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, 2003

Commission file number: 0-3579974

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

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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, 2003 |   | $1,665,268 |
|--------------------------------------------------------------------------------------------------------------|--------|------------|
| Number of shares outstanding    of the registrant's Common Stock    as of May 20, 2003                   |   | 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 2003, which definitive proxystatement will be filed with the Securities and Exchange Commission within 120 days after the closeof the year ended February 28, 2003.

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# 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 
- 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. CONTROLS AND PROCEDURES 
- PART IV
-    - ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K 
- SIGNATURES

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# 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 (i) developing real estate and (ii) providing financingand management services to medical practices. On September 14, 2000, a subsidiary of the Company formeda majority-owned Limited Liability Company to operate as a "certified capital company" pursuant to Sections11 and 1511 of the New York State Tax Law (herein as "Capco") under the State's Capco Program.

#### Real Estate Division

The Real Estate Division of the Company presently conducts its operations throughYolo Equities Corp., Yolo Capital Corp. and Highlands Pollution Control Corp, wholly-owned subsidiarieswhich own the interests described below in parcels of real estate. For the fiscal year ended February28, 2003, the total revenues derived from the real estate division were $1,036,962, constituting 20%of the total revenues of MFC. A brief description of each parcel follows:

##### Goshen,New York

The transactions related to the sale of this property were completed in the fiscalyear ended February 28, 2002, resulting in the realization of $745,000 of deferred income related tothe original sale of the property in a prior fiscal year.

##### 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 about $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  is due to the Company as of February28, 2003, 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.

##### 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, together 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. The properties consist 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 develop, is available for single family residences, townhouses, condominium units and a hotelsite. There is already constructed on the property (i) a waste water treatment plant owned by HighlandsPollution Control Corp. (a wholly-owned subsidiary of the Yolo Capital Corp.), (ii) a Clubhouse withswimming pool and six tennis courts and (iii) a small office building. Adjoining the site 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. Under terms of the agreement, the City of New Yorkis reimbursing the Company for all costs incurred with the upgrade of the facility. See Note 4 of Notesto Consolidated Financial Statements.

The Company will seek to complete a sale of the Clubhouse in the fiscal year endedFebruary 29, 2004. The small office building is in process of being converted into three residentialtownhouse units, which will be offered for sale during the summer of 2003.

The hotel site consists of 11 acres contiguous to the ski slopes at Hunter Mountain.Yolo Equities Corp. is currently applying to the Planning Board of the Town of Hunter for site approvalof a first phase development of additional condominium units with eventual construction of a hotel andfurther condominium units in subsequent phases. The Company plans to participate with other developersin financing and constructing improvements on the 11 acre site.

This will then leave Yolo Equities Corp. with about 70 acres of undeveloped land,also contiguous to the Hunter Mountain ski slopes, for which there are no present plans for development.The future development of this acreage and the subsequent phases at the hotel site will require theCompany to double the capacity of the waste water treatment plant, for which State permits already exist.The City of New York will pay for the upgrade in technology (but not the expansion of capacity) of thisfacility because of the Federal requirement to incorporate the latest technology in order to improvethe quality of the water derived from the City's Catskill Mountain Watershed Area (in which Hunter islocated).

##### OtherProperties

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

#### Medical Division

The Medical Division consists of (i) the three wholly-owned Limited Liability Companies(Nexus Garden City, LLC, FRM Court Street, LLC and Nexus Borough Park, LLC) and a 25% and 33% ownedinterest in two other Limited Liability Companies, all of which act as service organizations for providersof medical services and (ii) a wholly-owned subsidiary of the Company, Medical Financial Corp., whichpurchases unpaid medical insurance claims, paying cash to the medical provider in return for a negotiatedfee. In the fiscal year ended February 28, 2003, the total revenues of the Medical Division were $4,223,485,constituting 80% of total revenues of the Company. For its clients, this Division delivers managementservices and increased liquidity, which is normally unavailable to medical groups from traditional sources.The management services include inputting the data on the customers' receivables into the Company'scomputer system, processing the data and presenting the customers' bills to the insurance company incompliance with regulations to facilitate payment, following up with collection efforts if the billsare not paid promptly, furnishing weekly or other periodic status reports of the customers' receivablesand other information relating to their medical practices.

The expected growth in revenues of the Medical Division will be supported by theCompany's investment in new technology. This technology, which includes document imaging equipment and software, the internal development of a more efficient collections program and the purchase of newcomputers needed to run these programs. The investment in this technology has already decreased thetime required to perform collection tasks to a fraction of the time required under the old systems.The Company's labor intensive services are now more efficient due to these capital expenditures.

#### Capco Division

The Capco Division was commenced by the filing on September 14, 2000 of Articlesof Organization in New York State for FRM N.Y. Capital LLC which is a 99% majority owned subsidiaryof the Company. This LLC was formed for the purpose of being approved as a "certified capital company"pursuant to Sections 11 and 1511 of the New York State Tax Law (herein a "Capco") under the Capco Program.A "certified capital company" as used in this context is a "for profit" entity, located and qualifiedto conduct business in New York State, which is certified by the New York State Insurance Department("Department") based on standards set forth in the New York Tax Law (the "Statute"). The Capco was approved,and will seek to participate in any future New York Capco Program. The  NY Capco Statute createsa tax credit incentive mechanism to increase investment of financial resources of insurance companiesinto venture capital to businesses approved by the Department as qualified to provide jobs and promotethe growth of the economy in New York State ("Qualified Businesses"). 

The Capco will use (i) its own capital of $500,000, plus (ii) the investment of insurancecompanies which wish to take substantial equity interests in New York companies in order to encourageand assist them in creating, developing and expanding their business. The Capco's emphasis will be onviable small business enterprises which have had difficulty in attracting institutional venture capitaland which will expand employment opportunities in New York thereby promoting the growth of the State'seconomy. The Capco has not yet commenced the business for which it was formed, as it is pending theauthorization of additional State funding for the program.

### Marketing

The Company's marketing in its real estate activities is limited to working withreal estate brokers to sell the properties held for sale in Hunter, N.Y.

The Medical Division markets its services to medical groups through its own individualemployees and consultants by direct contact with potential customers recommended by existing customersand those who contact MFC after reading newspaper advertisements or receiving its brochure by directmail solicitation. MFC designs its own brochure for such solicitations. MFC designed and obtained thenames for two websites, "medicalfinancial.com" and "mdhelp.com".

The Capco Program will be marketed by the Managers of FRM N.Y. Capital LLC, who areexperienced in the venture capital field.

### Competition

#### Real Estate Division

The Company's presently owned real estate held for development and sale is locatedin Hunter, New York. The real estate market for second homes in this resort community has recently experiencedimproved demand. The Company will be compete with many owners and developers in the locale in connectionwith the development and sale of its properties for residential use.

#### Medical Division

MFC competes with a wide variety of management and financial service companies, includingpublic companies, banks, and factoring companies (which advance funds on the security of purchased receivables).The Company is very small in relation to such competitors. However the Company's services are also designedto serve a niche market and in its focus on purchasing and collecting medical insurance claims of certainmedical groups, the competition is limited to only a few companies.

#### Capco

The Company is awaiting further legislation in New York to provide financial incentivesfor insurance companies and Capco organizations. If and when the legislation is enacted, the Companywill compete with many other Capco organizations for approval by the New York Insurance Department forits Capco Programs.

### Trademarks

None.

### Employees

As of February 28, 2003, the Company had 45 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 held for development and sale as set forth in Item1 above, MFC lease 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.

MFC leases a medical office in Brooklyn, NY, where it formerly provided managementservices for a medical practice that was also a finance client. This office has been sub-leased to anunrelated party until the lease expiration on March 31, 2004.

MFC leases MRI facilities in Garden City South, NY and Central Islip, NY, where itprovides MRI and management services for a finance client's radiology practice. The lease in GardenCity South expires on February 28, 2005, with a five year renewal option and the lease in Central Islip,expires on September 30, 2006.

## ITEM 3. LEGAL PROCEEDINGS

MFC is not presently a party to any material litigation.

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

None, other than the election of directors on July 18, 2002.

### 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, 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, 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.

|                   |                  | Common Stock |
|-------------------|-----------------------|--------------|
| **Fiscal Period** |                  | High Bid     |   | Low Bid |
|                   |                  |         |   |   |
| **2001**          |                  |         |   |   |
| Quarter 4         | (12/01/00 - 02/28/01) | $1.00        |   | $1.00 |
|                   |                  |         |   |   |
| **2002**          |                  |         |   |   |
| Quarter 1         | (03/01/01 - 05/31/01) | $2.15        |   | $1.00 |
| Quarter 2         | (06/01/01 - 08/31/01) | $1.60        |   | $0.59 |
| Quarter 3         | (09/01/01 - 11/30/01) | $2.70        |   | $0.55 |
| Quarter 4         | (12/01/01 - 02/28/02) | $2.50        |   | $2.01 |
|                   |                  |         |   |   |
| **2003**          |                  |         |   |   |
| Quarter 1         | (03/01/02 - 05/31/02) | $2.19        |   | $0.70 |
| Quarter 2         | (06/01/02 - 08/31/02) | $2.18        |   | $0.35 |
| Quarter 3         | (09/01/02 - 11/30/02) | $1.85        |   | $0.44 |
| Quarter 4         | (12/01/02 - 02/28/03) | $1.85        |   | $1.40 |
|                   |                  |         |   |   |

The last trade on May 20, 2003 was $1.55.

### 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, 2003, there were approximately 1,000 holders of record of MFC commonstock representing about 2,400 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 6,000 sharesheld by Allan Kornfeld, Chairman of the Company and 3,000 shares held each by David Michael and AndersSterner, 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 28, |   | February 28, |   | February 29, |   | February 28, |
|                                          | 2003                                                                                                                       |   | 2002 |   | 2001 |   | 2000 |   | 1999 |
| **Income Statement Data:**               |                                                                                                                       |   |   |   |   |   |   |   |   |
| Total revenue                            |  $   5,260,447                                                                                              |   |  $   4,166,494 |   |  $   2,359,123 |   |  $   2,283,267 |   |  $   1,457,690 |
| Costs and expenses                       |       4,354,250                                                                                   |   |       3,294,304 |   |       3,277,340 |   |       3,258,798 |   |       1,893,223 |
|                                          |                                                                                                                       |   |   |   |   |   |   |   |   |
| Income (loss) from operations       |          906,197                                                                   |   |          872,190 |   |        (918,217) |   |        (975,531) |   |        (435,533) |
| Other (expenses) net of other income     |          (16,988)                                                                  |   |          (50,199) |   |        (220,170) |   |          (27,636) |   |          (44,874) |
|                                          |                                                                                                                       |   |   |   |   |   |   |   |   |
| Income (loss) from continuing            |                                                                                                                       |   |   |   |   |   |   |   |   |
| operations before provision for          |                                                                                                                       |   |   |   |   |   |   |   |   |
| income taxes                             |          889,209                                                                   |   |          821,991 |   |     (1,138,387) |   |     (1,003,167) |   |        (480,407) |
| (Benefit) provision for income taxes     |          (75,876)                                                                  |   |            13,606 |   |            10,936 |   |            14,328 |   |              5,676 |
|                                          |                                                                                                                       |   |   |   |   |   |   |   |   |
| Income (loss) from continuing operations |          965,085                                                                   |   |          808,385 |   |     (1,149,323) |   |     (1,017,495) |   |        (486,083) |
| Income from discontinued operations, net |                                                                                                                       |   |   |   |   |   |   |   |   |
| of taxes (including gain on sale of      |                                                                                                                       |   |   |   |   |   |   |   |   |
| subsidiary of $381,182 in 2000 and  |                                                                                                                       |   |   |   |   |   |   |   |   |
| $96,303 in 1999                          |                      - |   |                      - |   |          399,028 |   |          325,215 |   |          119,514 |
|                                          |                                                                                                                       |   |   |   |   |   |   |   |   |
| Net income (loss)                        |  $      965,085                                                                              |   |  $      808,385 |   |  $    (750,295) |   |  $    (692,280) |   |  $    (366,569) |
|                                          |                                                                                                                       |   |   |   |   |   |   |   |   |
| Earnings (loss) per common share:        |                                                                                                                       |   |   |   |   |   |   |   |   |
|                                          |                                                                                                                       |   |   |   |   |   |   |   |   |
| Income (loss) from continuing operations |  $            0.54                                             |   |  $            0.45 |   |  $          (0.64) |   |  $          (0.56) |   |  $          (0.27) |
| Income from discontinued operations      |                    -   |   |                    -   |   |                0.22 |   |                0.18 |   |                0.07 |
| Basic and diluted earnings (loss)        |                                                                                                                       |   |   |   |   |   |   |   |   |
| per common share                         |  $            0.54                                             |   |  $            0.45 |   |  $          (0.42) |   |  $          (0.38) |   |  $          (0.20) |
|                                          |                                                                                                                       |   |   |   |   |   |   |   |   |
| Number of shares used in computation of  |                                                                                                                       |   |   |   |   |   |   |   |   |
| basic and diluted earnings per share     |       1,787,350                                                                                   |   |       1,792,662 |   |       1,807,261 |   |       1,816,462 |   |       1,816,462 |
|                                          |                                                                                                                       |   |   |   |   |   |   |   |   |
|                                          | As of                                                                                                                      |
|                                          | February 28,                                                                                                               |   | February 28, |   | February 28, |   | February 29, |   | February 28, |
|                                          | 2003                                                                                                                       |   | 2002 |   | 2001 |   | 2000 |   | 1999 |
| **Balance Sheet Data:**                  |                                                                                                                       |   |   |   |   |   |   |   |   |
| Working Capital                          |  $   2,856,804                                                                                              |   |  $   3,441,529 |   |  $   2,264,177 |   |  $   1,531,120 |   |  $   1,471,640 |
|                                          |                                                                                                                       |   |   |   |   |   |   |   |   |
| Total Assets                             |  $   7,075,843                                                                                              |   |  $   6,277,489 |   |  $   7,222,100 |   |  $   7,376,210 |   |  $   9,022,618 |
|                                          |                                                                                                                       |   |   |   |   |   |   |   |   |
| Long-term debt                           |  $      303,182                                                                              |   |  $      203,654 |   |  $      316,982 |   |  $        24,655 |   |  $      799,480 |
|                                          |                                                                                                                       |   |   |   |   |   |   |   |   |
| Common Shareholders' equity              |  $   5,640,114                                                                                              |   |  $   4,702,368 |   |  $   3,907,282 |   |  $   4,685,912 |   |  $   5,378,192 |
|                                          |                                                                                                                       |   |   |   |   |   |   |   |   |
| Book value per share                     |  $            3.18                                             |   |  $            2.63 |   |  $            2.17 |   |  $            2.58 |   |  $            2.96 |
|                                          |                                                                                                                       |   |   |   |   |   |   |   |   |
| Common shares outstanding                |       1,775,053                                                                                   |   |       1,790,000 |   |       1,800,000 |   |       1,816,462 |   |       1,816,462 |
|                                          |                                                                                                                       |   |   |   |   |   |   |   |   |
    (a) During fiscal year ended February 29, 2000, the  Company disposed of its interest in Wendclark Corp.
    (b) 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 notlimited to, statements regarding future operations, financial condition and liquidity, expendituresto develop real estate owned by the Company, future borrowing, capital requirements and the Company'sfuture development plans are based on current expectations. These statements are forward looking innature and involve a number of risks and uncertainties. Actual results may differ materially. Amongthe factors that could cause actual results to differ materially are the following: changes in the businessof the Company's medical provider clients, a legislative change in insurance regulations would affectthe future purchases of medical receivables, changes in the real estate and financial markets, and otherrisk factors described herein and in the Company's reports filed and to be filed from time to time withthe 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

MFC presently generates revenues from two business segments: real estate and medical.

