) |  %  |   |         230 |   |        153 |   |           77 |   |        50 |  %  |
|   Total costs and expenses                       |      2,339                                       |   |      3,959                                             |   |    (1,620) |   |   (41) |  %  |   |      3,959 |   |     3,790 |   |         169 |   |          4 |  %  |
|                                                       |                                                                 |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   (Loss) income from operations                  |    (2,116)                                                 |   |     (1,162)                                                 |   |       (954) |   |   |   |   |     (1,162) |   |        433 |   |     (1,595) |   |   |   |
|   Other income (expense)                         |           (5)           |   |          (20)                      |   |           15 |   |   |   |   |          (20) |   |          (5) |   |          (15) |   |   |   |
|   (Loss) income before income taxes              |    (2,121)                                                 |   |     (1,182)                                                 |   |       (939) |   |   |   |   |     (1,182) |   |        428 |   |     (1,610) |   |   |   |
|   Income taxes                                   |             1 |   |             1       |   |             - |   |   |   |   |             1 |   |             - |   |             1 |   |   |   |
|   (Loss) income from                             |                                                                 |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     discontinued operations            |  $(2,122)                                                       |   |  $ (1,183)                                                            |   |  $   (939) |   |   |   |   |  $ (1,183) |   |  $    428 |   |  $ (1,611) |   |   |   |

The Company's revenues from discontinued operations in 2005 were  $223,000, a decrease of $2,574,000 as compared to 2004. The Company's revenues from discontinued operations in 2004were  $2,797,000, a decrease of $1,426,000 as compared to 2003. The decreases inboth periods were due to the elimination of revenues as part of the Company's decision on  February 4, 2004, to restructure the medical financing segment. The decrease inrevenues in 2004 was also attributable to the elimination throughout the year ofpoorly collecting clients, which was used as a way to be more selective inthe bill purchasing process due to new State insurance department regulationsthat made collections more difficult. In addition, management service feesdecreased in 2004 due to a decrease in the size of the medical practices thatwere managed. The Company bills for its services based on the amount of expensesthat it incurs on behalf of those practices. If those practices decrease theirsize, the Company will not incur as much expense, resulting in a decrease in theamount of service fees. These fees were net of billing adjustments. Managementservice fees were billed monthly according to the cost of services rendered tothe client. If the assets of the management client, which is also a financeclient, were not enough to satisfy the billed fees, an allowance for billingadjustments was recorded to reduce the Company's net receivables to an amountthat is equal to the assets of the client that were available for payment.

Costs and expenses from discontinued operations in 2005 decreased by $1,620,000, to $2,339,000. The decrease in	2005 was due to decreases	in medical receivable expenses, medical management service expenses, bad debts,	and depreciation and amortization, offset by increases in impairment loss	and	loss on disposal of assets. The decrease in medical receivable expenses of  $739,000 is due to a reduction in employment costs of $637,000 and other expenses due to the  decrease in services provided as a result of the of the Company's decision on February 4,  2004, to restructure the medical financing segment. For the same reason, medical management  service expenses decreased by $986,000 in 2005.

Costs and expenses from discontinued operations in 2004increased by $169,000, to $3,959,000. The increase in 2004 was due to increases	in medical receivable expenses, bad debts, and depreciation and amortization,offset by a decrease in medical management service expenses. The $43,000 increase in medical receivable expenses in 2004 was primarily dueto (i) an increase of  $68,000 in the costs of filingarbitrations against insurance companies on denied and unpaid medical bills,which was a result of an increase in the amount of arbitrations that were closedin 2004 as compared to 2003, and (ii) an increase of $14,000 in computer related expenses, due to a reduction inthe allocation of capitalized costs, offset by a decrease in postage costs of $69,000.The decrease in postage expenses in 2004 was due to a less costly method ofmailing medical bills and the related packages to the insurance carriers and adecrease in the quantity of mailings due to the reduction in the amount of billspurchased.

The $704,000 decrease in medical management expensesin 2004 was due to a net decrease  inoperating expenses from managing  a radiologist's practices, and (ii) areduction in operating expenses from a former client's office that isnow closed. A decrease in operating expenses occurs when there is a decrease in amanagement client's radiology practice. The reduction in operating expenses wasrelated to the reduction in the size of the radiologist's practice. As the sizeof the radiologist's practice decreases, expenses also decrease.

The Company may incur a medical receivable bad debt loss when the portion of a  medical claim collected does not exceed the advance (including the fee charged) given to the  client. The increase in bad debt expense that occurred during the years endedFebruary 28, 2005 and February 29, 2004 was based on an increase inadverse arbitration decisions from the hearings that were decided during thoseperiods. An increase in  the amount of closed arbitration cases has provided management with a larger base of  information to better estimate the reserve for bad debts. Management'sdecision to increase the bad debt reserve was based on the overall decrease inthe collections rate from the arbitrations that have been closed during the lasttwo fiscal years.  Management believes that it will be increasingly more difficult to collect on outstanding  receivables, and has initiated an additional program that it believes could increase the collections  rate. Management used this information when it made the decision in February 2004 to eliminate  the purchase of additional receivables. Management had also taken other measures during fiscal  2004 to reduce its bad debts, such as eliminating poorly collecting clients and reducing  the upfront advance percentage that it paid when receivables were purchased. Management will  monitor the results of these efforts as to the effect on collection rates, and whether the  reserve for bad debts is adequate based on actual collections.

The Company may incur a medical management bad debt loss when the assets of  the management client, which is also a finance client, are potentially insufficient to satisfy  all of the billed fees from prior periods. Since the management clients are also finance clients,  the bad debt reserve is a result of the overall decrease in the collections rate from the  arbitrations that have been closed during the years ended February 28, 2005	and February 29, 2004. The Company increased the bad  debt reserves during those periods, because it believes receivables available to pay management fees will be lower based on  the information that had become and is currently becoming available. The final bad debt expense  will ultimately be determined after all receivables are litigated.

The impairment losses of $271,000 in 2005 and $229,000 in 2004were a result ofmanagement's estimate as to the excess of the carrying value of the net assetsover the estimated (i) future cash flow generated from these assets and (ii) proceeds fromtheir ultimate sale.

The loss on disposal of assets of $218,000 in 2005 was a result of (i) the loss of $8,000 from the final disposition and sale of one MRI  facility, and (ii) the $210,000 loss incurred as a result of the decision in August 2004 to  abandon the remaining MRI facility, rather than continuing to pay the carrying costs of the  closed operation and trying to sell the assets before the lease expired on February 28, 2005.

The decrease in depreciation and amortization of $70,000, to$160,000 in 2005 was a result of the disposal of the assets of thetwo MRI facilities that the Company closed in 2005.  

The increase in depreciation expense of $77,000 in 2004 was a result of the opening of an additional MRI facility inNovember 2002 and the continuing upgrades of the MRI machines that the Companyowned and utilized in providing its management services.

For the reasons described above, most notably, the decreasein revenues from discontinued operations, compared to changes in costs andexpenses, the Company recorded a netlossof $2,492,000 in 2005, an increase of $1,059,000 from the net loss of $1,433,000 in 2004.For the same reasons as 2005, and in addition, the reduction in other real estate revenue, the Company recorded a netlossof $1,433,000 in 2004, a decrease in earnings of $2,398,000 from the net incomeof $965,000 in 2003. 

### Liquidity and Capital Resources

The Company's two business activities during the year endedFebruary 28, 2005 resulted in an increase of cash in the amount of $204,000. Through August 26, 2004, the Company operated in two distinct industries  consisting of real estate and medical financing. The medical financing business was conducted through(i) Medical Financial Corp., a wholly owned subsidiary, which purchased insurance claims receivables from medical practices and  provided certain services to those practices; and (ii) three other subsidiaries, which were  formed to provide additional management services to certain medical practices. On February 4,  2004, the Company decided to restructure the medical financing segment. The plan of restructuring  called for (i) the purchase of insurance claims receivables from medical practices to be  discontinued, (ii) the sale of the assets of the three subsidiaries that were formed to provide  additional management services to certain medical practices, and (iii) the focusof the operations of  the medical segment on collections and other services. On August 26, 2004, the	Company sold its continuing service obligations and the related future	revenue rights of its medical financing business. As a result of the restructuring on  February 4, 2004, and the sale of its continuing service obligations on August 26, 2004, the  medical financing segment has been reclassified as discontinued operations and prior periods have  been restated. The funds for its needs are expected to be provided fromexisting cash and proceeds from the collection of outstanding receivables. Ifthose sources are insufficient, additional funds may be provided fromasset-based borrowing facilities, refinancing of assets under capital leases,issuance of common stock, and the sale of real estate assets.

The real estate division is not expected to be a significant user of cash flow     from operations due to the elimination of carrying and development costs on the real estate that was sold     during the current and prior periods. The Company's real estate assets in Hunter, New York, are owned free     and clear of mortgages. On September 23, 2004, the company sold the 10 acres of land for the     hotel site that was in the beginning stages of development. The gross sales price was     $1,250,000, which was comprised of a down-payment of $350,000 and a $900,000, non-interest     bearing, balloon mortgage note that matures on November 10, 2005. The Company	is using an     imputed interest rate of 5% on the note. Due to a title issue on a 1.6 acre parcel contiguous     to the hotel site, that parcel could not be conveyed at the time of closing. If the Company     cannot freely convey the 1.6 acres by June 1, 2006, the mortgage note on the hotel site will     be reduced by $125,000. The Company reduced the gross sales price of the hotel site by     $125,000 as a reserve against the possible reduction in the mortgage note.  Further     development of the Hunter property, at any significant cost, is expected to be funded by     existing cash, issuance of common stock, the proceeds from mortgage note on the hotel site, issuance of Series B     Bonds, other asset-based financing, and the sale of other property in Hunter.

The Company believes that its present cash resources, the cash available from financing activities,	and issuance of additional common stock will besufficient on a short-term basis and over the next 12 months to fund itsexisting real estate business and discontinued operations, its company-wide working capital needs, and its expected investments in property and equipment. The Companyexpects that the collection of its existing receivables from discontinued	operations will enable funds to be provided internally and from its financing activities.

The Company's significant sources of financing have been fromSeries A and Series B bonds and construction loan financing. Both Series A andSeries B bonds are issued for 18-month terms and may be redeemed with 60 dayswritten notice in maximum increments of $50,000. Due to this redemption option,these bonds have been classified as current debt. As provided for in the debt instruments of the Series A and Bbonds, the Company has extended maturity dates as evidenced by formalcommitments. The Company may also refinance amounts that may be requested bybondholders for early redemptions through the issuance of new bonds. The Companyrepaid the outstanding balance of its construction loan from the proceeds ofthe sales of the townhouses that secured the loan.

Cash provided by operations in 2005 was $212,000, as compared to $405,000 beingused in 2004. The $617,000 net increasein cash provided by operations in 2005 was due to an increase in (i) collections from the sale of real estate of $509,000,	(ii) decrease in net assets of discontinued operations of $1,114,000 in 2005, compared to a	decrease     of $422,000 in 2004, primarily caused by the reduction of outstanding	receivables, due to the discontinuation of the medical division, and (iii) fluctuations in operating assets and     liabilities of $227,000, primarily caused by timing differences. The increases in cash provided by operations were     offset by an increase in real estate held for development or sale of	$71,000 and an increase in net loss, after adjustments for non-cash items of (i)     depreciation, (ii) real estate gains and losses, (iii) deferred interest	income, (iv) adjustment of amounts due to co-investors, (v) provision for bad debts and (vi)     impairment losses and disposal losses from discontinued operations, the net of these items     totaling $740,000.

