UNITED STATES  SECURITIES AND EXCHANGE COMMISSION  Washington, D.C. 20549

FORM 10-K/A

Amendment No. 1

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

For the fiscal year ended February 29, 2004

Commission file number: 0-3579974

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

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

Common Stock, $.001 par value

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K  is not contained herein, and will not be contained, to the best of registrant's knowledge in definitive proxy or information  statements incorporated by reference in Part III of this Form 10-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, 2004 |   | $2,807,467 |
|------------------------------------------------------------------------------------------------------------------|--------|------------|
| Number of shares outstanding of the registrant's Common      Stock      as of May 20, 2004                   |   | 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 proxy statement relating to the annual meeting of stockholders to  be held in July 2003, which definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days  after the close of the year ended February 28, 2003.

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# TABLE OF  CONTENTS

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

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# Explanatory  Note

The purpose of this Amendment No. 1 to the Annual Report on Form 10-K of MFC Development Corp. (the  "Company") for the year ended February 29, 2004 (the "Original Form 10-K") is to correct a clerical oversight  that occurred during the edgarizing process. The page of the Original Form 10-K titled "MFC Development Corp. and  Subsidiaries, Consolidated Statements of Operations" did not include such statements, but erroneously included a duplication  of Liabilities and Stockholders' Equity.

This Amendment No. 1 continues to reflect circumstances as of the date of the filing of the Original Form  10-K and does not reflect events occurring after the filing of the Original Form 10-K, or modify or update those disclosures in  any way.

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# PART I

## ITEM 1. BUSINESS

### General

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

#### Proposed Transaction

On April  9, 2004, the Company filed a Current Report on Form 8-K announcing the signing on March 26,  2004 of an Acquisition Agreement with Creative Marketing Group, Inc, ("CMG") and its shareholders to acquire 100% of  CMG's outstanding capital stock in exchange for shares of common stock of MFC.  After the closing, MFC shall issue  approximately 7,900,000 shares (approximately 80%) of common stock to CMG stockholders and holders of CMG debt out of  approximately 10,000,000 shares of common stock which will then be issued and outstanding.  The completion of the  acquisition is subject to several conditions including, but not limited to, the closing of a private offering raising a minimum  of $1,000,000 and a maximum of $2,500,000.  

CMG is a sales and marketing company which since the year 2000 has been exclusively working with a national  brand name in the coffee industry which has a brand name recognition in excess of 90% among consumers.  In late 2002 CMG  obtained exclusive licensing agreements permitting it to use the trademark of such national brand name in the production and sale  of coffee and coffee filters through retailers, food service, hospitality and in-office locations throughout the United  States.  CMG's relationship with this national brand name creates marketing opportunities to enhance the awareness and  availability of such national brand name's coffee makers and the coffee and coffee filters which CMG may produce and sell  under its licenses in the United States.

Completion of the transaction described is subject to the satisfaction of a number of conditions and there can  be no assurance that all of the conditions will be met or that the registrant will successfully complete the acquisition or that  CMG will raise adequate funds in the private placement.

### Business Description

MFC is engaged in the business of (i) developing real estate and (ii) providing financing and management  services to medical practices.

#### Real Estate Division

The Real Estate Division of the Company presently conducts its operations through Yolo Equities Corp. and  Highlands Pollution Control Corp, wholly-owned subsidiaries which own the interests described below in parcels of real estate.  For the fiscal year ended February 29, 2004, the total revenues derived from the real estate division were $619,114, constituting  30% of the total revenues from continuing operations 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 fiscal year ended February 28,  2002, resulting in the realization of $745,000 of deferred income related to the 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 Gateway Boulevard in East Granby,  Connecticut which was carried at the value of $900,000 on February 28, 1995. In the fiscal year ended February 29, 1996, the  Company spent approximately $1,300,000 in developing the site and 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 February  29, 2004, pursuant to a purchase money second mortgage. The gain on the sale of this property was recognized on the accrual  method in prior years, except for a reserve of $850,000 which was recognized in January 2003 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 properties in Hunter, New  York, along with co-investors. The co-investors are entitled to receive 35% of the cash proceeds of the sales of Hunter  Properties made after June 30, 2000, after deducting the net 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 acreage in an area known as Hunter Highlands, which is adjacent to the Hunter Mountain Ski Slopes in the  Town of Hunter, Greene County, New York. The undeveloped portion of the acreage, which Yolo Equities Corp. plans to sell or  develop, is available for single family residences, townhouses, condominium units and a hotel site. There is already constructed  on the property (i) a waste water treatment plant owned by Highlands Pollution Control Corp. (a wholly-owned subsidiary of the  Yolo Equities Corp.), (ii) a Clubhouse with swimming pool and six tennis courts and (iii) a small office building which was  renovated and converted into three townhouse units. One of the townhouse units was sold in February 2004, the remaining two units  are currently under contract for sale. Adjoining the site are 200 condominium units 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 York is reimbursing the Company for all costs incurred  with the upgrade of the facility. See Note 4 of Notes to Consolidated Financial Statements.

The Company will seek to complete a sale of the Clubhouse in the fiscal year ended February 28, 2005.

The hotel site consists of 10 plus acres contiguous to the ski slopes at Hunter Mountain. Yolo Equities Corp.  has received approval from the Planning Board of the Town of Hunter for site approval of a first phase development of additional  condominium units with eventual construction of a hotel and further condominium units in subsequent phases. The Company plans to  participate with other developers in financing and constructing improvements on the site or sell its interest if the sales price  is acceptable.

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 the Company 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  this facility because of the Federal requirement to incorporate the latest technology in order to improve the quality of the  water derived from the City's Catskill Mountain Watershed Area (in which Hunter is located).

##### Other Properties

The Company, alone or with co-investors and joint ventures, may acquire other lands for development of  residential, commercial and office structures, when management identifies opportunities for 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% owned interest in two other Limited Liability  Companies, all of which act as service organizations for providers of medical services ("Medical Management Services  business") and (ii) a wholly-owned subsidiary of the Company, Medical Financial Corp., which in the past, purchased unpaid  medical insurance claims, paying cash to the medical provider in return for a negotiated fee (the "Medical Finance  business"). In the fiscal year ended February 29, 2004, MFC experienced a significant increase in the amount of time that  the medical insurance claims were outstanding, which resulted in a negative impact on its cash flow.

On February 4, 2004, in response to the change in collections, the Company decided to restructure the Medical  Division.  The plan of restructuring calls for the Medical Finance business to discontinue the purchase of insurance claims  from medical practices, and to focus future operations on collections and other services.  In addition, the Company will  sell the assets of the Medical Management Services business.  As a result of this decision, the operations of the Medical  Management Services business have been reclassified as discontinued operations, and prior periods have been restated to reflect  this classification.   

In the fiscal year ended February 29, 2004, the total revenues of the Medical Division were $1,442,982,  constituting 70% of total revenues from continuing operations of the Company. For its clients, this Division delivers management  services 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's computer system, processing the data  and presenting the customers' bills to the insurance company in compliance with regulations to facilitate payment, following  up with collection efforts if the bills are not paid promptly, furnishing weekly or other periodic status reports of the  customers' receivables and other information relating to their medical practices.

The operations of the Medical Division are being supported by the Company'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 new computers needed to run these programs. The investment in this technology has already  decreased the time 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.

### Marketing

The Company's marketing in its real estate activities is limited to working with real 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 individual employees and  consultants by direct contact with potential customers recommended by existing customers and those who contact MFC after reading  newspaper advertisements or receiving its brochure by direct mail solicitation. MFC designs its own brochure for such  solicitations. MFC designed and obtained the names for two websites, "medicalfinancial.com" and  "mdhelp.com".

### Competition

#### Real Estate Division

The Company's presently owned real estate held for development or sale is located in Hunter, New York. The  real estate market for second homes in this resort community is presently experiencing improved demand. The Company will be  competing with many owners and developers in the locale in connection with the development and sale of its properties for  residential use.

#### Medical Division

MFC competes with a wide variety of management and financial service companies, including public companies,  banks, and factoring companies. The Company is very small in relation to such competitors. However the Company's services are  also designed to serve a niche market and in its focus on collecting certain medical insurance claims of medical groups, the  competition is limited to only a few companies.

### Trademarks

None.

### Employees

As of February 29, 2004, the Company had 28 employees. None of the Company's employees are 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 substances in real property.  Future compliance with environmental laws is not expected to have a material effect on its business.

## ITEM 2. PROPERTIES

In addition to the real property held for development or sale as set forth in Item 1 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.

## ITEM 3. LEGAL PROCEEDINGS

MFC is not presently a party to any material litigation.

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

None, other than the election of directors on July 17, 2003.

### Other Information

#### Cautionary Statement

In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of  1995, the Company is hereby filing cautionary statements identifying important risk factors that could cause the Company's  actual results to differ materially from those projected in forward looking statements 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 relating to the foregoing. Forward-looking statements  are inherently subject to risks and uncertainties, many of 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 identify forward-looking statements that involve risks and uncertainties. Future events and actual results could  differ materially from those underlying the forward-looking statements. The factors that could cause actual results to differ  materially from those suggested by any such statements include, but are not limited to, those discussed or identified from time  to time in the Company's public filings, including general economic and market conditions, changes in domestic laws,  regulations and taxes, changes in competition and pricing environments, regional or general changes in real estate values.

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

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# PART II

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

### Registration and Market Prices of Common Stock

The Form 10 Registration of the common stock of MFC Development Corp. pursuant to Section 12(g) of the  Securities Exchange Act of 1934 as finally amended on January 17, 2001 was effective as of November 30, 2000 and MFC has been a  reporting company since that date, filing its first quarterly statement 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 from FRM. Shareholders'  basis in the Company's shares is equal to the market value when distributed, which was $1.00 per share based on its trading  on the NASDAQ Bulletin Board under the symbol MFCD. The following table sets forth the range of high and low bid quotations of  the Company's common stock for the periods set forth below, as reported by the National Quotation Bureau, Inc. Such  quotations represent inter-dealer quotations, without adjustment for retail markets, markdowns or commissions, and do not  necessarily represent actual transactions.

|                   |                  | Common Stock |
|-------------------|-----------------------|--------------|
| **Fiscal Period** |                  | High Bid     |   | Low Bid |
|                   |                  |         |   |   |
| **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 |
|                   |                  |         |   |   |
| **2004**          |                  |         |   |   |
| Quarter 1         | (03/01/03 - 05/31/03) | $1.85        |   | $1.55 |
| Quarter 2         | (06/01/03 - 08/31/03) | $1.90        |   | $1.31 |
| Quarter 3         | (09/01/03 - 11/30/03) | $1.85        |   | $1.35 |
| Quarter 4         | (12/01/03 - 02/29/04) | $1.30        |   | $0.60 |

The last trade on May 20, 2004 was $2.40.

### Dividends

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

### Holders

As of May 1, 2004, there were approximately 1,000 holders of record of MFC common stock representing about  2,400 beneficial owners of its shares. There are no options or warrants to purchase common stock of the Company outstanding  except for options to purchase a total of 6,000 shares held by Allan Kornfeld, former Chairman of the Company and 4,500 shares  held each by David Michael, a former Director and Anders Sterner, presently a Director of the Company. The Company does not know  of any shares of common stock of MFC that are held by any director, officer or holder of as much as 5% of the outstanding stock  for sale pursuant to a filing under Rule 144 of the Securities Act. The Company has not agreed to register any common stock for  sale under the Securities Act by any shareholder or the Company, the offering of which could have a material effect on the market  price of the Company's common equity.

## ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

    -  Fiscal Year EndedFebruary 29,             February 28,             February 28,             February 28,             February 29,2004             2003             2002             2001             2000**Income Statement Data:**                                                                                                                     Total revenue $   2,062,096              $   2,977,770              $   2,733,510              $   1,433,109              $   2,262,396Costs and expenses      2,853,916                   2,382,915                   1,986,218                   2,257,887                   3,179,783                                                                                                                     Income (loss) from operations        (791,820)                      594,855                      747,292                    (824,778)                    (917,387)Other (expenses) net of other income         (90,592)                      (31,774)                      (51,652)                    (221,468)                      (28,096)                                                                                                                     Income (loss) from continuing                                                                                                                     operations before provision for                                                                                                                     income taxes       (882,412)                      563,081                      695,640                 (1,046,246)                    (945,483)Provision (benefit) for income taxes             7,042                      (75,876)                        13,606                        10,936                        14,328                                                                                                                     Income (loss) from continuing operations       (889,454)                      638,957                      682,034                 (1,057,182)                    (959,811)Income (loss) from discontinued operations, net                                                                                                                     of taxes (including impairment loss of $229,000                                                                                                                     in 2004 and gain on sale of subsidiary of $381,182                                                                                                                     in 2001 and $96,301 in 2000)       (543,570)                      326,128                      126,351                      306,887                      267,531                                                                                                                     Net income (loss) $ (1,433,024)              $      965,085              $      808,385              $    (750,295)              $    (692,280)                                                                                                                     Earnings (loss) per common share:                                                                                                                                                                                                                                          Income (loss) from continuing operations $          (0.50)              $            0.36              $            0.38              $          (0.59)              $          (0.53)Income from discontinued operations             (0.31)                                       0.18                                       0.07                                       0.17                                       0.15Basic and diluted earnings (loss)                                                                                                                     per common share $          (0.81)              $            0.54              $            0.45              $          (0.42)              $          (0.38)                                                                                                                     Number of shares used in computation of                                                                                                                     basic and diluted earnings per share      1,775,053                   1,787,350                   1,792,662                   1,807,261                   1,816,462                                                                                                                     As ofFebruary 29,             February 28,             February 28,             February 28,             February 29,2004             2003             2002             2001             2000**Balance Sheet Data:**                                                                                                                     Working Capital $   1,707,230              $   3,542,728              $   3,852,763              $   2,454,741              $   2,851,037                                                                                                                     Total Assets $   5,903,032              $   7,075,843              $   6,277,489              $   7,222,100              $   7,376,210                                                                                                                     Long-term debt $      103,452              $      271,617              $      192,449              $      263,644              $        24,655                                                                                                                     Common Shareholders' equity $   4,207,090              $   5,640,114              $   4,702,368              $   3,907,282              $   4,685,912                                                                                                                     Book value per share $            2.37              $            3.18              $            2.63              $            2.17              $            2.58                                                                                                                     Common shares outstanding      1,775,053                   1,775,053                   1,790,000                   1,800,000                   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 DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF OPERATIONS

All statements contained herein that are not historical facts, including but not limited to, statements  regarding future operations, financial condition and liquidity, expenditures to develop real estate owned by the Company, future  borrowing, capital requirements, and the Company's future development plans, are based on current expectations. These  statements are forward-looking in nature and involve a number of risks and uncertainties. Actual results may differ materially.  Among the factors that could cause actual results to differ materially are the following: changes affecting the business of the  Company's medical service organization and medical provider clients, a legislative change in insurance regulations affecting  the future collections of medical receivables, changes in the real estate and financial markets, adverse arbitration or court  decisions on collectibility of purchased receivables, environmental action by governments affecting development of real estate,  and other risk factors described herein and in the Company's reports filed and to be filed from time to time with the  Commission. The discussion and analysis below is based on the Company's Consolidated Financial Statements and 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 parcels of real estate in Hunter, New York held for future development or sale, in which co-investors also have  interests, and of a mortgage note receivable on a property that was previously sold. Revenues in the real estate division vary  substantially from period to period depending on when a particular transaction closes and depending on whether the closed  transaction is recognized for accounting purposes as a sale, or is reflected as a financing, or is deferred to a future  period.

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

In August 2001, the Company entered into an agreement with a debtor regarding an outstanding mortgage  receivable and debenture (together the "Goshen Receivables") on property located in Goshen, New York. Under the terms  of the agreement, the debtor satisfied the Goshen Receivables by payments 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 original sale of the property.

The medical segment is conducted through Medical Financial Corp., a wholly owned subsidiary, which purchases  insurance claims receivables from medical practices, paying cash to the medical provider in return for a negotiated fee, and  provides other collection services to those practices; and (ii) three other subsidiaries which were formed to provide additional  management services to certain medical practices. On February 4, 2004, the Company decided to restructure the medical financing  segment. The plan of restructuring calls for (i) the purchase of insurance claims receivables from medical practices to be  discontinued, (ii) the sale of the assets of the three subsidiaries that were formed to provide additional management services to  certain medical practices, and (iii) focus the operations of the medical segment on collections and other services. As a result  of this decision, management services has been reclassified as discontinued operations and prior periods have been restated.

*Proposed Transaction*

On April  9, 2004, the Company filed a Current Report on Form 8-K announcing the signing on March 26,  2004 of an Acquisition Agreement with Creative Marketing Group, Inc, ("CMG") and its shareholders to acquire 100% of  CMG's outstanding capital stock in exchange for shares of common stock of MFC.  After the closing, MFC shall issue  approximately 7,900,000 shares (approximately 80%) of common stock to CMG stockholders and holders of CMG debt out of  approximately 10,000,000 shares of common stock which will then be issued and outstanding.  The completion of the  acquisition is subject to several conditions including, but not limited to, the closing of a private offering raising a minimum  of $1,000,000 and a maximum of $2,500,000.  