The real estate segment consists of various parcels of real estate, held for futuredevelopment and sale, in which co-investors also have interests, and a mortgage note receivable on aproperty that was previously sold. Revenues in the real estate division vary substantially from periodto period depending on when a particular transaction closes and depending on whether the closed transactionis recognized for accounting purposes as a sale or reflected as a financing or is deferred to a futureperiod.

In February 2003, the Company was released from a rental obligation arising fromthe sale of real estate in a prior period. 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.

In August 2001, the Company entered into an agreement with a debtor regarding anoutstanding mortgage receivable and debenture (together the "Goshen Receivables") on property locatedin Goshen, New York. Under the terms of the agreement, the debtor satisfied the Goshen Receivables bypayments of principal and accrued interest of $167,500 in August 2001 and $1,507,500 in November 2001.As a result of this agreement, the Company realized $745,000 of deferred income related to the originalsale of the property.

The medical segment consists of three Limited Liability Companies which act as serviceorganizations for providers of medical services and a wholly-owned subsidiary, Medical Financial Corp.,which purchases medical insurance claims receivable, paying cash to the medical provider in return fora negotiated fee.

**Critical Accounting Policies**

Management's discussion and analysis of its financial position and results of operationsare based upon the Company's consolidated financial statements, which have been prepared in accordancewith accounting principles generally accepted in the United States of America. The preparation of thesefinancial statements requires management to make estimates and judgments that affect the reported amountsof assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.Actual results could differ from those estimates. Management believes that the critical accounting policiesand areas that require the most significant judgments and estimates to be used in the preparation ofthe consolidated financial statements are allowance for doubtful accounts and the valuation allowanceagainst its deferred tax asset.

**Allowance for Doubtful Accounts**

*Mortgage and note receivable:*The Company evaluates the credit positions onits notes 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 value of the collateral is in excessof the related receivables. The Company continually evaluates its notes receivable that are past dueas to the collectibility of principal and interest. The Company considers the financial condition ofthe debtor, the outlook of the debtor's industry, decrease in the ratio of collateral values to loansand any prior write downs on loans. The above considerations are all used in determining whether theCompany should suspend recording interest income on any notes receivable or provide for any loss reserves.

*Finance and management receivables:* Management's periodic evaluation ofthe adequacy of the allowance for loan losses is based on the Company's past loan loss experience, knownand 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 economicconditions. When the Company estimates that it may be probable that a specific customer account maybe uncollectible, that balance is included in the reserve calculation. Actual results could differ fromthese estimates under different assumptions.

*Deferred tax assets:* The Company records a valuation allowance to reduce thecarrying 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 strategiesin assessing the need for the valuation allowance, should the Company determine that it would not beable to realize all or part of its net deferred tax assets in the future, an adjustment to the valuationallowance would be charged to income in the period in which such determination was made. A reductionin the valuation allowance and corresponding credit to income may be required if the likelihood of realizingexisting deferred tax assets were to increase.

### Results of Operations

*Year Ended February 28, 2003 Comparedto Year Ended February 28, 2002*

The Company's revenues from operations for the year endedFebruary 28, 2003 ("2003") were $5,260,000, an increase of $1,094,000 or 26% as compared to the yearended February 28, 2002 ("2002"). The increase was a result of increase in the medical division, offsetby a decrease in the real estate division.

Revenue in the real estate division decreased in 2003 by  $79,000, to $1,037,000.The decrease was due to (i) a $68,000 decrease in interest income from the Goshen mortgage, (ii) lackof real estate sales in 2003 as compared to 2002, when the Company sold the land for eight un-builtcondominium units for $50,000, offset by (iii) an increase of gain on sale of real estate of $35,000in 2003. The increase reflects the 2003 recognition of $850,000 of deferred income attributable to thetermination of a contingent obligation related to a sale leaseback, as compared to the 2002 realizationof $745,000 of deferred income related to the settlement of an outstanding mortgage.

The $1,173,000 increases in revenues in the medical division were due to increasesin both income from the purchase and collection of medical claims and in management fees. The 20% increasein income from the purchase and collection of medical claims of $324,000 in 2003 were primarily dueto additional collection services that are now being provided to new and existing clients. These additionalservices also generate interest income received from insurance companies for delayed payments on improperlydenied and delayed receivables.

The increases in management fees of $849,000 (59%)  in 2003, was a result ofthe increase in management services that the Company provides to two of its finance clients. In November2002, the Company began operating a second MRI facility, providing management services to a financeclient's radiology practices.  In November 2002, the Company also acquired a 25% equity interestin a third facility that provides management services to the same client. Management fees were alsogenerated from the management of a finance client's physical therapy practice through October 2002.These fees are net of billing adjustments. 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 financeclient, are not enough to satisfy the billed fees, an allowance for billing adjustments is recordedto reduce the Company's net receivables to an amount that is equal to the assets of the client thatare available for payment.

Costs and expenses from operations increased by $1,060,000 (32%) to $4,354,000 in2003. The increase  was due to increases of $999,000 in the medical division, $56,000 in corporateexpenses and other, and $54,000 in depreciation and amortization, offset by a decrease of $49,000 inthe real estate division.

The net decrease of $49,000 in the real estate division in 2003 was due to a decreasein the amount of properties sold in 2003, which results in a decrease in the cost of sales, offset byan annual salary increase.

The 38% increase in costs and expenses in the medical division in 2003 was due toan increase of $324,000 (20%) in medical receivable expenses and an increase of $849,000 (59%) of expensesthat are related to the management of finance clients' medical practices. The increases in medical receivableexpenses in 2003 were primarily due to (i) increases in employment costs, including annual salary increases,the expansion of the sales and marketing department and new employees needed to provide the additionalcollection services that the Company now provides, (ii) other costs that are related to the additionalcollection services and (iii) new banking fees that are related to client services. In addition, theCompany has also been more selective in the bill-purchasing process, which results in reduced bad debtlosses. The Company may incur a bad debt loss when the portion of a medical claim collected does notexceed the advance (including the fee charged) given to the client. The Company also has other contractualrights to help minimize its risk of loss. The Company continually monitors the aging of the uncollectedmedical claims as it relates to its advances, and establishes a reserve deemed adequate to cover potentiallosses.

The 51% increase in medical management expenses in 2003 are related to the 59% increasein revenues for the same period. The Company incurred additional expenses due to growth in the managementclient's radiology practices. As expenses increase, the Company may bill more for the services it provides.

The increase in corporate expenses and other of $56,000 (19%) in 2003 are primarilydue to increases in executive salaries, accounting fees, director and officer liability insurance andshareholder reporting expenses. The increase in depreciation and amortization of $54,000 (52%) in 2003is attributable to increased capital expenditures in the medical financing division, continuing theCompany's trend of relying on technology to perform formerly labor intensive functions. Net interestexpense in 2003 was $17,000, a decrease of $19,000 (52%) from 2002. The decrease in 2003 reflects interestearned from the collection of the proceeds of the Goshen receivables in 2002 and the partial use ofthose proceeds to repay debt that was incurred to finance the purchase of additional medical claimsreceivable.

The benefit for income taxes of $76,000 in 2003 reflects a current year benefit of$90,000. Through 2002, the Company had accumulated net operating losses ("NOL's") of $4,600,000, availableto be carried forward through February 28, 2022. Prior to 2003, the Company had not generated taxableincome and had taken a 100% valuation allowance against the deferred tax asset of $1,571,000 that theseNOL's would generate. In 2003, the Company generated taxable income and estimated that it would deriveminimum future tax savings of  $90,000 from these NOL's, and recorded a valuation allowance of$1,471,000 against the remainder of the deferred tax asset.   

For the reasons described above, the Company recorded net income from operationsof $965,000 in 2003, an increase of $157,000 (19%) from $808,000 in 2002.

#### Year Ended February28, 2002 Compared to Year Ended February 28, 2001

The Company's revenues from continuing operations for the year ended February 28,2002 ("2002") was $4,166,000, an increase of $1,807,000 or 77% as compared to the year ended February28, 2001 ("2001"). The increase was a result of increases in both the real estate and medical divisions.

Revenue in the real estate division increased in 2002 by $812,000, to $1,116,000.The increase was due to the settlement of the Goshen receivables, which resulted in the realizationof $745,000 of deferred income from real estate that was sold in prior periods and an increase in interestfrom mortgages. The increase in interest from mortgages of $61,000 in 2002 was attributable to an increasein accrued interest income on the mortgage receivable from the property located in Goshen, NY. The accrualof interest on this mortgage had been suspended during the period from December 1, 1999 through May31, 2001 because the annual interest payments that were due in February 2000 and 2001 were not paiduntil August 2001.

The $995,000 increase in revenues in the medical division was due to an increasein both income from the purchase and collection of medical claims and management fees. The 43% increasein income from the purchase and collection of medical claims of $488,000 in 2002 was due to (i) additionalcollections services that are now being provided to existing clients and (ii) $120,000 due to the changein the accounting estimate related to the timing of revenue as set forth in Note 3.

The increase in management fees of  $507,000 (55%) in 2002, was a result ofthe increase in management services that the Company provides to two of its finance clients. The Companyoperates an MRI facility that provides management services to a finance client's radiology practice.Management fees were also generated from the management of a finance client's physical therapy practice.These fees are net of billing adjustments of $83,000. Management service fees are billed monthly accordingto the cost of services rendered to the client. If the assets of the management client, which is alsoa finance client, are not enough to satisfy the billed fees, an allowance for billing adjustments isrecorded to reduce the Company's net receivables to an amount that is equal to the assets of the clientthat are available for payment.

Costs and expenses from continuing operations increased by $17,000 (1%) to $3,294,000in 2002. The increase was due to increases of $227,000 in the medical division and $22,000 in depreciationand amortization, offset by decreases of $182,000 in the real estate division and $50,000 in corporateexpenses and other.

The decrease in costs and expenses in the real estate division in 2002 were due toa decrease in the amount of properties sold in 2002, which results in a decrease in the cost of sales.The decrease was also due to a reduction of operating expenses in 2002, after a portion of the Hunterproperty was sold during the first quarter of the current fiscal year.

The increase in costs and expenses in the medical division was due to an increasein expenses of $266,000 that are related to the management of two finance client's medical practices,offset by a decrease of $39,000 in medical receivable expenses. The 27% increase in medical managementexpenses in 2002 are related to the 55% increase in revenues for the same period. The 3% decrease inmedical receivable expenses in 2002 as compared to its increase in revenues was primarily due to thecost of increasing the infrastructure in 2001 in anticipation of the new clients that were eventuallyobtained. The Company now has an improved infrastructure, which includes better trained employees, computersystems and office facilities that can handle further increases of revenue without substantial increasesin expenses. In addition, the Company has also been more selective in the bill purchasing process, whichresults in a minimal amount of bad debt losses. The Company may incur a bad debt loss when the portionof a medical claim collected does not exceed the advance (including the fee charged) given to the client.The Company also has other contractual rights to help minimize its risk of loss. The Company continuallymonitors the aging of the uncollected medical claims as it relates to its advances and establishes areserve deemed adequate to cover potential losses.

The decrease in corporate expenses and other of $50,000 in 2002 is primarily dueto reductions in professional fees, reallocations of a greater portion of executive salaries to themedical division and a reduction in shareholder reporting expenses. The increase in depreciation andamortization of $22,000 in 2002 is attributable to increased capital expenditures in the medical financingdivision. Interest expense in 2002 was $62,000, an increase of $29,000 from 2001. The increase was attributableto the debt that was incurred to finance the purchase of additional medical claims receivable and anMRI machine in the medical division.

Spin-off expenses decreased by $209,000 in 2002 to $-0-, due to the one time onlycharge in 2001 of the distribution of MFC stock to FRM's shareholders and the registration of MFC'scommon stock.