Cash used by investing activities was $8,000 in 2005 as compared with no  activity in 2003. The increase in the use of cash in 2005 was due to capital expenditures of  $8,000 in 2005.

Net cash used by financing activities was $-0- in 2005 as	compared with $172,000 being provided in 2004. The $172,000 decrease in cash being provided in 2005 was due to  net loan borrowing in 2004, as compared to $-0- net borrowing in 2005. The proceeds from the  additional borrowings in 2004 were used to finance insurance claims receivable, which are  outstanding for a longer period of time as a result of new regulations that create timing issues  and make the collection process more difficult.

The table below summarizes aggregate maturities of future minimum note and leasepayments under non-cancelable operating and capital leases as of February 28, 2005.

|                                     |   |                                                                                   |   |  Less than                                                                              |   | 1-3                                                                                                                                     |   |  4-5                                                                                                                                     |   |  After 5                                                                                                                                 |
|-------------------------------------|--------|----------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|
|  Contractual Obligations  |   |  Total                                                                       |   |  1 Year                                                                                 |   |  Years                                                                                                                        |   |  Years                                                                                                                                   |   |  Years                                                                                                                                   |
|                                     |   |                                                                                   |   |                                                                                              |   |                                                                                                                                    |   |                                                                                                                                               |   |                                                                                                                                               |
|  Notes Payable            |   |  $           950,000            |   |  $           950,000                       |   |  $                      - |   |  $                      -            |   |  $                      -            |
|  Operating Leases         |   |               156,200 |   |                 78,200 |   |                 78,000                                       |   |                          - |   |                          - |
|                                     |   |                                                                                   |   |                                                                                              |   |                                                                                                                                    |   |                                                                                                                                               |   |                                                                                                                                               |
|  Total                    |   |  $        1,106,200                            |   |  $        1,028,200                                       |   |  $             78,000                                                  |   |  $                      -            |   |  $                      -            |

## ITEM 7A. QUANTITATIVEAND QUALITATIVE DISCLOSURES OF MARKET RISK

At February 28, 2005, the Company's debt that is sensitive tochanges in interest rates includes (i) Series A bonds of $750,000 maturing throughFebruary 2006, and (ii) Series B bonds of $200,000 maturing through September 2005. Interest on both of the Series A and Series Bbonds is calculated at a rate of prime plus 3% but not less than 9% per annumnor more than 15% per annum. The rate of interest will be adjusted at the end ofeach calendar quarter. An interest rate increase would have a negative impact tothe extent thatthe prime rate rises to above 6% and the Company maintains a balance in eitherof the Series A or Series B bonds. As of February 28, 2005, an increase in the prime rate to 7% wouldhave a maximum negative impact of approximately $10,000 per annum and eachadditional 1% increase in the prime rate would have a maximum negative impact ofapproximately $10,000 per annum. As of February 29, 2004, an increase in theprime rate to 7% would have had a negative impact of approximately $18,000 andeach additional 1% increase in the prime rate would have had a negative impactof approximately $13,000.

An interest rate change would not impact the Company's cashflows on the fixed rate mortgage receivable.

The Company's is also exposed to interest rate risk relatedto its receivables as a consequence of having fixed interest rate receivables. TheCompany is exposed to interest rate risk arising from changes in the level of interest rates. It isanticipated that the fair market value of receivables with a fixed interest rate will increase as interestrates fall and the fair market value will decrease as interest rates rise.

## ITEM 8. FINANCIALSTATEMENTS AND SUPPLEMENTARY DATA

The financial statements required by this Item 8 are set forth in Item 15 of thisForm 10-K. All information which has been omitted is either inapplicable or not required.

## ITEM 9. CHANGES IN AND DISAGREEMENTSWITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

**ITEM 9A. CONTROLS AND PROCEDURES**

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosedin the Company's Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specifiedin the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including itsChief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Indesigning and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matterhow well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designedto do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controlsand procedures.

During the 90-day period prior to the date of this report, an evaluation was performed under the supervision and with the participationof our Company's management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of thedesign and operation of our disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and theChief Financial Officer concluded that our disclosure controls and procedures were effective. Subsequent to the date of this evaluation,there have been no significant changes in the Company's internal controls or in other factors that could significantly affect thesecontrols, and no corrective actions taken with regard to significant deficiencies or material weaknesses in such controls.

 

----

# PART III

## ITEM 10. DIRECTORS AND EXECUTIVEOFFICERS OF THE REGISTRANT

The information required by this Item is set forth in the Company's definitive proxystatement, which will be filed with the Securities and Exchange Commission within 120 days of February28, 2005. Such information is incorporated herein by reference and made a part hereof.

## ITEM 11. EXECUTIVECOMPENSATION

The information required by this Item is set forth in the Company's definitive proxystatement, which will be filed with the Securities and Exchange Commission within 120 days of February28, 2005. Such information is incorporated herein by reference and made a part hereof.

**Code of Ethics**

The Company has adopted a written Code of Ethics that appliesto all of its directors, officers and employees.  It is available on theCompany's website at www.mfcdevelopment.com and shareholders may obtain a papercopy by writing to the Secretary at the address set forth on page 1.  Anyamendment to the Code of Ethics, or waiver thereof, will be disclosed on thewebsite promptly after its date.

## ITEM 12. SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item is set forth in the Company's definitive proxystatement, which will be filed with the Securities and Exchange Commission within 120 days of February28, 2005. Such information is incorporated herein by reference and made a part hereof.

## ITEM 13. CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is set forth in the Company's definitive proxystatement, which will be filed with the Securities and Exchange Commission within 120 days of February28, 2005. Such information is incorporated herein by reference and made a part hereof.

## ITEM 14.PRINCIPAL ACCOUNTANTS FEES AND SERVICES

The information required by this Item is set forth in the Company's definitive proxystatement, which will be filed with the Securities and Exchange Commission within 120 days of February28, 2005. Such information is incorporated herein by reference and made a part hereof.

----

# PART IV

## ITEM 15. EXHIBITS, FINANCIAL STATEMENTSCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

1. Consolidated Financial Statements

As of February 28, 2005 and February 29, 2004 and for the fiscal years ended	February 28, 2005, February    29, 2004 and February 28,  2003.
- Report of Holtz Rubenstein Reminick LLP
- Consolidated Balance Sheets
- Consolidated Statements of Operations
- Consolidated Statement of Stockholders' Equity
- Consolidated Statements of Cash Flows
- Notes to Consolidated Financial Statements

2. Financial Statement Schedules
- Schedule II - Valuation and Qualifying Accounts
- Schedule III - Real Estate and Accumulated Depreciation
- Schedule IV - Mortgage Loans on Real Estate

The data required by all other schedules is either included in the consolidated financial statements    or is not required.

3. Reports Filed on Form 8-K:
On April 9, 2004 and June 4, 2004, the Company filed Current Reports on Form 8-K	relating to the announcement of the signing of an Acquisition Agreement with	Creative Marketing Group, Inc. ("CMG") to acquire 100% of CMG's outstanding capital stock in exchange for	shares of common stock of the Company, after which the shareholders of CMG	would have a majority ownership. The Form 8-K that was filed on June 4, 2004	also included a copy of the Code of Ethics that had been approved by the	Company's Board of Directors on May 27, 2004.

On May 3, 2005, the Company filed a Current Report on	Form 8-K announcing that:
(1) The Company has terminated acquisition negotiations	with CMG after the Board of Directors of the Company determined that CMG	would not be able to meet the conditions specified in a previously reported	agreement for the acquisition of that company.
(2) The Company's Board of Directors authorized	management to obtain additional capital through the issuance of up to 500,000	shares of common stock in a private sale.
(3) The Company's Board of Directors authorized	management to commence discussions with a direct marketing company that	expressed interest to be acquired by the Company. 
		On May 23, 2005, the Company filed a Current Report on Form 8-K		announcing that:
 
		(1) A non-binding letter of intent had been signed with the direct		marketing company, Worldwide Excellence, Inc. of Los Angeles,		California, to negotiate for its acquisition by the Company.
 
		(2) On May 19, 2005, the Companyexchanged its $946,732 second mortgage on the office building in East Granby,Connecticut owned by Gateway Granby, LLC ("Gateway") for a $1,000,000 equityinvestment in Gateway, constituting 49% of the equity ownership of Gateway.
Report of Independent Registered Public Accounting Firm
The Board of Directors and ShareholdersMFC Development Corp., Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of MFC Development Corp.,Inc. and its subsidiaries as of February 28, 2005 and February 29, 2004 and the related consolidated statements ofoperations, stockholders' equity and cash flows for the three years ended February 28, 2005. Our auditsalso included the consolidated financial statement schedules listed in the Index at Item 15(a) for thethree years ended February 28, 2005. These consolidated financial statements and consolidated financialstatement schedules are the responsibility of the Company's management. Our responsibility is to expressan opinion on these consolidated financial statements and consolidated financial statement schedulesbased on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly,in all material respects, the consolidated financial position of MFC Development Corp., Inc. and itssubsidiaries at February 28, 2005 and February 29, 2004 and the consolidated results of their operations and theircash flows for the three years ended February 28, 2005 in conformity with accounting principles generallyaccepted in the United States of America. Also, in our opinion, the related consolidated financial statementschedules for the three years ended February 28, 2005, when considered in relation to the basic financialstatements taken as a whole, present fairly, in all material respects, the information set forth therein.

The accompanying consolidated financial statements have beenprepared assuming the Company will continue as a going concern.  As discussed inNote 1 to the consolidated financial statements, the Company's recurring lossesfrom operations raise substantial doubt about its ability to continue as a goingconcern.  Management's plans in regard to these matters are also described inNote 1.  The consolidated financial statements do not include any adjustmentsthat might result from the outcome of this uncertainty.
           /s/  HOLTZ RUBENSTEIN REMINICK LLP          Melville, New York      May 23, 2005
MFC Development Corp. and Subsidiaries
Consolidated BalanceSheets **February 28,** **February 29,** **2005** **2004**    **Assets**    			Current assets:    			  Cash and cash equivalents ** $           216,612** 			 $             12,992 			  Mortgage and note receivable **              747,927** 			                         - 			  Other current assets **                18,293** 			                40,260 			  Assets of discontinued operations **           1,263,802** 			           3,470,793 			Total current assets **           2,246,634** 			           3,524,045     			Property and equipment:    			  Property and equipment, at cost **                49,710** 			                41,365 			  Less accumulated depreciation and amortization **                37,790** 			                33,494  **                11,920** 			                  7,871     			Other assets:    			  Real estate held for development or sale **              486,270** 			           1,334,384 			  Mortgage and note receivable - related party **              946,732** 			              946,732 			  Deferred tax asset, net **                90,000** 			                90,000 			Total other assets **           1,523,002** 			           2,371,116     			Total assets ** $        3,781,556** 			 $        5,903,032 
 
**Liabilities and Stockholders' Equity**    		Current liabilities:    		  Accounts payable and accrued expenses ** $           372,115** 		 $           163,334 		  Current portion of notes payable, including amounts payable to related    		   parties of $50,000 at February 28, 2005 and $75,000 at February 29,		2004 **              950,000** 		              972,956 		  Income taxes payable **                  2,044** 		                  2,858 		  Due to co-investor **              420,061** 		                         - 		  Liabilities of discontinued operations **              163,805** 		              314,034 		Total current liabilities **           1,908,025** 		           1,453,182     		Other liabilities:    		  Notes payable **                         -** 		                88,997 		  Due to co-investors **              158,344** 		              147,763 		  Other **                         -** 		                  6,000 		Total other liabilities **              158,344** 		              242,760     		Commitments and contingencies        		Stockholders' equity:    		  Preferred stock - $.001 par value;    		    Authorized - 2,000,000 shares;    		    Issued and outstanding - 0 shares **                         -** 		                         - 		  Common stock - $.001 par value;    		    Authorized - 40,000,000 shares;    		    Issued and outstanding - 1,800,000 shares **                  1,800** 		                  1,800 		  Capital in excess of par value **           5,968,420** 		           5,968,420 		  Accumulated deficit **         (4,214,395)** 		         (1,722,492) **           1,755,825** 		           4,247,728 		  Less treasury stock, at cost - 24,947 shares **              (40,638)** 		              (40,638)		  Total stockholders' equity **           1,715,187** 		           4,207,090     		Total liabilities and stockholders' equity ** $        3,781,556** 		 $        5,903,032 
*See accompanying notes.*