CMG is a sales and marketing company which since the year 2000 has been exclusively working with a national  brand name in the coffee industry which has a brand name recognition in excess of 90% among consumers.  In late 2002 CMG  obtained exclusive licensing agreements permitting it to use the trademark of such national brand name in the production and sale  of coffee and coffee filters through retailers, food service, hospitality and in-office locations throughout the United  States.  CMG's relationship with this national brand name creates marketing opportunities to enhance the awareness and  availability of such national brand name's coffee makers and the coffee and coffee filters which CMG may produce and sell  under its licenses in the United States.

Completion of the transaction described is subject to the satisfaction of a number of conditions and there can  be no assurance that all of the conditions will be met or that the registrant will successfully complete the acquisition or that  CMG will raise adequate funds in the private placement.

**Critical Accounting Policies**

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

**Allowance for Doubtful Accounts**

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

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

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

**Revenue Recognition**

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

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

### Results of Operations

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

|                                                         |  Year ended                                     |   |  Year ended                                                |
|---------------------------------------------------------|-----------------------------------------------------------|--------|----------------------------------------------------------------------|
|                                                         | **February 29,**                                          |   | **February 28,**                                                     |
|                                                         |                                                      |   |                                                                 |   | **Change** |   |   |   |   |   | **Change** |
|                                                         | **2004**                                                  |   | **2003**                                                             |   | **$** |   |  %  |   | **2003** |   | **2002** |   | **$** |   |  %  |
| **Revenues:**                                           |                                                      |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Gain on sale of real estate                      |  $         - |   |  $    850                                        |   |  $ (850) |   |   |   |   |  $    850 |   |  $    815 |   |  $    35 |   |   |   |
|   Other real estate                                |        450                  |   |             - |   |      450 |   |   |   |   |             - |   |          50 |   |       (50) |   |   |   |
|   Rental income                                    |        103                  |   |        103                             |   |           - |   |   |   |   |        103 |   |          99 |   |          4 |   |   |   |
|   Interest from mortgages                          |          66       |   |          84                  |   |       (18) |   |   |   |   |          84 |   |        152 |   |       (68) |   |   |   |
|   Total real estate                                |        619                  |   |     1,037                                             |   |     (418) |   |      (40) |  %  |   |     1,037 |   |     1,116 |   |       (79) |   |        (7) |  %  |
|                                                         |                                                      |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Income from the purchase and                     |                                                      |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     collections of medical receivables   |                                                      |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Earned purchase discounts            |        796                  |   |     1,305                                             |   |     (509) |   |   |   |   |     1,305 |   |     1,315 |   |       (10) |   |   |   |
|     Other collection fees           |                                                      |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       and reimbursements  |        647                  |   |        636                             |   |        11 |   |   |   |   |        636 |   |        302 |   |      334 |   |   |   |
|   Total medical                                    |     1,443                                  |   |     1,941                                             |   |     (498) |   |      (26) |  %  |   |     1,941 |   |     1,617 |   |      324 |   |        20 |  %  |
|                                                         |                                                      |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                         |                                                      |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Total revenues                                   |  $ 2,062                                             |   |  $ 2,978                                                        |   |  $ (916) |   |      (31) |  %  |   |  $ 2,978 |   |  $ 2,733 |   |  $  245 |   |          9 |  %  |

The Company's revenues from continuing operations for the year ended February 29, 2004 ("2004")  were $2,062,000, a decrease of $916,000 or 31% as compared to the year ended February 28, 2003 ("2003"). The change was  a result of decreases in both the medical and real estate divisions. The Company's revenues from continuing operations for  the year ended February 28, 2003 ("2003") were $2,978,000, an increase of $245,000 or 9% as compared to the year ended  February 28, 2002 ("2002"). The increase was a result of an increase in the medical division, offset by a decrease in  the real estate division.

Revenue in the real estate division decreased by $418,000, to $619,000, in 2004. The decrease in 2004 was due  to a decrease in gain on sale of real estate and interest from mortgages, offset by an increase in other real estate revenue. The  decrease in gain on sale of real estate in 2004 reflects the 2003 recognition of $850,000 of deferred income attributable to the  termination of a contingent obligation related to a sale leaseback. The decrease in interest from mortgages in 2004 was due to a  temporary reduction of the interest rate from the Granby mortgage as consideration for the termination of the contingent  obligation related to a sale leaseback. The increase in other real estate revenue in 2004 was due an increase of $450,000, as a  result of (i) adjustments to amounts due to co-investors of $275,000, offset by $25,000 paid in settlement of a dispute with a  prior co-investor, and (ii) the sale of a townhouse for $200,000 at the Hunter property in February 2004.

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) lack of real estate sales in 2003 as compared to 2002, when  the Company sold the land for eight un-built condominium units for $50,000, offset by (iii) an increase of gain on sale of real  estate of $35,000 in 2003. The increase reflects the 2003 recognition of $850,000 of deferred income attributable to the  termination of a contingent obligation related to a sale leaseback, as compared to the 2002 realization of $745,000 of deferred  income related to the settlement of an outstanding mortgage.

Revenue in the medical division decreased by $498,000, to $1,443,000, in 2004. The decrease in 2004 was due to  decreases in the amount of insurance claims purchased, resulting in a $509,000 decrease in fees, offset by an increase of $11,000  in income from additional collection services. The decrease in earned fees is a result of the Company's restructuring in  February 2004 and the elimination throughout the year of poorly collecting clients, which was used as a way  to be more  selective in the bill purchasing process due to new State insurance department regulations that make collections more difficult.  The increase in the additional collection services in 2004 was due to more successful collections during the first two quarters  of the fiscal year, offset by reductions during the remainder of 2004. The reductions in the later part of 2004 were due to the  Company being less successful in its collection efforts as a result of increased efforts by insurance companies to delay and deny  medical bills. These additional services also generate interest income received from insurance companies for delayed payments on  improperly denied and delayed receivables.

Revenue in the medical division increased by $324,000, to $1,941,000, in 2003. The increase in 2003 was  primarily due to additional collection services that began being provided to new and existing clients. These additional services  also generate interest income received from insurance companies for delayed payments on improperly denied and delayed  receivables.

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

|                                      |  Year ended                    |   |  Year ended                               |
|--------------------------------------|------------------------------------------|--------|-----------------------------------------------------|
|                                      | **February 29,**                         |   | **February 28,**                                    |
|                                      |                                     |   |                                                |   | **Change** |   |   |   |   |   | **Change** |
|                                      | **2004**                                 |   | **2003**                                            |   | **$** |   |  %  |   | **2003** |   | **2002** |   | **$** |   |  %  |
| **Costs and expenses:**              |                                     |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Real estate                   |  $    387            |   |  $    204                       |   |  $  183 |   |        90 |  %  |   |  $    204 |   |  $    254 |   |  $   (50) |   |      (20) |  %  |
|   Medical receivables           |     1,763                 |   |     1,719                            |   |        44 |   |          3 |  %  |   |     1,719 |   |     1,357 |   |      362 |   |        27 |  %  |
|   Bad debt                      |        191 |   |          15 |   |      176 |   |   1,173 |  %  |   |          15 |   |          19 |   |         (4) |   |      (21) |  %  |
|   Corporate expenses            |        392 |   |        356            |   |        36 |   |        10 |  %  |   |        356 |   |        299 |   |        57 |   |        19 |  %  |
|   Depreciation and amortization |        121 |   |          89 |   |        32 |   |        36 |  %  |   |          89 |   |          57 |   |        32 |   |        56 |  %  |
|   Total costs and expenses      |  $ 2,854                            |   |  $ 2,383                                       |   |  $  471 |   |        20 |  %  |   |  $ 2,383 |   |  $ 1,986 |   |  $  397 |   |        20 |  %  |

Costs and expenses in the real estate division increased in 2004 by $183,000 to $387,000. The increase was  primarily due to the $182,000 cost of real estate sold due in 2004 compared to none being sold in 2003. Costs and expenses in the  real estate division decreased in 2003 by $50,000 to $204,000. The decrease was due to a decrease in the amount of properties  sold in 2003, which results in a decrease in the cost of sales, offset by an annual salary increase.

The $44,000 increase in medical receivable expenses in 2004 was primarily due to (i) an increase of   $68,000 in the costs of filing arbitrations against insurance companies on denied and unpaid medical bills, which was a result of  an increase in the amount of arbitrations that were closed in 2004 as compared to 2003 and (ii) an increase of $14,000 in  computer related expenses, due to a reduction in the allocation of capitalized costs, offset by a decrease in postage costs of  $69,000. The decrease in postage expenses in 2004 was due to a less costly method of mailing medical bills and the related  packages to the insurance carriers and a decrease in the quantity of mailings due to the reduction in the amount of bills  purchased.

The $362,000 increase in medical receivable expenses in 2003 was 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 additional collection services that the Company began providing, (ii) other costs that are related to the additional  collection services and (iii) new banking fees that are related to client services.

The $176,000 increase in bad debt expense in 2004 is due to increases of bad debt reserves. The Company may  incur a medical receivable bad debt loss when the portion of a medical claim collected does not exceed the advance (including the  fee charged) given to the client. The increase in bad debt expense is based on an increase in adverse arbitration decisions from  the hearings that were decided during 2004. An increase in the amount of closed arbitration cases has provided management  with a larger base of information to better estimate the reserve for bad debts. Management's decision to increase the  bad debt reserve was based on the overall decrease in the collections rate from the arbitrations that have been closed in the  last half of 2004. Management believes that it will be increasingly more difficult to collect on outstanding receivables, and has  initiated a new program that it believes could increase the collections rate. Management used this information when it made the  decision in February 2004 to eliminate the purchase of additional receivables and change the focus of the operations of the  medical segment to collections and other services. Management had also taken other measures during 2004 to reduce its bad debts,  such as eliminating poorly collecting clients and  reducing the upfront advance percentage that it pays when receivables are  purchased. Management will monitor the results of these efforts as to the effect on collection rates, and whether the reserve for  bad debts is adequate based on actual collections.

The $4,000 decrease in bad debt expense in 2003 was due the Company becoming more selective in the  bill-purchasing process, which results in reduced bad debt losses.

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

The $57,000 increase in corporate expenses in 2003 was primarily due to increases in executive salaries,  accounting fees, director and officer liability insurance and shareholder reporting expenses.

The increase in depreciation and amortization of $32,000 in both 2004 and 2003 was attributable to increased  capital expenditures in the medical financing division, continuing the Company's trend of relying on technology to perform  formerly labor intensive functions.

Net interest expense in 2004 was $91,000, compared to $32,000 in 2003. The increase in 2004 was caused by  additional borrowing due to the amount of time insurance claims receivable are now remaining outstanding as a result of new  regulations that make the collection process more difficult. The collection delays, which are timing issues rather than credit  issues, have caused the Company to increase its borrowings to finance the additional receivables.

Net interest expense in 2003 was $32,000, a decrease of $20,000 from 2002. The decrease in 2003 reflects  interest earned from the collection of the proceeds of the Goshen receivables in 2002 and the partial use of those proceeds to  repay debt that was incurred to finance the purchase of additional medical claims receivable.

Through 2004, the Company had accumulated net operating losses ("NOLs") of $5,328,000 available to  be carried forward through February 28, 2023. In 2004, the Company did not generate any taxable income, as it did in 2003, and  estimated that it would not derive any additional minimum future tax savings in addition to the $90,000 that was estimated in  2003. The Company has taken a 95% valuation allowance of $1,721,000 against the deferred tax asset of $1,811,000 that these NOLs  would generate.

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 ("NOLs") of $4,600,000, available to be carried forward through February  28, 2022. Prior to 2003, the Company had not generated taxable income and had taken a 100% valuation allowance against the  deferred tax asset of $1,571,000 that these NOLs would generate. In 2003, the Company generated taxable income and estimated that  it would derive minimum future tax savings of $90,000 from these NOLs, and recorded a valuation allowance of $1,471,000  against the remainder of the deferred tax asset.  

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

|                                            |  Year ended                                                |   |  Year ended                                                |
|--------------------------------------------|----------------------------------------------------------------------|--------|----------------------------------------------------------------------|
|                                            | **February 29,**                                                     |   | **February 28,**                                                     |
|                                            |                                                                 |   |                                                                 |   | **Change** |   |   |   |   |   | **Change** |
|                                            | **2004**                                                             |   | **2003**                                                             |   | **$** |   |  %  |   | **2003** |   | **2002** |   | **$** |   |  %  |
| **Discontinued operations:**               |                                                                 |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Medical management service fees     |  $ 1,354                                                        |   |  $ 2,282                                                        |   |  $ (928) |   |      (41) |  %  |   |  $ 2,282 |   |  $ 1,433 |   |  $  849 |   |        59 |  %  |
|                                            |                                                                 |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Medical management services         |     1,198                                             |   |     1,902                                             |   |     (704) |   |      (37) |  %  |   |     1,902 |   |     1,261 |   |      641 |   |        51 |  %  |
|   Bad debt                            |        348                             |   |             - |   |      348 |   |           - |  %  |   |             - |   |             - |   |           - |   |           - |  %  |
|   Impairment loss                     |        229                             |   |             - |   |      229 |   |           - |  %  |   |             - |   |             - |   |           - |   |           - |  %  |
|   Depreciation and amortization       |        113                             |   |          69                  |   |        44 |   |        64 |  %  |   |          69 |   |          47 |   |        22 |   |        47 |  %  |
|   Total costs and expenses            |     1,888                                             |   |     1,971                                             |   |       (83) |   |        (4) |  %  |   |     1,971 |   |     1,308 |   |      663 |   |        51 |  %  |
|                                            |                                                                 |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Income (loss) from operations       |      (534)                                       |   |        311                             |   |     (845) |   |   |   |   |        311 |   |        125 |   |      186 |   |   |   |
|   Other income (expense)              |          (9)                 |   |          15                  |   |       (24) |   |   |   |   |          15 |   |            1 |   |        14 |   |   |   |
|   Income (loss) before income taxes   |      (543)                                       |   |        326                             |   |     (869) |   |   |   |   |        326 |   |        126 |   |      200 |   |   |   |
|   Income taxes                        |             - |   |             - |   |           - |   |   |   |   |             - |   |             - |   |           - |   |   |   |
|   Income (loss) from                  |                                                                 |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     discontinued operations |  $  (543)                                                  |   |  $    326                                        |   |  $ (869) |   |   |   |   |  $    326 |   |  $    126 |   |  $  200 |   |   |   |

The decrease in management service fees of $928,000 in 2004 was a result of the decrease in management  services that the Company provided to one of the two finance clients it manages. The decrease in management fees from that client  is related to a decrease in the size of its medical practice. The Company bills for its services based on the amount of expenses  that it incurs on behalf of those practices. If those practices decrease their size, the Company will not incur as much expense,  resulting in a decrease in the amount of service fees. These fees are net of billing adjustments. Management service fees are  billed monthly according to the cost of services rendered to the client. If the assets of the management client, which is also a  finance client, are not enough to satisfy the billed fees, an allowance for billing adjustments is recorded to reduce the  Company's net receivables to an amount that is equal to the assets of the client that are available for payment.

The increase in management service fees of $849,000 in 2003, was a result of the increase in management  services that the Company provides to two of its finance clients. In November 2002, the Company began operating a second MRI  facility, providing management services to a finance client's radiology practices.  In November 2002, the Company also  acquired a 25% equity interest in a third facility that provides management services to the same client. Management fees were  also generated from the management of a finance client's physical therapy practice through October 2002. These fees are net  of billing adjustments.

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

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

The bad debt expense of $348,000 in 2004 reflects increases of bad debt reserves. The Company may incur a  medical management bad debt loss when the assets of the management client, which is also a finance client, are potentially  insufficient to satisfy the billed fees from prior periods. Since the management clients are also finance clients, the bad debt  reserve is a result of the overall decrease in the collections rate from the arbitrations that have been closed in the last half  of 2004. The Company increased the bad debt reserve based on the information that it currently has, because it now believes  receivables available to pay management fees will be lower. The final bad debt expense will ultimately be determined after all  receivables are litigated.

The impairment loss of $229,000 in 2004 is a result of management's estimate as to the excess of the  carrying value of the net assets of the medical management service subsidiaries over the estimated proceeds from their ultimate  sale.

The increase in depreciation expense of $44,000 in 2004 and $22,000 are both a result of the opening of an  additional MRI facility in November 2002 and the continuing upgrades of the MRI machines that the Company owns and utilizes in  providing its management services.

For the reasons described above, the Company recorded a net loss of $1,433,000 in 2004, a decrease of  $2,398,000 from the net income of $965,000 in 2003. For the same reasons, net income increased by $157,000 in 2003 from $808,000  in 2002.