Income from discontinued operations decreased by $399,000 to $-0- in 2001, due tothe gain of $381,000 from the sale of the Wendcello subsidiary in the quarter ended August 31, 2000.

For the reasons described above, most notably, (i) the settlement of the Goshen receivables resulting in the realization of $745,000 of deferred income, (ii) the continuing increases in revenuesin the medical division, which are substantially greater than increases in expenses and (iii) the eliminationof spin-off expenses, the Company recorded net income from continuing operations of $808,000 for theyear ended February 28,2002 as compared to a loss of $1,149,000 for the year ended February 28, 2002.

### Liquidity and Capital Resources

The Company's two business activities during the yearended February 28, 2003 resulted in a decrease of cash in the amount of $1,091,000. The Company expectscontinued growth of its medical division based on its ongoing negotiations with prospective new clients,which are expected to be obtained in the next few months. These prospective clients will result in anincrease in the amount of cash needed to purchase their medical insurance claims receivable. The fundsfor those needs are expected to be provided from existing cash and an additional $175,000 of SeriesA Bonds that were issued after the year end. Additional funds may be provided by additional asset-basedborrowing facilities, refinancing of assets under capital leases and the sale of real estate assets.

The real estate division is not expected to be a significantuser of cash flow from operations, due to the elimination of carrying costs on the real estate thatwas sold during the two years ended February 28, 2002. The Company's real estate assets in Hunter, NYare owned free and clear of mortgages, except for the construction loan that is being used to financethe current property renovation. Further development of this property, at any significant cost, is expectedto be funded by additional proceeds from the construction loan, the issuance of Series B Bonds, otherasset-based financing, the sale of property under renovation or the sale of other property in Hunter.

The Company believes that its present cash resources and the cash available fromfinancing activities will be sufficient on a short-term basis and over the next 12 months to fund continuedexpansion of its medical financing business, its company-wide working capital needs, and its expectedinvestments in property and equipment. The Company intends to pace its growth in the medical divisionto its capacity to provide the funds internally and from its financing activities.

Cash used by operations in 2003 was $284,000, as compared to $77,000 being used in2002. The $207,000 increase in cash used by operations in 2003 was due to (i) an increase in the additionsto management fee receivables of $200,000, (ii) a decrease of $50,000 in collections from real estateheld for development and sale, (iii) an increase of $57,000 in expenditures on real estate  primarilydue to the conversion of a vacant office building into townhouse units and (iv) and fluctuations inoperating assets and liabilities primarily caused by timing differences. These increases in the useof cash were offset by increases in cash provided by operations due to an increase in net income afteradjustments for non cash items of depreciation, real estate gains, provision for bad debts and billingadjustments, and deferred taxes, the net of these items totaling $320,000.

Cash used by investing activities was $1,111,000 in 2003 as compared with the $1,305,000being provided in 2002. The increase in the use of cash in 2003 of $2,416,000 was primarily due to (i)$1,313,000 decrease in principal payments from notes receivable due to the settlement of the Goshenreceivables in 2002, (ii) $1,045,000 net increase in funds used to purchase medical claims receivable,(iii) $25,000 down-payment for the equity interest of an additional MRI facility and (iv) $45,000 increasein capital expenditures for computers and software projects. The capital expenditures for technologycontinues the program begun last year, which has significantly decreased the time required to performcollection tasks.

Net cash provided by financing activities was $304,000 in 2003 as compared with the$173,000 used in 2002. The $477,000 increase in cash being provided in 2003 was primarily due to (i)$331,000 of net borrowing in 2002, as compared to $49,000 of net debt repayments in 2002 and (ii) therepurchase of minority interests of $100,000 in 2002, distributions to minority interests and purchaseof treasury stock in 2002.The proceeds from the additional borrowings in 2003 were used for the purchaseof additional medical receivables and to finance the growth in medical management receivables.

The table below summarizes aggregate maturities of future minimum note and leasepayments under non-cancelable operating and capital leases as of February 28, 2003.

|                                    |   |                                                                                        |   |  Less      than                                                                                   |   | 1-3                                                                                                    |   |  4-5                                                                                                                                               |   |  After      5                                                                                                                                      |
|------------------------------------|--------|---------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
|  Contractual      Obligations |   |  Total                                                                                 |   |  1      Year                                                                                      |   |  Years                                                                                            |   |  Years                                                                                                                                             |   |  Years                                                                                                                                             |
|                                    |   |                                                                                        |   |                                                                                                   |   |                                                                                                   |   |                                                                                                                                                    |   |                                                                                                                                                    |
|  Notes      Payable           |   |  $                903,282            |   |  $                683,478                       |   |  $                  70,751            |   |  $                  43,600                                                             |   |  $                105,453                                                                        |
|  Operating      Leases        |   |                    537,666 |   |                    206,231            |   |                    331,435            |   |                               - |   |                               - |
|  Capital      Leases          |   |                    145,098 |   |                      87,238 |   |                      57,860 |   |                               - |   |                               - |
|                                    |   |                                                                                        |   |                                                                                                   |   |                                                                                                   |   |                                                                                                                                                    |   |                                                                                                                                                    |
|  Total                        |   |  $             1,586,046                            |   |  $                976,947                       |   |  $                460,046                       |   |  $                  43,600                                                             |   |  $                105,453                                                                        |
|                                    |   |                                                                                        |   |                                                                                                   |   |                                                                                                   |   |                                                                                                                                                    |   |                                                                                                                                                    |

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

The Company's market risk arises principally from the interest rate risk relatedto its receivables. Interest rate risk is 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 debt 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.

----

# 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, 2003. 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, 2003. Such information is incorporated herein by reference and made a part hereof.

## 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, 2003. 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, 2003. Such information is incorporated herein by reference and made a part hereof.

## ITEM 14. CONTROLSAND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that informationrequired to be disclosed in the Company's Securities Exchange Act reports is recorded, processed, summarizedand reported within the time periods specified in the SEC's rules and forms, and that such informationis accumulated and communicated to the Company's management, including its Chief Executive Officer andChief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Indesigning and evaluating the disclosure controls and procedures, management recognized that any controlsand procedures, no matter how well designed and operated, can provide only reasonable assurance of achievingthe desired control objectives, as ours are designed to do, and management necessarily was requiredto apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.During the 90-day period prior to the date of this report, an evaluation was performed under the supervisionand with the participation of our Company's management, including the Chief Executive Officer and theChief Financial Officer, of the effectiveness of the design and operation of our disclosure controlsand procedures. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officerconcluded that our disclosure controls and procedures were effective. Subsequent to the date of thisevaluation, there have been no significant changes in the Company's internal controls or in other factorsthat could significantly affect these controls, and no corrective actions taken with regard to significantdeficiencies or material weaknesses in such controls. 

----

# 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, 2003 and 2002 and for the fiscal years ended February    28, 2003, 2002 and 2001.
- Report of Holtz Rubenstein & Co., LLP
- Consolidated Balance Sheets
- Consolidated Statements of Operations
- Consolidated Statements 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. All exhibits are incorporated herein by reference to Amendment No. 3 to Form 10 dated January    17, 2001.
- Exhibit Index

(b) Reports Filed on Form 8-K:
The Company filed Forms 8-K on December 2, 2002 and February 10, 2003.

----

### Report of Independent Auditors

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, 2003 and 2002 and the related consolidated statements ofoperations, stockholders' equity and cash flows for the three years ended February 28, 2003. Our auditsalso included the consolidated financial statement schedules listed in the Index at Item 15(a) for thethree years ended February 28, 2003. 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 auditing standards generally acceptedin the United States of America. 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, 2003 and 2002 and the consolidated results of their operations and theircash flows for the three years ended February 28, 2003 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, 2003, when considered in relation to the basic financialstatements taken as a whole, present fairly, in all material respects, the information set forth therein.

|                                      |
|-------------------------------------------|
| /s/  HOLTZ RUBENSTEIN & CO., LLP |
| Melville, New York      May 8, 2003       |

----

MFC Development Corp. and Subsidiaries

### Consolidated BalanceSheets

|                                                            |   | February 28,                                                                                                                                                |   | February 28,                                                                                                                                            |
|------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                            |   | 2003                                                                                                                                                        |   | 2002                                                                                                                                                    |
|                                                            |   |                                                                                                                                                        |   |                                                                                                                                                    |
| **Assets**                                                 |   |                                                                                                                                                        |   |                                                                                                                                                    |
| Current assets:                                            |   |                                                                                                                                                        |   |                                                                                                                                                    |
|        Cash and cash equivalents                      |   | ** $           247,129**                                                                             |   |  $             1,338,214                                                                                        |
|        Mortgage and note receivable - current         |   | **                              -** |   |                      31,822                                                  |
|        Finance receivables, net                       |   | **           2,540,340**                                                                                  |   |                 1,708,268                                                                             |
|        Management fees receivables, net               |   | **           1,058,188**                                                                                  |   |                    729,979                                                             |
|        Other current assets                           |   | **              138,694**                                                                  |   |                    149,713                                                             |
| Total current assets                                       |   | **           3,984,351**                                                                                  |   |                 3,957,996                                                                             |
|                                                            |   |                                                                                                                                                        |   |                                                                                                                                                    |
| Property and equipment:                                    |   |                                                                                                                                                        |   |                                                                                                                                                    |
|        Property and equipment, at cost                |   | **           1,116,109**                                                                                  |   |                    790,169                                                             |
|        Less accumulated depreciation and amortization |   | **              447,809**                                                                  |   |                    298,545                                                             |
|                                                            |   | **              668,300**                                                                  |   |                    491,624                                                             |
|                                                            |   |                                                                                                                                                        |   |                                                                                                                                                    |
| Other assets:                                              |   |                                                                                                                                                        |   |                                                                                                                                                    |
|        Real estate held for development and sale      |   | **              951,358**                                                                  |   |                    625,713                                                             |
|        Mortgage and note receivable                   |   | **              946,732**                                                                  |   |                    943,970                                                             |
|        Loans receivable                               |   | **              237,176**                                                                  |   |                    196,417                                                             |
|        Investment in unconsolidated subsidiaries      |   | **              103,951**                                                                  |   |                               - |
|        Deferred tax asset, net                        |   | **                     90,000**                                                  |   |                               - |
|        Other                                          |   | **                     93,975**                                                  |   |                      61,769                                                  |
| Total other assets                                         |   | **           2,423,192**                                                                                  |   |                 1,827,869                                                                             |
|                                                            |   |                                                                                                                                                        |   |                                                                                                                                                    |
| Total assets                                               |   | ** $        7,075,843**                                                                                             |   |  $             6,277,489                                                                                        |
|                                                            |   |                                                                                                                                                        |   |                                                                                                                                                    |

 
|                                                                               |   | February 28,                                                                                                                                                |   | February 28,                                                                                                                                            |
|-------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                               |   | 2003                                                                                                                                                        |   | 2002                                                                                                                                                    |
| **Liabilities and Stockholders' Equity**                                  |   |                                                                                                                                                        |   |                                                                                                                                                    |
| Current liabilities:                                                          |   |                                                                                                                                                        |   |                                                                                                                                                    |
|        Accounts payable and accrued expenses                             |   | ** $           365,156**                                                                             |   |  $                287,890                                                                        |
|        Current portion of notes payable                                  |   | **              758,884**                                                                  |   |                    225,153                                                             |
|        Income taxes payable                                              |   | **                       3,507**                                       |   |                        3,424                                       |
| Total current liabilities                                                     |   | **           1,127,547**                                                                                  |   |                    516,467                                                             |
|                                                                               |   |                                                                                                                                                        |   |                                                                                                                                                    |
| Other liabilities:                                                            |   |                                                                                                                                                        |   |                                                                                                                                                    |
|        Notes payable                                                     |   | **              274,682**                                                                  |   |                    158,654                                                             |
|        Deferred Income                                                   |   | **                              -** |   |                    850,000                                                             |
|        Other                                                             |   | **                     28,500**                                                  |   |                      45,000                                                  |
| Total other liabilities                                                       |   | **              303,182**                                                                  |   |                 1,053,654                                                                             |
|                                                                               |   |                                                                                                                                                        |   |                                                                                                                                                    |
| Minority interest in subsidiary                                               |   | **                       5,000**                                       |   | **                       5,000**                                   |
|                                                                               |   |                                                                                                                                                        |   |                                                                                                                                                    |
| 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                                               |   | **            (289,468)**                                                                            |   |               (1,254,553)                                                                                       |
|                                                                               |   | **           5,680,752**                                                                                  |   |                 4,715,667                                                                             |
|        Less treasury stock, at cost - 24,947 shares and 10,000 shares at |   |                                                                                                                                                        |   |                                                                                                                                                    |
|          February 28, 2003 and 2002                            |   | **              (40,638)**                                                                 |   |                    (13,299)                                                            |
|        Total stockholders' equity                                    |   | **           5,640,114**                                                                                  |   |                 4,702,368                                                                             |
|                                                                               |   |                                                                                                                                                        |   |                                                                                                                                                    |
| Total liabilities and stockholders' equity                                |   | ** $        7,075,843**                                                                                             |   |  $             6,277,489                                                                                        |
|                                                                               |   |                                                                                                                                                        |   |                                                                                                                                                    |