MFC Development Corp. and Subsidiaries
Consolidated Statementsof Operations		 Year ended  		 Year ended  		 Year ended **February 28,** **February 29,** **February 28,****2005** **2004** **2003****Revenues**     		  Sale of real estate** $     1,583,154** 		 $        200,000  		 $                    - 		  Other real estate**                       -** 		           249,647  		           850,000 		  Rental income**           110,691** 		           103,207  		           103,207 		  Interest from mortgages**             83,032** 		             66,260  		             83,755 		  Total revenues**        1,776,877** 		           619,114  		        1,036,962      **Costs and expenses**     		  Real estate**        1,716,835** 		           386,575  		           204,280 		  Corporate expenses**           334,183** 		           392,017  		           355,504 		  Depreciation and amortization**               4,296** 		               4,265  		               4,735 		  Total costs and expenses**        2,055,314** 		           782,857  		           564,519      		(Loss) income from operations**          (278,437)** 		          (163,743) 		           472,443      		Other income (expense):     		  Interest expense**            (86,950)** 		            (80,140) 		            (11,483)**            (86,950)** 		            (80,140) 		            (11,483)     		(Loss) income from continuing operations before     		  provision (benefit) for income taxes**          (365,387)** 		          (243,883) 		           460,960 		Provision (benefit) for income taxes**               3,795** 		               6,378  		            (75,838)		(Loss) income from continuing operations**          (369,182)** 		          (250,261) 		           536,798      		(Loss) income from discontinued operations, net of taxes:     		(Loss) income from discontinued operations**       (1,179,866)** 		          (414,909) 		           443,009 		Bad debt**          (453,680)** 		          (538,569) 		            (14,722)		Impairment loss**          (270,728)** 		          (229,285) 		                       - 		(Loss) on disposal**          (218,447)** 		                       -  		                       - 		Total (loss) income from discontinued operations, net of taxes**       (2,122,721)** 		       (1,182,763) 		           428,287      		Net (loss) income** $    (2,491,903)** 		 $    (1,433,024) 		 $        965,085      		(Loss) earnings per common share:     		  (Loss) earnings from continuing operations** $             (0.21)** 		 $             (0.14) 		 $              0.30 		  (Loss) earnings from discontinued operations**                (1.19)** 		                (0.67) 		                 0.24 		Basic and diluted (loss) earnings per common share** $             (1.40)** 		 $             (0.81) 		 $              0.54      		Number of shares used in computation of basic and     		  diluted earnings per share**        1,775,053** 		        1,775,053  		        1,787,350 
*See accompanying notes.*

MFC Development Corp. and Subsidiaries
Consolidated Statementof Stockholders' Equity          **Total** **Compre-**   **Additional**      **Stock-** **hensive****Common Stock** **Paid-In** **Accumulated** **Treasury Stock** **holders'** **Income****Shares****Amount** **Capital** **Deficit** **Shares****Amount** **Equity** **(Loss)**             		Balance, February 28, 2002		  1,800,000 		 $ 1,800  		 $ 5,968,420  		 $ (1,254,553) 		  10,000 		 $ (13,299) 		 $ 4,702,368   		  Purchase of treasury stock		                 - 		            -  		                   -  		                     -  		  14,947 		    (27,339) 		       (27,339)  		  Net income		                 - 		            -  		                   -  		         965,085  		            - 		               -  		       965,085  		 $        965,085 		  Comprehensive income		                 - 		            -  		                   -  		                     -  		            - 		               -  		                   -  		 $        965,085 		Balance, February 28, 2003		  1,800,000 		    1,800  		    5,968,420  		       (289,468) 		  24,947 		    (40,638) 		    5,640,114   		  Net loss		                 - 		            -  		                   -  		    (1,433,024) 		            - 		               -  		  (1,433,024) 		 $   (1,433,024)		  Comprehensive loss		                 - 		            -  		                   -  		                     -  		            - 		               -  		                   -  		 $   (1,433,024)**Balance, February 29, 2004****  1,800,000****    1,800** **    5,968,420** **    (1,722,492)** **  24,947****    (40,638)** **    4,207,090**  **  Net loss****                 -****            -** **                   -** **    (2,491,903)** **            -****               -** **  (2,491,903)** ** $   (2,491,903)****  Comprehensive loss****                 -****            -** **                   -** **                     -** **            -****               -** **                   -** ** $   (2,491,903)****Balance, February 28, 2005****  1,800,000**** $ 1,800** ** $ 5,968,420** ** $ (4,214,395)** **  24,947**** $ (40,638)** ** $ 1,715,187**  
*See accompanying notes.*

MFC Development Corp. and Subsidiaries
Consolidated Statementsof Cash Flows**Year Ended** **Year Ended** **Year Ended****February 28,** **February 29,** **February 28,****2005** **2004** **2003****Cash flows from operating activities**     		Net (loss) income** $   (2,491,903)** 		 $   (1,433,024) 		 $        965,085 		Adjustments to reconcile net (loss) income to net cash     		provided by (used in) operating activities:     		Depreciation and amortization**               4,296** 		               4,265  		               4,735 		Gain on sale of real estate held for development or sale**         (275,399)** 		           (17,741) 		                      - 		Gain on sale of real estate sold in prior year**                      -** 		                      -  		         (850,000)		Deferred interest income **           (16,773)** 		                      -  		                      - 		Loss (gain) on adjustments of amounts due to co-investors**           142,721** 		         (274,647) 		                      - 		Provision for bad debts from discontinued operations**           453,680** 		           538,569  		             14,722 		Impairment of assets from discontinued operations**           270,728** 		           229,285  		                      - 		Loss from disposal of assets from discontinued operations**           218,447** 		                      -  		                      - 		Deferred tax benefit**                      -** 		                      -  		           (90,000)		Changes in operating assets and liabilities:     		Collections from sale of real estate held for development or sale**           709,532** 		           200,000  		                      - 		Additions to real estate held for development or sale**         (141,205)** 		           (70,375) 		         (132,031)		Prepaid expenses, miscellaneous receivables and other assets**             21,967** 		           (12,472) 		           (16,987)		Net assets of discontinued operations**        1,113,907** 		           422,047  		      (1,246,559)		Accounts payable, accrued expenses and taxes**           207,967** 		             31,822  		           110,805 		Other liabilities**             (6,000)** 		           (22,500) 		           (16,500)		Net cash provided by (used in) operating activities**           211,965** 		         (404,771) 		      (1,256,730)     **Cash flows from investing activities**     		Capital expenditures and intangible assets**             (8,345)** 		                      -  		             (2,710)		Principal payments on notes receivable, related party**                      -** 		                      -  		             29,060 		Net cash (used in) provided by investing activities**             (8,345)** 		                      -  		             26,350      **Cash flows from financing activities**     		Proceeds of notes payable, including amounts from related parties of     		  $-0- in 2005, $25,000 in 2004 and $50,000 in 2003**           275,000** 		           400,000  		           672,500 		Principal payments on notes payable, including amounts paid to related     		  parties of $25,000 in 2005, $-0- in 2004 and $-0- in 2003**         (275,000)** 		         (228,047) 		                      - 		Purchase of treasury stock**                      -** 		                      -  		           (27,339)		Net cash provided by financing activities**                      -** 		           171,953  		           645,161      		Net increase (decrease) increase in cash and cash equivalents**           203,620** 		         (232,818) 		         (585,219)		Cash and cash equivalents, beginning of year**             12,992** 		           245,810  		           831,029      		Cash and cash equivalents, end of year** $        216,612** 		 $          12,992  		 $        245,810      **Additional cash flow information**     		Interest paid** $          95,408** 		 $          90,592  		 $          35,179 		Income taxes paid** $            4,915** 		 $            6,611  		 $          13,058      **Non-cash investing and financing activities**     		Disbursement of construction loan** $                   -** 		 $          72,500  		 $        145,000 		Proceeds from sale of real estate held for development or sale     		used to pay-off construction loan** $        111,953** 		 $                   -  		 $                   - 		Mortgage and note receivable from purchaser of real estate sold** $        731,154** 		 $                   -  		 $                   - 
*See accompanying notes.*

MFC Development Corp. and Subsidiaries
Notes to ConsolidatedFinancial Statements1. Organizationof the Company
The consolidated financial statements consist of MFC Development Corp. (the "Company"or "MFC") and its wholly-owned subsidiaries. MFC was a wholly-owned subsidiary of FRMO Corp., formerlyFRM Nexus, Inc. ("FRM or Nexus"). All of FRM's assets and liabilities were transferred to MFC on August31, 2000, except for $10,000. Because such entities are under common control, this transaction has beenaccounted for in a manner similar to a pooling of interests on MFC's books.

The Company was incorporated on May 18, 1990 under the laws of the State of Delawareas PSI Food Services, Inc. On August 9, 2000, the Company changed its name toMFC Development Corp. and increased authorized capital stock from 2,000,000shares common stock, par value $.10 per share to 2,000,000 shares preferredstock, par value $.001 per share and 40,000,000 shares common stock, par value$.001 per share. The Board of Directors is authorized to provide at anytime forthe issuance of MFC preferred stock with the rights, preferences and limitationsas established by the Board.

The accompanying consolidated financial statements have beenprepared assuming that the Company will continue as a going concern.  However,the Company incurred net losses of approximately $2,492,000 and $1,433,000during the years ended February 28, 2005 and February 29, 2004, respectively,principally from discontinued operations.  This factor raises substantial doubtabout the Company's ability to continue as a going concern.  

Management is making efforts to sell its real estate held fordevelopment or sale in the normal course of business and significantly reduceoperating expenses.  In addition, the Company is seeking to raise equity capitaland is considering business combinations with other entities. The consolidatedfinancial statements do not include any adjustments that might be necessaryshould the Company be unable to continue as a going concern.    
2. Basis of PresentationBusinessActivities of the Company
Through August 26, 2004, the Company operated in two distinct industries  consisting of real estate and medical financing. The medical financing business was conducted through Medical Financial Corp., a wholly  owned subsidiary, which (i) purchased insurance claims receivables from medical practices and  provided certain services to those practices; and (ii) three other subsidiaries, which were  formed to provide additional management services to certain medical practices. On February 4,  2004, the Company decided to restructure the medical financing segment. The plan of restructuring  called for (i) the purchase of insurance claims receivables from medical practices to be  discontinued, (ii) the sale of the assets of the three subsidiaries that were formed to provide  additional management services to certain medical practices, and (iii) focus the operations of  the medical segment on collections and other services. On August 26, 2004 the	Company sold its continuing service obligations and the related future	revenue rights of its medical financing business in exchange for	preferential collection rates on the receivables that are expected to be	collected. As a result of the restructuring on  February 4, 2004, and the sale of its continuing service obligations on August 26, 2004, the  medical financing segment has been reclassified as discontinued operations and prior periods have  been restated.

The real estate business is conducted by the Company through various  subsidiaries. It holds a mortgage on a real estate parcel and owns real estate in Hunter, New York, which is currently held for development or  sale. The Company also holds a mortgage on a real estate parcel in Connecticut.