### Liquidity and Capital Resources

The Company's two business activities during the year ended February 29, 2004 resulted in a decrease of  cash in the amount of $230,000. The changes in regulations that caused the increase in the length of the collection cycle of  insurance claims resulted in an increase in the amount of cash needed to purchase medical insurance claims receivable. As a  result of the increase in the collection cycle, the finance clients that are also management clients had less funds available to  pay for management service fees, which then increased the management fee receivable collection cycle. On February 4, 2004, as a  result of the increased collection cycle and the related use of cash, the Company decided to restructure the Medical  Division.

As part of the restructuring, the Company decided to offer for sale the two MRI facilities that the Company  owns and operates, discontinuing the medical management service business. For new prospective clients, the emphasis will be on  less cash-intensive services, such as billing, collections and other management services. The Company is not seeking any new  accounts receivable finance clients and is in the process of eliminating the purchase of additional medical insurance claims. The  funds for its needs are expected to be provided from existing cash and proceeds from the collection of outstanding receivables.  If those sources are insufficient, additional funds may be provided from asset-based borrowing facilities, refinancing of assets  under capital leases, issuance of preferred stock, and the sale of real estate assets.

The real estate division is not expected to be a significant user of cash flow from operations due to the  elimination of carrying costs on the real estate that was sold during prior periods. The Company's real estate assets in  Hunter, New York are owned free and clear of mortgages, except for the construction loan that was used to finance the current  property renovation, which is now complete. Further development of this property, at any significant cost, is expected to be  funded by the issuance of Series B Bonds, other asset-based financing, the sale of the renovated property or the sale of other  property in Hunter.

The Company believes that its present cash resources and the cash available from financing activities will be  sufficient on a short-term basis and over the next 12 months to fund its existing medical financing business, its company-wide  working capital needs, and its expected investments in property and equipment. The Company expects that the reduction in both its  client base and the advances it makes to its existing customers in the medical division will enable funds to be provided  internally and from its financing activities.

The Company's significant sources of financing are from Series A and Series B bonds and construction loan  financing. Both Series A and Series B bonds are issued for 18 month terms and may be redeemed with 60 days written notice in  maximum increments of $50,000. Due to this redemption option, these bonds have been classified as current debt. As provided for  in the debt instruments of the Series A and B bonds, the Company has extended maturity dates as evidenced by formal commitments.  The Company may also refinance amounts that may be requested by bondholders for early redemptions through the issuance of new  bonds. The Company also intends to use proceeds from the projected sale of real estate to repay or prepay debts. The construction  loan is secured by the two remaining townhouses at the Hunter, New York property. Both such townhouse are under contract for sale  and a portion of the proceeds of the first one those sales, if and when the sale closes, will be used to pay the remaining  balance of the construction loan.

Cash used by operations in 2004 was $1,150,000, as compared to $39,000 being provided in 2003. The $1,189,000  increase in cash used by operations in 2004 was due to (i) a change in net income to loss, after adjustments for non-cash items  of depreciation, real estate gains, provision for bad debts and deferred tax benefits, the net of these items totaling  $1,414,000, and (ii) fluctuations in operating assets and liabilities of $30,000, primarily caused by timing differences. These  increases in the use of cash were offset by (i) an increase in collections from the sale of real estate of $200,000, (ii) a  $62,000 reduction in the amount of cash used for real estate held for development or sale, and (iii) fluctuations in net assets  of discontinued operations $122,000.

Cash provided by investing activities was $788,000 in 2004 as compared with $961,000 being used in 2003. The  change in cash from being used in 2003 to being provided in 2004 of $1,749,000 was primarily due to $1,746,000 net increase in  proceeds from the collection of finance receivables. The increase in funds from the collection of receivables of $896,000 in 2004  compared to $847,000 being used in 2003 to purchase receivables was due to the decrease in receivable purchases in 2004 as  compared to the increase in purchases that occurred in 2003. The decrease in receivable purchases in 2004 is a result of the  Company's eliminating poorly collecting clients and plan to reduce and eliminate the purchase of receivables as part of its  plan of restructuring that was implemented in February 2004.

Net cash provided by financing activities was $132,000 in 2004 as compared with the $371,000 provided in 2003.  The $239,000 decrease in cash being provided in 2004 was primarily due to $132,000 of net borrowing in 2004, as compared to  $398,000 of net borrowing in 2003. The proceeds from the additional borrowings in 2004 were used to finance insurance claims  receivable, which are outstanding for a longer period of time as a result of new regulations that create timing issues and make  the collection process more difficult.

The table below summarizes aggregate maturities of future minimum note and lease payments under non-cancelable  operating and capital leases as of February 29, 2004.

|                                     |   |                                                                                                     |   |  Less than                                                                                     |   | 1-3                                                                                                                 |   |  4-5                                                                                                                                            |   |  After 5                                                                                                                                        |
|-------------------------------------|--------|----------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|
|  Contractual Obligations  |   |  Total                                                                                         |   |  1 Year                                                                                        |   |  Years                                                                                                    |   |  Years                                                                                                                                          |   |  Years                                                                                                                                          |
|                                     |   |                                                                                                     |   |                                                                                                     |   |                                                                                                                |   |                                                                                                                                                      |   |                                                                                                                                                      |
|  Notes Payable            |   |  $        1,076,698                                              |   |  $           982,446                              |   |  $             83,376                              |   |  $             10,876                                                                    |   |  $                             -            |
|  Operating Leases         |   |               246,481                   |   |                        85,681 |   |               160,800                              |   |                                 - |   |                                 - |
|  Capital Leases           |   |                        31,571 |   |                        28,008 |   |                          3,563 |   |                                 - |   |                                 - |
|                                     |   |                                                                                                     |   |                                                                                                     |   |                                                                                                                |   |                                                                                                                                                      |   |                                                                                                                                                      |
|  Total                    |   |  $        1,354,750                                              |   |  $        1,096,135                                              |   |  $           247,739                                         |   |  $             10,876                                                                    |   |  $                             -            |

## ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET  RISK

At February 29, 2004, the Company's debt that is sensitive to changes in interest rates includes (i)  Series A bonds of $750,000 maturing through September 2005, (ii) Series B bonds of $200,000 maturing through March 2005, and  (iii) the construction loan of $112,000 maturing the earlier of the sale of the related real estate or July 2008. Interest on  both of the Series A and Series B bonds is calculated at a rate of prime plus 3% but not less than 9% per annum nor more than 15%  per annum. The rate of interest will be adjusted at the end of each calendar quarter. Interest on the construction loan is based  at a rate of prime plus 1.5% but not less than 6.25% per annum nor more than 14% per annum. An interest rate increase would have  a negative impact to the extent that (i) the prime rate rises to above 6% and the Company maintains a balance in either of the  Series A or Series B bonds and (ii) the prime rate rises above 4.75% and the real estate held for sale that is collateral for the  construction loan is not sold. As of February 29, 2004, an increase in the prime rate to 7% would have a maximum negative impact  of approximately $12,000 per annum and each additional 1% increase in the prime rate would have a maximum negative impact of  approximately $11,000 per annum. As of February 28, 2003, an increase in the prime rate to 7% would have had a negative impact of  approximately $15,000 and each additional 1% increase in the prime rate would have had a negative impact of approximately  $13,000.

An interest rate change would not impact the Company's cash flows on the fixed rate bank loan, promissory  note, capital lease obligations, or the mortgage receivable.

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

## ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

None.

**ITEM 9A. CONTROLS AND PROCEDURES**

We maintain disclosure controls and procedures that are designed to ensure that information required to be  disclosed in the Company's Securities Exchange Act reports is recorded, processed, summarized and reported within the time  periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the  Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely  decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management  recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of  achieving the desired control objectives, as ours are designed to do, and management necessarily was required to 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 supervision  and with the participation of our Company's management, including the Chief Executive Officer and the Chief Financial  Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation,  the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective.  Subsequent to the date of this evaluation, there have been no significant changes in the Company's internal controls or in  other factors that could significantly affect these controls, and no corrective actions taken with regard to significant  deficiencies or material weaknesses in such controls.

 

----

# PART III

## ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item is set forth in the Company's definitive proxy statement, which will  be filed with the Securities and Exchange Commission within 120 days of February 29, 2004. Such information is incorporated  herein by reference and made a part hereof.

## ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is set forth in the Company's definitive proxy statement, which will  be filed with the Securities and Exchange Commission within 120 days of February 29, 2004. Such information is incorporated  herein by reference and made a part hereof.

**Code of Ethics**

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

## ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND  MANAGEMENT

The information required by this Item is set forth in the Company's definitive proxy statement, which will  be filed with the Securities and Exchange Commission within 120 days of February 29, 2004. Such information is incorporated  herein by reference and made a part hereof.

## ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is set forth in the Company's definitive proxy statement, which will  be filed with the Securities and Exchange Commission within 120 days of February 29, 2004. Such information is incorporated  herein by reference and made a part hereof.

## ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES

The information required by this Item is set forth in the Company's definitive proxy statement, which will  be filed with the Securities and Exchange Commission within 120 days of February 29, 2004. Such information is incorporated  herein by reference and made a part hereof.

----

# PART IV

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

-  (a) The following documents are filed as part of this report:  1. Consolidated Financial Statements    -  As of February 29, 2004 and February 28, 2003 and for the fiscal years ended February 29,          2004, February 28, 2003 and 2002.      - Report of Holtz Rubenstein & Co., LLP
    - Consolidated Balance Sheets
    - Consolidated Statements of Operations
    - Consolidated Statement of Stockholders' Equity
    - Consolidated Statements of Cash Flows
    - Notes to Consolidated Financial Statements  2. Financial Statement Schedules    -      - Schedule II - Valuation and Qualifying Accounts
    - Schedule III - Real Estate and Accumulated Depreciation
    - Schedule IV - Mortgage Loans on Real Estate  The data required by all other schedules is either included in the consolidated financial statements or is not          required.  3. Reports Filed on Form 8-K:    -  - On July 29, 2003, the Company filed a Current Report on Form 8-K relating to the announcement of the commencement              of discussions with a privately held company seeking to enter into a Letter of Intent whereby it would become a              subsidiary of the Company.
 
  -  
  -  - On August 28, 2003, the Company filed a Current Report on Form 8-K relating to the announcement of the signing of              a Letter of Intent with a privately held company whereby it would become a subsidiary of the Company.
 
  -  
  -  - On February 23, 2004, the Company filed a Current Report on Form 8-K relating to the announcement of the Company              agreeing to commence negotiations with Creative Marketing Group, Inc. ("CMG") to acquire 100% of that              corporation's outstanding capital stock in exchange for shares of common stock of the Company after which the              shareholders of CMG will have a majority ownership.
 
  -  
  -  - On April  9, 2004, the Company filed a Current Report on Form 8-K relating to the announcement of the              signing of an Acquisition Agreement with CMG to acquire 100% of CMG's outstanding capital stock in exchange for              shares of common stock of the Company, after which the shareholders of CMG will have a majority ownership. 

----

### Report of Independent Registered Public  Accounting Firm

The Board of Directors and Shareholders  MFC Development Corp., Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of MFC Development Corp., Inc. and its  subsidiaries as of February 29, 2004 and February 28, 2003 and the related consolidated statements of operations,  stockholders' equity and cash flows for the three years ended February 29, 2004. Our audits also included the consolidated  financial statement schedules listed in the Index at Item 15(a) for the three years ended February 29, 2004. These consolidated  financial statements and consolidated financial statement schedules are the responsibility of the Company's management. Our  responsibility is to express an opinion on these consolidated financial statements and consolidated financial statement schedules  based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material  respects, the consolidated financial position of MFC Development Corp., Inc. and its subsidiaries at February 29, 2004 and  February 28, 2003 and the consolidated results of their operations and their cash flows for the three years ended February 29,  2004 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the  related consolidated financial statement schedules for the three years ended February 29, 2004, when considered in relation to  the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

|                                      |
|-------------------------------------------|
| /s/  HOLTZ RUBENSTEIN & CO., LLP |
| Melville, New York          May 14, 2004  |

----

MFC Development Corp. and Subsidiaries

### Consolidated Balance Sheets

|                                                       |   | **February 29,**                                                                                      |   | **February 28,**                                                                                  |
|-------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------|
|                                                       |   | **2004**                                                                                              |   | **2003**                                                                                          |
|                                                       |   |                                                                                                  |   |                                                                                              |
| **Assets**                                            |   |                                                                                                  |   |                                                                                              |
| Current assets:                                       |   |                                                                                                  |   |                                                                                              |
|   Cash and cash equivalents                      |   | ** $             12,992**            |   |  $           242,608                       |
|   Finance receivables, net                       |   | **           1,453,048**                            |   |            2,540,340                            |
|   Other current assets                           |   | **                60,415** |   |                 79,055 |
|   Assets of discontinued operations              |   | **           1,625,502**                            |   |            1,844,837                            |
| Total current assets                                  |   | **                  3,151,957**                     |   |            4,706,840                            |
|                                                       |   |                                                                                                  |   |                                                                                              |
| Property and equipment:                               |   |                                                                                                  |   |                                                                                              |
|   Property and equipment, at cost                |   | **              784,164**            |   |               668,423            |
|   Less accumulated depreciation and amortization |   | **              434,523**            |   |               313,083            |
|                                                       |   | **                     349,641**     |   |                      355,340     |
|                                                       |   |                                                                                                  |   |                                                                                              |
| Other assets:                                         |   |                                                                                                  |   |                                                                                              |
|   Real estate held for development or sale       |   | **           1,334,384**                            |   |               951,358            |
|   Mortgage and note receivable - related party   |   | **              946,732**            |   |               946,732            |
|   Deferred tax asset, net                        |   | **                90,000** |   |                 90,000 |
|   Other                                          |   | **                30,318** |   |                 25,573 |
| Total other assets                                    |   | **           2,401,434**                            |   |            2,013,663                            |
|                                                       |   |                                                                                                  |   |                                                                                              |
| Total assets                                          |   | ** $        5,903,032**                                       |   |  $        7,075,843                                       |
|                                                       |   |                                                                                                  |   |                                                                                              |
|                                                                                       |   | **February 29,**                                                                                                                                              |   | **February 28,**                                                                                                                                          |
|---------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                       |   | **2004**                                                                                                                                                      |   | **2003**                                                                                                                                                  |
| **Liabilities and Stockholders' Equity**                                          |   |                                                                                                                                                          |   |                                                                                                                                                      |
| Current liabilities:                                                                  |   |                                                                                                                                                          |   |                                                                                                                                                      |
|   Accounts payable and accrued expenses                                          |   | ** $           313,102**                                                                               |   |  $           285,400                                                                               |
|   Current portion of notes payable, including amounts payable to related         |   |                                                                                                                                                          |   |                                                                                                                                                      |
|    parties of $50,000 at February 29, 2004 and $25,000 at February 28, 2003 |   | **           1,008,173**                                                                                    |   |               650,525                                                                    |
|   Income taxes payable                                                           |   | **                         3,355**                                       |   |                   3,507                                              |
|   Liabilities of discontinued operations                                         |   | **              120,097**                                                                    |   |               224,680                                                                    |
| Total current liabilities                                                             |   | **                  1,444,727**                                                                             |   |            1,164,112                                                                                    |
|                                                                                       |   |                                                                                                                                                          |   |                                                                                                                                                      |
| Other liabilities:                                                                    |   |                                                                                                                                                          |   |                                                                                                                                                      |
|   Notes payable                                                                  |   | **                97,452**                                                         |   |               243,117                                                                    |
|   Due to co-investors                                                            |   | **              147,763**                                                                    |   |                                 - |
|   Other                                                                          |   | **                         6,000**                                       |   |                 28,500                                                         |
| Total other liabilities                                                               |   | **              251,215**                                                                    |   |               271,617                                                                    |
|                                                                                       |   |                                                                                                                                                          |   |                                                                                                                                                      |
| 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                                                            |   | **         (1,722,492)**                                                                                              |   |             (289,468)                                                                              |
|                                                                                       |   | **           4,247,728**                                                                                    |   |            5,680,752                                                                                    |
|   Less treasury stock, at cost - 24,947 shares                                   |   | **              (40,638)**                                                                   |   |               (40,638)                                                                   |
|   Total stockholders' equity                                                 |   | **           4,207,090**                                                                                    |   |            5,640,114                                                                                    |
|                                                                                       |   |                                                                                                                                                          |   |                                                                                                                                                      |
| Total liabilities and stockholders' equity                                        |   | ** $        5,903,032**                                                                                               |   |  $        7,075,843                                                                                               |
|                                                                                       |   |                                                                                                                                                          |   |                                                                                                                                                      |

 