*See accompanying notes.*

----

MFC Development Corp. and Subsidiaries

### Consolidated Statementsof Operations

|                                                                |  Year      ended                                                                                                                           |   |  Year      ended                                                                                                                       |   |  Year      ended                                                                                                            |
|----------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------|
|                                                                | February 28,                                                                                                                                    |   | February 28,                                                                                                                                |   | February 28,                                                                                                                     |
|                                                                | 2003                                                                                                                                            |   | 2002                                                                                                                                        |   | 2001                                                                                                                             |
| **Revenues**                                                   |                                                                                                                                            |   |                                                                                                                                        |   |                                                                                                                             |
|        Gain on sale of real estate                        | ** $        850,000**                                                                                   |   |  $             815,288                                                                              |   |  $                         - |
|        Sale of real estate                                | **                            -** |   |                   50,000                                                        |   |                 119,000                                                        |
|        Rental income                                      | **           103,207**                                                                        |   |                   99,246                                                        |   |                   93,639                                             |
|        Interest from mortgages                            | **             83,755**                                                             |   |                 152,189                                                                   |   |                   91,621                                             |
|        Income from the purchase                           |                                                                                                                                            |   |                                                                                                                                        |   |                                                                                                                             |
|          and collections of medical receivables | **        1,940,808**                                                                                        |   |              1,616,787                                                                                   |   |              1,128,849                                                                        |
|        Medical management service fees                    | **        2,282,677**                                                                                        |   |              1,432,984                                                                                   |   |                 926,014                                                        |
|        Total revenues                                     | **        5,260,447**                                                                                        |   |              4,166,494                                                                                   |   |              2,359,123                                                                        |
|                                                                |                                                                                                                                            |   |                                                                                                                                        |   |                                                                                                                             |
| **Costs and expenses**                                         |                                                                                                                                            |   |                                                                                                                                        |   |                                                                                                                             |
|        Real estate                                        | **           204,280**                                                                        |   |                 253,574                                                                   |   |                 435,966                                                        |
|        Medical receivables                                | **        1,734,291**                                                                                        |   |              1,376,644                                                                                   |   |              1,416,420                                                                        |
|        Medical management services                        | **        1,901,531**                                                                                        |   |              1,260,230                                                                                   |   |                 994,035                                                        |
|        Corporate expenses and other                       | **           355,838**                                                                        |   |                 299,595                                                                   |   |                 349,470                                                        |
|        Depreciation and amortization                      | **           158,310**                                                                        |   |                 104,261                                                                   |   |                   81,449                                             |
|        Total costs and expenses                           | **        4,354,250**                                                                                        |   |              3,294,304                                                                                   |   |              3,277,340                                                                        |
|                                                                |                                                                                                                                            |   |                                                                                                                                        |   |                                                                                                                             |
| Income (loss) from operations                                  | **           906,197**                                                                        |   |                 872,190                                                                   |   |                (918,217)                                                            |
|                                                                |                                                                                                                                            |   |                                                                                                                                        |   |                                                                                                                             |
| Other income (expense):                                        |                                                                                                                                            |   |                                                                                                                                        |   |                                                                                                                             |
|        Interest income                                    | **             23,176**                                                             |   |                   25,901                                                        |   |                   24,904                                             |
|        Interest expense                                   | **            (40,164)**                                                                 |   |                  (62,060)                                                            |   |                  (33,037)                                                 |
|        Spin-off expenses                                  | **                            -** |   |                             - |   |                (209,187)                                                            |
|        Minority interest in net income of subsidiary      | **                            -** |   |                  (14,040)                                                            |   |                    (2,850)                                      |
|                                                                | **            (16,988)**                                                                 |   |                  (50,199)                                                            |   |                (220,170)                                                            |
|                                                                |                                                                                                                                            |   |                                                                                                                                        |   |                                                                                                                             |
| Income (loss) from continuing operations before                |                                                                                                                                            |   |                                                                                                                                        |   |                                                                                                                             |
|        (benefit) provision for income taxes               | **           889,209**                                                                        |   |                 821,991                                                                   |   |             (1,138,387)                                                                            |
| (Benefit) provision for income taxes                           | **            (75,876)**                                                                 |   |                   13,606                                                        |   |                   10,936                                             |
| Income (loss) from continuing operations                       | **           965,085**                                                                        |   |                 808,385                                                                   |   |             (1,149,323)                                                                            |
| Income from discontinued operations, net of taxes              |                                                                                                                                            |   |                                                                                                                                        |   |                                                                                                                             |
|        (including gain on sale of subsidiary of $381,182) | **                            -** |   |                             - |   |                 399,028                                                        |
| Net income (loss)                                              | ** $        965,085**                                                                                   |   |  $             808,385                                                                              |   |  $            (750,295)                                                                       |
|                                                                |                                                                                                                                            |   |                                                                                                                                        |   |                                                                                                                             |
| Earnings (loss) per common share:                              |                                                                                                                                            |   |                                                                                                                                        |   |                                                                                                                             |
|        Earnings (loss) from continuing operations         | ** $              0.54**                                                  |   |  $                   0.45                                             |   |  $                  (0.64)                                      |
|        Income from discontinued operations                | **                          -  ** |   |                           -   |   |                       0.22                       |
| Basic and diluted earnings (loss) per common share             | ** $              0.54**                                                  |   |  $                   0.45                                             |   |  $                  (0.42)                                      |
|                                                                |                                                                                                                                            |   |                                                                                                                                        |   |                                                                                                                             |
| Number of shares used in computation of basic and              |                                                                                                                                            |   |                                                                                                                                        |   |                                                                                                                             |
|        diluted earnings per share                         | **        1,787,350**                                                                                        |   |              1,792,662                                                                                   |   |              1,807,261                                                                        |
|                                                                |                                                                                                                                            |   |                                                                                                                                        |   |                                                                                                                             |

*See accompanying notes.*

----

MFC Development Corp. and Subsidiaries

### Consolidated Statementsof Stockholders' Equity

|                                |                                                                                                                          |                                                                                  |    |                                                                                                                                      |        |                                                                                                                                            |           |                                                                                                        |                                                                                                        |   | Total                                                                                                                                     |   |                                         |
|--------------------------------|-------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------|---------|-------------------------------------------------------------------------------------------------------------------------------------------|-------------|-------------------------------------------------------------------------------------------------------------------------------------------------|----------------|-------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|
|                                |                                                                                                                          |                                                                                  |    | Additional                                                                                                                                |        |                                                                                                                                            |           |                                                                                                        |                                                                                                        |   | Stock-                                                                                                                                    |   | Compre-                                      |
|                                | Common Stock                                                                                                                  |                                                                                  | Paid-In |                                                                                                                                      | Accumulated |                                                                                                                                            | Treasury Stock |                                                                                                        | holders'                                                                                                |   | hensive                                                                                                                                   |
|                                | Shares                                                                                                                        | Amount                                                                                |    | Capital                                                                                                                                   |        | Deficit                                                                                                                                         |           | Shares                                                                                                      | Amount                                                                                                      |   | Equity                                                                                                                                    |   | Income                                       |
|                                |                                                                                                                          |                                                                                  |    |                                                                                                                                      |        |                                                                                                                                            |           |                                                                                                        |                                                                                                        |   |                                                                                                                                      |   |                                         |
| Balance, February 29, 2000     |           1,816,462                                                                                       |  $        1,816                                                        |    |  $         5,996,739                                                                                                  |        |  $         (1,312,643)                                                                                                      |           |                       -     |  $                   -                |   |  $         4,685,912                                                                                                  |   |                                         |
| Net (loss)                     |                          -     |                    - |    |                            -     |        |                (750,295)                                                                           |           |                       -     |                       -     |   |               (750,295)                                                                           |   |  $        (750,295)           |
| Purchase and retirement of     |                                                                                                                          |                                                                                  |    |                                                                                                                                      |        |                                                                                                                                            |           |                                                                                                        |                                                                                                        |   |                                                                                                                                      |   |                                         |
| treasury stock                 |              (16,462)                                                                      |               (16)                            |    |                 (28,319)                                                                |        |                             -     |           |                       -     |                       -     |   |                 (28,335)                                                                |   |                                         |
| Comprehensive (loss)           |                          -     |                    - |    |                            -     |        |                             -     |           |                       -     |                       -     |   |                            -     |   |  $        (750,295)           |
| Balance, February 28, 2001     |           1,800,000                                                                                       |            1,800                                             |    |             5,968,420                                                                                       |        |             (2,062,938)                                                                                           |           |                       -     |                       -     |   |             3,907,282                                                                                       |   |                                         |
| Purchase of treasury stock     |                          -     |                    - |    |                            -     |        |                             -     |           |             10,000                                                            |            (13,299)                                                                |   |                 (13,299)                                                                |   |                                         |
| Net income                     | **                         -** | **              -**  |    | **                           -** |        |                  808,385                                                                 |           |                       -     |                       -     |   |                808,385                                                                       |   |  $          808,385 |
| Comprehensive income           | **                         -** | **              -**  |    | **                           -** |        |                             -     |           |                       -     |                       -     |   |                            -     |   |  $          808,385 |
| **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**                                                                                                   |   |                                         |
|                                |                                                                                                                          |                                                                                  |    |                                                                                                                                      |        |                                                                                                                                            |           |                                                                                                        |                                                                                                        |   |                                                                                                                                      |   |                                         |

*See accompanying notes.*

----

MFC Development Corp. and Subsidiaries

### Consolidated Statementsof Cash Flows

|                                                                      | Year Ended                                                                                                                                                  |   | Year Ended                                                                                                                                              |   | Year Ended                                                                                                                                              |
|----------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                      | February 28,                                                                                                                                                |   | February 28,                                                                                                                                            |   | February 28,                                                                                                                                            |
|                                                                      | 2003                                                                                                                                                        |   | 2002                                                                                                                                                    |   | 2001                                                                                                                                                    |
| **Cash flows from operating activities**                             |                                                                                                                                                        |   |                                                                                                                                                    |   |                                                                                                                                                    |
| Net income (loss)                                                    | ** $           965,085**                                                                             |   |  $                808,385                                                                        |   |  $              (750,295)                                                                                  |
| Adjustments to reconcile net income (loss) to net cash               |                                                                                                                                                        |   |                                                                                                                                                    |   |                                                                                                                                                    |
| used in operating activities:                                        |                                                                                                                                                        |   |                                                                                                                                                    |   |                                                                                                                                                    |
| Depreciation and amortization                                        | **              158,310**                                                                  |   |                    104,261                                                             |   |                      81,449                                                  |
| Gain on sale of real estate held for development and sale            | **                              -** |   |                    (16,376)                                                            |   |                      (1,872)                                                 |
| Gain on sale of real estate                                          | **            (850,000)**                                                                            |   |                  (815,288)                                                                       |   |                               - |
| Gain on sale of subsidiaries                                         | **                              -** |   |                               - |   |                  (381,182)                                                                       |
| Provision for bad debts and billing adjustments                      | **              319,761**                                                                  |   |                    101,883                                                             |   |                    256,981                                                             |
| Net income from unconsolidated subsidiary                            | **                     (3,951)**                                                 |   |                               - |   |                               - |
| Deferred tax benefit                                                 | **              (90,000)**                                                                 |   |                               - |   |                               - |
| Minority interest in net income of subsidiary                        | **                              -** |   |                      14,040                                                  |   |                        2,850                                       |
| Changes in operating assets and liabilities:                         |                                                                                                                                                        |   |                                                                                                                                                    |   |                                                                                                                                                    |
| Increase in management fee receivables                               | **            (633,248)**                                                                            |   |                  (432,779)                                                                       |   |                  (595,146)                                                                       |
| Collections from sale of real estate held for development            |                                                                                                                                                        |   |                                                                                                                                                    |   |                                                                                                                                                    |
| and sale, net of payment to participant                              | **                              -** |   |                      50,000                                                  |   |                    119,000                                                             |
| Additions to real estate held for development and sale               | **            (132,031)**                                                                            |   |                    (75,184)                                                            |   |                    (45,401)                                                            |
| Prepaid expenses, miscellaneous receivables and other assets         | **              (78,849)**                                                                 |   |                    279,196                                                             |   |                    (22,193)                                                            |
| Net assets of discontinued operations                                | **                              -** |   |                               - |   |                    (18,926)                                                            |
| Accounts payable, accrued expenses and taxes                         | **                     77,349**                                                  |   |                  (119,360)                                                                       |   |                    191,624                                                             |
| Other liabilities                                                    | **              (16,500)**                                                                 |   |                      23,993                                                  |   |                        1,007                                       |
| Net cash used in operating activities                                | **            (284,074)**                                                                            |   |                    (77,229)                                                            |   |               (1,162,104)                                                                                       |
|                                                                      |                                                                                                                                                        |   |                                                                                                                                                    |   |                                                                                                                                                    |
| **Cash flows from investing activities**                             |                                                                                                                                                        |   |                                                                                                                                                    |   |                                                                                                                                                    |
| Capital expenditures and intangible assets                           | **            (227,282)**                                                                            |   |                  (182,231)                                                                       |   |                    (85,622)                                                            |
| Finance receivables                                                  | **            (846,794)**                                                                            |   |                    198,030                                                             |   |                  (889,763)                                                                       |
| Principal payments on notes receivable                               | **                     29,060**                                                  |   |                 1,342,518                                                                             |   |                      26,597                                                  |
| Loan receivable                                                      | **              (40,759)**                                                                 |   |                    (59,282)                                                            |   |                    (86,774)                                                            |
| Investment in unconsolidated subsidiary                              | **              (25,000)**                                                                 |   |                               - |   |                               - |
| Principal payments on loan receivable                                | **                              -** |   |                        5,705                                       |   |                      42,315                                                  |
| Proceeds from sale of subsidiaries                                   | **                              -** |   |                               - |   |                 1,575,000                                                                             |
| Net cash (used in) provided by investing activities                  | **         (1,110,775)**                                                                                            |   |                 1,304,740                                                                             |   |                    581,753                                                             |
|                                                                      |                                                                                                                                                        |   |                                                                                                                                                    |   |                                                                                                                                                    |
| **Cash flows from financing activities**                             |                                                                                                                                                        |   |                                                                                                                                                    |   |                                                                                                                                                    |
| Proceeds of notes payable                                            | **              699,168**                                                                  |   |                    150,000                                                             |   |                    678,000                                                             |
| Principal payments on notes payable                                  | **            (368,065)**                                                                            |   |                  (199,237)                                                                       |   |                  (465,593)                                                                       |
| Sale of equity to minority interest                                  | **                              -** |   |                               - |   |                    100,000                                                             |
| Acquisition of minority interest shares                              | **                              -** |   |                  (100,000)                                                                       |   |                               - |
| Distribution to minority interest                                    | **                              -** |   |                    (10,834)                                                            |   |                      (1,056)                                                 |
| Purchase of treasury stock                                           | **              (27,339)**                                                                 |   |                    (13,299)                                                            |   |                    (28,335)                                                            |
| Net cash provided by (used in) financing activities                  | **              303,764**                                                                  |   |                  (173,370)                                                                       |   |                    283,016                                                             |
|                                                                      |                                                                                                                                                        |   |                                                                                                                                                    |   |                                                                                                                                                    |
| Net (decrease) increase in cash and cash equivalents                 | **         (1,091,085)**                                                                                            |   |                 1,054,141                                                                             |   |                  (297,335)                                                                       |
| Cash and cash equivalents, beginning of year                         | **           1,338,214**                                                                                  |   |                    284,073                                                             |   |                    581,408                                                             |
|                                                                      |                                                                                                                                                        |   |                                                                                                                                                    |   |                                                                                                                                                    |
| Cash and cash equivalents, end of year                               | ** $           247,129**                                                                             |   |  $             1,338,214                                                                                        |   |  $                284,073                                                                        |
|                                                                      |                                                                                                                                                        |   |                                                                                                                                                    |   |                                                                                                                                                    |
| **Additional cash flow information**                                 |                                                                                                                                                        |   |                                                                                                                                                    |   |                                                                                                                                                    |
| Interest paid                                                        | ** $             42,646**                                                                  |   |  $                  61,909                                                             |   |  $                  15,830                                                             |
| Income taxes paid                                                    | ** $             13,058**                                                                  |   |  $                  18,097                                                             |   |  $                  17,916                                                             |
|                                                                      |                                                                                                                                                        |   |                                                                                                                                                    |   |                                                                                                                                                    |
| **Noncash investing and financing activities**                       |                                                                                                                                                        |   |                                                                                                                                                    |   |                                                                                                                                                    |
| Assets acquired under capital leases                                 | ** $             98,656**                                                                  |   |  $                  59,012                                                             |   |  $                117,689                                                                        |
| Promissory note issued for the purchase of unconsolidated subsidiary | ** $             75,000**                                                                  |   |  $                           -            |   |  $                           -            |
| Disbursement of construction loan                                    | ** $           145,000**                                                                             |   |  $                           -            |   |  $                           -            |
|                                                                      |                                                                                                                                                        |   |                                                                                                                                                    |   |                                                                                                                                                    |