In addition to the two operating divisions of the Company, a division, Capco, was formed during 2000. Capco, which had never conducted the business for which it was  formed, was discontinued on February 4, 2004.
Principlesof Consolidation
The consolidated financial statements include the accounts of the Company and allof its subsidiaries (hereinafter also referred to as the "Company"). All significant intercompany accountsand transactions have been eliminated in consolidation.
3. Significant AccountingPoliciesRevenueRecognition
The full accrual method is used on the sale of real estateif the profit is determinable, the Company is not obligated to perform significant activities afterthe sale to earn the profit and there is no continuing involvement with the property. If the buyer'sinitial and continuing investments are inadequate to demonstrate a commitment to pay for the property,the installment method is used, resulting in the deferral of income. If there is continuing involvementwith the property by the Company, the financing method is used.
Receivables
Mortgages and notes receivable result from the sale of real estate. These receivablesbear interest and are recorded at face value, less unamortized discount.

*Impairment Assessment* The Company evaluates the credit positions on itsnotes receivable and the value of the related collateral on an ongoing basis. The Company estimatesthat all of its notes receivable are fully collectible and the collateral is in excess of the relatedreceivables. The Company continually evaluates its notes receivable that are past due as to the collectibilityof principal and interest. The Company considers the financial condition of the debtor, the outlookof the debtor's industry, decrease in the ratio of collateral values to loans and any prior write downson loans. The above considerations are all used in determining whether the Company should suspend recordinginterest income on any notes receivable or provide for any loss reserves.
Depreciationand Amortization
Depreciation of property and equipment is provided by application of the straight-linemethod over estimated useful lives as follows:
Furniture and fixtures			7 years			Computer, software, office and medical equipment			3-5 years
Amortization of leasehold improvements is provided by the application of the straight-linemethod over the shorter of their estimated useful lives or the terms of the related leases and rangefrom three to six years.
Real EstateHeld for Development or Sale
Properties are carried at the lower of acquisition cost or market, less the coststo sell. The methods for valuing property and mortgages where current appraisals are unobtainable arebased on management's best judgments regarding the economy and market trends. As a result, estimatesmay change based on ongoing evaluation of future economic and market trends. Such judgments are basedon management's knowledge of real estate markets in general and of sale or rental prices of comparableproperties in particular.
Leases
Leases which transfer substantially all of the risk and benefits of ownership areclassified as capital leases, and assets and liabilities are recorded at amounts equal to the lesserof the present value of the minimum lease payments or the fair value of the leased properties at thebeginning of the respective lease terms. Such assets are amortized in the same manner as owned assetsare depreciated. Interest expenses relating to the lease liabilities are recorded to effect constantrates of interest over the terms of the leases. Leases which do not meet such criteria are classifiedas operating leases and the related rentals are charged to expense as incurred.
IncomeTaxes
Deferred income taxes are recognized for all temporary differences between the taxand financial reporting bases of the Company's assets and liabilities based on enacted tax laws andstatutory tax rates applicable to the periods in which the differences are expected to affect taxableincome.
Earningsper Share
Earnings per common share for each of the three years ended February 28, 2005, iscalculated by dividing net income by weighted average common shares outstanding during the period. Theeffect of outstanding stock options on earnings per share does not have a material effect in calculationof earnings per share during any of the periods presented.
Cash andCash Equivalents
For purposes of the consolidated statements of cash flows, the Company considersall highly liquid, short-term investments with an original maturity of three months or less to be cashequivalents.
Concentrationof Risk
Financial instruments which potentially subject the Companyto concentrations of credit risk consist principally of cash, money marketmutual funds, commercial paper and trade and notes receivable.

All note receivables are from the sale of real estate in New York and Connecticut.
AdvertisingCosts
The Company expenses the cost of advertising as incurred. For the years endedFebruary 28, 2005, February29, 2004 and February 28, 2003, advertising expense totaled approximately $-0-, $1,000, and $4,000.
Fair Valueof Financial Instruments
The following disclosure of the estimated fair value of financial instruments ismade in accordance with the requirements of Statement of Financial Accounting Standards No. 107, "Disclosuresabout Fair Value of Financial Instruments". The estimated fair values of financial instruments havebeen determined by the Company using available market information and appropriate valuation methodologies.Considerable judgment is required in interpreting market data to develop the estimates of fair value.Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Companycould realize in a sale.

The carrying amounts and estimated fair values of financial instruments approximatedtheir carrying values for all periods presented.
Use ofEstimates
The preparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilitiesat the date of the financial statements and the reported amounts of revenues and expenses during thereporting period. Actual results could differ from those estimates.
Stock Based CompensationAs allowed by SFAS 123, "Accounting for Stock-Based Compensation," the Company haselected to continue to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issuedto Employees" (APB 25), in accounting for its stock option grants to board members. Under APB 25, theCompany does not recognize compensation expense upon the issuance of its stock options because the optionterms are fixed and the exercise price equals the market price of the underlying stock on the grantdate. The Company has determined that utilizing the fair value method of SFAS 123 would have an immaterialeffect on its results of operations for all periods presented.Effectsof New Accounting PronouncementsIn December2004, the FASB issued SFAS No. 123(R), "Accounting for Stock-Based Compensation"("SFAS No. 123(R)"). SFAS No. 123(R) establishes standards for the accountingfor transactions in which an entity exchanges its equity instruments for goodsor services. This statement focuses primarily on accounting for transactions inwhich an entity obtains employee services in share-based payment transactions.SFAS No. 123(R) requires that the fair value of such equity instruments berecognized as an expense in the historical financial statements as services areperformed. Prior to SFAS No. 123(R), only certain pro forma disclosures of fairvalue were required. The provisions of this statement, as amended by the SEC,are effective as of the beginning of the first fiscal year that begins afterJune 15, 2005.  The adoption of SFAS No.123(R) is not expected to have amaterial impact on the Company's financial position or results of operations.On December16, 2004, the FASB issued SFAS No. 153, "Exchange of Non-monetary Assets", anamendment of Accounting Principles Board ("APB") Opinion No. 29, which differedfrom the International Accounting Standards Board's ("IASB") method ofaccounting for exchanges of similar productive assets.  Statement No. 153replaces the exception from fair value measurement in APB No. 29, with a generalexception from fair value measurement for exchanges of non-monetary assets thatdo not have commercial substance. The statement is to be applied prospectivelyand is effective for non-monetary asset exchanges occurring in fiscal periodsbeginning after June 15, 2005. The adoption of SFAS No.153 is not expected tohave a material impact on the Company's financial position or result ofoperations.4. Real Estate ActivitiesMortgagesand Notes Receivable
Mortgages and notes receivable, arising from the sale of real estate, consists of thefollowing:
			 February 28,  			 February 29, 			 2005  			 2004 			 Current portion:    			 Hunter, New York (Real Estate Developer) ** $           900,000** 			 $                      - 			 Valuation allowance **            (125,000)** 			                         - 			 Deferred interest **              (27,073)** 			 **              747,927** 			                         - 			 Non-current portion:    			 Granby, Connecticut (Real Estate Operator) - Related Party **              946,732** 			              946,732 			 Total ** $        1,694,659** 			 $           946,732 
*Hunter, New York -*On September 23, 2004, the	Company sold the 10 acres of land for the hotel site that was in the	beginning stages of development. The gross sales price was $1,250,000, which	was comprised of a down-payment of $350,000 and a $900,000, non-interest	bearing, balloon mortgage note that matures on November 10, 2005. The	Company is using an imputed interest rate of  5% on the note. Due to a title issue on a 1.6 acre parcel contiguous to the hotel site, that  parcel could not be conveyed at the time of closing. If the Company cannot freely convey the 1.6  acres by June 1, 2006, the mortgage note on the hotel site will be reduced by $125,000. The  Company has taken a valuation allowance on the note receivable for the full	amount and has reduced the gross sales price of the hotel site by $125,000	as a reserve against the possible reduction in the mortgage note. Co-investors will share in the  positive cash flow from the collections of this note, after deducting costs and expenses of carrying and developing the	Hunter  property.

*Granby, Connecticut (Related Party) -*This mortgage calls for monthly payments of interest only at the rate of 7% per annum through March 1, 2006.  Beginning on April 1, 2006, payments will include principal and interest at the rate of 9% per annum. The Granby note receivable is being used as collateral for certain debt. Co-investors will share in the  positive cash flow from the collections of this note, after deducting costs and expenses of carrying and developing the Granby  property. The owner of the property is a limited liability company, 24% owned by Lester Tanner's daughter. Lester  Tanner is a shareholder, director and president of the Company. For the years	ended February 28, 2005, February29, 2004 and February 28, 2003, interest income from this note was approximately	$66,000, $66,000 and $84,000.

Both mortgages are  collateralized by the underlying real estate and mature as follows:
			 Year ending February 28,  			 2006  $           747,927 			 2007                 31,549 			 2008                 37,508 			 2009                 41,026 			 2010                 44,875 			 Thereafter               791,774  $        1,694,659 Real EstateHeld for Development or Sale
The Hunter property that the Company owns is adjacent to anexisting condominium development located at the base of Hunter Mountain in Greene County, NewYork. The Company's property includes approximately 65 acres of undeveloped land, a clubhouse witha recreational facility,and a sewage treatment plant that serves the condominium development. This property was acquired through foreclosureand was written down to its fair market value. The net proceeds of any sales of this property will beallocated 65% to the Company and 35% to co-investors, after deducting the cost of carrying all of theHunter properties. This property is being used as collateral for a line of credit.

The Hunter property consists of the following:
			 February 28,  			 February 29, 			 2005  			 2004 			 65 acres of undeveloped land ** $           600,000** 			 $           600,000 			 Clubhouse **              300,000** 			              300,000 			 10 acre hotel site to be developed **                         -** 			              299,876 			 Townhouse units **                         -** 			              416,098 **              900,000** 			           1,615,974 			 Less due to co-investors **            (413,730)** 			            (281,590)** $           486,270** 			 $        1,334,384 
Waste Water Treatment Plant

Highlands Pollution Control Corp. (HPCC), a subsidiary of the Company, owns a wastewater treatmentfacility at the Hunter property, which is located in the New York City ("NYC") watershed area. NYC hasmodified the environmental regulations for the watershed area to ensure clean drinking water is availableto its residents. NYC entered into an agreement with HPCC to bring the facility in compliance with thenew regulations. Under the terms of the agreement, NYC has agreed to reimburse HPCC for all costs incurredwith the upgrade of the facility and a portion of the additional costs incurredto operate the upgraded facility. During the years ended February 28, 2005, February 29, 2004and February 28, 2003, HPCC hasincurred costs and has been reimbursed by NYC for amounts approximating$118,000, $394,000 and $1,448,000.The costs and reimbursements have been netted in the accompanying balance sheet. 