*See accompanying notes.*

----

MFC Development Corp. and Subsidiaries

### Consolidated Statements of Operations

|                                                           |  Year ended                                                                                                                             |   |  Year ended                                                                                                                         |   |  Year ended                                                                                 |
|-----------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------|
|                                                           | **February 29,**                                                                                                                                  |   | **February 28,**                                                                                                                              |   | **February 28,**                                                                                      |
|                                                           | **2004**                                                                                                                                          |   | **2003**                                                                                                                                      |   | **2002**                                                                                              |
| **Revenues**                                              |                                                                                                                                              |   |                                                                                                                                          |   |                                                                                                  |
|   Gain on sale of real estate                        | ** $                           -**            |   |  $        850,000                                                                                     |   |  $        815,288                                             |
|   Other real estate                                  | **           449,647**                                                                          |   |                               - |   |              50,000                       |
|   Rental income                                      | **           103,207**                                                                          |   |            103,207                                                                          |   |              99,246                       |
|   Interest from mortgages                            | **             66,260**                                                               |   |              83,755                                                               |   |            152,189                                  |
|   Income from the purchase                           |                                                                                                                                              |   |                                                                                                                                          |   |                                                                                                  |
|     and collections of medical receivables | **        1,194,985**                                                                                          |   |         1,686,558                                                                                          |   |         1,474,386                                                  |
|   Reimbursed expenses                                | **           247,997**                                                                          |   |            254,250                                                                          |   |            142,401                                  |
|   Total revenues                                     | **        2,062,096**                                                                                          |   |         2,977,770                                                                                          |   |         2,733,510                                                  |
|                                                           |                                                                                                                                              |   |                                                                                                                                          |   |                                                                                                  |
| **Costs and expenses**                                    |                                                                                                                                              |   |                                                                                                                                          |   |                                                                                                  |
|   Real estate                                        | **           386,575**                                                                          |   |            204,280                                                                          |   |            253,574                                  |
|   Medical receivables                                | **        1,762,737**                                                                                          |   |         1,719,569                                                                                          |   |         1,357,454                                                  |
|   Bad debt                                           | **           191,147**                                                                          |   |              14,722                                                               |   |              19,190                       |
|   Corporate expenses                                 | **           392,017**                                                                          |   |            355,504                                                                          |   |            299,270                                  |
|   Depreciation and amortization                      | **           121,440**                                                                          |   |              88,840                                                               |   |              56,730                       |
|   Total costs and expenses                           | **        2,853,916**                                                                                          |   |         2,382,915                                                                                          |   |         1,986,218                                                  |
|                                                           |                                                                                                                                              |   |                                                                                                                                          |   |                                                                                                  |
| (Loss) income from operations                             | **          (791,820)**                                                                              |   |            594,855                                                                          |   |            747,292                                  |
|                                                           |                                                                                                                                              |   |                                                                                                                                          |   |                                                                                                  |
| Other income (expense):                                   |                                                                                                                                              |   |                                                                                                                                          |   |                                                                                                  |
|   Interest income                                    | **                              -** |   |                   923                                    |   |                2,976            |
|   Interest expense                                   | **            (90,592)**                                                                   |   |             (32,697)                                                                   |   |             (54,628)                           |
|                                                           | **            (90,592)**                                                                   |   |             (31,774)                                                                   |   |             (51,652)                           |
|                                                           |                                                                                                                                              |   |                                                                                                                                          |   |                                                                                                  |
| (Loss) income from continuing operations before           |                                                                                                                                              |   |                                                                                                                                          |   |                                                                                                  |
|   provision (benefit) for income taxes               | **          (882,412)**                                                                              |   |            563,081                                                                          |   |            695,640                                  |
| Provision (benefit) for income taxes                      | **               7,042**                                                    |   |             (75,876)                                                                   |   |              13,606                       |
| (Loss) income from continuing operations                  | **          (889,454)**                                                                              |   |            638,957                                                                          |   |            682,034                                  |
|                                                           |                                                                                                                                              |   |                                                                                                                                          |   |                                                                                                  |
| (Loss) income from discontinued operations, net of taxes  |                                                                                                                                              |   |                                                                                                                                          |   |                                                                                                  |
|   (including impairment loss of $229,285 in 2004)    | **          (543,570)**                                                                              |   |            326,128                                                                          |   |            126,351                                  |
| Net (loss) income                                         | ** $    (1,433,024)**                                                                                                         |   |  $        965,085                                                                                     |   |  $        808,385                                             |
|                                                           |                                                                                                                                              |   |                                                                                                                                          |   |                                                                                                  |
| (Loss) earnings per common share:                         |                                                                                                                                              |   |                                                                                                                                          |   |                                                                                                  |
|   (Loss) earnings from continuing operations         | ** $             (0.50)**                                                        |   |  $              0.36                                                    |   |  $              0.38            |
|   (Loss) income from discontinued operations         | **                (0.31)**                                             |   |                  0.18                                         |   |                  0.07 |
| Basic and diluted earnings (loss) per common share        | ** $             (0.81)**                                                        |   |  $              0.54                                                    |   |  $              0.45            |
|                                                           |                                                                                                                                              |   |                                                                                                                                          |   |                                                                                                  |
| Number of shares used in computation of basic and         |                                                                                                                                              |   |                                                                                                                                          |   |                                                                                                  |
|   diluted earnings per share                         | **        1,775,053**                                                                                          |   |         1,787,350                                                                                          |   |         1,792,662                                                  |

*See accompanying notes.*

----

MFC Development Corp. and Subsidiaries

### Consolidated Statement of Stockholders' Equity

|                                |                                                                                                   |                                                                     |        |                                                                                                                      |            |                                                                                                                                  |               |                                                                     |                                                                                       |   | **Total**                                                                                                                 |   | **Compre-**                                               |
|--------------------------------|--------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------|-------------|---------------------------------------------------------------------------------------------------------------------------|-----------------|---------------------------------------------------------------------------------------------------------------------------------------|--------------------|--------------------------------------------------------------------------|--------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------|
|                                |                                                                                                   |                                                                     |        | **Additional**                                                                                                            |            |                                                                                                                                  |               |                                                                     |                                                                                       |   | **Stock-**                                                                                                                |   | **hensive**                                               |
|                                | **Common Stock**                                                                                       |                                                                     | **Paid-In** |                                                                                                                      | **Accumulated** |                                                                                                                                  | **Treasury Stock** |                                                                     | **holders'**                                                                           |   | Income                                                                                                                    |
|                                | **Shares**                                                                                             | **Amount**                                                               |        | **Capital**                                                                                                               |            | **Deficit**                                                                                                                           |               | **Shares**                                                               | **Amount**                                                                                 |   | **Equity**                                                                                                                |   | **(Loss)**                                                |
|                                |                                                                                                   |                                                                     |        |                                                                                                                      |            |                                                                                                                                  |               |                                                                     |                                                                                       |   |                                                                                                                      |   |                                                      |
| Balance, February 28, 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**                                                                                          |   |                                                      |
| **Net loss**                   | **                 -** | **            -** |        | **                          -** |            | **    (1,433,024)**                                                                                                    |               | **            -** | **               -** |   | **  (1,433,024)**                                                                                                    |   | ** $   (1,433,024)**                       |
| **Comprehensive loss**         | **                 -** | **            -** |        | **                          -** |            | **                            -** |               | **            -** | **               -** |   | **                          -** |   | ** $   (1,433,024)**                       |
| **Balance, February 29, 2004** | **  1,800,000**                                                                                   | ** $ 1,800**                                                        |        | ** $ 5,968,420**                                                                                                     |            | ** $ (1,722,492)**                                                                                                               |               | **  24,947**                                                        | ** $ (40,638)**                                                                       |   | ** $ 4,207,090**                                                                                                     |   |                                                      |
|                                |                                                                                                   |                                                                     |        |                                                                                                                      |            |                                                                                                                                  |               |                                                                     |                                                                                       |   |                                                                                                                      |   |                                                      |

*See accompanying notes.*

----

MFC Development Corp. and Subsidiaries

### Consolidated Statements of Cash Flows

|                                                                      | **Year Ended**                                                                                                                              |   | **Year Ended**                                                                                                                          |   | **Year Ended**                                                                                                                          |
|----------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
|                                                                      | **February 29,**                                                                                                                            |   | **February 28,**                                                                                                                        |   | **February 28,**                                                                                                                        |
|                                                                      | **2004**                                                                                                                                    |   | **2003**                                                                                                                                |   | **2002**                                                                                                                                |
| **Cash flows from operating activities**                             |                                                                                                                                        |   |                                                                                                                                    |   |                                                                                                                                    |
| Net (loss) income                                                    | ** $   (1,433,024)**                                                                                                         |   |  $        965,085                                                                               |   |  $        808,385                                                                               |
| Adjustments to reconcile net income (loss) to net cash               |                                                                                                                                        |   |                                                                                                                                    |   |                                                                                                                                    |
| (used in) provided by operating activities:                          |                                                                                                                                        |   |                                                                                                                                    |   |                                                                                                                                    |
| Depreciation and amortization                                        | **           121,440**                                                                    |   |              88,840                                                         |   |              56,730                                                         |
| Gain on sale of real estate held for development or sale             | **           (17,741)**                                                                   |   |                              - |   |            (16,376)                                                                   |
| Gain on sale of real estate sold in prior year                       | **                             -** |   |          (850,000)                                                                              |   |          (815,288)                                                                              |
| Gain on adjustments of amounts due to co-investors                   | **         (274,647)**                                                                              |   |                              - |   |                              - |
| Provision for bad debts                                              | **           191,147**                                                                    |   |              14,722                                                         |   |              19,190                                                         |
| Deferred tax benefit                                                 | **                             -** |   |            (90,000)                                                                   |   |                              - |
| Changes in operating assets and liabilities:                         |                                                                                                                                        |   |                                                                                                                                    |   |                                                                                                                                    |
| Collections from sale of real estate held for development or sale    | **           200,000**                                                                    |   |                              - |   |              50,000                                                         |
| Additions to real estate held for development or sale                | **           (70,375)**                                                                   |   |          (132,031)                                                                              |   |            (75,184)                                                                   |
| Prepaid expenses, miscellaneous receivables and other assets         | **             13,895**                                                         |   |            (43,648)                                                                   |   |            331,751                                                                    |
| Net assets of discontinued operations                                | **           114,752**                                                                    |   |              (6,723)                                                        |   |          (964,350)                                                                              |
| Accounts payable, accrued expenses and taxes                         | **             27,550**                                                         |   |            109,572                                                                    |   |          (188,614)                                                                              |
| Other liabilities                                                    | **           (22,500)**                                                                   |   |            (16,500)                                                                   |   |              23,993                                                         |
| Net cash (used in) provided by operating activities                  | **      (1,149,503)**                                                                                              |   |              39,317                                                         |   |          (769,763)                                                                              |
|                                                                      |                                                                                                                                        |   |                                                                                                                                    |   |                                                                                                                                    |
| **Cash flows from investing activities**                             |                                                                                                                                        |   |                                                                                                                                    |   |                                                                                                                                    |
| Capital expenditures and intangible assets                           | **         (108,277)**                                                                              |   |          (143,442)                                                                              |   |          (106,534)                                                                              |
| Finance receivables                                                  | **           896,145**                                                                    |   |          (846,794)                                                                              |   |            198,030                                                                    |
| Principal payments on notes receivable, related party                | **                             -** |   |              29,060                                                         |   |         1,342,518                                                                                    |
| Net cash provided by (used in) provided by investing activities      | **           787,868**                                                                    |   |          (961,176)                                                                              |   |         1,434,014                                                                                    |
|                                                                      |                                                                                                                                        |   |                                                                                                                                    |   |                                                                                                                                    |
| **Cash flows from financing activities**                             |                                                                                                                                        |   |                                                                                                                                    |   |                                                                                                                                    |
| Proceeds of notes payable, including amounts from related parties of |                                                                                                                                        |   |                                                                                                                                    |   |                                                                                                                                    |
|   $25,000 in 2004, $50,000 in 2003 and $150,000 in 2002         | **           400,000**                                                                    |   |            699,168                                                                    |   |            150,000                                                                    |
| Principal payments on notes payable including $270,000 to a related  |                                                                                                                                        |   |                                                                                                                                    |   |                                                                                                                                    |
|   party in 2003 and $538,000 in 2002                            | **         (267,981)**                                                                              |   |          (300,481)                                                                              |   |          (161,098)                                                                              |
| Purchase of treasury stock                                           | **                             -** |   |            (27,339)                                                                   |   |            (13,299)                                                                   |
| Net cash provided by (used in) financing activities                  | **           132,019**                                                                    |   |            371,348                                                                    |   |            (24,397)                                                                   |
|                                                                      |                                                                                                                                        |   |                                                                                                                                    |   |                                                                                                                                    |
| Net increase (decrease) increase in cash and cash equivalents        | **         (229,616)**                                                                              |   |          (550,511)                                                                              |   |            639,854                                                                    |
| Cash and cash equivalents, beginning of year                         | **           242,608**                                                                    |   |            793,119                                                                    |   |            153,265                                                                    |
|                                                                      |                                                                                                                                        |   |                                                                                                                                    |   |                                                                                                                                    |
| Cash and cash equivalents, end of year                               | ** $          12,992**                                                                    |   |  $        242,608                                                                               |   |  $        793,119                                                                               |
|                                                                      |                                                                                                                                        |   |                                                                                                                                    |   |                                                                                                                                    |
| **Additional cash flow information**                                 |                                                                                                                                        |   |                                                                                                                                    |   |                                                                                                                                    |
| Interest paid                                                        | ** $          90,592**                                                                    |   |  $          35,179                                                                    |   |  $          54,478                                                                    |
| Income taxes paid                                                    | ** $            6,611**                                                         |   |  $          13,058                                                                    |   |  $          18,097                                                                    |
|                                                                      |                                                                                                                                        |   |                                                                                                                                    |   |                                                                                                                                    |
| **Non-cash investing and financing activities**                      |                                                                                                                                        |   |                                                                                                                                    |   |                                                                                                                                    |
| Assets acquired under capital leases                                 | ** $            7,464**                                                         |   |  $          19,486                                                                    |   |  $          59,012                                                                    |
| Disbursement of construction loan                                    | ** $          72,500**                                                                    |   |  $        145,000                                                                               |   |  $                   -                   |
|                                                                      |                                                                                                                                        |   |                                                                                                                                    |   |                                                                                                                                    |

*See accompanying notes.*

----

MFC Development Corp. and Subsidiaries

### Notes to Consolidated Financial Statements

#### 1. Organization of 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., formerly FRM Nexus, Inc.  ("FRM or Nexus"). All of FRM's assets and liabilities were transferred to MFC on August 31, 2000, except for  $10,000. Because such entities are under common control, this transaction has been accounted 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 Delaware as 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 share to 2,000,000 shares preferred stock, par value $.001 per share and  40,000,000 shares common stock, par value $.001 per share. The Board of Directors is authorized to provide at anytime for the  issuance of MFC 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

##### Business Activities of the Company

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

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 or sale, and holds a mortgage on a real estate parcel in Connecticut.

The medical financing business is conducted through Medical Financial Corp., a wholly owned subsidiary, which  (i) purchases insurance claims receivables from medical practices and provides certain services to those practices; and (ii)  three other subsidiaries were formed to provide additional management services to certain medical practices. On February 4, 2004,  the Company decided to restructure the medical financing segment. The plan of restructuring calls for (i) the purchase of  insurance claims receivables from medical practices to be discontinued, (ii) the sale of the assets of the three subsidiaries  that were formed to provide additional management services to certain medical practices, and (iii) focus the operations of the  medical segment on collections and other services. As a result of this decision, management services has been reclassified as  discontinued operations and prior periods have been restated.

In addition to the two operating divisions of the Company, a new division, Capco, was formed during 2000.  Capco, which had never conducted the business for which it was formed, was also discontinued on February 4, 2004.

##### Principles of Consolidation

The consolidated financial statements include the accounts of the Company and all of its subsidiaries  (hereinafter also referred to as the "Company"). All significant intercompany accounts and transactions have been  eliminated in consolidation.

#### 3. Significant Accounting Policies

##### Revenue Recognition

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

*Purchase and Collection of Medical Insurance Claims Receivables.* Medical Financial Corp., a wholly  owned subsidiary of the Company purchases insurance claims receivable from medical practices and provides collection services to  those practices. The Company charges a fee (purchase discount) upon the purchase of those receivables, which compensates the  Company for the advance payment that is paid to the client and for the collection services rendered to collect the receivables.  The Company also charges additional fees for other services, such as a percentage of collections when the receivables need to be  litigated when the insurance companies improperly delay payment or deny claims. The insurance companies also pay interest on late  payments, and reimbursements for litigation filing fees and attorney's fees on cases that they lost. The Company also charges  its clients interest if the advance payment and purchase discount ("Funding Balance") on purchased receivables have not  been fully collected after the contractual collection period, usually 180 days.