*See accompanying notes.*

----

MFC Development Corp. and Subsidiaries

### Notes to ConsolidatedFinancial Statements

#### 1. 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 to MFC Development Corp.and increased authorized capital stock from 2,000,000 shares common stock, par value $.10 per shareto 2,000,000 shares preferred stock, par value $.001 per share and 40,000,000 shares common stock, parvalue $.001 per share. The Board of Directors is authorized to provide at anytime for the issuance ofMFC preferred stock with the rights, preferences and limitations as established by the Board. Stockholders'equity for prior periods was restated to reflect this change.

#### 2. Basis of Presentation

##### BusinessActivities of the Company

The Company operates in two distinct industries consisting of real estate and medicalfinancing.

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

The medical financing business is conducted through (i) Medical Financial Corp.,a wholly owned subsidiary, which purchases insurance claims receivables from medical practices and providescertain services to those practices; and (ii) three other subsidiaries were formed to provide additionalmanagement services to certain medical practices.

In addition to the two operating divisions of the Company, a new division, Capco,was formed during 2000. Capco, which has not yet conducted the business for which it was formed, willoperate through a majority owned subsidiary of the Company. This LLC was approved as a "certified capitalcompany" pursuant to Sections 11 and 1511 of the New York State Tax Law (herein a "Capco"). A "certifiedcapital company" as used in this context is a "for profit" entity, located and qualified to conductbusiness in New York State, which is certified by the New York State Insurance Department ("Department")based on standards set forth in the New York Tax Law (the "Statute"). The Statute creates a tax creditincentive mechanism to encourage investment of financial resources by insurance companies into venturecapital to businesses approved by the Department as qualified to provide jobs and promote the growthof the economy in New York State ("Qualified Businesses"). Capco will seek to participate in any futureNew York Capco programs, pending authorization of additional State funding for this program.

##### 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 AccountingPolicies

##### RevenueRecognition

*Real Estate.* 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.

*Purchase and Collection of Medical Insurance Claims Receivables.* A fee ischarged to medical providers upon the purchase of their accounts receivable by the Company. The feeis for the up-front payment that the Company makes upon purchase of the receivables and for collectionservices rendered to collect the receivables. This fee income is deferred and recognized over the contractualcollection period in proportion to the costs of collection. The deferred fee income is netted againstfinance receivables (see note 5). The Company is not entitled to interest on unpaid principal balances.

Through June 1, 2001, income was recognized on a pro-rata basis as the related netcollectible value of the receivables were collected. The Company incurs most of its expenses at thebeginning of the contractual collection period, while collections vary throughout the period. EffectiveJune 1, 2001, the Company determined that income would be more accurately reflected if the related costsof collection were used as a basis for determining the timing of revenue recognition over the contractualperiod since the Company is entitled to this fee whether or not the receivables are collected. The totalamount of revenue during the contractual period remains the same under both methods. As a result ofthe modification as to the timing of revenue recognition, an additional $120,000 was included in revenueduring the year ended February 28, 2002.  

*Medical Management Service Fees.* Three subsidiaries provide additional managementservices to certain medical practices. Management fees are 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 is used to record all management service fees.

##### Receivables

###### Mortgages andNotes Receivable

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.

###### Finance and ManagementReceivables

The Company purchases 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's loan 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 and are substitutedor repaid at the end of the contractual period. The Company is still entitled to the collection of itsfees from customers regardless of whether or not the underlying accounts receivable are 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. As a resultof the right of return and right of offset features, the Company believes that a valuation allowancegenerally is not required for these receivables.

*Impairment Assessment.* Management's periodic evaluation of the adequacyof the allowance for loan losses is based on the Company's past loan 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.

##### 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, medical and transportation equipment | 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 1.5 to 22 years.

##### Real EstateHeld for Development and 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.

Investment in Unconsolidated Subsidiaries

The Company's investments in subsidiaries in which the ownership interest is greaterthan 20%, but less than 51%, are accounted for using the equity method.

##### 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, 2003, 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 Company to concentrations ofcredit risk consist principally of cash, money market mutual funds, commercial paper and trade and notesreceivable. As of February 28, 2003, the Company had $118,000 of cash in one of its accounts.

Finance receivables arise from the purchase from medical providers in the New YorkCity area of their insurance claims from various insurance companies. For the year ended February 28,2003, fees earned from five medical providers were 20%, 18%, 12%, 11% and 10% of earned fees. For theyear ended February 28, 2002, fees earned from four medical providers were 18%, 16%, 14% and 12% ofearned fees. For the year ended February 28, 2001, fees earned from four medical providers were 19%,13%, 11% and 11% of earned fees. As of February 28, 2003, claims receivable from two insurance companiescomprised 13% and 15% of total finance receivables. As of February 28, 2002, claims receivable fromtwo insurance companies comprised 20% and 10% of total finance receivables. 

All note receivables are from the sale of real estate in New York and Connecticut(see Note 4).

##### AdvertisingCosts

The Company expenses the cost of advertising as incurred. For the years ended February28, 2003, 2002 and 2001 advertising expense totaled approximately $5,000, $1,000, and $5,000.

##### 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.

Reclassifications

The prior year balance of due to finance customers was reclassified to conform tothe current year presentation as disclosed in Note 5. Finance receivables and management receivables,which in prior years were combined, are now stated separately to reflect the increase in the medicalmanagement activity. Certain prior year line items on the statement of cash flows has been reclassifiedto reflect these changes.

##### Effectsof New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board issued FinancialAccounting Standards No. 142 ("SFAS No.142"), "Goodwill and Other Intangible Assets." SFAS No.142 addressesfinancial accounting and reporting for acquired goodwill and other intangible assets. Under SFAS No.142,goodwill and some intangible assets will no longer be amortized, but rather reviewed for impairmenton a periodic basis. The provisions of this Statement became effective on March 1, 2002 and were requiredto be applied to all goodwill and other intangible assets recognized in its  financial  statementsat that date. The adoption of SFAS No.142 did not have a material impact on the Company's financialstatements.

In August 2001, the FASB issued SFAS No. 143, "Accounting for AssetRetirement Obligations." SFAS No.143 addresses financial accounting and reporting for obligations associatedwith the retirement of tangible long-lived assets and the associated asset retirement costs. The Companyis required to adopt the provisions of SFAS No.143 effective March 1, 2003. The adoption of SFAS No.143is not expected to have a material impact on the financial statements.

In August 2001, the FASB issued SFAS No.144, "Accounting for theImpairment or Disposal of Long-Lived Assets."  SFAS No.144 addresses financial accounting and reporting  for the impairment or disposal of long-lived assets. The adoption of SFAS No. 144 didnot have a material impact on our financial statements.

In April 2002, SFAS No. 145, "Rescission of FASB Statements No.4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections" was issued. This statementprovides guidance on the classification of gains and losses from the extinguishment of debt and on theaccounting for certain specified lease transactions. Certain provisions of this statement related tothe classification of gains and losses from extinguishment of debt are required to be adopted by theCompany beginning  March 1, 2003. All other provisions were required to be adopted after May 15,2002. It is not anticipated that the adoption of this statement will have a material impact on the consolidatedfinancial position, consolidated results of operations or liquidity of the Comapany. 

In June 2002, SFAS No.146, "Accounting for Costs Associated withExit or Disposal Activities" was issued. This statement provides guidance on the recognition and measurementof liabilities associated with disposal activities and became effective for the Company on January 1,2003. 

In December 2002, the FASB issued SFAS No.148, "Accounting forStock-Based Compensation - Transition and Disclosure, an amendment of FASB Statement No.123," whichamends SFAS No.123, "Accounting for Stock-Based Compensation," to provide alternative methods of transitionfor a voluntary change to the fair value based method of accounting for stock-based employee compensation.The transition and annual disclosure provisions of SFAS No.148 are effective for fiscal years endingafter December 15, 2002. In addition, SFAS No.148 amends the disclosure requirements of SFAS No.123to require prominent disclosures in both annual and interim financial statements about the method ofaccounting for stock-based employee compensation and the effect of the method used on reported results.The Company will continue to account for stock-based compensation to employees under  APB Opinion  No. 25 and related interpretations.

#### 4. Real Estate Activities

##### Sale ofReal Estate, Granby, Connecticut

The Company's 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.

##### Sale ofReal Estate, Goshen, New York

During fiscal years 1997 and 1996, the Company sold real estate in Goshen, New Yorkfor $2,499,350. This transaction and the related note receivable was with Windemere Pines at Goshen,Inc. ("Windemere"), a part of the Windemere Group of construction companies, in which Jed Schutz isan officer, director and shareholder. Mr. Schutz is also a shareholder of MFC and FRM and was a directorof FRM until May 1999.

The consideration received on this sale did not satisfy the initial investment criteriato use the full accrual method of profit recognition. The sale was accounted for using the installmentmethod, resulting in the deferral of income until the initial and continuing investment criteria issufficient (see Note 3). The installment method was used since recovery of the cost of the propertyis reasonably assured if the buyer defaults on the mortgage receivable.

In August 2001, the Company entered into an agreement with Windemere regarding themortgage receivable and debenture on the property located in Goshen, New York (together the "GoshenReceivables"). Under the terms of the agreement, Windemere satisfied the Goshen Receivables by paymentsof $167,500 on August 16, 2001 and $1,507,500 on November 14, 2001, which included principal and accruedinterest, resulting in the realization of $745,000 of deferred income related to the original sale ofthe property.

Interest income from this transaction (principal amount of note receivable was $2,310,000)was $63,075 and $-0-  for the years ended February 28, 2002 and 2001. The terms of the note calledfor an annual payment of interest of $30,000. The payment for fiscal 2000 was not paid, which resultedin the suspension of accruing interest from December 1, 1999 through May 31, 2001. There was no allowancefor loss because the market value of the collateral, less costs to sell, was greater than the carryingamounts of the related notes receivable and accrued interest receivable.

##### OtherReal Estate Sales

The Company sold eight condominium units in Hunter, New York, during the years endedFebruary 28, 2002 and 2001 for various amounts as part of the operations of the real estate division.

In each of January 2001 and May 2001, the land for eight unbuilt condominium unitsin Hunter, New York was sold to a related party, Eastern Mountain Properties, LLC, which is 45% ownedby Dr. Anne-Renne Testa, who is the wife of Lester Tanner, a director, president and shareholder ofthe Company. Each parcel of land was sold for $50,000, which approximated the fair market value of theproperty, based on a bid for the same amount from an unrelated party, which was acceptable to the Company,but was later withdrawn. The Company realized a gain of $16,000 from the sale of each property.