Due to Co-investors

Amounts payable to co-investors on property that has not yet been sold are  included in real estate held for development or sale, as reductions to the asset. Amounts payable  to co-investors on property that has previously been sold, and is subject to the final collection  of a mortgage note receivable, are recorded as liabilities. Amounts due to	co-investors on property that has previously been sold and the relatedmortgage receivable is summarized as	follows:
 **February 28, 2005** **February 29, 2004** 			 Due 			 Mortgage  			 Due 			 Mortgage  			 to 			 Note  			 to 			 Note **Property Location** 			 Co-investor 			 Receivable  			 Co-investor 			 Receivable       			Hunter, New York (current liability) ** $           420,061**** $           738,373** 			 $                      - 			 $                      - 			Granby, Connecticut (long-term liability) **              156,708****              946,732** 			              147,763 			              946,732  ** $           576,769**** $        1,685,105** 			 $           147,763 			 $           946,732 Sale of Real Estate, Hunter, New York
In October 2002, the Company commenced construction at its Hunter, New York  property of the renovation of a vacant office building into three townhouse units. A construction  loan in the amount of $290,000 was obtained, which was secured by the Hunter property. One of  the completed units was sold in February 2004 for $200,000, of which $170,000 of the proceeds was  used to reduce the construction loan. The two remaining units were sold during the quarter ended  August 31, 2004, for a total sales price of $502,000. The Company realized a net gain of $13,000  from the sale of these three townhouses, which included a loss of $5,000	during the year ended February 28, 2005 and a gain of $18,000 during the year ended  February 29, 2004. The $106,000  balance of the construction loan was repaid on June 25, 2004 from the proceeds of the second  unit. The Company capitalized interest and loan acquisition costs during the construction period.  Capitalized interest and loan acquisition costs for the years ended February	28, 2005, February 29, 2004 and February 28, 2003, was $3,000, $16,000 and $9,000.

The sale of the ten acre hotel site on September 23, 2004,	as described above in mortgages and notes receivable, resulted in a gain of $280,000.

The sale of real estate is summarized as follows:
			 Year ended  			 Year ended  			 Year ended **February 28,** **February 29,** **February 28,****2005** **2004** **2003**     			 Gross sale of hotel site ** $     1,250,000** 			 $                    -  			 $                    - 			 Valuation allowance **          (125,000)** 			                       -  			                       - 			 Deferred interest **            (43,846)** 			                       -  			                       - 			 Net sale of hotel site **        1,081,154** 			                       -  			                       - 			 Sale of townhouses **           502,000** 			           200,000  			                       -      			 Total sale of real estate ** $     1,583,154** 			 $        200,000  			 $                    - 
OtherReal Estate Revenue

Other real estate revenue includes the following:
			 Year ended  			 Year ended  			 Year ended **February 28,** **February 29,** **February 28,****2005** **2004** **2003**     			 Net gain on adjustments of amounts due to co-investors  ** $                    -** 			 $         249,647  			 $                    - 			 Gain on sale of real estate sold in prior year - Granby,			Connecticut (Related Party) **                       -** 			                       -  			            850,000      			 Total other real estate revenue ** $                    -** 			 $         249,647  			 $                    - 
*Adjustments of Amounts Due to Co-investors*- The net proceeds of any sales of the	Hunter, New York property will be allocated 65% to the Company and 35% to	co-investors, after deducting the cost of carrying all of the Hunter	properties. Upon payment in full of the Granby mortgage note, co-investors	will share in the positive cash flow from the collections of the note, after	deducting costs and expenses of carrying and developing the related	property. During the year ended February 29, 2004, the Company paid $25,000 in	settlement of a dispute with a prior co-investor and the Company reevaluated	balances owed to the current co-investors as a result of the current	development at the Hunter property. Accordingly, amounts payable to all	co-investors were adjusted, resulting in a (i) net gain for the year endedFebruary 29, 2004 of $275,000, which was included in other real estate revenue, and a (ii)  net loss for the year ended February 28, 2005 of $143,000 which was included in costs and  expenses from real estate.

*Sale ofReal Estate, Granby, Connecticut**(Related Party)*- The Company had sold an office building in East Granby, Connecticut during fiscal1996 and leased back a portion of the space, which was then subleased to a third party through August31, 2002. The Company remained obligated on its leaseback for a 42 month period from September 1, 2002through February 28, 2006 (the Vacancy Period) for monthly rentals of $31,062. As a result, $850,000of the gain recorded on the sale in 1996, representing the present value of the monthly rental for 42months, was deferred. In fiscal 1998, Northwest Management Corp. ("NWM"), a shareholder of the Companysigned an agreement to indemnify the Company for any payments made during the Vacancy Period in considerationfor keeping any rentals from a new sublease which might be obtained during the Vacancy Period in excessof $31,062 per month. The president of NWM, Lester Tanner, also a shareholder, director and presidentof the Company, has the power to vote NWM shares, which are owned by his two children. From September1, 2002 through January 31, 2003 the Company paid the monthly rentals for the vacant space of $31,062,all of which were reimbursed to the Company by NWM pursuant to its indemnity agreement.

On February 1, 2003, the Company was released from its obligation under the 1996leaseback, when NWM provided a substitute lease for the Vacancy Period at $31,062 per month, which wasaccepted by the owner of the property. The owner of the property is a limited liability company, 24%owned by Lester Tanner's daughter. The Company agreed with the owner to reduce, from 9% per annum to7% per annum, the interest rate on the second mortgage that the Company holds on the property for theperiod from February 1, 2003 through March 1, 2006 and to defer principal payments during the same period.As a result of the termination of its leaseback, the Company recorded a gain of  $850,000 in thefiscal year ending February 28, 2003.

Real Estate Costs and Expenses

Real estate costs and expenses consist of the following:
			 Year ended  			 Year ended  			 Year ended **February 28,** **February 29,** **February 28,****2005** **2004** **2003**     			 Cost of real estate sold ** $     1,307,755** 			 $        182,258  			 $                    - 			 Net loss on adjustment to co-investors  **           142,721** 			                       -  			                       - 			 Other real estate costs and expenses **           266,359** 			           204,317  			           204,280      			 Total real estate costs and expenses ** $     1,716,835** 			 $        386,575  			 $        204,280 5. Property andEquipment
Property and equipment consists of the following:
			  			 February 28,  			 February 29, 			 2005  			 2004    			 Leasehold improvements ** $               2,194** 			 $               2,194 			 Computer equipment & software **                21,006** 			                21,006 			 Other equipment and furniture **                26,510** 			                18,165 **                49,710** 			                41,365 			 Less accumulated depreciation and amortization **                37,790** 			                33,494 			 Property and equipment, net ** $             11,920** 			 $               7,871 
For the years ended February 28, 2005, February 29, 2004 andFebruary 28, 2003, depreciation expense was $4,296, $4,265 and $4,735.
6. Notes Payable
Notes payable include the following:
**February 28,** **February 29,****2005** **2004**   			 Series A Bonds ** $             750,000** 			 $             750,000 			 Series B Bonds **                200,000** 			                200,000 			 Bank loan **                            -** 			                111,953 **                950,000** 			             1,061,953 			 Less current maturities **                950,000** 			                972,956 			 Long-term debt ** $                         -** 			 $               88,997 
*Series A Bonds:* In July 2002, the board of directors authorized the  Company to issue an aggregate of $750,000 of Series A Bonds ("Bonds") in $25,000  increments to finance additional growth of the medical division. There were $750,000 of Bonds  outstanding at February 28, 2005. Each Bond matures eighteen months after the issue date and may be  extended for additional six month periods by mutual consent of the Company and the individual  bondholders. Interest is payable monthly, and is calculated at a rate of prime plus 3% but not  less than 9% per annum nor more than 15% per annum. The rate of interest will be adjusted at the  end of each calendar quarter. The rate of interest as of February 28, 2005 was 9%. Monthly  interest-only payments are due through maturity. The Bonds may only be prepaid on 120 days prior  written notice. The Company, at the option of the bondholders, may be required to prepay on 60  days prior written notice, up to an aggregate of $50,000 per bondholder per 60 day period. The  Company may not issue more than $100,000 of Bonds to each bondholder. A director, officer and  shareholder of the Company is related to five of the bondholders. One other director-shareholder  holds a $25,000 bond, and is related to one other bondholder.

The Bonds are a joint and several obligation of the Company and its  subsidiary, Medical Financial Corp. The Bonds are collateralized by insurance claims receivable  purchased by Medical Financial Corp., which are not older than six months, equal to at least 333%  of the principal sum outstanding under the line.

*Series B Bonds:* In February 2003, the board of directors authorized  the Company to issue an aggregate of $450,000 of Series B Bonds ("Bonds") in $25,000  increments to finance the development of the real estate in Hunter, New York and elsewhere,  except for $25,000, which may be used by the Company for the purchase of additional shares of its  common stock and $200,000 for working capital. There were $200,000 of Bonds outstanding at	February 28, 2005, one of which was held by NWM Capital, LLC., a related party that is owned by an  officer, director and shareholder of the Company. Another director, officer and shareholder of  the Company is related to one of the bondholders. Each Bond matures eighteen months after the  issue date and may be extended for additional six month periods by mutual consent of the Company  and the individual bondholders. Interest is payable monthly, and is calculated at a rate of prime  plus 3% but not less than 9% per annum nor more than 15% per annum. The rate of interest will be  adjusted at the end of each calendar quarter. The rate of interest as of	February 28, 2005 was 9%.  Monthly interest only payments are due through maturity. The Bonds may only be prepaid on 120  days prior written notice. The Company, at the option of the bondholders, may be required to  prepay on 60 days prior written notice, up to an aggregate of $50,000 per bondholder per 60 day  period. The Company may not issue more than $100,000 of Bonds to each bondholder.

The Bonds are a joint and several obligation of the Company and its  subsidiary, Yolo Equities Corp. The Bonds are collateralized by the mortgage note receivable on  the property located in Granby, Connecticut.

Interest expense on related party borrowings for the yearsended February 28, 2005, February 29, 2004 February 28, 2003 was $5,063, $5,250and $661.

*Bank Loan - Construction:* In October 2002, the Company obtained a  $290,000 construction loan to be used for development at its Hunter, New York property.This loan was paid in full on June 25, 2004 when a portion of the property wassold. The  terms of the loan called for monthly payments of interest through June 1, 2003, at which time it  converted into a term loan with monthly payments of principal and interest that would amortize  the loan in 15 years. Interest was at a rate of prime plus 1.5% but not less than 6.25% per annum  nor more than 14% per annum. This loan was secured by the Hunter property and was guaranteed by Lester  Tanner, who is a director, shareholder and President of the Company. There were $2,900 of  commitment fees paid in connection with this loan.

Aggregate maturities of the amount of notes payable at February28, 2005 is as follows:
			 Year ending February 28,   			 2006 			 $             950,000 			 Total 			 $             950,000 *7. Treasury Stock*
On November 27, 2002, the Company mailed to its shareholders who own 99 or fewershares of its common stock an offer to purchase the shares at $2.00 per share before January 8, 2003.The total number of shares owned by said small shareholders is less than 5% of the Company's outstandingshares. The total amount of shares repurchased was 9,447, for a total amount of $18,894. The Companypurchased an additional 5,500 shares of common stock for $8,445 in 2003.
*8.  Commitments and Contingencies* Minimum Operating Lease Commitments
In April 2000, MFC signed a lease extension for its executive offices under a sevenyear lease expiring on February 28, 2007.

Subject to annual real estate adjustments, the following is a schedule of futureminimum rental payments required under the above operating leases:
			 Year ending February 28,  			 2006 			                78,200 			 2007 			                78,000 			 $           156,200 
For the years ended February 28, 2005, February 29 2004 andFebruary 28, 2003,  rent expense totaled approximately $83,000for each year.
OtherCommitments and Contingencies
As stated in Note 4, the net proceeds of any sales of the Hunter, New York property	will be allocated 65% to the Company and 35% to co-investors, after	deducting the cost of carrying all of the Hunter properties. The Company has	periodically provided to the co-investors an accounting for their 35%	interest. The sale of the ten acre parcel in Hunter, New York that was made	on September 23, 2004, reported herein, was the subject of the Company's	current accounting to the co-investors as of February 28, 2005, the close of	the Company's most recent fiscal year. On November 16, 2004, prior to the	receipt of the most recent accounting, the co-investors of	the Hunter property commenced a lawsuit against the Company in Westchester	County, New York, in connection with their	interests in the Hunter property.