*Purchase Discount.* The purchase discount is deferred and recognized over the contractual collection  period in proportion to the costs of collection. The deferred income is netted against finance receivables (see note 5). The  Company is not entitled to interest on unpaid Funding Balances within the contractual collection period. Through June 1, 2001,  income was recognized on a pro-rata basis as the related net collectible value of the receivables were collected. The Company  incurs most of its expenses at the beginning of the contractual collection period, while collections vary throughout the period.  Effective June 1, 2001, the Company determined that income would be more accurately reflected if the related costs of collection  were used as a basis for determining the timing of revenue recognition over the contractual period since the Company is entitled  to this fee whether or not the receivables are collected. The total amount of revenue during the contractual period remains the  same under both methods. As a result of the modification as to the timing of revenue recognition, an additional $120,000 was  included in revenue during the year ended February 28, 2002.

*Other Collection Fees.* The Company charges some of its clients an additional collection fee on the  proceeds from collections on cases that required a legal action to receive payment. No revenue is recorded on unresolved cases,  which represent a gain contingency. Revenue is recorded when the proceeds from collections are received by the Company.

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

*Reimbursed Expenses.* The Company is reimbursed by insurance companies for statutory legal fees and  the cost of filing on cases when the insurance companies have lost legal actions. The Company is reimbursed by its clients for  the costs of postage and lock box charges that are incurred on the clients' behalf. Income from reimbursed expenses from  insurance companies is recorded when the amount is determinable. Income from reimbursed expenses from clients is recorded when  the amounts are known and if management estimates that the amounts are collectible.

##### Receivables

###### Mortgages and  Notes Receivable

Mortgages and notes receivable result from the sale of real estate. These receivables bear interest and are  recorded at face value, less unamortized discount.

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

###### Finance  Receivables

The Company purchases the net collectible value of medical insurance claims on a limited recourse basis. Net  collectible value is the amount that the insurance companies will pay based on established fee schedules used by insurance  companies. The net collectible value is often less than the face value of the claim due to the difference in billing rates  between the established fee schedules and what the medical practice ordinarily would bill for a particular procedure. The Company  is only responsible to collect the fee scheduled amount. If any amounts are collected in excess of the purchased amount and the  Company's fee, that amount will be applied to the client's loan balance. Finance receivables are reported at their  outstanding unpaid principal balances, reduced by any charge-off or valuation allowance and net of unearned revenues. The  recourse basis is limited to the extent any receivables purchased by the Company are disputed. Such receivables are deemed to be  invalid and are substituted or repaid at the end of the contractual period. The Company is still entitled to the collection of  its fees 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 principals of 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 companies because of denials, requests  for additional information not readily available, or a matter under investigation within 180 days of the purchase date.

In addition to the right to return the invalid receivables to the Seller, the Company has the right to offset  any of its obligations to the Seller by any invalid receivables. As a result of the right of return and right of offset features,  the Company believes that a valuation allowance generally is not required for these receivables.

*Impairment Assessment.* Management's periodic evaluation of the adequacy of the allowance for loan  losses is based on the Company's past loan loss experience, known and inherent risks in the portfolio, adverse situations  that may affect the customer's ability to repay, the estimated value of any underlying collateral and current economic  conditions.

##### Depreciation and Amortization

Depreciation of property and equipment is provided by application of the straight-line method over estimated  useful lives as follows:

| Furniture and fixtures                         | 7 years   |
|------------------------------------------------|-----------|
| Computer, medical and transportation equipment | 3-5 years |

Amortization of leasehold improvements is provided by the application of the straight-line method over the  shorter of their estimated useful lives or the terms of the related leases and range from three to six years.

##### Real Estate Held for Development or Sale

Properties are carried at the lower of acquisition cost or market, less the costs to sell. The methods for  valuing property and mortgages where current appraisals are unobtainable are based on management's best judgments regarding  the economy and market trends. As a result, estimates may change based on ongoing evaluation of future economic and market  trends. Such judgments are based on management's knowledge of real estate markets in general and of sale or rental prices of  comparable properties in particular.

##### Leases

Leases which transfer substantially all of the risk and benefits of ownership are classified as capital  leases, and assets and liabilities are recorded at amounts equal to the lesser of the present value of the minimum lease payments  or the fair value of the leased properties at the beginning of the respective lease terms. Such assets are amortized in the same  manner as owned assets are depreciated. Interest expenses relating to the lease liabilities are recorded to effect constant rates  of interest over the terms of the leases. Leases which do not meet such criteria are classified as operating leases and the  related rentals are charged to expense as incurred.

##### Income Taxes

Deferred income taxes are recognized for all temporary differences between the tax and financial reporting  bases of the Company's assets and liabilities based on enacted tax laws and statutory tax rates applicable to the periods in  which the differences are expected to affect taxable income.

##### Earnings per Share

Earnings per common share for each of the three years ended February 29, 2004, is calculated by dividing net  income by weighted average common shares outstanding during the period. The effect of outstanding stock options on earnings per  share does not have a material effect in calculation of earnings per share during any of the periods presented.

##### Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid, short-term  investments with an original maturity of three months or less to be cash equivalents.

##### Concentration of Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist  principally of cash, money market mutual funds, commercial paper and trade and notes receivable.

Finance receivables arise from the purchase from medical providers in the New York City area of their  insurance claims from various insurance companies. February 29, 2004, fees earned from three medical providers were 23%, 20% and  18% of earned fees. For the year ended February 28, 2003, fees earned from five medical providers were 20%, 18%, 12%, 11% and 10%  of earned fees. For the year ended February 28, 2002, fees earned from four medical providers were 18%, 16%, 14% and 12% of  earned fees. As of February 29, 2004, claims receivable from one insurance company comprised 23% of total finance receivables. As  of February 28, 2003, claims receivable from two insurance companies comprised 13% and 15% of total finance receivables.

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

##### Advertising Costs

The Company expenses the cost of advertising as incurred. For the years ended February 29, 2004, February 28,  2003 and 2002, advertising expense totaled approximately $1,000, $4,000, and $1,000.

##### Fair Value of Financial Instruments

The following disclosure of the estimated fair value of financial instruments is made in accordance with the  requirements of Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial  Instruments". The estimated fair values of financial instruments have been 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  Company could realize in a sale.

The carrying amounts and estimated fair values of financial instruments approximated their carrying values for  all periods presented.

##### Use of Estimates

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

##### Stock Based Compensation

As allowed by SFAS 123, "Accounting for Stock-Based Compensation," the Company has elected to  continue to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25), in  accounting for its stock option grants to board members. Under APB 25, the Company does not recognize compensation expense upon  the issuance of its stock options because the option terms are fixed and the exercise price equals the market price of the  underlying stock on the grant date. The Company has determined that utilizing the fair value method of SFAS 123 would have an  immaterial effect on its results of operations for all periods presented.

##### Effects of New Accounting Pronouncements

Effective January 1, 2003, the Company adopted SFAS No. 146, "Accounting for Costs Associated  with Exit or Disposal Activities." SFAS No. 146 addresses financial accounting and reporting for costs associated with  exit or disposal activities and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability  Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a  Restructuring)". SFAS No. 146 requires that a liability for a cost associated with an exit or disposal plan be  recognized when the liability is incurred. Under SFAS No. 146, an exit or disposal plan exists when the following criteria  are met:  

> 
Management, having the authority to approve the action, commits to a plan of termination.

The plan identifies the number of employees to be terminated, their job classifications or functions and    their locations, and the expected completion date.

The plan establishes the terms of the benefit arrangement, including the benefits that employees will    receive upon termination (including but not limited to cash payments), in sufficient detail to enable employees to determine    the type and amount of benefits they will receive if they are involuntarily terminated.

Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will    be made or that the plan will be withdrawn.

SFAS No. 146 establishes that fair value is the objective for initial measurement of the liability. In  cases where employees are required to render service beyond a minimum retention period until they are terminated in order to  receive termination benefits, a liability for termination benefits is recognized ratably over the future service period. Under  EITF Issue No. 94-3, a liability for the entire amount of the exit cost was recognized at the date that the entity met the  four criteria described above.

Effective March 1, 2003, the Company adopted the recognition and measurement provisions of Financial  Accounting Standards Board ("FASB") Interpretation No. 45 ("Interpretation 45"), "Guarantor's  Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". This  interpretation elaborates on the disclosures to be made by a guarantor in interim and annual financial statements about the  obligations under certain guarantees. Interpretation 45 also clarifies that a guarantor is required to recognize, at the  inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial  recognition and initial measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued  or modified after December 31, 2002. The Company does not currently provide significant guarantees on a routine basis. As a  result, this interpretation has not had a material impact on our financial statements.

In December 2003, the FASB issued FASB Interpretation No. 46 (revised December 2003)  ("Interpretation 46"), "Consolidation of Variable Interest Entities". Application of this interpretation  is required in the Company's financial statements for the year ended February 29, 2004. Interpretation 46 addresses  the consolidation of business enterprises to which the usual condition (ownership of a majority voting interest) of consolidation  does not apply. This interpretation focuses on controlling financial interests that may be achieved through arrangements that do  not involve voting interests. It concludes that in the absence of clear control through voting interests, a company's  exposure (variable interest) to the economic risks and potential rewards from the variable interest entity's assets and  activities are the best evidence of control. If an enterprise holds a majority of the variable interests of an entity, it would  be considered the primary beneficiary. The primary beneficiary is required to include assets, liabilities and the results of  operations of the variable interest entity in its financial statements. The Company determined that it does not have any  arrangements or relationships with special-purpose entities.

#### 4. Real Estate Activities

##### Mortgage and Note Receivable - Related Party

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

|                                                        |  February 29,                                                         |   |  February 28,                                                     |
|--------------------------------------------------------|---------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|
|                                                        |  2004                                                                 |   |  2003                                                             |
|                                                        |                                                                            |   |                                                                        |
|  Granby, Connecticut (Real Estate Operator)  | ** $           946,732** |   |  $           946,732 |

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

|  Year ending February 28,  |                                                                                                                                                      |
|--------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|
|  2005                      |  $                             -            |
|  2006                      |                                 - |
|  2007                      |                        31,549                                                  |
|  2008                      |                        37,508                                                  |
|  2009                      |                        41,026                                                  |
|  Thereafter                |               836,649                                                                    |
|                                      |  $           946,732                                                                               |

As of February 29, 2004 and February 28, 2003, this mortgage receivable was performing.

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

The owner of the property is a limited liability company, 24% owned by Lester Tanner's daughter. Lester  Tanner is a shareholder, director and president of the Company. Interest income from this note for the years ended February 29,  2004, February 28, 2003 and 2002 was $66,000, $84,000 and $89,000.

##### Real Estate Held for Development or 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, New York. This property  includes approximately 65 acres of undeveloped land, a hotel site, a clubhouse with a recreational facility, the remaining two  unsold units of three townhouses that were converted from an office building during fiscal 2004 and 2003, and a sewage treatment  plant that serves the development. This property was acquired through foreclosure and was written down to its fair market value.  The net proceeds of any sales of this property will be allocated 65% to the Company and 35% to co-investors, after deducting the  cost of carrying all of the Hunter 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 property of the renovation of a  vacant office building into three townhouse units. A construction loan in the amount of $290,000 was obtained, which is secured  by the Hunter property. One of the completed units was sold in February 2004 for $200,000, of which $170,000 of the proceeds  was used to reduce the construction loan. The balance of the construction loan at February 29, 2004 was $112,000. The Company is  capitalizing interest and loan acquisition costs during the construction period. For the years ended February 29, 2004 and  February 28, 2003, $16,000 and $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 treatment facility at  the Hunter property, which is located in the New York City ("NYC") watershed area. NYC has modified the environmental  regulations for the watershed area to ensure clean drinking water is available to its residents. NYC entered into an agreement  with HPCC to bring the facility in compliance with the new regulations. Under the terms of the agreement, NYC has agreed to  reimburse HPCC for all costs incurred with the upgrade of the facility and a portion of the additional costs incurred to operate  the upgraded facility. During the years ended February 29, 2004, February 28, 2003 and 2002, HPCC has incurred costs and has been  reimbursed by NYC for amounts approximating $394,000, $1,448,000 and $116,000. The costs and reimbursements have been netted in  the accompanying balance sheet.

##### Due to Co-investors

Amounts payable to co-investors on property that has not yet been sold are included in real estate held for  development or sale, as reductions to the asset. Amounts payable to co-investors on property that has previously been sold, and  is subject to the final collection of a mortgage note receivable, are recorded as liabilities.

##### Sale of Real Estate, Granby, Connecticut

The Company had sold an office building in East Granby, Connecticut during fiscal 1996 and leased back a  portion of the space, which was then subleased to a third party through August 31, 2002. The Company remained obligated on its  leaseback for a 42 month period from September 1, 2002 through February 28, 2006 (the Vacancy Period) for monthly rentals of  $31,062. As a result, $850,000 of the gain recorded on the sale in 1996, representing the present value of the monthly rental for  42 months, was deferred. In fiscal 1998, Northwest Management Corp. ("NWM"), a shareholder of the Company signed an  agreement to indemnify the Company for any payments made during the Vacancy Period in consideration for keeping any rentals from  a new sublease which might be obtained during the Vacancy Period in excess of $31,062 per month. The president of NWM, Lester  Tanner, also a shareholder, director and president of the Company, has the power to vote NWM shares, which are owned by his two  children. From September 1, 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 1996 leaseback, when NWM provided  a substitute lease for the Vacancy Period at $31,062 per month, which was accepted 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 to 7% per annum, the interest rate on the second mortgage that the Company holds on the property for the period  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 the fiscal year ending February 28, 2003.

##### Sale of Real Estate, Goshen, New York

During fiscal years 1997 and 1996, the Company sold real estate in Goshen, New York for $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 is an officer, director and shareholder. Mr. Schutz is also a  shareholder of MFC and FRM and was a director of FRM until May 1999.

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

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

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

##### Other Real Estate Revenue

Other real estate revenue for the years ended February 29, 2004, February 28, 2003 and 2002 are as  follows:

|                                                                            |  Year ended                                        |   |  Year ended                                                                                                                         |   |  Year ended                                                                                                                         |
|----------------------------------------------------------------------------|--------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                            |  February 29,                                      |   |  February 28,                                                                                                                       |   |  February 28,                                                                                                                       |
|                                                                            |  2004                                              |   |  2003                                                                                                                               |   |  2002                                                                                                                               |
|                                                                            |                                                         |   |                                                                                                                                          |   |                                                                                                                                          |
|  Gross sales of real estate held for development or        sale  | ** $      200,000**            |   |  $                           -            |   |  $          50,000                                                                          |
|  Net gain on adjustment to co-investors                     | **         249,647** |   |                               - |   |                               - |
|                                                                            |                                                         |   |                                                                                                                                          |   |                                                                                                                                          |
|  Total other real estate revenue                                 | ** $      449,647**            |   |  $                           -            |   |  $          50,000                                                                          |

The net proceeds of any sales of the Hunter, New York property will be allocated 65% to the Company and 35% to  co-investors, after deducting the cost of carrying all of the Hunter properties. Upon payment in full of the Granby mortgage  note, co-investors will share in the positive cash flow from the collections of the note, after deducting costs and expenses of  carrying and developing the related property. During fiscal 2004, the Company paid $25,000 in settlement of a dispute with a  prior co-investor and the Company reevaluated balances owed to the current co-investors as a result of the current development at  the Hunter property. Accordingly, amounts payable to all co-investors were adjusted, resulting in a net gain of $249,647.

In May 2001, the land for four unbuilt condominium units in Hunter, New York was sold to a related party,  Eastern Mountain Properties, LLC, which is 45% owned by Dr. Anne-Renne Testa, who is the wife of Lester Tanner, a director,  president and shareholder of the Company. The parcel of land was sold for $50,000, which approximated the fair market value of  the property, 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 this property.

#### 5. Finance Receivables, Net

Medical Financial Corp., a wholly owned subsidiary of the Company purchases insurance claims receivable from  medical practices and provides collection services to those practices. The Company charges a fee (purchase discount) upon the  purchase of those receivables, which compensates the Company for the advance payment that is paid to the client and for the  collection services rendered to collect the receivables. The Company also charges additional fees for other services, such as a  percentage of collections when the receivables need to be litigated when the insurance companies improperly delay payment or deny  claims. The insurance companies also pay interest on late payments, and reimbursements for litigation filing fees and  attorney's fees on cases that they lost. The Company also charges its clients interest if the advance payment and purchase  discount on purchased receivables are not collected or offset in full after the contractual collection period, usually 180  days.