##### Mortgageand Note Receivable

Mortgage and note receivable, arising from the sale of real estate, consists of thefollowing:

|                                                       |  February      28,                                                                                                                                     |   |  February      28,                                                                      |
|-------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------|
|                                                       |  2003                                                                                                                                                  |   |  2002                                                                                   |
|  Granby,      Connecticut (Real Estate Operator) | ** $           946,732**                                                                             |   |  $                975,792             |
|  Less      current portion                       | **                              -** |   |                    (31,822) |
|                                                       | ** $           946,732**                                                                             |   |  $                943,970             |
|                                                       |                                                                                                                                                        |   |                                                                                         |

This mortgage calls for monthly payments of interest only at the rate of 7% per annumthrough March 1, 2006. Beginning on April 1, 2006, payments will include principal and interest at therate of 9% per annum. The mortgage is collateralized by the underlying real estate and matures as follows:

|  Year ending February 28, |                                                                                                                                                    |
|--------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
|  2004                     |  $                           -            |
|  2005                     |                               - |
|  2006                     |                               - |
|  2007                     |                      31,549                                                  |
|  2008                     |                      37,508                                                  |
|  Thereafter               |                    877,675                                                             |
|                                |  $                946,732                                                                        |
|                                |                                                                                                                                                    |

As of February 28, 2003 and 2002, this mortgage receivable was performing.

The Granby note receivable is being used as collateral for certain debt. Co-investorswill share in the positive cash flow from the collections of this note, after deducting costs and expensesof carrying and developing the Granby property.

##### Real EstateHeld for Development and Sale

The following properties are included in real estate held for development and sale:

The Hunter property is located at the base of Hunter Mountain in Greene County, NewYork. This property includes approximately 70 acres of undeveloped land, a hotel site, a clubhouse witha recreational facility, an office building that is currently being converted into three townhouse unitsand a sewage treatment plant that serves the 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 construction loan and a line of credit.

In October 2002, the Company commenced construction at its Hunter, New York propertyof the renovation of a vacant office building into three condominium units. A construction loan in theamount of $290,000 was obtained, which is secured by the Hunter property.  The Company is capitalizinginterest and loan acquisition costs during the construction period. For the year ended February 28,2003, $9,000 of interest and loan acquisition costs were capitalized. 

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. During the years ended February 28, 2003, 2002 and 2001, HPCC hasincurred costs and has been reimbursed by NYC for amounts approximating $1,448,000, $116,000 and $126,000.The costs and reimbursements have been netted in the accompanying balance sheet. 

#### 5. Finance and ManagementFee Receivables, Net

Net finance and management fees receivables consist of the following:

|                                              | February 28,                                                                                 |   | February 28,                                                                                  |
|----------------------------------------------|----------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------|
|                                              | 2003                                                                                         |   | 2002                                                                                          |
|  Gross      finance receivables         | ** $          4,902,950**                  |   |  $               3,882,913                  |
|  Allowance      for credit losses       | **              (264,285)** |   |                    (252,535) |
|  Deferred      finance income           | **              (223,390)** |   |                    (224,231) |
|                                              | **             4,415,275**       |   |                   3,406,147       |
|  Due      to finance customers          | **           (1,874,935)**                 |   |                 (1,697,879)                 |
|  Net      finance receivables           | ** $          2,540,340**                  |   |  $               1,708,268                  |
|                                              |                                                                                         |   |                                                                                          |
|                                              |                                                                                         |   |                                                                                          |
|  Gross      management fee receivables  | ** $          1,682,044**                  |   |  $               1,048,796                  |
|  Allowance      for billing adjustments | **              (623,856)** |   |                    (318,817) |
|  Net      management fee receivables    | ** $          1,058,188**                  |   |  $                  729,979  |
|                                              |                                                                                         |   |                                                                                          |

Due to finance customers represents the amount of the unpaid receivables less theadvance payment and fee that the Company charges. The Company is liable for this amount only if (i)it is collected or (ii) if an insurance carrier suffers a financial inability to pay.

Management service fees are billed monthly according to the cost of services renderedto the client. If the assets of the management client, which is also a finance client, are not enoughto satisfy the billed fees, an allowance for billing adjustments is recorded to reduce the Company'snet receivables to an amount that is equal to the assets of the client that are available for payment.

There is approximately $5,198,000 of additional collateral consisting of financereceivables that are past the contractual collection period, and written off, but not yet uncollectible.

Certain of these receivables are collateral for a line of credit.

#### 6. Property andEquipment

Property and equipment consists of the following:

|                                                      |  February      28,                                                                                    |   |  February      28,                                                                                |
|-----------------------------------------------------------|------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------|
|                                                           |  2003                                                                                                 |   |  2002                                                                                             |
|  Leasehold      improvements                         | ** $             90,117**                 |   |  $                  73,587            |
|  Computer      equipment & software              | **              485,968**                 |   |                    328,734            |
|  Medical      equipment                              | **              131,318**                 |   |                      84,281 |
|  Equipment      under capital leases                 | **              342,728**                 |   |                    244,072            |
|  Other      equipment and furniture                  | **                     65,978** |   |                      59,495 |
|                                                           | **           1,116,109**                                 |   |                    790,169            |
|  Less      accumulated depreciation and amortization | **              447,809**                 |   |                    298,545            |
|  Property      and equipment, net                    | ** $           668,300**                            |   |  $                491,624                       |
|                                                           |                                                                                                       |   |                                                                                                   |

As of February 28, 2003 and 2002, accumulated amortization of equipment under capitalleases was $123,804 and $78,030.

For the years ended February 28, 2003, 2002 and 2001, depreciation expense, whichincludes amortization under capital leases, was $149,262, $104,621 and $81,449.

#### 7. Loans Receivable

In February 2000, one of the Company's subsidiaries entered into an agreement toprovide management services to a finance client's radiology practice. These services include operatingan MRI facility that the Company leases from a third party. In February 2000, the Company entered intoan additional agreement to pay the prior operator ("the Manager") of the MRI facility a management feeof 50% of the positive cash flow from the services derived from that facility, in exchange for the continuationof his management and business development services. During fiscal 2003, the Company paid $54,278 tothe Manager in consideration for a reduction of the current and future periods' management fee to 10%of positive cash flow. The remainder of the cash flow is retained by the Company. The amount paid forthe reduction of future management fees is being amortized over 36 months. For the year ended February28, 2003, amortization expense was $9,046. 

As part of this agreement, the Company agreed to administer the repayment of certaindebts of the manager from various sources of funds that are due to him. The Company at its discretion,advanced cash to meet the schedule of payments when the source of funds was insufficient to do so. Asof February 28, 2003, those debts were repaid and the Company will no longer advance cash for that purpose.These advances bear interest at the rate of prime plus 2%, with a minimum rate of 12%. The outstandingbalances on this loan at February 28, 2003 and 2002 were $237,176 and $196,417.

***8. Investments in Unconsolidated Subsidiaries***

In November 2002, the Company obtained a 25% and 33% equity interest in two LimitedLiability Companies that together operate an MRI facility for a finance client's radiology practice.The acquisition cost was $100,000 which included a down-payment of $25,000 and a note in the amountof $75,000, which is secured by the Company's membership interest in the two Limited Liability Companies(see Note 9). The Company is accounting for these investments under the equitymethod.

#### 9. Notes Payable

Notes payable include the following:

|                                      | February 28,                                                                                                                                                                  |   | February 28,                                                                                                                                                                  |
|--------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                      | 2003                                                                                                                                                                          |   | 2002                                                                                                                                                                          |
|  Series      A Bonds            | ** $             575,000**                                                                                   |   |  $                              -                |
|  Series      B Bonds            | **                       25,000**                                                        |   |                                  -     |
|  Bank      loans                | **                     240,472**                                                                   |   | **                                 -** |
|  Promissory      note           | **                       62,810**                                                        |   | **                                 -** |
|  Related      party credit line | **                                 -** |   |                      270,000                                                                       |
|  Capital      lease obligations | **                     130,284**                                                                   |   |                      113,807                                                                       |
|                                      | **             1,033,566**                                                                                        |   |                      383,807                                                                       |
|  Less      current maturities   | **                     758,884**                                                                   |   |                      225,153                                                                       |
|  Long-term      debt            | ** $             274,682**                                                                                   |   |  $                  158,654                                                                                  |
|                                      |                                                                                                                                                                          |   |                                                                                                                                                                          |

*Series A Bonds:*In July 2002, the board of directors authorized the Companyto issue an aggregate of $750,000 of Series A Bonds ("Bonds") in $25,000 increments to finance additionalgrowth of the medical division. There were $575,000 of Bonds outstanding at February 28, 2003. EachBond matures eighteen months after the issue date and may be extended for additional six month periodsby mutual consent of the Company and the individual bondholders. Interest is payable monthly, and iscalculated at a rate of prime plus 3% but not less than 9% per annum nor more than 15% per annum. Therate of interest will be adjusted at the end of each calendar quarter. The rate of interest as of February28, 2003 was 9%. Monthly interest only payments are due through maturity. The Bonds may only be prepaidon 120 days prior written notice. The Company, at the option of the bondholders, may be required toprepay 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 shareholderof the Company is related to four of the bondholders. Another director and shareholder holds a $25,000bond.

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

*Series B Bonds:*In February 2003, the board of directors authorized the Companyto issue an aggregate of $450,000 of Series B Bonds ("Bonds") in $25,000 increments to finance the developmentof the real estate in Hunter, NY and elsewhere, except for $25,000, which may be used by the Companyfor the purchase of additional shares of its common stock. There was one $25,000 Bond outstanding atFebruary 28, 2003, which was held by NWM Capital, LLC., a related party that is owned by an officer,director and shareholder of the Company. Each Bond matures eighteen months after the issue date andmay be extended for additional six month periods by mutual consent of the Company and the individualbondholders. Interest is payable monthly, and is calculated at a rate of prime plus 3% but not lessthan 9% per annum nor more than 15% per annum. The rate of interest will be adjusted at the end of eachcalendar quarter. The rate of interest as of February 28, 2003 was 9%. Monthly interest only paymentsare 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 anaggregate of $50,000 per bondholder per 60 day period. The Company may not issue more than $100,000of Bonds to each bondholder. 

The Bonds are a joint and several obligation of the Company and its subsidiary, YoloEquities Corp. The Bonds are collateralized by the mortgage note receivable on the property locatedin Granby, Ct.

*Bank Loan - Construction:* In October 2002, the Company obtained a $290,000construction loan to be used for development at its Hunter, New York property. As of February 28, 2003,the Company's borrowing on this loan was $217,500. The terms of the loan call for monthly payments ofinterest until the earlier of the loan being fully disbursed or June 1, 2003, at which time it convertsinto a term loan with monthly payments of principal and interest that will amortize the loan in 15 years.Interest is at a rate of prime plus 1.5% but not less than 6.25% per annum nor more than 14% per annum.The rate of interest and monthly payment will be adjusted once every year beginning on May 1, 2004.The current rate of interest is 6.25%. This loan is secured by the Hunter property and is guaranteedby Lester Tanner, who is a director, shareholder and President of the Company. There were $2,900 ofcommitment fees paid in connection with this loan.

*Bank Loan - Equipment:* In September 2002, the Company obtained a $27,000 loansecured by certain existing computer equipment. This loan is for a term of 36 months with monthly paymentsof $916 for principal and interest at the rate of 14% per annum. There were no commitment fees paidin connection with this loan.

*Promissory Note:*In November 2002, the Company became obligated under a $75,000note for a 25% and 33% equity interest in two Limited Liability Companies. The terms of the note callfor 12 monthly payments, beginning in January 2003 of $6,455 for principal and interest at the rateof 6% per annum. The note is secured by the Company's membership interest in the two Limited LiabilityCompanies.

*Related Party Credit Line:* In October 2000, a $500,000 line of credit wasobtained from a related party, NWM Capital, LLC., which is owned by an officer, director and shareholderof the Company. By mutual consent of the Company and NWM, the line was terminated on August 31, 2002and the then outstanding balance of $110,000 was paid in full. The line provided for interest on outstandingbalances at a rate of 15% per annum (12% effective April 1, 2002). There were no commitment fees paidin connection with this line of credit.

Interest expense on related party borrowings for the years ended February 28, 2003,2002 and 2001 was $9,950, $50,305 and $20,639.

*Capital Lease Obligations.* The Company has acquired certain equipment undervarious capital leases expiring in 2005. The leases provide for monthly payments of principal and interestof $10,723 and have been capitalized at imputed interest rates of 10.00% to 19.04%.

Aggregate maturities of the amount of notes payable and capital leases at February28, 2003 are as follows:

|                                         |                                                                                                                                                                      |   | Capital                                                                                                                                                                   |   |                                                                                                               |
|-----------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------|
|                                         | Notes                                                                                                                                                                     |   | Lease                                                                                                                                                                     |   |                                                                                                               |
|  Year      ending February 28,     | Payable                                                                                                                                                                   |   | Obligations                                                                                                                                                               |   | Total                                                                                                              |
|  2004                              |  $                  683,478                                                                              |   |  $                    87,238                                                                   |   |  $                  770,716                       |
|  2005                              |                        27,003                                                        |   |                        57,860                                                        |   |                        84,863 |
|  2006                              |                        23,904                                                        |   |                                  - |   |                        23,904 |
|  2007                              |                        19,844                                                        |   |                                  - |   |                        19,844 |
|  2008                              |                        21,121                                                        |   |                                                                                                                                                                      |   |                        21,121 |
|  Thereafter                        |                      127,932                                                                   |   |                                  - |   |                      127,932            |
|                                         |                      903,282                                                                   |   |                      145,098                                                                   |   |                   1,048,380                            |
|  Amount      representing interest |                                  - |   |                        14,814                                                        |   |                        14,814 |
|  Total      (a)                    |  $                  903,282                                                                              |   |  $                  130,284                                                                              |   |  $               1,033,566                                       |
|                                         |                                                                                                                                                                      |   |                                                                                                                                                                      |   |                                                                                                               |

(a) Total capital lease obligations represent presentvalue of minimum lease payments.

#### *10. 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.

#### 11. Minimum OperatingLease Commitments

In March 2000, one of the Company's subsidiaries in the medical division signed afive year lease for premises for an MRI facility that will be used to provide management services fora radiology practice.

In April 2000, MFC signed a lease extension for its executive offices under a sevenyear lease expiring on February 28, 2007.