On December 2, 2004, the Company filed its answer to the	complaint, stating among other things that as a result of the recent sale	of the Hunter property, and of the potential for the realization of the	proceeds of the purchase money mortgage in November 2005, the periodic	accounting to the co-investors to be made as of February 28, 2005, will	begin to show in the Company's next fiscal year potentially positive amounts	available to plaintiffs upon the advancement of the Hunter Highlands	Development.

Discovery requested by the Company has been deferred at	the request of  the co-investors' counsel, who has informed the	Company's counsel that the co-investors wish to receive the details of the	sale of the real property and the Company's accounting for their 35% interest after	which if acceptable, by the co-investors, their lawsuit will be discontinued. The Company	has provided that accounting and is waiting for a response.

In the normal course of business, the Company becomes a party to	other various legal  claims, actions and complaints. The Company's management does not expect that the results in  any of these legal proceedings will have a material adverse effect on the Company's results  of operations, financial position or cash flows.
9. Stock Options
Each non-employee director who owns less than 5% of the Company's stock is annuallygranted a five year option to purchase 1,500 shares of common stock. The exercise price of the optionsis the mean between the high and low asked price at the close of trading on the grant date. As of February28, 2005, five current and former directors had been issued options totaling 18,000 shares, expiring through July 15,2009, at option prices ranging from $1.00 to $2.00 per share.
10. Income Taxes
The provision (benefit) for income taxes from continuingoperations consist of the following:
			 Year ended  			 Year ended  			 Year ended 			 February 28,  			 February 29,  			 February 28, 			 2005  			 2004  			 2003 			 Current:      			   Federal ** $                             -** 			 $                             -  			 $                             - 			   State **                         3,795** 			                         6,378  			                       14,162 			 Total current **                         3,795** 			                         6,378  			                       14,162      			 Deferred:      			   Federal **                                -** 			                                -  			                     (77,000)			   State **                                -** 			                                -  			                     (13,000)			 Total deferred **                                -** 			                                -  			                     (90,000)     			 Total ** $                      3,795** 			 $                      6,378  			 $                  (75,838)
After the spin-off from FRM on January 23, 2001, MFC and its subsidiariesfiled consolidated Federal tax returns. MFC andits subsidiaries file individual state tax returns. The gain on sale of real estate, resulting fromthe recognition of deferred income from the sale of the Granby, Ct property in fiscal 2003was included in taxable income of the Company's formerparent in the year that the property were sold.

The Company has net operating loss ("NOL") carryforwards for Federal purposes ofapproximately $7,456,000. These losses will be available for future years, expiring through February28, 2024. During fiscal 2003, the Company utilized $32,000 of its Federal NOL carryforwards. The Company,however, has taken a 96% valuation allowance against Federal NOL carryforwards due to a prior historyof operating tax losses and the uncertainty of generating enough taxable income throughout the carryforwardperiod to utilize the full amount available.

Significant components of deferred tax assets (liabilities) were as follows:
			 Year ended  			 Year ended  			 Year ended 			 February 28,  			 February 29,  			 February 28, 			 2005  			 2004  			 2003 			 Tax loss carryforwards ** $               2,535,061** 			 $               1,811,387  			 $               1,560,591 			 Receivables **                     457,336** 			                     269,669  			                       89,857 			 Mortgage and note receivable **                       53,837** 			                       50,239  			                                - 			 Real estate held for development or sale **                            (92)** 			                     (45,019) 			                       98,600 			 Investment in unconsolidated subsidiaries **                       31,246** 			                       18,343  			                                - 			 Other assets **                                -** 			                       52,374  			                                - **                  3,077,388** 			                  2,156,993  			                  1,749,048 			 Less valuation allowance **                (2,987,388)** 			                (2,066,993) 			                (1,659,048)			 Deferred tax assets ** $                    90,000** 			 $                    90,000  			 $                    90,000 
The following is a reconciliation of the statutory federal and effective income tax rates for theyears ended:
			 Year ended  			 Year ended  			 Year ended 			 February 28,  			 February 29,  			 February 28, 			 2005  			 2004  			 2003 			 % of Pretax Income  			 % of Pretax Income  			 % of Pretax Income 			 Statutory federal income tax      			 expense rate **                         (34.0)** 			                         (34.0) 			                           34.0 			 Recognition of previously taxed      			 deferred income **                               - ** 			                               -   			                         (34.0)			 Utilization of NOL carryforwards - deferred **                               - ** 			                               -   			                         (19.5)			 Valuation allowance against      			 NOL carryforwards **                           34.0** 			                           34.0  			                               -  			 State taxes, less federal      			 tax effect **                             1.0** 			                             2.6  			                             3.1 **                             1.0** **                             2.6** 			                         (16.4)11. DiscontinuedOperations
On February 4, 2004, the Company instituted a plan to restructure the medical  financing segment. The plan of restructuring called for the Company to sell the assets of the  three subsidiaries that were formed to provide additional management services to certain medical  practices. On August 26, 2004 the Company sold its continuing service obligations and the related  future revenue rights of its medical financing business in exchange for preferential collection  rates on the receivables that are expected to be collected. As part of the terms of the sale, the  Company will retain half of the interest paid by insurance companies on late payments from  improperly denied receivables. The Company expects that the interest income it receives will be  great enough to cover the additional costs that will be due when the existing receivables are  collected. The Company still expects to incur certain additional costs related to its  discontinued operation, until all of the receivables are collected. The medical financing  business was conducted through Medical Financial Corp., a wholly owned subsidiary, which (i)  purchased insurance claims receivables from medical practices and provided certain services to  those practices; and (ii) three other subsidiaries, which were formed to provide additional  management services to certain medical practices. Accordingly, the operating results of the  medical financing segment for each of the three years ended February 28, 2005 has  been presented as "(Loss) income from discontinued operations, net of income taxes".  Net assets and liabilities to be disposed of or liquidated, at their book value, have been  separately classified in the accompanying balance sheets at February 28, 2005 and February 29,  2004.

The Company recorded impairment loss of (i) $229,000, for the year ended  February 29, 2004 and (ii) an additional impairment loss of $271,000 during the	year ended  February 28, 2005, in connection with the write-down of the assets that were to be disposed of. During  the year ended February 28, 2005, the Company recorded a loss of $218,000 on the disposal  of the assets from its medical management service business. Due to operating losses, there was no  income tax benefit from the write-down and disposal of these assets. In addition, the Capco  division, which was formed during 2000 and had never conducted the business for which it was  formed, was discontinued on February 4, 2004. The results of operations of the Capco division  were immaterial and have been combined with the results of operations of the medical financing  segment.
Revenue Recognition
*Purchase and Collection of Medical Insurance Claims Receivables*

As part of the discontinued operations of the Company, Medical Financial  Corp., a wholly owned subsidiary of the Company, purchased insurance claims receivable from  medical practices and provided collection services to those practices. The Company charged a fee  (purchase discount) upon the purchase of those receivables, which compensated the Company for the  advance payment that it paid to the client and for the collection services rendered to collect  the receivables. The Company also charged additional fees for other services, such as a  percentage of collections when the receivables needed to be litigated as the insurance companies  improperly delayed payment or denied claims. The insurance companies also paid interest on late  payments, and reimbursements for litigation filing fees and attorney's fees on cases that  they lost. The Company also charged its clients interest if the advance payment and purchase  discount ("Funding Balance") on purchased receivables are not collected or offset in full after the contractual  collection period, usually 180 days.

*Purchase Discount.* The purchase discount was deferredand recognized over the contractual collection period in proportion to the costsof collection. The deferred income was netted against finance receivables. TheCompany was not entitled to interest on unpaid Funding Balances within thecontractual collection period.

*Other Collection Fees.* Through August 24, 2004, the Company charged some of itsclients an additional collection fee on the proceeds from collections on casesthat required a legal action to receive payment. No revenue was recorded onunresolved cases, which represented a gain contingency. Revenue was recorded whenthe proceeds from collections were received by the Company.

*Interest Income.* Interest was charged to certain clients at apredetermined rate on Funding Balances that have not been fully collected afterthe contractual collection period. Interest income was recorded monthly based onthe unpaid Funding Balance from the prior month. Interest income from insurancecompanies is only recorded when cases are won by the Company. No revenue isrecorded on unresolved cases, which represent a gain contingency. Interestincome from insurance companies is recorded when the amount is determinable,which is the earlier of notification that a case was lost by the insurancecompanies or when the interest payment is paid if there is no advancenotification.

*Reimbursed Expenses.* Through August 24, 2004, the Companywas reimbursed byinsurance companies for statutory legal fees and is still being reimbursed for the cost of filing on caseswhen the insurance companies have lost legal actions. The Company was reimbursedby its clients for the costs of postage and lock box charges that were incurredon the clients' behalf. Income from reimbursed expenses from insurance companiesis recorded when the amount is determinable. Income from reimbursed expensesfrom clients was recorded when the amounts were known and when management estimatesthat the amounts were collectible.
*Medical Management Service Fees*Three subsidiaries provided additional managementservices to certain medical practices. Management fees were billed to these medical practices monthlyin amounts that are relative to the expenses and services provided by the Company for that month. Theaccrual method of accounting was used to record all management service fees.Financeand Management Fee Receivables
The Company purchased the net collectible value of medical insurance claims on alimited recourse basis. Net collectible value is the amount that the insurance companies will pay basedon established fee schedules used by insurance companies. The net collectible value is often less thanthe face value of the claim due to the difference in billing rates between the established fee schedulesand what the medical practice ordinarily would bill for a particular procedure. The Company is onlyresponsible to collect the fee scheduled amount. If any amounts are collected in excess of the purchasedamount and the Company's fee, that amount will be applied to the client'sFunding Balance. Finance receivablesare reported at their outstanding unpaid principal balances, reduced by any charge-off or valuationallowance and net of unearned revenues. The recourse basis is limited to the extent any receivablespurchased by the Company are disputed. Such receivables are deemed to be invalid andwere substitutedor repaid at the end of the contractual period. The Company was still entitled to the collection of itsfees from customers regardless of whether or not the underlying accounts receivablewere collectible.Performance of these receivables are personally guaranteed by the owner of the practice and/or the principalsof the related management companies.

The Company purchases the receivables and has the right to return the "invalid receivables."By contractual definition, these are receivables that have not been recovered from insurance companiesbecause of denials, requests for additional information not readily available, or a matter under investigationwithin 180 days of the purchase date. In addition to the right to return the invalid receivables to the Seller, the Companyhas the right to offset any of its obligations to the Seller by any invalid receivables. 

The Company may incur a finance receivable bad debt loss when the portion of a  medical claim collected does not exceed the advance (including the fee charged) given to the  client. The increase in bad debt expense that occurred during the years ended	February 28, 2005 and February 29, 2004  was based on an increase in adverse arbitration  decisions from the hearings that were decided during those periods. An  increase in the amount of closed arbitration cases has provided management with a larger base of  information to better estimate the reserve for bad debts. Management's decision to increase  the bad debt reserve was based on the overall decrease in the collections rate from the  arbitrations that have been closed during the last two fiscal years. Management believes that it will be  increasingly more difficult to collect on outstanding receivables, and has initiated	an additional  program that it believes could increase the collections rate. Management had also taken other  measures to reduce its bad debts, such as eliminating poorly collecting clients and reducing  the upfront advance percentage that it paid when receivables were purchased. Management continues  to monitor the results of these efforts as to the effect on collection rates, and whether the  reserve for bad debts is adequate based on actual collections. In addition, the Company has  incurred actual bad debt losses when it determined that it was more cost effective to agree on a  settlement for less than the full value of the receivables than to incur the additional  collection costs.