Net finance receivables consist of the following:

|                                         | **February 29,**                                                                                    |   | **February 28,**                                                                         |
|-----------------------------------------|-----------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------|
|                                         | **2004**                                                                                            |   | **2003**                                                                                 |
|  Gross finance receivables    | ** $          2,783,846**                         |   |  $          4,902,950                  |
|  Allowance for credit losses  | **                     (455,432)** |   |               (264,285) |
|  Deferred finance income      | **                     (101,290)** |   |               (223,390) |
|                                         | **                    2,227,124**       |   |              4,415,275       |
|  Due to finance customers     | **                     (774,076)** |   |            (1,874,935)                 |
|  Net finance receivables      | ** $          1,453,048**                         |   |  $          2,540,340                  |

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

The Company may incur a finance receivable bad debt loss when the portion of a medical claim collected does  not exceed the advance (including the fee charged) given to the client. The increase in bad debt expense that occurred during the  year ended February 29, 2004 is based on an increase in adverse arbitration decisions from the hearings that were decided on  during the last several months. An increase in the amount of closed arbitration cases has provided management with a larger base  of information to better estimate the reserve for bad debts. Management's decision to increase the bad debt reserve was based  on the overall decrease in the collections rate from the arbitrations that have been closed in the last few months. Management  believes that it will be increasingly more difficult to collect on outstanding receivables, and has initiated a new program that  it believes could increase the collections rate. Management has also taken other measures to reduce its bad debts, such as  eliminating poorly collecting clients and  reducing the upfront advance percentage that it makes when receivables are  purchased. Management will monitor the results of these efforts as to the effect on collection rates, and whether the reserve for  bad debts is adequate based on actual collections.

From the date the Company purchases insurance claims receivable from medical practices and the advance payment  is made to the client, the Company has 180 days to collect or determine that the bills were invalid as contractually defined. If  the Company collects the advance payment and fee, all additional amounts, if any, that are collected are given to the client.  While by contract, the Company considers these receivables invalid, in reality, for reasons outside of the Company's control,  such as the customer being able to provide additional information to overturn a denial, the receivables will get paid and are  then not uncollectible. The collections from these written-off receivables are the same collections that may be used as an offset  to other obligations that the Company may have with the client. Recoveries from these written-off receivables are paid to the  customer or used as an offset, when necessary. As of February 29, 2004, there were approximately $3,995,000 of receivables that  were outside of the contractual collection period, written-off, but are still collectible and historically, collected in  significant amounts and were used to offset other obligations from the client to the Company. The write-offs and recoveries are a  balance sheet item only, and do not affect the income statement. The income statement would only be affected if any part of the  advance payment or fee was not collected in the 180 day period. For that situation, a reserve has been established.

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

Detail of income from the purchase and collection of medical receivables and medical receivable costs and  expenses were as follows:

|                                                             |  Year ended                                                                                 |   |  Year ended                                                                                             |   |  Year ended                                                                      |
|-------------------------------------------------------------|-------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------|
|                                                             |  February 29,                                                                               |   |  February 28,                                                                                           |   |  February 28,                                                                    |
|                                                             |  2004                                                                                       |   |  2003                                                                                                   |   |  2002                                                                            |
|                                                             |                                                                                                  |   |                                                                                                              |   |                                                                                       |
|  Revenues                                         |                                                                                                  |   |                                                                                                              |   |                                                                                       |
|  Purchase discounts                               | ** $        674,285**                                         |   |  $     1,304,648                                                                         |   |  $     1,081,055                                                  |
|  Earned (deferred) purchase discounts             |                                                                                                  |   |                                                                                                              |   |                                                                                       |
|     from current and prior months       | **           122,100**                              |   |                          841 |   |            233,505                       |
|  Earned purchase discounts                        | **           796,385**                              |   |         1,305,489                                                              |   |         1,314,560                                       |
|  Other collection fees                            | **           111,485**                              |   |              97,057                                   |   |              13,604            |
|  Interest income from insurance companies         | **           268,010**                              |   |            245,104                                              |   |            104,610                       |
|  Interest income from clients                     | **                    15,105**            |   |              32,408                                   |   |              32,262            |
|  Closing fees                                     | **                      4,000** |   |                6,500                        |   |                9,350 |
|                                                             |                                                                                                  |   |                                                                                                              |   |                                                                                       |
|  Total income from the purchase and               |                                                                                                  |   |                                                                                                              |   |                                                                                       |
|     collections of medical receivables  | ** $     1,194,985**                                                         |   |  $     1,686,558                                                                         |   |  $     1,474,386                                                  |
|                                                             |                                                                                                  |   |                                                                                                              |   |                                                                                       |
|  Reimbursed expenses                              |                                                                                                  |   |                                                                                                              |   |                                                                                       |
|  Reimbursed attorney and filing fees              | ** $        186,469**                                         |   |  $        139,444                                                         |   |  $          48,018                       |
|  Reimbursed expenses - postage                    | **                    30,317**            |   |              80,032                                   |   |              92,466            |
|  Reimbursed expenses - bank lock box fees         | **                    31,211**            |   |              34,774                                   |   |                1,917 |
|                                                             |                                                                                                  |   |                                                                                                              |   |                                                                                       |
|  Total reimbursed expenses                        | ** $        247,997**                                         |   |  $        254,250                                                         |   |  $        142,401                                  |
|                                                             |                                                                                                  |   |                                                                                                              |   |                                                                                       |
|                                                             |                                                                                                  |   |                                                                                                              |   |                                                                                       |
|  Costs and expenses                               |                                                                                                  |   |                                                                                                              |   |                                                                                       |
|  Employment costs                                 | ** $     1,238,840**                                                         |   |  $     1,246,733                                                                         |   |  $     1,029,234                                                  |
|  Occupancy costs                                  | **                    82,233**            |   |              80,115                                   |   |              81,976            |
|  Litigation filing fees                           | **           127,418**                              |   |              58,622                                   |   |              15,560            |
|  Lock box and other bank fees                     | **                    75,377**            |   |              77,446                                   |   |                7,853 |
|  Technology support                               | **                    28,565**            |   |              15,008                                   |   |              21,517            |
|  Accounting and legal                             | **                    14,000**            |   |              13,739                                   |   |              14,570            |
|  Office supplies and equipment rental             | **                    42,199**            |   |              34,479                                   |   |              33,774            |
|  Postage                                          | **                    40,005**            |   |            108,782                                              |   |              83,168            |
|  Telephone                                        | **                    37,557**            |   |              37,743                                   |   |              32,836            |
|  Other costs                                      | **                    76,543**            |   |              46,902                                   |   |              36,966            |
|                                                             |                                                                                                  |   |                                                                                                              |   |                                                                                       |
|  Total medical receivable expenses                | ** $     1,762,737**                                                         |   |  $     1,719,569                                                                         |   |  $     1,357,454                                                  |

#### 6. Property and Equipment

Property and equipment consists of the following:

|                                                  |  February 29,                                                                                      |   |  February 28,                                                                                  |
|------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------|
|                                                            |  2004                                                                                              |   |  2003                                                                                          |
|  Leasehold improvements                          | ** $                    56,386**            |   |  $             56,386                   |
|  Computer equipment & software               | **                     614,161**            |   |               438,513                   |
|  Equipment under capital leases                  | **                       85,962** |   |               145,869                   |
|  Other equipment and furniture                   | **                       27,655** |   |                        27,655 |
|                                                            | **                     784,164**            |   |               668,423                   |
|  Less accumulated depreciation and amortization  | **                     434,523**            |   |               313,083                   |
|  Property and equipment, net                     | ** $           349,641**                              |   |  $           355,340                              |

As of February 29, 2004 and February 28, 2003, accumulated amortization of equipment under capital leases was  $28,489 and $70,845.

For the years ended February 29, 2004, February 28, 2003 and 2002, depreciation expense, which includes  amortization under capital leases, was $121,440, $88,440 and $56,730.

#### 7. Notes Payable

Notes payable include the following:

|                                       | **February 29,**                                                                                                         |   | **February 28,**                                                                                                     |
|---------------------------------------|--------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------|
|                                       | **2004**                                                                                                                 |   | **2003**                                                                                                             |
|  Series A Bonds             | ** $                    750,000**                       |   |  $             575,000                              |
|  Series B Bonds             | **                       200,000**            |   |                          25,000 |
|  Bank loans                 | **                       126,698**            |   |                        240,472            |
|  Capital lease obligations  | **                         28,927** |   |                          53,170 |
|                                       | **                    1,105,625**                            |   |                        893,642            |
|  Less current maturities    | **                    1,008,173**                            |   |                        650,525            |
|  Long-term debt             | ** $                      97,452**            |   |  $             243,117                              |

*Series A Bonds:* In July 2002, the board of directors authorized the Company to issue an aggregate of  $750,000 of Series A Bonds ("Bonds") in $25,000 increments to finance additional growth of the medical division. There  were $750,000 of Bonds outstanding at February 29, 2004. Each Bond matures eighteen months after the issue date and may be  extended for additional six month periods by mutual consent of the Company and the individual bondholders. Interest is payable  monthly, and is calculated at a rate of prime plus 3% but not less than 9% per annum nor more than 15% per annum. The rate of  interest will be adjusted at the end of each calendar quarter. The rate of interest as of February 29, 2004 was 9%. Monthly  interest-only payments are due through maturity. The Bonds may only be prepaid on 120 days prior written notice. The Company, at  the option of the bondholders, may be required to prepay on 60 days prior written notice, up to an aggregate of $50,000 per  bondholder per 60 day period. The Company may not issue more than $100,000 of Bonds to each bondholder. A director, officer and  shareholder of the Company is related to six of the bondholders. Two other directors-shareholders, each hold a $25,000 bond, and  they are both related to two other bondholders.

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

*Series B Bonds:* In February 2003, the board of directors authorized the Company to issue an aggregate  of $450,000 of Series B Bonds ("Bonds") in $25,000 increments to finance the development of the real estate in Hunter,  New York and elsewhere, except for $25,000, which may be used by the and February ,  Company for the purchase of additional  shares of its common stock and $200,000 for working capital. There were $200,000 of Bonds outstanding at February 29, 2004, one  of which was held by NWM Capital, LLC., a related party that is owned by an officer, director and shareholder of the Company.  Another director, officer and shareholder of the Company is related to two of the bondholders. Each Bond matures eighteen months  after the issue date and may be extended for additional six month periods by mutual consent of the Company and the individual  bondholders. Interest is payable monthly, and is calculated at a rate of prime plus 3% but not less than 9% per annum nor more  than 15% per annum. The rate of interest will be adjusted at the end of each calendar quarter. The rate of interest as of  February 29, 2004 was 9%. Monthly interest only payments are due through maturity. The Bonds may only be prepaid on 120 days  prior written notice. The Company, at the option of the bondholders, may be required to prepay on 60 days prior written notice,  up to an aggregate of $50,000 per bondholder per 60 day period. The Company may not issue more than $100,000 of Bonds to each  bondholder.

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

*Bank Loan - Construction:* In October 2002, the Company obtained a $290,000 construction loan to be  used for development at its Hunter, New York property. The balance of the loan at February 29, 2004 and February 28, 2003 was  $111,953 and $217,500. The terms of the loan call for monthly payments of interest through June 1, 2003, at which time it  converted into a term loan with monthly payments of principal and interest that 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 guaranteed by Lester Tanner, who is a director, shareholder and President of the Company. There were  $2,900 of commitment fees paid in connection with this loan.

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

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

Interest expense on related party borrowings for the years ended February 29, 2004, February 28, 2003 and 2002  was $5,250, $9,950 and $50,305.

*Capital Lease Obligations.* The Company has acquired certain equipment under various capital leases  expiring in 2007. The leases provide for monthly payments of principal and interest of $3,280 and have been capitalized at  imputed interest rates of 14.37% to 19.12%.

Aggregate maturities of the amount of notes payable and capital leases at February 29, 2004 are as  follows:

|                                          |                                                                                                                                                                        |   | **Capital**                                                                                                                                                                 |   |                                                                                                                            |
|------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------|
|                                          | **Notes**                                                                                                                                                                   |   | **Lease**                                                                                                                                                                   |   |                                                                                                                            |
|  Year ending February 28,      | **Payable**                                                                                                                                                                 |   | **Obligations**                                                                                                                                                             |   | **Total**                                                                                                                       |
|  2005                          |  $             982,446                                                                                     |   |  $                      28,008                                                                   |   |  $          1,010,454                                                         |
|  2006                          |                          29,696                                                        |   |                            3,288                                             |   |                          32,984            |
|  2007                          |                          26,005                                                        |   |                               275                             |   |                          26,280            |
|  2008                          |                          27,675                                                        |   |                                    - |   |                          27,675            |
|  2009                          |                          10,876                                                        |   |                                                                                                                                                                        |   |                          10,876            |
|                                          |              1,076,698                                                                                          |   |                          31,571                                                        |   |              1,108,269                                              |
|  Amount representing interest  |                                    - |   |                            2,644                                             |   |                            2,644 |
|  Total (a)                     |  $          1,076,698                                                                                                     |   |  $                      28,927                                                                   |   |  $          1,105,625                                                         |

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

#### 8. Treasury Stock

On November 27, 2002, the Company mailed to its shareholders who own 99 or fewer shares 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 outstanding shares. The total amount of shares repurchased was 9,447, for a  total amount of $18,894. The Company purchased an additional 5,500 shares of common stock for $8,445 in 2003.

#### 9. Minimum Operating Lease Commitments

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

Subject to annual real estate adjustments, the following is a schedule of future minimum rental payments  required under the above operating leases:

|  Year ending February 28,  |                                                                                                     |
|--------------------------------------|----------------------------------------------------------------------------------------------------------|
|  2005                      |  $             80,400                   |
|  2006                      |                        80,400 |
|  2007                      |                        80,400 |
|                                      |  $           241,200                              |

For the years ended February 29, 2004, February 28 2003 and 2002 rent expense totaled approximately $83,000  for each year.

##### Other Commitments 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 legal proceedings will have a material adverse  effect on the Company's results of operations, financial position or cash flows.

#### 10. Stock Options

Each non-employee director who owns less than 5% of the Company's stock is annually granted a five year  option to purchase 1,500 shares of common stock. The exercise price of the options is the mean between the high and low asked  price at the close of trading on the grant date. As of February 29, 2004, three directors had been issued options totaling 15,000  shares, expiring through July 18, 2008, at option prices ranging from $1.00 to $2.00 per share.

#### 11. Income Taxes

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

|                            |  Year ended                                                                                                                                                                                   |   |  Year ended                                                                                                                                                                    |   |  Year ended                                                                                                                                                                               |
|----------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                            |  February 29,                                                                                                                                                                                 |   |  February 28,                                                                                                                                                                  |   |  February 28,                                                                                                                                                                             |
|                            |  2004                                                                                                                                                                                         |   |  2003                                                                                                                                                                          |   |  2002                                                                                                                                                                                     |
|  Current:        |                                                                                                                                                                                                    |   |                                                                                                                                                                                     |   |                                                                                                                                                                                                |
|    Federal  | ** $                                    -**            |   |  $                                    - |   |  $                                    -            |
|    State    | **                                7,042**                                       |   |                               14,124                                       |   |                               13,606                                                  |
|  Total current   | **                                7,042**                                       |   |                               14,124                                       |   |                               13,606                                                  |
|                            |                                                                                                                                                                                                    |   |                                                                                                                                                                                     |   |                                                                                                                                                                                                |
|  Deferred:       |                                                                                                                                                                                                    |   |                                                                                                                                                                                     |   |                                                                                                                                                                                                |
|    Federal  | **                                       -** |   |                             (77,000)                                                 |   |                                        - |
|    State    | **                                       -** |   |                             (13,000)                                                 |   |                                        - |
|  Total deferred  | **                                       -** |   |                             (90,000)                                                 |   |                                        - |
|                            |                                                                                                                                                                                                    |   |                                                                                                                                                                                     |   |                                                                                                                                                                                                |
|  Total           | ** $                             7,042**                                                  |   |  $                         (75,876)                                                            |   |  $                           13,606                                                             |

After the spin-off from FRM on January 23, 2001, MFC and its subsidiaries filed consolidated Federal tax  returns. MFC and its subsidiaries file individual state tax returns. The gain on sale of real estate, resulting from the  recognition of deferred income from the sale of the Granby, Ct property in fiscal 2003 and the settlement of the Goshen  receivables in fiscal 2002 were both included in taxable income of the Company's former parent in the years that the  properties were sold.

The Company has net operating loss ("NOL") carryforwards for Federal purposes of approximately  $5,328,000. These losses will be available for future years, expiring through February 28, 2023. During fiscal 2003, the Company  utilized $32,000 of its Federal NOL carryforwards. The Company, however, has taken a 95% valuation allowance against Federal NOL  carryforwards due to a prior history of operating tax losses and the uncertainty of generating enough taxable income throughout  the carryforward period to utilize the full amount available.