In April 2001, one of the Company's subsidiaries in the medical division signed athree year lease extension for premises that are used to provide management services for a medical practicethat provides physical therapy and pain treatment.

In October 2002, one of the Company's subsidiaries in the medical division signeda four year lease for premises for an MRI facility that will be used to provide management servicesfor a radiology practice.

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, |                                                                                                   |
|--------------------------------|--------------------------------------------------------------------------------------------------------|
|  2004                     |                    206,231            |
|  2005                     |                    154,610            |
|  2006                     |                      90,405 |
|  2007                     |                      86,420 |
|                                |  $                537,666                       |
|                                |                                                                                                   |

For the years ended February 28 2003, 2002 and 2001 rent expense totaled approximately$217,563, $211,000 and $172,000.

##### OtherCommitments and Contingencies

In the normal course of business, the Company becomes a party to various legal claims,actions and complaints. The Company's management does not expect that the results in any of these legalproceedings will have a material adverse effect on the Company's results of operations, financial positionor cash flows.

#### 12. 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, 2003, three directors had been issued options totaling 12,000 shares, expiring through July 18,2007, at option prices ranging from $1.00 to $2.00 per share.

As 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.

#### 13. Income Taxes

The (benefit) provision for income taxes consist of the following:

|                           |  Year      ended                                                                                                                                                                      |   |  Year      ended                                                                                                                                                                             |   |  Year      ended                                                                                                                                                                             |
|---------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                           |  February      28,                                                                                                                                                                    |   |  February      28,                                                                                                                                                                           |   |  February      28,                                                                                                                                                                           |
|                           |  2003                                                                                                                                                                                 |   |  2002                                                                                                                                                                                        |   |  2001                                                                                                                                                                                        |
|  Current:            |                                                                                                                                                                                       |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |
|         Federal | ** $                                  -** |   |  $                                  -            |   |  $                                  -            |
|         State   | **                            14,124**                                       |   |                             13,606                                                  |   |                             10,936                                                  |
|  Total      current  | **                            14,124**                                       |   |                             13,606                                                  |   |                             10,936                                                  |
|                           |                                                                                                                                                                                       |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |
|  Deferred:           |                                                                                                                                                                                       |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |
|         Federal | **                          (77,000)**                                                 |   |                                      - |   |                                      - |
|         State   | **                          (13,000)**                                                 |   |                                      - |   |                                      - |
|  Total      deferred | **                          (90,000)**                                                 |   |                                      - |   |                                      - |
|                           |                                                                                                                                                                                       |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |
|  Total               | ** $                       (75,876)**                                                            |   |  $                         13,606                                                             |   |  $                         10,936                                                             |
|                           |                                                                                                                                                                                       |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |

MFC and its subsidiaries filed consolidated tax returns with FRM through January23, 2001, which had no federal tax liability due to current and prior year net operating losses. AfterJanuary 23, 2001, MFC and its subsidiaries are not filing consolidated tax returns with FRM. 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 2003 and the settlementof the Goshen receivables in fiscal 2002 were both included in taxable income of the Company's formerparent in the years that the properties were sold.

The Company has net operating loss ("NOL") carryforwards for Federal purposes ofapproximately $4,590,000. These losses will be available for future years, expiring through February28, 2022. During fiscal 2003, the Company utilized $32,000 of its Federal NOL carryforwards. The Company,however, has taken a 94% valuation allowance against Federal NOL carryforwards due to a prior historyof operating tax losses and the uncertainty of generating enough taxable income through out 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      28,                                                                                                                                                                |   |  February      28,                                                                                                                                                                |
|                                     |  2003                                                                                                                                |   |  2002                                                                                                                                                                             |   |  2001                                                                                                                                                                             |
|  Tax      loss carryforwards   | ** $                    1,560,591**                            |   |  $                    1,218,875                                                                             |   |  $                       521,273                                                             |
|  Less      valuation allowance | **                     (1,470,591)**                           |   |                      (1,218,875)                                                                            |   |                         (521,273)                                                            |
|  Deferred      tax assets      | ** $                         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      28,                                                                                                                                                                           |   |  February      28,                                                                                                                                                                           |
|                                                        |  2003                                                                                                                                                                                            |   |  2002                                                                                                                                                                                        |   |  2001                                                                                                                                                                                        |
|                                                        |  %      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                             | **                              (32.5)**                                      |   |                               (34.0)                                      |   |                                                                                                                                                                                              |
|  Other      permanent timing differences          | **                                  0.2**                 |   |                                     -  |   |                                     -  |
|  Utilization      of NOL carryforwards - current  | **                                (1.7)**                           |   |                                     -  |   |                                     -  |
|  Utilization      of NOL carryforwards - deferred | **                              (10.1)**                                      |   |                                     -  |   |                                     -  |
|  Valuation      allowance against                 |                                                                                                                                                                                                  |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |
|  NOL      carryforwards                           | **                                    - ** |   |                                     -  |   |                                 34.0                            |
|  State      taxes, less federal                   |                                                                                                                                                                                                  |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |
|  tax      effect                                  | **                                  1.6**                 |   |                                   1.6                 |   |                                   1.0                 |
|                                                        | **                                (8.5)**                           |   |                                   1.6                 |   |                                   1.0                 |
|                                                        |                                                                                                                                                                                                  |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |

#### 14. DiscontinuedOperations

On May 23, 2000, the Company committed to sell Wendcello Corp., the remaining subsidiarythat operated in the food service division. On June 20, 2000, the Company completed the sale of WendcelloCorp., including all of its assets and liabilities, and received $1,575,000 in cash, resulting in again of approximately $381,000.

During the period from May 23, 2000 (the measurement date for discontinuing operationsof the food service division) to June 20, 2000 (disposal date), net income from operations of the discontinuedfood service division was $11,700. The results of operations of Wendcello has been classified as discontinuedoperations.

A summary of the results of discontinued operations for the food services divisionis as follows for the year ended February 28, 2001:

|  Operating revenues, including gain on sale      |                                                                                                              |
|-------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------|
|  of      subsidiary of $381,182                  |  $             3,714,425                                                  |
|  Operating      expenses                         |                 3,316,091                                       |
|  Income      from operations                     |                    398,334                       |
|  Interest      expense, net of interest (income) |                      (1,774)           |
|  Income      before income taxes                 |                    400,108                       |
|  Income      taxes                               |                        1,080 |
|  Income      from discontinued operations,       |                                                                                                              |
|  net      of taxes                               |  $                399,028                                  |
|                                                       |                                                                                                              |

#### 15. Business SegmentInformation

Operating segments are managed separately and represent separate business units thatoffer different products and serve different markets. The Company's reportable segments include: (1)real estate, (2) medical financing, and (3) other, which is comprised of corporate overhead, Capco (whichis inactive) and net assets of discontinued operations. The real estate segment operates in New Yorkand Connecticut. The medical financing segment operates in New York and New Jersey.

The accounting policies of the segments are the same as those described in the summaryof significant accounting policies. All inter-segment balances have been eliminated.

Business segment information follows:

|                                                               |  Real                                                                                                                                                  |  Medical                                                                                              |                                                                                                                                             |                                                                                                       |
|---------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------|
|                                                               |  Estate                                                                                                                                                |  Financing                                                                                            |  Other                                                                                                                                      |  Total                                                                                                |
| **February 28, 2003**                                         |                                                                                                                                                        |                                                                                                       |                                                                                                                                             |                                                                                                       |
|  Total      revenue from external customers              | ** $        1,036,962**                                                                                             | ** $        4,223,485**                                            | ** $                           -** | ** $        5,260,447**                                            |
|  Income      (loss) from operations                      | **              830,668**                                                                  | **              434,088**                 | **            (358,559)**                                                                 | **              906,197**                 |
|  Other      expense (income), net                        | **                        (923)**                                 | **                     20,380** | **                     (2,469)**                                      | **                     16,988** |
|  Income      (loss) from continuing operations           |                                                                                                                                                        |                                                                                                       |                                                                                                                                             |                                                                                                       |
|         before (benefit) provision for income taxes | **              831,591**                                                                  | **              413,708**                 | **            (356,090)**                                                                 | **              889,209**                 |
|                                                               |                                                                                                                                                        |                                                                                                       |                                                                                                                                             |                                                                                                       |
|  Total      assets                                       | **           1,874,251**                                                                                  | **           4,573,412**                                 | **              628,180**                                                       | **           7,075,843**                                 |
|                                                               |                                                                                                                                                        |                                                                                                       |                                                                                                                                             |                                                                                                       |
|  Capital      expenditures                               | **                              -** | **              323,229**                 | **                       2,709**                            | **              325,938**                 |
|  Depreciation      and amortization                      | **                       2,014**                                       | **              153,575**                 | **                       2,721**                            | **              158,310**                 |
|                                                               |                                                                                                                                                        |                                                                                                       |                                                                                                                                             |                                                                                                       |
| **February 28, 2002**                                         |                                                                                                                                                        |                                                                                                       |                                                                                                                                             |                                                                                                       |
|  Total      revenue from external customers              |  $             1,116,723                                                                                            |  $             3,049,771                                           |  $                           -     |  $             4,166,494                                           |
|  Income      (loss) from operations                      |                    860,092                                                                 |                    314,119                |                  (302,021)                                                                |                    872,190                |
|  Other      expense (income), net                        |                      (2,778)                                                     |                      41,829     |                      11,148                                           |                      50,199     |
|  Income      (loss) from continuing operations           |                                                                                                                                                        |                                                                                                       |                                                                                                                                             |                                                                                                       |
|         before (benefit) provision for income taxes |                    862,870                                                                 |                    272,290                |                  (313,169)                                                                |                    821,991                |
|                                                               |                                                                                                                                                        |                                                                                                       |                                                                                                                                             |                                                                                                       |
|  Total      assets                                       |                    (20,473)                                                                |                 5,122,948                                |                 1,175,014                                                                      |                 6,277,489                                |
|                                                               |                                                                                                                                                        |                                                                                                       |                                                                                                                                             |                                                                                                       |
|  Capital      expenditures                               |                        2,833                                           |                    235,505                |                        2,905                                |                    241,243                |
|  Depreciation      and amortization                      |                        3,057                                           |                      98,778     |                        2,426                                |                    104,261                |
|                                                               |                                                                                                                                                        |                                                                                                       |                                                                                                                                             |                                                                                                       |
| **February 28, 2001**                                         |                                                                                                                                                        |                                                                                                       |                                                                                                                                             |                                                                                                       |
|  Total      revenue from external customers              |  $                304,260                                                                            |  $             2,054,863                                           |  $                           -     |  $             2,359,123                                           |
|  Income      (loss) from operations                      |                  (138,277)                                                                           |                  (430,470)                          |                  (349,470)                                                                |                  (918,217)                          |
|  Other      expense (income), net                        |                      (9,928)                                                     |                      21,944     |                    208,154                                                      |                    220,170                |
|  Income      (loss) from continuing operations           |                                                                                                                                                        |                                                                                                       |                                                                                                                                             |                                                                                                       |
|         before (benefit) provision for income taxes |                  (128,349)                                                                           |                  (452,414)                          |                  (557,624)                                                                |               (1,138,387)                                          |
|                                                               |                                                                                                                                                        |                                                                                                       |                                                                                                                                             |                                                                                                       |
|  Total      assets                                       |                 4,078,447                                                                                 |                 3,027,154                                |                    116,499                                                      |                 7,222,100                                |
|                                                               |                                                                                                                                                        |                                                                                                       |                                                                                                                                             |                                                                                                       |
|  Capital      expenditures                               |                        4,322                                           |                    201,189                |                           500                |                    206,011                |
|  Depreciation      and amortization                      |                        2,821                                           |                      74,878     |                        3,750                                |                      81,449     |

----

#### 16. SupplementalFinancial Information

Selected Quarterly Financial Data(Unaudited) 

|                                                            | Quarter                                                                             |   |                                                                                      |
|------------------------------------------------------------|-------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------|
|                                                            |                                                                                |   |                                                                                      |   |   |   |   |   |   |
|                                                            | First                                                                               |   | Second                                                                                    |   | Third |   | Fourth |   | Total |
| **Year ended February 28, 2003**                           |                                                                                |   |                                                                                      |   |   |   |   |   |   |
| Total revenue                                              |  $           966,539                                  |   |  $         1,145,965                                                  |   |  $         1,177,098 |   |  $         1,970,845 |   |  $         5,260,447 |
|                                                            |                                                                                |   |                                                                                      |   |   |   |   |   |   |
| Net income                                                 |  $             31,867                       |   |  $              28,583                       |   |  $              20,004 |   |  $            884,631 |   |  $            965,085 |
|                                                            |                                                                                |   |                                                                                      |   |   |   |   |   |   |
| Earnings per common share:                                 |                                                                                |   |                                                                                      |   |   |   |   |   |   |
| Basic and diluted income per common share                  |  $                 0.02 |   |  $                  0.02 |   |  $                  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 |
|                                                            |                                                                                |   |                                                                                      |   |   |   |   |   |   |
| **Year ended February 28, 2002**                           |                                                                                |   |                                                                                      |   |   |   |   |   |   |
| Total revenue                                              |  $           782,029                                  |   |  $            926,082                                  |   |  $         1,552,943 |   |  $            905,440 |   |  $         4,166,494 |
|                                                            |                                                                                |   |                                                                                      |   |   |   |   |   |   |
| Net (loss) income                                          |  $           (43,777)                                 |   |  $              50,869                       |   |  $            728,291 |   |  $              73,002 |   |  $            808,385 |
|                                                            |                                                                                |   |                                                                                      |   |   |   |   |   |   |
| Earnings (loss) per common share:                          |                                                                                |   |                                                                                      |   |   |   |   |   |   |
| Basic and diluted (loss) income                            |                                                                                |   |                                                                                      |   |   |   |   |   |   |
|        per common share                               |  $               (0.02)           |   |  $                  0.03 |   |  $                  0.41 |   |  $                  0.04 |   |  $                  0.45 |
|                                                            |                                                                                |   |                                                                                      |   |   |   |   |   |   |
| Number of shares used in computation                       |                                                                                |   |                                                                                      |   |   |   |   |   |   |
|        of basic and diluted loss per share            |            1,797,863                                       |   |             1,790,000                                       |   |             1,790,000 |   |             1,790,000 |   |             1,792,662 |
|                                                            |                                                                                |   |                                                                                      |   |   |   |   |   |   |
|                                                            |                                                                                |   |                                                                                      |   |   |   |   |   |   |