From the date the Company purchased insurance claims receivable from medical  practices and the advance payment was made to the client, the Company had 180 days to collect or  determine that the bills were invalid as contractually defined. If the Company collected the  advance payment and fee, all additional amounts, if any, that were collected were given to the  client. While by contract, the Company considers these receivables invalid, in reality, for  reasons outside of the Company's control, such as the customer being able to provide  additional information to overturn a denial, the receivables will get paid and are then not  uncollectible. The collections from these written-off receivables are the same collections that  may be used as an offset to other obligations that the Company may have with the client.  Recoveries from these written-off receivables are paid to the customer or used as an offset, when  necessary. As of February 28, 2005, there were approximately	$1,299,000 of receivables that were  outside of the contractual collection period, written-off, but are still collectible and  historically, collected in significant amounts and were used to offset other obligations from the  client to the Company, including management fee receivables.

The write-offs and recoveries are a balance sheet item only, and do not  affect the income statement. The income statement would only be affected if any part of the  advance payment or fee was not collected in the 180 day period. For that situation, a reserve has  been established. Management's periodic evaluation of the adequacyof the allowance is based on the Company's past loss experience, known and inherentrisks in the portfolio, adverse situations that may affect the customer's ability to repay, the estimatedvalue of any underlying collateral and current economic conditions.

Net finance receivable and management fees receivable consist of the following:
**February 28,** **February 29,****2005** **2004**   			 Gross finance receivables ** $          1,408,781** 			 $          2,783,846 			 Allowance for credit losses **              (624,889)** 			              (455,432)			 Deferred finance income **                (57,226)** 			              (101,290)**                726,666** 			             2,227,124 			 Due to finance customers **              (360,620)** 			              (774,076)			 Net finance receivables ** $             366,046** 			 $          1,453,048    			 Gross management fee receivables ** $          2,490,283** 			 $          2,575,995 			 Allowance for billing adjustments & bad  debts **           (1,683,534)** 			           (1,418,871)			 Net management fee receivables ** $             806,749** 			 $          1,157,124 
Due to finance customers represents the amount of the unpaid receivables less  the advance payment and fee that the Company charges. The Company is liable for this amount only  if (i) it is collected or (ii) an insurance carrier suffers a financial inability to pay.

If the assets of themanagement client, which is also a finance client, are not enough to satisfy thebilled fees, an allowance for billing adjustments is recorded to reduce theCompany's net receivables to an amount that is equal to the assets of the clientthat are available for payment.

These receivables are collateral for a line of credit.

Summarized financial information of the medical financing segment as  discontinued operations for each of the three years ended February 28, 2005  follows:
			 Year ended  			 Year ended  			 Year ended 			 February 28,  			 February 29,  			 February 28, 			 2005  			 2004  			 2003      			 Revenue:      			 Income from the purchase and collections      			   of medical receivables ** $           114,642** 			 $        1,194,985  			 $        1,686,558 			 Medical management service fees **                47,663** 			           1,353,749  			           2,282,677 			 Reimbursed expenses **                60,326** 			              247,997  			              254,250 			 Total revenue **              222,631** 			           2,796,731  			           4,223,485      			 Costs and expenses:      			 Medical receivables **           1,024,287** 			           1,762,737  			           1,719,569 			 Medical management services **              211,736** 			           1,198,223  			           1,901,865 			 Bad debt **              453,680** 			              538,569  			                14,722 			 Impairment loss **              270,728** 			              229,285  			                         - 			 Loss on disposal of assets **              218,447** 			                         -  			                         - 			 Depreciation and amortization **              160,037** 			              230,477  			              153,575 			 Total costs and expenses **           2,338,915** 			           3,959,291  			           3,789,731      			 (Loss) income from operations **         (2,116,284)** 			         (1,162,560) 			              433,754 			 Other expense **                (5,196)** 			              (19,539) 			                (5,505)			 (Loss) income before income taxes **         (2,121,480)** 			         (1,182,099) 			              428,249 			 Income taxes **                  1,241** 			                     664  			                     (38)     			 (Loss) income from discontinued operations, net of taxes ** $      (2,122,721)** 			 $      (1,182,763) 			 $           428,287 
The components of assets and liabilities of discontinued operations are as  follows:
			 February 28,  **February 29,****2005** **2004**   			 Finance receivables, net ** $           366,046** 			 $        1,453,048 			 Management fee receivables, net **              806,749** 			           1,157,124 			 Other current assets **                35,929** 			                41,611 			 Property and equipment, at cost, net of accumulated    			   depreciation, amortization and impairment allowance **                35,598** 			              603,502 			 Loan receivable **                         -** 			                83,137 			 Investment in unconsolidated subsidiaries **                10,000** 			                50,000 			 Other assets **                  9,480** 			                82,371 			 Total assets ** $        1,263,802** 			 $        3,470,793    			 Accounts payable and accrued expenses ** $           155,118** 			 $           238,797 			 Current portion of notes payable **                  8,687** 			                75,237 			 Total liabilities ** $           163,805** 			 $           314,034 12.Subsequent Events
On May 10, 2005, Yolo Equities Corp.sold all the outstanding shares of its subsidiary, Highlands Pollution ControlCorp. for $75,000, subject to a recorded agreement by which it has the right toobtain a share of the increased capacity of the waste water treatment plant forthe development of its remaining 65 acres of undeveloped land in Hunter, NY byparticipating in the financing of the expansion for which State permits alreadyexist. The Company will record a gain of approximately $ 92,000 on the sale ofHighlands Pollution Control Corp.

On May 17, 2005, Yolo Equities Corp.completed the sale of the Clubhouse in Hunter, New York for $320,000 payable bya second mortgage on the real estate, bearing interest at the rate of 8% perannum, commencing on September 1, 2005. Since the buyer's initial and continuinginvestments are inadequate to demonstrate a commitment to pay for the property,the installment method is used, resulting in the deferral of income. Thedeferred gain on the sale of this property is approximately $20,000. 

On May 19, 2005, the Companyexchanged its $946,732 second mortgage on the office building in East Granby,Connecticut owned by Gateway Granby, LLC ("Gateway") for a $1,000,000 equityinvestment in Gateway, constituting 49% of the equity ownership of Gateway. TheCompany sold the office building to Gateway in 1996 for $4,800,000, of which$3,853,268 has been paid and $946,732 is the purchase money second mortgagematuring on March 8, 2017. The total equity investment in Gateway after theexchange is $2,050,000, of which $265,000 is owned by Shari Stack, the daughterof Lester Tanner (a shareholder, director and president of the Company), and$785,000 is owned by unrelated parties. Gateway owns the office building subjectto a non-recourse first mortgage held by Banknorth, N.A. in the amount of$2,200,000.
13. SupplementalFinancial Information
Selected Quarterly Financial Data(Unaudited) 
			Quarter           			First 			Second 			Third 			Fourth 			Total**Year ended February 28, 2005**         			Total revenue			 $        42,463  			 $       544,614  			 $    1,131,234  			 $         58,566  			 $    1,776,877          			Income (loss) from continuing operations			       (146,119) 			         (227,361) 			          123,943  			         (119,645) 			         (369,182)			Income (loss) from discontinued operations			       (408,298) 			         (773,759) 			         (293,261) 			         (647,403) 			      (2,122,721)			Net income (loss)			 $    (554,417) 			 $   (1,001,120) 			 $      (169,318) 			 $      (767,048) 			 $   (2,491,903)         			Earnings (loss) per common share:         			Income (loss) from continuing operations			 $          (0.08) 			 $            (0.13) 			 $             0.07  			 $            (0.07) 			 $            (0.21)			Income (loss) from discontinued operations			             (0.23) 			               (0.43) 			               (0.17) 			               (0.36) 			               (1.19)			Basic and diluted income (loss) per common share			 $          (0.31) 			 $            (0.56) 			 $            (0.10) 			 $            (0.43) 			 $            (1.40)         			Number of shares used in computation         			  of basic and diluted earnings (loss) per share			      1,775,053  			       1,775,053  			       1,775,053  			       1,775,053  			       1,775,053          **Year ended February 29, 2004**         			Total revenue			 $      216,941  			 $         42,370  			 $         42,545  			 $       317,258  			 $       619,114          			Income (loss) from continuing operations			           52,037  			         (123,337) 			         (143,845) 			           (35,116) 			         (250,261)			Income (loss) from discontinued operations			           25,308  			            48,469  			         (675,046) 			         (581,494) 			      (1,182,763)			Net income (loss)			 $        77,345  			 $        (74,868) 			 $      (818,891) 			 $      (616,610) 			 $   (1,433,024)         			Earnings (loss) per common share:         			Income (loss) from continuing operations			 $            0.03  			 $            (0.07) 			 $            (0.08) 			 $            (0.02) 			 $            (0.14)			Income (loss) from discontinued operations			               0.01  			                0.03  			               (0.38) 			               (0.33) 			               (0.67)			Basic and diluted income (loss) per common share			 $            0.04  			 $            (0.04) 			 $            (0.46) 			 $            (0.35) 			 $            (0.81)         			Number of shares used in computation         			  of basic and diluted earnings (loss) per share			      1,775,053  			       1,775,053  			       1,775,053  			       1,775,053  			       1,775,053          **Year ended February 28, 2003**         			Total revenue			 $        47,641  			 $         47,275  			 $         40,252  			 $       901,794  			 $    1,036,962          			Income (loss) from continuing operations			         (89,248) 			         (110,504) 			           (85,696) 			          822,246  			          536,798 			Income (loss) from discontinued operations			         121,115  			          139,087  			          105,700  			            62,385  			          428,287 			Net income (loss)			 $        31,867  			 $         28,583  			 $         20,004  			 $       884,631  			 $       965,085          			Earnings (loss) per common share:         			Income (loss) from continuing operations			 $          (0.05) 			 $            (0.06) 			 $            (0.05) 			 $             0.46  			 $             0.30 			Income (loss) from discontinued operations			               0.07  			                0.07  			                0.06  			                0.04  			                0.24 			Basic and diluted income (loss) per common share			 $            0.02  			 $             0.01  			 $             0.01  			 $             0.50  			 $             0.54          			Number of shares used in computation         			  of basic and diluted earnings (loss) per share			      1,790,000  			       1,790,000  			       1,789,665  			       1,779,590  			       1,787,350 
 

MFC Development Corp. and Subsidiaries
Financial StatementSchedulesSchedule II - Valuation and Qualifying Accounts
Year ended February 28, 2005

 
 Column A  			 Column B  			 Column C  			 Column D  			 Column E              			 Additions  			 Additions      			 Balance at  			 Charged to  			 Charged to    			 Balance at  			 Beginning  			 Costs and  			 Other    			 End of 			 Description  			 of Period  			 Expenses  			 Accounts  			 (Deductions)  			 Period           **February 28, 2005**          			 Allowance for credit losses- finance receivables  ** $       793,143** ** $       351,964** ** $                   -** ** $                   -** ** $    1,145,107**			 Allowance for billing adjustments and           			 bad debts - Management fee receivables  ** $    1,418,871** ** $       182,507** ** $         82,156** ** $                   -** ** $    1,683,534**          			 Valuation allowance -           			 Deferred tax asset  ** $    2,066,993** ** $                   -** ** $       920,395** ** $                   -** ** $    2,987,388**			 Mortgage receivable  ** $                   -** ** $                   -** ** $       125,000** ** $                   -** ** $       125,000**          			February 29, 2004          			 Allowance for credit losses  			 $       264,285  			 $       528,858  			 $                   -  			 $                   -  			 $       793,143 			 Allowance for billing adjustments and           			 bad debts - Management fee receivables  			 $       623,856  			 $       347,422  			 $       447,593  			 $                   -  			 $    1,418,871           			 Valuation allowance -           			 Deferred tax asset  			 $    1,659,048  			 $                   -  			 $       407,945  			 $                   -  			 $    2,066,993 			 Mortgage receivable  			 $                   -  			 $                   -  			 $                   -  			 $                   -  			 $                   -           **February 28, 2003**          			 Allowance for credit losses  			 $       252,535  			 $         11,750  			 $                   -  			 $                   -  			 $       264,285 			 Allowance for billing adjustments and           			 bad debts - Management fee receivables  			 $       318,817  			 $                   -  			 $       305,039  			 $                   -  			 $       623,856           			 Valuation allowance -           			 Deferred tax asset  			 $    1,403,337  			 $                   -  			 $       345,711  			 $        (90,000) 			 $    1,659,048 			 Mortgage receivable  			 $                   -  			 $                   -  			 $                   -  			 $                   -  			 $                   - 
 

*Allowance for Credit Lossesand Bad Debts:*A periodic evaluation of the allowance for credit lossesand bad debts on finance receivables and management fee receivables is based onthe Company's past loss experience, known and inherent risks in the portfolio,adverse situations that may affect the customer's ability to repay, theestimated value of any underlying collateral, the outlook of the debtor'sindustry and current economic conditions. When the Company estimates that it maybe probable that a specific customer account may be uncollectible, that balanceis included in the allowance calculation.