Significant components of deferred tax assets (liabilities) were as follows:

|                                      |  Year ended                                                                                                                       |   |  Year ended                                                                                                                   |   |  Year ended                                                                                                                                                                    |
|--------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                      |  February 29,                                                                                                                     |   |  February 28,                                                                                                                 |   |  February 28,                                                                                                                                                                  |
|                                      |  2004                                                                                                                             |   |  2003                                                                                                                         |   |  2002                                                                                                                                                                          |
|  Tax loss carryforwards    | ** $                      1,811,387**                            |   |  $                      1,560,591                            |   |  $                      1,218,875                                                                             |
|  Less valuation allowance  | **                       (1,721,387)**                           |   |                        (1,470,591)                           |   |                        (1,218,875)                                                                            |
|  Deferred tax assets       | ** $                           90,000** |   |  $                           90,000 |   |  $                                    - |

The following is a reconciliation of the statutory federal and effective income tax rates for the years ended:

|                                                         |  Year ended                                                                                                                                                                                   |   |  Year ended                                                                                                                                                                               |   |  Year ended                                                                                                                                                                               |
|---------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                         |  February 29,                                                                                                                                                                                 |   |  February 28,                                                                                                                                                                             |   |  February 28,                                                                                                                                                                             |
|                                                         |  2004                                                                                                                                                                                         |   |  2003                                                                                                                                                                                     |   |  2002                                                                                                                                                                                     |
|                                                         |  % 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                                   | **                                    0.8**                 |   |                                     1.6                 |   |                                     1.6                 |
|                                                         | **                                    0.8**                 |   |                                   (8.5)                           |   |                                     1.6                 |

#### 12. Discontinued Operations

On February 4, 2004, the Company instituted a plan to restructure the medical financing segment. The plan of  restructuring calls for the Company to sell the assets of the three subsidiaries that were formed to provide additional  management services to certain medical practices. Accordingly, the operating results of management services for each of the three  years ended February 29, 2004 has been presented as "Income (loss) from discontinued operations, net of income taxes".  Net assets to be disposed of or liquidated, at their book value, have been separately classified in the the accompanying balance  sheets at February 29, 2004 and February 28, 2003. The Company recorded an impairment loss of $229,285, for the year ended  February 29, 2004 in connection with the write-down of the assets that are to be disposed of. Due to operating losses, there was  no income tax benefit from the write-down of assets. In addition, the Capco division, which was formed during 2000 and had never  conducted the business for which it was formed, was also discontinued on February 4, 2004. The results of operations of the Capco  division were immaterial and have been combined with the results of operations of the management services.

Summarized financial information for management services as discontinued operations for the years ended  February 29, 2004, February 28, 2003 and 2002 follows:

|                                                                             |  Year ended                                                                                                                                         |   |  Year ended                                                                                                                                     |   |  Year ended                                                                                                                                     |
|-----------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                             | **February 29,**                                                                                                                                              |   | **February 28,**                                                                                                                                          |   | **February 28,**                                                                                                                                          |
|                                                                             | **2004**                                                                                                                                                      |   | **2003**                                                                                                                                                  |   | **2002**                                                                                                                                                  |
|                                                                             |                                                                                                                                                          |   |                                                                                                                                                      |   |                                                                                                                                                      |
|  Medical management service fees                                  | ** $        1,353,749**                                                                                               |   |  $        2,282,677                                                                                               |   |  $        1,432,984                                                                                               |
|                                                                             |                                                                                                                                                          |   |                                                                                                                                                      |   |                                                                                                                                                      |
|  Medical management services                                      | **           1,198,223**                                                                                    |   |            1,901,865                                                                                    |   |            1,260,555                                                                                    |
|  Bad debt                                                         | **                     347,422**                                                             |   |                                 - |   |                                 - |
|  Impairment loss                                                  | **                     229,285**                                                             |   |                                 - |   |                                 - |
|  Depreciation and amortization                                    | **                     113,302**                                                             |   |                        69,470                                                  |   |                        47,531                                                  |
|                                                                             | **           1,888,232**                                                                                    |   |            1,971,335                                                                                    |   |            1,308,086                                                                                    |
|                                                                             |                                                                                                                                                          |   |                                                                                                                                                      |   |                                                                                                                                                      |
|  Income (loss) from operations                                    | **                   (534,483)**                                                                       |   |               311,342                                                                    |   |               124,898                                                                    |
|  Other income (expense)                                           | **                       (9,087)**                                                 |   |                        14,786                                                  |   |                          1,453                                       |
|  Income (loss) before income taxes                                | **                   (543,570)**                                                                       |   |               326,128                                                                    |   |               126,351                                                                    |
|  Income taxes                                                     | **                                -** |   |                                 - |   |                                 - |
|                                                                             |                                                                                                                                                          |   |                                                                                                                                                      |   |                                                                                                                                                      |
|  Income (loss) from discontinued operations, net of        taxes  | ** $         (543,570)**                                                                                         |   |  $           326,128                                                                               |   |  $           126,351                                                                               |

The components of assets and liabilities of discontinued operations are as follows:

|                                                            | **February 29,**                                                                                                                                              |   | **February 28,**                                                                                                    |
|------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------|
|                                                            | **2004**                                                                                                                                                      |   | **2003**                                                                                                            |
|  Management fee receivables, net                 | ** $        1,157,124**                                                                                               |   |  $        1,058,188                                                         |
|  Other current assets                            | **                       21,878**                                                  |   |                        59,639            |
|  Property and equipment at cost                  | **                     451,131**                                                             |   |               447,686                              |
|  Less accumulated depreciation and amortization  | **                   (189,399)**                                                                       |   |             (134,726)                                        |
|  Loan receivable                                 | **                       83,137**                                                  |   |               237,176                              |
|  Investment in unconsolidated subsidiaries       | **                       50,000**                                                  |   |               103,951                              |
|  Other assets                                    | **                       51,631**                                                  |   |                        72,923            |
|  Total assets                                    | ** $        1,625,502**                                                                                               |   |  $        1,844,837                                                         |
|                                                            |                                                                                                                                                          |   |                                                                                                                |
|  Accounts payable and accrued expenses           | ** $                    88,532**                                                             |   |  $             79,756                              |
|  Current portion of notes payable                | **                       31,565**                                                  |   |               108,359                              |
|  Long term debt                                  | **                                -** |   |                        31,565            |
|  Minority interest in subsidiary                 | **                                -** |   |                          5,000 |
|  Total liabilities                               | ** $           120,097**                                                                               |   |  $           224,680                                         |

#### 13. Business Segment Information

Operating segments are managed separately and represent separate business units that offer 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. The real estate segment operates in New York and Connecticut. The medical  financing segment operates in New York.

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

Business segment information follows:

|                                                                |  Real                                                                                                                                               |  Medical                                                                                           |                                                                                                                                                          |                                                                                                         |
|----------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------|
|                                                                |  Estate                                                                                                                                             |  Financing                                                                                         |  Other                                                                                                                                              |  Total                                                                                             |
| **February 29, 2004**                                          |                                                                                                                                                          |                                                                                                         |                                                                                                                                                          |                                                                                                         |
|  Total revenue from external customers               | ** $           619,114**                                                                               | ** $        1,442,982**                                              | ** $                             -**            | ** $        2,062,096**                                              |
|  Income (loss) from operations                       | **                     230,759**                                                             | **                   (628,077)**                      | **                   (394,502)**                                                                       | **                   (791,820)**                      |
|  Other expense (income), net                         | **                         2,244**                                       | **                       88,348** | **                                -** | **                       90,592** |
|  Income (loss) from continuing operations            |                                                                                                                                                          |                                                                                                         |                                                                                                                                                          |                                                                                                         |
|    before (benefit) provision for income taxes  | **                     228,515**                                                             | **                   (716,425)**                      | **                   (394,502)**                                                                       | **                   (882,412)**                      |
|                                                                |                                                                                                                                                          |                                                                                                         |                                                                                                                                                          |                                                                                                         |
|  Assets - continuing                                 | **           2,333,409**                                                                                    | **           1,849,315**                                   | **                       94,806**                                                  | **           4,277,530**                                   |
|  Assets - discontinued                               | **                                -** | **           1,625,502**                                   | **                                -** | **           1,625,502**                                   |
|  Total assets                                        | **           2,333,409**                                                                                    | **           3,474,817**                                   | **                       94,806**                                                  | **           5,903,032**                                   |
|                                                                |                                                                                                                                                          |                                                                                                         |                                                                                                                                                          |                                                                                                         |
|  Capital expenditures                                | **                                -** | **                     115,741**            | **                                -** | **                     115,741**            |
|  Depreciation and amortization                       | **                         1,780**                                       | **                     117,175**            | **                         2,485**                                       | **                     121,440**            |
|                                                                |                                                                                                                                                          |                                                                                                         |                                                                                                                                                          |                                                                                                         |
| **February 28, 2003**                                          |                                                                                                                                                          |                                                                                                         |                                                                                                                                                          |                                                                                                         |
|  Total revenue from external customers               |  $        1,036,962                                                                                                   |  $        1,940,808                                                  |  $                             -                |  $        2,977,770                                                  |
|  Income (loss) from operations                       |               830,668                                                                        |               122,412                       |             (358,225)                                                                                  |               594,855                       |
|  Other expense (income), net                         |                           (923)                                     |                        32,697     |                                 -     |                        31,774     |
|  Income (loss) from continuing operations            |                                                                                                                                                          |                                                                                                         |                                                                                                                                                          |                                                                                                         |
|    before (benefit) provision for income taxes  |               831,591                                                                        |                        89,715     |             (358,225)                                                                                  |               563,081                       |
|                                                                |                                                                                                                                                          |                                                                                                         |                                                                                                                                                          |                                                                                                         |
|  Assets - continuing                                 |            2,003,751                                                                                        |            3,105,889                                       |               121,366                                                                        |            5,231,006                                       |
|  Assets - discontinued                               |                                 -     |            1,844,837                                       |                                 -     |            1,844,837                                       |
|  Total assets                                        |            2,003,751                                                                                        |            4,950,726                                       |               121,366                                                                        |            7,075,843                                       |
|                                                                |                                                                                                                                                          |                                                                                                         |                                                                                                                                                          |                                                                                                         |
|  Capital expenditures                                |                                 -     |               160,218                       |                          2,709                                           |               162,927                       |
|  Depreciation and amortization                       |                          2,014                                           |                        84,105     |                          2,721                                           |                        88,840     |
|                                                                |                                                                                                                                                          |                                                                                                         |                                                                                                                                                          |                                                                                                         |
| **February 28, 2002**                                          |                                                                                                                                                          |                                                                                                         |                                                                                                                                                          |                                                                                                         |
|  Total revenue from external customers               |  $        1,116,723                                                                                                   |  $        1,616,787                                                  |  $                             -                |  $        2,733,510                                                  |
|  Income (loss) from operations                       |               860,092                                                                        |               188,896                       |             (301,696)                                                                                  |               747,292                       |
|  Other expense (income), net                         |                        (2,778)                                                     |                        54,430     |                                 -     |                        51,652     |
|  Income (loss) from continuing operations            |                                                                                                                                                          |                                                                                                         |                                                                                                                                                          |                                                                                                         |
|    before (benefit) provision for income taxes  |               862,870                                                                        |               134,466                       |             (301,696)                                                                                  |               695,640                       |
|                                                                |                                                                                                                                                          |                                                                                                         |                                                                                                                                                          |                                                                                                         |
|  Assets - continuing                                 |            2,332,367                                                                                        |            2,148,503                                       |                        12,868                                                      |            4,493,738                                       |
|  Assets - discontinued                               |                                 -     |            1,783,751                                       |                                 -     |            1,783,751                                       |
|  Total assets                                        |            2,332,367                                                                                        |            3,932,254                                       |                        12,868                                                      |            6,277,489                                       |
|                                                                |                                                                                                                                                          |                                                                                                         |                                                                                                                                                          |                                                                                                         |
|  Capital expenditures                                |                          2,833                                           |               159,809                       |                          2,905                                           |               165,547                       |
|  Depreciation and amortization                       |                          3,057                                           |                        51,247     |                          2,426                                           |                        56,730     |

#### 14. Proposed Transaction

On April  9, 2004, the Company filed a Current Report on Form 8-K announcing the signing on March 26,  2004 of an Acquisition Agreement with Creative Marketing Group, Inc, ("CMG") and its shareholders to acquire 100% of  CMG's outstanding capital stock in exchange for shares of common stock of MFC.  After the closing, MFC shall issue  approximately 7,900,000 shares (approximately 80%) of common stock to CMG stockholders and holders of CMG debt out of  approximately 10,000,000 shares of common stock which will then be issued and outstanding.  The completion of the  acquisition is subject to several conditions including, but not limited to, the closing of a private offering raising a minimum  of $1,000,000 and a maximum of $2,500,000.  

CMG is a sales and marketing company which since the year 2000 has been exclusively working with a national  brand name in the coffee industry which has a brand name recognition in excess of 90% among consumers.  In late 2002 CMG  obtained exclusive licensing agreements permitting it to use the trademark of such national brand name in the production and sale  of coffee and coffee filters through retailers, food service, hospitality and in-office locations throughout the United  States.  CMG's relationship with this national brand name creates marketing opportunities to enhance the awareness and  availability of such national brand name's coffee makers and the coffee and coffee filters which CMG may produce and sell  under its licenses in the United States.

Completion of the transaction described is subject to the satisfaction of a number of conditions and there can  be no assurance that all of the conditions will be met or that the registrant will successfully complete the acquisition or that  CMG will raise adequate funds in the private placement.

 

 

 

 

----

#### 15. Supplemental Financial Information

Selected Quarterly Financial Data (Unaudited)

|                                                       | Quarter                                                                                   |   |                                                                                                 |
|-------------------------------------------------------|-------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------|
|                                                       |                                                                                      |   |                                                                                                 |   |   |   |   |   |   |
|                                                       | First                                                                                     |   | Second                                                                                               |   | Third |   | Fourth |   | Total |
| **Year ended February 29, 2004**                      |                                                                                      |   |                                                                                                 |   |   |   |   |   |   |
| Total revenue                                         |  $      645,343                                             |   |  $       520,840                                                  |   |  $       363,152 |   |  $       532,761 |   |  $    2,062,096 |
|                                                       |                                                                                      |   |                                                                                                 |   |   |   |   |   |   |
| Income (loss) from continuing operations              |            29,293                       |   |          (120,702)                                           |   |          (462,187) |   |          (335,858) |   |          (889,454) |
| Income (loss) from discontinued operations            |            48,052                       |   |             45,834                            |   |          (356,704) |   |          (280,752) |   |          (543,570) |
| Net income (loss)                                     |  $        77,345                                  |   |  $        (74,868)                                           |   |  $      (818,891) |   |  $      (616,610) |   |  $   (1,433,024) |
|                                                       |                                                                                      |   |                                                                                                 |   |   |   |   |   |   |
| Earnings (loss) per common share:                     |                                                                                      |   |                                                                                                 |   |   |   |   |   |   |
| Income (loss) from continuing operations              |  $            0.02            |   |  $            (0.07)                     |   |  $            (0.26) |   |  $            (0.19) |   |  $            (0.50) |
| Income (loss) from discontinued operations            |                0.03 |   |                      0.03 |   |                (0.20) |   |                (0.16) |   |                (0.31) |
| Basic and diluted income (loss) per common share      |  $            0.05            |   |  $            (0.04)                     |   |  $            (0.46) |   |  $            (0.35) |   |  $            (0.81) |
|                                                       |                                                                                      |   |                                                                                                 |   |   |   |   |   |   |
| Number of shares used in computation                  |                                                                                      |   |                                                                                                 |   |   |   |   |   |   |
|   of basic and diluted earnings (loss) per share |       1,775,053                                                  |   |        1,775,053                                                       |   |        1,775,053 |   |        1,775,053 |   |        1,775,053 |
|                                                       |                                                                                      |   |                                                                                                 |   |   |   |   |   |   |
| **Year ended February 28, 2003**                      |                                                                                      |   |                                                                                                 |   |   |   |   |   |   |
| Total revenue                                         |  $      459,017                                             |   |  $       563,991                                                  |   |  $       553,060 |   |  $    1,401,702 |   |  $    2,977,770 |
|                                                       |                                                                                      |   |                                                                                                 |   |   |   |   |   |   |
| Income (loss) from continuing operations              |          (70,136)                                 |   |            (68,218)                                |   |            (58,940) |   |           836,251 |   |           638,957 |
| Income (loss) from discontinued operations            |          102,003                                  |   |             96,801                            |   |             78,944 |   |             48,380 |   |           326,128 |
| Net income (loss)                                     |  $        31,867                                  |   |  $         28,583                                       |   |  $         20,004 |   |  $       884,631 |   |  $       965,085 |
|                                                       |                                                                                      |   |                                                                                                 |   |   |   |   |   |   |
| Earnings (loss) per common share:                     |                                                                                      |   |                                                                                                 |   |   |   |   |   |   |
| Income (loss) from continuing operations              |  $          (0.04)                      |   |  $            (0.04)                     |   |  $            (0.03) |   |  $             0.47 |   |  $             0.36 |
| Income (loss) from discontinued operations            |                0.06 |   |                      0.05 |   |                      0.04 |   |                      0.03 |   |                      0.18 |
| Basic and diluted income (loss) per common share      |  $            0.02            |   |  $             0.01                 |   |  $             0.01 |   |  $             0.50 |   |  $             0.54 |
|                                                       |                                                                                      |   |                                                                                                 |   |   |   |   |   |   |
| Number of shares used in computation                  |                                                                                      |   |                                                                                                 |   |   |   |   |   |   |
|   of basic and diluted earnings (loss) per share |       1,790,000                                                  |   |        1,790,000                                                       |   |        1,789,665 |   |        1,779,590 |   |        1,787,350 |
|                                                       |                                                                                      |   |                                                                                                 |   |   |   |   |   |   |
| **Year ended February 28, 2002**                      |                                                                                      |   |                                                                                                 |   |   |   |   |   |   |
| Total revenue                                         |  $      453,219                                             |   |  $       538,219                                                  |   |  $    1,231,957 |   |  $       510,115 |   |  $    2,733,510 |
|                                                       |                                                                                      |   |                                                                                                 |   |   |   |   |   |   |
| Income (loss) from continuing operations              |          (78,990)                                 |   |             20,002                            |   |           744,716 |   |              (3,694) |   |           682,034 |
| Income (loss) from discontinued operations            |            35,213                       |   |             30,867                            |   |            (16,425) |   |             76,696 |   |           126,351 |
| Net income (loss)                                     |  $      (43,777)                                            |   |  $         50,869                                       |   |  $       728,291 |   |  $         73,002 |   |  $       808,385 |
|                                                       |                                                                                      |   |                                                                                                 |   |   |   |   |   |   |
| Earnings (loss) per common share:                     |                                                                                      |   |                                                                                                 |   |   |   |   |   |   |
| Income (loss) from continuing operations              |  $          (0.04)                      |   |  $             0.01                 |   |  $             0.42 |   |  $                      -   |   |  $             0.38 |
| Income (loss) from discontinued operations            |                0.02 |   |                      0.02 |   |                (0.01) |   |                      0.04 |   |                      0.07 |
| Basic and diluted income (loss) per common share      |  $          (0.02)                      |   |  $             0.03                 |   |  $             0.41 |   |  $             0.04 |   |  $             0.45 |
|                                                       |                                                                                      |   |                                                                                                 |   |   |   |   |   |   |
| Number of shares used in computation                  |                                                                                      |   |                                                                                                 |   |   |   |   |   |   |
|   of basic and diluted earnings (loss) per share |       1,797,863                                                  |   |        1,790,000                                                       |   |        1,790,000 |   |        1,790,000 |   |        1,792,662 |