----

MFC Development Corp. and Subsidiaries

### Financial StatementSchedules

#### Schedule II - Valuation and Qualifying Accounts

Year ended February 28, 2003

 

|  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, 2003**                        |   |                                                                                                                       |   |                                                                                                                           |   |                                                                                                                           |   |                                                                                                                           |   |   |
|  Allowance      for credit losses       |   | ** $       252,535**                                                                    |   | ** $         11,750**                                                             |   | ** $                        -** |   | ** $                        -** |   | ** $       264,285** |
|  Allowance      for billing adjustments |   | ** $       318,817**                                                                    |   | ** $                        -** |   | ** $       305,039**                                                                        |   | ** $                        -** |   | ** $       623,856** |
|  Valuation      allowance -             |   |                                                                                                                       |   |                                                                                                                           |   |                                                                                                                           |   |                                                                                                                           |   |   |
|  Deferred      tax asset                |   | ** $    1,218,875**                                                                                    |   | ** $                        -** |   | ** $       341,716**                                                                        |   | ** $        (90,000)**                                                                 |   | ** $    1,470,591** |
|                                              |   |                                                                                                                       |   |                                                                                                                           |   |                                                                                                                           |   |                                                                                                                           |   |   |
| **February 28, 2002**                        |   |                                                                                                                       |   |                                                                                                                           |   |                                                                                                                           |   |                                                                                                                           |   |   |
|  Allowance      for credit losses       |   |  $            233,345                                                                   |   |  $              19,190                                                            |   |  $                        -     |   |  $                        -     |   |  $            252,535 |
|  Allowance      for billing adjustments |   |  $            236,124                                                                   |   |  $                        -     |   |  $              82,693                                                            |   |  $                        -     |   |  $            318,817 |
|  Valuation      allowance -             |   |                                                                                                                       |   |                                                                                                                           |   |                                                                                                                           |   |                                                                                                                           |   |   |
|  Deferred      tax asset                |   |  $            521,273                                                                   |   |  $                        -     |   |  $            697,602                                                                       |   |  $                        -     |   |  $         1,218,875 |
|                                              |   |                                                                                                                       |   |                                                                                                                           |   |                                                                                                                           |   |                                                                                                                           |   |   |
| **February 28, 2001**                        |   |                                                                                                                       |   |                                                                                                                           |   |                                                                                                                           |   |                                                                                                                           |   |   |
|  Allowance      for credit losses       |   |  $            212,488                                                                   |   |  $              20,857                                                            |   |  $                        -     |   |  $                        -     |   |  $            233,345 |
|  Allowance      for billing adjustments |   |  $                        - |   |  $                        -     |   |  $            236,124                                                                       |   |  $                        -     |   |  $            236,124 |
|  Valuation      allowance -             |   |                                                                                                                       |   |                                                                                                                           |   |                                                                                                                           |   |                                                                                                                           |   |   |
|  Deferred      tax asset                |   |  $            728,169                                                                   |   |  $                        -     |   |  $           (206,896)                                                                           |   |  $                        -     |   |  $            521,273 |
|                                              |   |                                                                                                                       |   |                                                                                                                           |   |                                                                                                                           |   |                                                                                                                           |   |   |

 

*Allowance for Credit Losses:*A periodicevaluation of the allowance for credit losses on finance receivables is based on the Company's pastloss experience, known and inherent risks in the portfolio, adverse situations that may affect the customer'sability to repay, the estimated value of any underlying collateral, the outlook of the debtor's industryand current economic conditions. When the Company estimates that it may be probable that a specificcustomer account may be uncollectible, that balance is included in the allowance calculation.

*Allowance for Billing Adjustments:* Managementservice fees are billed monthly according to the cost of services rendered to the client. If the assetsof the management client, which is also a finance client, are not enough to satisfy the billed fees,an allowance for billing adjustments is recorded to reduce the Company's net receivables to an amountthat is equal to the assets of the client that are available for payment.

----

#### Schedule III - Real Estate and Accumulated Depreciation

Year ended February 28, 2003

| 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         |   |  $                 - |   |  $                 - |   |  $      467,560                             |   |  $      128,830                                   |   |  $        62,946 |   |  $        60,585 |   |  $      890,773 |   |  $      951,358 |   |  $               - |
|                    |   |                                                                             |   |                                                                             |   |                                             |   |                                                   |   |                            |   |   |   |   |   |   |   |   |
| Total              |   |  $                 - |   |  $                 - |   |  $      467,560                             |   |  $      128,830                                   |   |  $        62,946 |   |  $        60,585 |   |  $      890,773 |   |  $      951,358 |   |  $               - |
|                    |   |                                                                             |   |                                                                             |   |                                             |   |                                                   |   |                            |   |   |   |   |   |   |   |   |
|                    |   |                                                                             |   |                                                                             |   |                                             |   |                                                   |   |                            |   |   |   |   |   |   |   |   |
|                    |   |                                                                             |   |                                                                             |   |                                             |   |                                                   |   |                            |   |   |   |   |   |   |   |   |
|                    |   | Column G                                                                         |   | Column H                                                                         |   | Column I                                         |   |                                                   |   |                            |   |   |   |   |   |   |   |   |
|                    |   |                                                                             |   |                                                                             |   | Line                                             |   |                                                   |   |                            |   |   |   |   |   |   |   |   |
|                    |   |                                                                             |   |                                                                             |   | where                                            |   |                                                   |   |                            |   |   |   |   |   |   |   |   |
|                    |   | Date of                                                                          |   |                                                                             |   | Depre-                                           |   |                                                   |   |                            |   |   |   |   |   |   |   |   |
|                    |   | Constr-                                                                          |   | Date                                                                             |   | ciation                                          |   |                                                   |   |                            |   |   |   |   |   |   |   |   |
| Columns            |   | uction                                                                           |   | Acquired                                                                         |   | Computed                                         |   |                                                   |   |                            |   |   |   |   |   |   |   |   |
| continued          |   |                                                                             |   |                                                                             |   |                                             |   |                                                   |   |                            |   |   |   |   |   |   |   |   |
| from above         |   |  -                                                                          |   | 02/29/1996                                                                       |   | N/A                                              |   |                                                   |   |                            |   |   |   |   |   |   |   |   |

The following is a reconciliation of the total amount at which real estate was carried for the yearsended:

|                                | February 28, 2003                                                                                                                   |   | February 28, 2002                                                                                                                   |   | February 28, 2001                                                                                                               |
|--------------------------------|-------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------|
|                                |                                                                                                                                |   |                                                                                                                                |   |                                                                                                                            |   |   |   |   |   |   |
| Balance at beginning of period |                                                                                                                                |   | ** $      625,713**                                                                                   |   |                                                                                                                            |   |  $           584,153 |   |   |   |  $           655,880 |
| Additions during period        |                                                                                                                                |   |                                                                                                                                |   |                                                                                                                            |   |   |   |   |   |   |
| Other acquisitions             | **                          -** |   |                                                                                                                                |   |                           - |   |   |   |                           - |   |   |
| Improvements, etc.             | **         325,645**                                                                        |   |                                                                                                                                |   |                 75,183                                                        |   |   |   |                 45,401 |   |   |
| Capitalized carrying costs     | **                          -** |   | **         325,645**                                                                        |   |                           - |   |                 75,183 |   |                           - |   |                 45,401 |
|                                |                                                                                                                                |   | **         951,358**                                                                        |   |                                                                                                                            |   |               659,336 |   |   |   |               701,281 |
| Deductions during period       |                                                                                                                                |   |                                                                                                                                |   |                                                                                                                            |   |   |   |   |   |   |
| Cost of real estate sold       | **                          -** |   |                                                                                                                                |   |                 33,623                                                        |   |   |   |               117,128 |   |   |
|                                |                                                                                                                                |   | **                          -** |   |                                                                                                                            |   |                 33,623 |   |   |   |               117,128 |
| Balance at close of period     |                                                                                                                                |   | ** $      951,358**                                                                                   |   |                                                                                                                            |   |  $           625,713 |   |   |   |  $           584,153 |

The Federal Income Tax Basis of the Hunter property is $1,230,367.

----

#### Schedule IV - Mortgage Loans on Real Estate

Year ended February 28, 2003

| 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 |   |                                       |   |  $2,436,759 |   |  $      946,732 |   |  $      946,732 |   |  $                  - |
| through 3/1/06   |   | 7%       |   |     |   |  $          5,523 |   |             |   |                 |   |                 |   |                                                                                   |
| 4/1/06-3/8/17    |   | 9%       |   |     |   |  $          9,863 |   |             |   |                 |   |                 |   |                                                                                   |
|                  |   |     |   |     |   |                                       |   |             |   |                 |   |                 |   |                                                                                   |
|                  |   |     |   |     |   |                                       |   |             |   |  $      946,732 |   |  $      946,732 |   |  $                  - |
|                  |   |     |   |     |   |                                       |   |             |   |                 |   |                 |   |                                                                                   |

The following is a reconciliation of the total amount at which mortgage loans were carried for theyears ended:

|                                  | February 28, 2003                                                                                                       |   | February 28, 2002                                                                                                       |   | February 28, 2001                                                                                                   |
|----------------------------------|-------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------|
|                                  |                                                                                                                    |   |                                                                                                                    |   |                                                                                                                |   |   |   |   |   |   |
| Balance at beginning of period   |                                                                                                                    |   | ** $    975,792**                                                                                   |   |                                                                                                                |   |  $      3,152,683 |   |   |   |  $      3,179,280 |
| Additions during period          |                                                                                                                    |   |                                                                                                                    |   |                                                                                                                |   |   |   |   |   |   |
| New mortgage loans               | **                        -** |   |                                                                                                                    |   |                         - |   |   |   |                         - |   |   |
|                                  |                                                                                                                    |   | **                        -** |   |                                                                                                                |   |                         - |   |   |   |                         - |
|                                  |                                                                                                                    |   | **       975,792**                                                                        |   |                                                                                                                |   |          3,152,683 |   |   |   |          3,179,280 |
| Deductions during period         |                                                                                                                    |   |                                                                                                                    |   |                                                                                                                |   |   |   |   |   |   |
| Collection of principal          | **         29,060**                                                             |   |                                                                                                                    |   |          1,342,518                                                                                   |   |   |   |               26,597 |   |   |
| Settlement of Goshen receivables | **                        -** |   |                                                                                                                    |   |             834,373                                                                   |   |   |   |                         - |   |   |
|                                  |                                                                                                                    |   | **         29,060**                                                             |   |                                                                                                                |   |          2,176,891 |   |   |   |               26,597 |
| Balance at close of period       |                                                                                                                    |   | ** $    946,732**                                                                                   |   |                                                                                                                |   |  $         975,792 |   |   |   |  $      3,152,683 |
|                                  |                                                                                                                    |   |                                                                                                                    |   |                                                                                                                |   |   |   |   |   |   |

----

### EXHIBIT INDEX

All 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 22, 2003.

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 22, 2003.

|                                                                 |
|----------------------------------------------------------------------|
| /s/ LESTER TANNER                                                    |
| Lester Tanner*President and Director**(Principal Executive Officer)* |
|                                                                 |
| /s/ DAVID MICHAEL                                                    |
| David Michael*Director*                                              |
|                                                                 |
| /s/ VICTOR BRODSKY                                                   |
| Victor Brodsky*Director*                                             |
|                                                                 |
| /s/ ANDERS STERNER                                                   |
| Anders Sterner*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, 2003 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 22, 2003

| /s/ LESTER TANNER                                    |   | /s/ VICTOR BRODSKY                                         |
|------------------------------------------------------|--------|------------------------------------------------------------|
| Lester Tanner*President and Chief Executive Officer* |   | Victor Brodsky*Vice President and Chief Financial Officer* |

 

 

 

----

**CERTIFICATIONS**

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-14 and 15d-14) 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; 
  -  evaluated the effectiveness of    the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing    date of this annual report (the "Evaluation Date"); and 
  -  presented in this annual report    our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation    as of the Evaluation Date; 
-  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; and 
-  The registrant's other certifying  officers and I have indicated in this annual report whether or not there were significant changes  in internal controls or in other factors that could significantly affect internal controls subsequent  to the date of our most recent evaluation, including any corrective actions with regard to significant  deficiencies and material weaknesses. 

| /s/ LESTER TANNER                                    |
|------------------------------------------------------|
| Lester Tanner*President and Chief Executive Officer* |

 

 

----

**CERTIFICATIONS**

I, Victor Brodsky, 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-14 and 15d-14) 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; 
  -  evaluated the effectiveness of    the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing    date of this annual report (the "Evaluation Date"); and 
  -  presented in this annual report    our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation    as of the Evaluation Date; 
-  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; and 
-  The registrant's other certifying  officers and I have indicated in this annual report whether or not there were significant changes  in internal controls or in other factors that could significantly affect internal controls subsequent  to the date of our most recent evaluation, including any corrective actions with regard to significant  deficiencies and material weaknesses. 

| /s/ VICTOR BRODSKY                                         |
|------------------------------------------------------------|
| Victor Brodsky*Vice President and Chief Financial Officer* |