*Allowance for BillingAdjustments:* Management service fees are billed monthly according to thecost of services rendered to the client. If the assets of the management client,which is also a finance client, are not enough to satisfy the billed fees, anallowance for billing adjustments is recorded to reduce the Company's netreceivables to an amount that is equal to the assets of the client that areavailable for payment.
Schedule III - Real Estate and Accumulated Depreciation
Year ended February 28, 2005
**Column A** **Column B** **Column C** **Column D** **Column E** **Column F**                     **Initial Cost to Company** **Cost Capitalized Subsequent to 			Acquisition** **Gross Amount at which 			Carried at Close of Period**                                 **Accumu-**     **Buildings**       **Buildings**   **lated** **Encum-**   **& Improve-** **Improve-** **Carrying**   **& Improve-**   **Depre-****Description** **brances** **Land** **ments** **ments** **Cost** **Land** **ments** **Total** **ciation**                  			Partial investment                  			in condominium                  			development,                  			Hunter, NY 			 $            -  			 $ 600,000  			 $ 300,000  			 $            -  			 $            -  			 $ 162,090  			 $ 324,180  			 $    486,270  			 $          -                   			Total 			 $            -  			 $ 600,000  			 $ 300,000  			 $            -  			 $            -  			 $ 162,090  			 $ 324,180  			 $    486,270  			 $          -                                                        **Column G** **Column H** **Column I**                 **Line**                 **where**             **Date of**   **Depre-**             **Constr-** **Date** **ciation**            			Columns **uction** **Acquired** **Computed**            			continued                  			from above 			 -  			02/29/96 			N/A            
The following is a reconciliation of the total amount at which real estate was carried for the yearsended:
**February 28, 2005** **February 29, 2004** **February 28, 2003**           			Balance at beginning of period  ** $   1,334,384**   			 $      951,358    			 $      625,713 			Additions during period           			Other acquisitions    			         422,410    			                     -   			Improvements, etc.**         514,766**   			         142,875    			         325,645   			Capitalized carrying costs**           46,500** **         561,266** 			                     -  			         565,285  			                     -  			         325,645   **      1,895,650**   			      1,516,643    			         951,358 			Deductions during period           			Cost of real estate sold**      1,277,240**   			         182,259    			                     -   			Other reductions**         132,140**   			                     -    			                     -     **      1,409,380**   			         182,259    			                     - 			Balance at close of period  ** $      486,270**   			 $   1,334,384    			 $      951,358            			Federal income tax basis  ** $      486,000**   			 $   1,201,974    			 $   1,231,358 Schedule IV - Mortgage Loans on Real Estate
Year ended February 28, 2005
**Column A** **Column B** **Column C** **Column D** **Column E** **Column F** **Column G** **Column H**                           **Principal**             **Amount of**             **Loans**             **Subject to**   **Final** **Periodic**   **Face** **Carrying** **Delinquent** **Interest** **Maturity** **Monthly** **Prior** **Amount of** **Amount of** **Principal****Description** **Rate** **Date** **Payment** **Liens** **Mortgages** **Mortgages** **or Interest**              			Second mortgage              			Office building,              			Granby, CT   			03/08/17   			 $2,298,421  			 $    946,732  			 $   946,732  			 $             - 			through 3/1/06 			7%   			 $     5,523         			4/1/06-3/8/17 			9%   			 $     9,863                       			First mortgage              			Land,              			Hunter, NY 			0% 			11/10/05 			 $             -  			 $               -  			 $    900,000  			 $   747,927  			 $             -  			(Imputed at 5%)       			  			  			                        			 $ 1,846,732  			 $1,694,659  			 $             - 
The following is a reconciliation of the total amount at which mortgage loans were carried for theyears ended:
**February 28, 2005** **February 29, 2004** **February 28, 2003**           			Balance at beginning of period  ** $    946,732**   			 $    946,732    			 $    975,792 			Additions during period           			New mortgage loans**       900,000**   			                   -    			                   -     **       900,000**   			                   -    			                   -   **    1,846,732**   			       946,732    			       975,792 			Deductions during period           			Collection of principal**                   -**   			                   -    			         29,060   			Valuation allowance**       125,000**   			                   -    			                   -   			Deferred interest**         27,073**   			    			     **       152,073**   			                   -    			         29,060 			Balance at close of period  ** $ 1,694,659**   			 $    946,732    			 $    946,732 EXHIBIT INDEX
Exhibits.

31.1 - Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 - Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 - Certification by the Chief Executive Officer and Chief Financial Officer Pursuant to Section 18 U.S.C. Section 1350 Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

The following exhibits are incorporated herein by reference to Amendment No. 3 to Form 10 dated January 17,2001.
    Exhibit Number     Exhibit Description      3.01     Certificate of Incorporation of the Company    3.03     Amended By-Laws of the Company    5.01     Opinion of Tanner Propp, LLP    21.01     A list of subsidiaries of the Company  SIGNATURES
Pursuant to the requirements of Section 13 or 15(d)2 of the Securities Exchange Act of 1934 as amended,the Registrant has duly cause this Report to be signed on its behalf by the undersigned, thereunto dulyauthorized, on May 26, 2005.

MFC DEVELOPMENT CORP.
           /s/ VICTOR BRODSKY          Victor Brodsky*Vice President and Chief Financial Officer**(Principal Financial and Accounting Officer)*     
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report hasbeen signed below by the following persons on behalf of the Registrant and in the capacities indicatedon May 26, 2005.
           /s/ LESTER TANNER    
Lester Tanner*President and Director**(Principal Executive Officer)*
           /s/ STEVEN KEVORKIAN    
Steven Kevorkian*Director*
           /s/ VICTOR BRODSKY    
Victor Brodsky*Director*
           /s/ ANDERS STERNER    
Anders Sterner*Director*
           /s/ JAY HIRSCHSON    
Jay Hirschson*Director*
CERTIFICATION
Each of the undersigned hereby certifies in his capacity as an officer of MFC DevelopmentCorp. (the "Company") that the Annual Report of the Company on Form 10-K for the period ended February28, 2005 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934and that the information contained in such report fairly presents, in all material respects, the financialcondition of the Company at the end of such period and the results of operations of the Company forsuch period.

May 26, 2005
      /s/ LESTER TANNER           /s/ VICTOR BRODSKY    
Lester Tanner*President and Chief Executive Officer*
 
Victor Brodsky*Vice President and Chief Financial Officer*

 

 

 
EXHIBITSExhibit 31.1Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Lester Tanner, certify that:
-  I have reviewed this	annual report on Form 10-K of MFC Development	Corp; 
-  Based on my knowledge, this	annual report does not contain	any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of	the circumstances under which such statements were made, not misleading with respect to the period covered by this	annual	report; 
-  Based on my knowledge, the financial statements, and other	financial information included in this annual report, fairly present in all material respects the financial condition, results	of operations and cash flows of the registrant as of, and for, the periods presented in this	annual report; 
-  The registrant's other certifying officers and I are responsible	for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))	for the registrant and we have:     -  Designed such disclosure controls and procedures to ensure		that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others		within those entities, particularly during the period in which this		annual report is being prepared; and 
  -  Evaluated the effectiveness of the registrant's disclosure		controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls		and procedures, as of the end of the period covered by this report based on such evaluation; and 
  -  
Disclosed in this report any change in the registrant's			internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's			fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially			affect, the registrant's internal control over financial reporting; and 
-  The registrant's other certifying officers and I have disclosed,	based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors	(or persons performing the equivalent function):     -  all significant deficiencies in the design or operation		of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial		data and have identified for the registrant's auditors any material weaknesses in internal controls; and 
  -  any        fraud, whether or not material, that involves management or other        employees who have a significant role in the registrant's internal        controls.     May		26, 2005 			/s/ LESTER TANNER Lester Tanner*President and Chief Executive Officer*   
Exhibit 31.2Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Victor Brodsky, certify that:
-  I have reviewed this	annual report on Form 10-K of MFC Development	Corp; 
-  Based on my knowledge, this quarterly report does not contain	any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of	the circumstances under which such statements were made, not misleading with respect to the period covered by this	annual	report; 
-  Based on my knowledge, the financial statements, and other	financial information included in this annual report, fairly present in all material respects the financial condition, results	of operations and cash flows of the registrant as of, and for, the periods presented in this	annual report; 
-  The registrant's other certifying officers and I are responsible	for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))	for the registrant and we have:     -  Designed such disclosure controls and procedures to ensure		that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others		within those entities, particularly during the period in which this		annual report is being prepared; and 
  -  Evaluated the effectiveness of the registrant's disclosure		controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls		and procedures, as of the end of the period covered by this report based on such evaluation; and 
  -  
Disclosed in this report any change in the registrant's			internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's			fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially			affect, the registrant's internal control over financial reporting; and 
-  The registrant's other certifying officers and I have disclosed,	based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors	(or persons performing the equivalent function):     -  all significant deficiencies in the design or operation		of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial		data and have identified for the registrant's auditors any material weaknesses in internal controls; and 
  -  any        fraud, whether or not material, that involves management or other        employees who have a significant role in the registrant's internal        controls. 
May		26, 2005 			/s/ VICTOR BRODSKY Victor Brodsky*Vice President and Chief Financial Officer*Exhibit 32.1Certification by the Chief Executive Officer and Chief Financial Officer Pursuant to Section 18 U.S.C. Section 1350Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of MFC Development Corporation *(the "Company")* on Form 10-K for the period endedFebruary 28, 2005 as filed with the Securities and Exchange Commission on thedate hereof (the "Report"),

We, Lester Tanner, Chief Executive Officer, and, Victor Brodsky, Chief Financial Officer of the Company,certify, pursuant to Section 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of Section	13(a) and 15(d) of the Securities Exchange Act of 1934; and

(2)  The information contained in the Report fairly presents, in all material respects,	the financial condition and results of operations of the Company.
			May 26, 2005 			May 26, 2005				/s/ LESTER TANNER								Lester Tanner*President and Chief Executive Officer* 				/s/ VICTOR BRODSKY								Victor Brodsky*Vice President and Chief Financial Officer*
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies this Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed bythe Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended  (the "Exchange Act"). Such certificationwill not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the ExchangeAct, except to the extent that the Company specifically incorporates it by reference.