----

MFC Development Corp. and Subsidiaries

### Financial Statement Schedules

#### Schedule II -  Valuation and Qualifying Accounts

Year ended February 29, 2004

 

|  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 29, 2004**                   |   |                                                    |   |                                                                                                                           |   |                                                                                                                           |   |                                                                                                                           |   |   |
|  Allowance for credit losses  |   | ** $       264,285** |   | ** $       191,147**                                                                        |   | ** $                        -** |   | ** $                        -** |   | ** $       455,432** |
|  Valuation allowance -        |   |                                                    |   |                                                                                                                           |   |                                                                                                                           |   |                                                                                                                           |   |   |
|  Deferred tax asset           |   | ** $    1,470,591**                 |   | ** $                        -** |   | ** $       250,796**                                                                        |   | ** $                        -** |   | ** $    1,721,387** |
|                                         |   |                                                    |   |                                                                                                                           |   |                                                                                                                           |   |                                                                                                                           |   |   |
| **February 28, 2003**                   |   |                                                    |   |                                                                                                                           |   |                                                                                                                           |   |                                                                                                                           |   |   |
|  Allowance for credit losses  |   |  $       252,535     |   |  $         11,750                                                                 |   |  $                   -          |   |  $                   -          |   |  $       264,285 |
|  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 |
|  Valuation allowance -        |   |                                                    |   |                                                                                                                           |   |                                                                                                                           |   |                                                                                                                           |   |   |
|  Deferred tax asset           |   |  $       521,273     |   |  $                   -          |   |  $       697,602                                                                            |   |  $                   -          |   |  $    1,218,875 |

 

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

----

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

Year ended February 29, 2004

| **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 |   |  $ 495,448 |   |  $ 838,936 |   |  $ 1,334,384 |   |  $          - |
|                    |   |                                                                        |   |                                                                        |   |                                                |   |                                                      |   |                       |   |   |   |   |   |   |   |   |
| Total              |   |  $            - |   |  $            - |   |  $ 467,560                                     |   |  $ 128,830                                           |   |  $   62,946 |   |  $ 495,448 |   |  $ 838,936 |   |  $ 1,334,384 |   |  $          - |
|                    |   |                                                                        |   |                                                                        |   |                                                |   |                                                      |   |                       |   |   |   |   |   |   |   |   |
|                    |   |                                                                        |   |                                                                        |   |                                                |   |                                                      |   |                       |   |   |   |   |   |   |   |   |
|                    |   |                                                                        |   |                                                                        |   |                                                |   |                                                      |   |                       |   |   |   |   |   |   |   |   |
|                    |   | **Column G**                                                                |   | **Column H**                                                                |   | **Column I**                                        |   |                                                      |   |                       |   |   |   |   |   |   |   |   |
|                    |   |                                                                        |   |                                                                        |   | **Line**                                            |   |                                                      |   |                       |   |   |   |   |   |   |   |   |
|                    |   |                                                                        |   |                                                                        |   | **where**                                           |   |                                                      |   |                       |   |   |   |   |   |   |   |   |
|                    |   | **Date of**                                                                 |   |                                                                        |   | **Depre-**                                          |   |                                                      |   |                       |   |   |   |   |   |   |   |   |
|                    |   | **Constr-**                                                                 |   | **Date**                                                                    |   | **ciation**                                         |   |                                                      |   |                       |   |   |   |   |   |   |   |   |
| Columns            |   | **uction**                                                                  |   | **Acquired**                                                                |   | **Computed**                                        |   |                                                      |   |                       |   |   |   |   |   |   |   |   |
| continued          |   |                                                                        |   |                                                                        |   |                                                |   |                                                      |   |                       |   |   |   |   |   |   |   |   |
| from above         |   |  -                                                                |   | 02/29/96                                                                    |   | N/A                                                 |   |                                                      |   |                       |   |   |   |   |   |   |   |   |

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

|                                | **February 29, 2004**                                                                                                               |   | **February 28, 2003**                                        |   | **February 28, 2002**                                                                                                           |
|--------------------------------|-------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------|
|                                |                                                                                                                                |   |                                                         |   |                                                                                                                            |   |   |   |   |   |   |
| Balance at beginning of period |                                                                                                                                |   | ** $      951,358**            |   |                                                                                                                            |   |  $      625,713 |   |   |   |  $      584,153 |
| Additions during period        |                                                                                                                                |   |                                                         |   |                                                                                                                            |   |   |   |   |   |   |
| Other acquisitions             | **         422,410**                                                                        |   |                                                         |   |                           - |   |   |   |                           - |   |   |
| Improvements, etc.             | **         142,875**                                                                        |   |                                                         |   |          325,645                                                                        |   |   |   |            75,183 |   |   |
| Capitalized carrying costs     | **                          -** |   | **         565,285** |   |                           - |   |          325,645 |   |                           - |   |            75,183 |
|                                |                                                                                                                                |   | **      1,516,643**                 |   |                                                                                                                            |   |          951,358 |   |   |   |          659,336 |
| Deductions during period       |                                                                                                                                |   |                                                         |   |                                                                                                                            |   |   |   |   |   |   |
| Cost of real estate sold       | **         182,259**                                                                        |   |                                                         |   |                           - |   |   |   |            33,623 |   |   |
|                                |                                                                                                                                |   | **         182,259** |   |                                                                                                                            |   |                           - |   |   |   |            33,623 |
| Balance at close of period     |                                                                                                                                |   | ** $   1,334,384**                            |   |                                                                                                                            |   |  $      951,358 |   |   |   |  $      625,713 |

The Federal Income Tax Basis of the Hunter property is $1,623,393.

----

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

Year ended February 29, 2004

| Column A         |   | Column B |   | Column C |   | Column D                              |   | Column E         |   | Column F        |   | Column G        |   | Column H                                                                          |
|------------------|--------|----------|--------|----------|--------|---------------------------------------|--------|------------------|--------|-----------------|--------|-----------------|--------|-----------------------------------------------------------------------------------|
|                  |   |     |   |     |   |                                  |   |             |   |            |   |            |   |                                                                              |
|                  |   |     |   |     |   |                                  |   |             |   |            |   |            |   | Principal                                                                         |
|                  |   |     |   |     |   |                                  |   |             |   |            |   |            |   | Amount of                                                                         |
|                  |   |     |   |     |   |                                  |   |             |   |            |   |            |   | Loans                                                                             |
|                  |   |     |   |     |   |                                  |   |             |   |            |   |            |   | Subject to                                                                        |
|                  |   |     |   | Final    |   | Periodic                              |   |             |   | Face            |   | Carrying        |   | Delinquent                                                                        |
|                  |   | Interest |   | Maturity |   | Monthly                               |   | Prior            |   | Amount of       |   | Amount of       |   | Principal                                                                         |
| Description      |   | Rate     |   | Date     |   | Payment                               |   | Liens            |   | Mortgages       |   | Mortgages       |   | or Interest                                                                       |
|                  |   |     |   |     |   |                                  |   |             |   |            |   |            |   |                                                                              |
| Second mortgage  |   |     |   |     |   |                                  |   |             |   |            |   |            |   |                                                                              |
| Office building, |   |     |   |     |   |                                  |   |             |   |            |   |            |   |                                                                              |
| Granby, CT       |   |     |   | 03/08/17 |   |                                  |   |  $2,298,421 |   |  $ 946,732 |   |  $ 946,732 |   |  $             - |
| through 3/1/06   |   | 7%       |   |     |   |  $     5,523 |   |             |   |            |   |            |   |                                                                              |
| 4/1/06-3/8/17    |   | 9%       |   |     |   |  $     9,863 |   |             |   |            |   |            |   |                                                                              |
|                  |   |     |   |     |   |                                  |   |             |   |            |   |            |   |                                                                              |
|                  |   |     |   |     |   |                                  |   |             |   |  $ 946,732 |   |  $ 946,732 |   |  $             - |

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

|                                  | **February 29, 2004**                                                                                                   |   | **February 28, 2003**                                                                                                   |   | **February 28, 2002**                                                                                               |
|----------------------------------|-------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------|
|                                  |                                                                                                                    |   |                                                                                                                    |   |                                                                                                                |   |   |   |   |   |   |
| Balance at beginning of period   |                                                                                                                    |   | ** $    946,732**                                                                                   |   |                                                                                                                |   |  $    975,792 |   |   |   |  $ 3,152,683 |
| Additions during period          |                                                                                                                    |   |                                                                                                                    |   |                                                                                                                |   |   |   |   |   |   |
| New mortgage loans               | **                        -** |   |                                                                                                                    |   |                         - |   |   |   |                         - |   |   |
|                                  |                                                                                                                    |   | **                        -** |   |                                                                                                                |   |                         - |   |   |   |                         - |
|                                  |                                                                                                                    |   | **       946,732**                                                                        |   |                                                                                                                |   |        975,792 |   |   |   |     3,152,683 |
| Deductions during period         |                                                                                                                    |   |                                                                                                                    |   |                                                                                                                |   |   |   |   |   |   |
| Collection of principal          | **                        -** |   |                                                                                                                    |   |          29,060                                                             |   |   |   |     1,342,518 |   |   |
| Settlement of Goshen receivables | **                        -** |   |                                                                                                                    |   |                         - |   |   |   |        834,373 |   |   |
|                                  |                                                                                                                    |   | **                        -** |   |                                                                                                                |   |          29,060 |   |   |   |     2,176,891 |
| Balance at close of period       |                                                                                                                    |   | ** $    946,732**                                                                                   |   |                                                                                                                |   |  $    946,732 |   |   |   |  $    975,792 |

----

## EXHIBIT INDEX

Exhibits

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

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

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

The following exhibits are incorporated herein by reference to Amendment No. 3 to Form 10 dated January 17, 2001.

**        Exhibit Number                 Exhibit Description                  3.01                 Certificate of Incorporation of the Company3.03                 Amended By-Laws of the Company5.01                 Opinion of Tanner Propp, LLP21.01                 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 duly authorized, on August 31, 2004.

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 has been signed below by the  following persons on behalf of the Registrant and in the capacities indicated on August 31, 2004.

|                                                                 |
|----------------------------------------------------------------------|
| /s/ LESTER TANNER                                                    |
| Lester Tanner*President and Director**(Principal Executive Officer)* |
|                                                                 |
| /s/ STEVEN KEVORKIAN                                                 |
| Steven Kevorkian*Director*                                           |
|                                                                 |
| /s/ VICTOR BRODSKY                                                   |
| Victor Brodsky*Director*                                             |
|                                                                 |
| /s/ ANDERS STERNER                                                   |
| Anders Sterner*Director*                                             |
|                                                                 |
| /s/ JAY HIRSCHSON                                                    |
| Jay Hirschson*Director*                                              |

----

# CERTIFICATION

Each of the undersigned hereby certifies in his capacity as an officer of MFC Development Corp. (the  "Company") that Amendment No. 1 to the Annual Report of the Company on Form 10-K/A for the period ended February 29,  2004 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information  contained in such report fairly presents, in all material respects, the financial condition of the Company at the end of such  period and the results of operations of the Company for such period.

August 30, 2004

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

 

 

 

----

# EXHIBITS

## Exhibit 31.1

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

I, Lester Tanner, certify that:

-  I have reviewed this Amendment No. 1 to the annual report on      Form 10-K/A of MFC Development Corp; 
-  Based on my knowledge, this annual report does not contain      any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of      the circumstances under which such statements were made, not misleading with respect to the period covered by this annual      report; 
-  Based on my knowledge, the financial statements, and other      financial information included in this annual report, fairly present in all material respects the financial condition,      results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 
-  The registrant's other certifying officers and I are      responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)      and 15d-15(e)) for the registrant and we have:    -  Designed such disclosure controls and procedures to          ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us          by others within those entities, particularly during the period in which this annual report is being prepared; and 
  -  Evaluated the effectiveness of the registrant's          disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure          controls and procedures, as of the end of the period covered by this report based on such evaluation; and 
  -  
Disclosed in this report any change in the            registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal            quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or            is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 
-  The registrant's other certifying officers and I have      disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's      board of directors (or persons performing the equivalent function):    -  all significant deficiencies in the design or operation          of internal controls which could adversely affect the registrant's ability to record, process, summarize and report          financial data and have identified for the registrant's auditors any material weaknesses in internal controls;          and 
  -  any fraud, whether or not material, that involves          management or other employees who have a significant role in the registrant's internal controls.     August 30, 2004              /s/ LESTER TANNER                            Lester Tanner*President and Chief Executive Officer*   

## Exhibit 31.2

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

I, Victor Brodsky, certify that:

-  I have reviewed this Amendment No. 1 to the annual report on      Form 10-K/A of MFC Development Corp; 
-  Based on my knowledge, this quarterly report does not      contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in      light of the circumstances under which such statements were made, not misleading with respect to the period covered by this      annual report; 
-  Based on my knowledge, the financial statements, and other      financial information included in this annual report, fairly present in all material respects the financial condition,      results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 
-  The registrant's other certifying officers and I are      responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)      and 15d-15(e)) for the registrant and we have:    -  Designed such disclosure controls and procedures to          ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us          by others within those entities, particularly during the period in which this annual report is being prepared; and 
  -  Evaluated the effectiveness of the registrant's          disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure          controls and procedures, as of the end of the period covered by this report based on such evaluation; and 
  -  
Disclosed in this report any change in the            registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal            quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or            is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 
-  The registrant's other certifying officers and I have      disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's      board of directors (or persons performing the equivalent function):    -  all significant deficiencies in the design or operation          of internal controls which could adversely affect the registrant's ability to record, process, summarize and report          financial data and have identified for the registrant's auditors any material weaknesses in internal controls;          and 
  -  any fraud, whether or not material, that involves          management or other employees who have a significant role in the registrant's internal controls. 

| August 30, 2004 | /s/ VICTOR BRODSKY                    Victor Brodsky*Vice President and Chief Financial Officer* |
|-----------------|--------------------------------------------------------------------------------------------------|

----

## Exhibit 32.1

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

In connection with the Amendment No. 1 to the Annual Report of MFC Development Corporation *(the  "Company")* on Form 10-K/A for the period ended February 29, 2004 as filed with the Securities and Exchange  Commission on the date hereof (the "Report"),

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

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

(2)  The information contained in the Report fairly presents, in all material respects, the financial    condition and results of operations of the Company.
              August 30, 2004                           August 30, 2004                          /s/ LESTER TANNER                            Lester Tanner*President and Chief Executive Officer*               /s/ VICTOR BRODSKY                            Victor Brodsky*Vice President and Chief Financial Officer*

A signed original of this written statement required by Section 906, or other document authenticating,  acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written  statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the  Securities and Exchange Commission or its staff upon request.

This certification accompanies the Amendment No. 1 to this Report on Form 10-K/A pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for  purposes of Section 18 of the Securities Exchange Act of 1934, as amended  (the "Exchange Act"). Such  certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or  the Exchange Act, except to the extent that the Company specifically incorporates it by reference.