U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                   FORM 10-KSB

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

     For the fiscal year ended December 31, 2003

                                       OR

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

     For the transition period from ______________ to ______________

                        Commission file number: 000-31182


                            The Neptune Society, Inc.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)



              Florida                                      59-2492929
 -----------------------------------        ------------------------------------
    (State or other jurisdiction            (I.R.S. Employer Identification No.)
        organization)

    4312 Woodman Avenue, Third Floor
         Sherman Oaks, California                            91423
----------------------------------------          -----------------------------
(Address of principal executive offices)                    (Zip Code)



       Registrant's telephone number, including area code: (818) 953-9995

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



                 None                                         None
---------------------------------------          -------------------------------
Title of each class to be so registered          Name of each exchange on which
                                                 each class is to be registered


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

                  Common Shares, Par Value of $0.001 per Share
--------------------------------------------------------------------------------
                                (Title of Class)


                                 Not Applicable
--------------------------------------------------------------------------------
                                (Title of Class)



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

     Check if there is no disclosure of delinquent  filers  pursuant to Item 405
of  Regulation  S-B is not  contained in this form,  and no  disclosure  will be
contained,  to the best of the  registrant's  knowledge,  in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. ______

     State issuer's revenues for its most recent fiscal year: $20.711,189

     State the aggregate market value of the voting and non-voting common equity
held by  non-affiliates  computed by  reference to the price at which the common
equity was last sold, or the average bid and asked price of such common  equity,
as of a specified date within the past 60 days: approximately $3,926,247

     State  the  number  of shares  of each of the  issuer's  classes  of common
equity, as of the latest practicable date: Shares of Common Stock outstanding as
of March 19, 2004 was 5,841,593.


DOCUMENTS INCORPORATED BY REFERENCE

Not Applicable

Transition Small Business Disclosure Format (Check One)

                    Yes [  ]                 No  [X]




<PAGE>

                                TABLE OF CONTENTS

<TABLE>

<S>                                                                                                       <C>
ITEM 1.    DESCRIPTION OF BUSINESS.........................................................................2

ITEM 2.    DESCRIPTION OF PROPERTIES......................................................................15

ITEM 3.    LEGAL PROCEEDINGS..............................................................................17

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................17

ITEM 5.    MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
           BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.................................................17

ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION......................................18

ITEM 7.    FINANCIAL STATEMENTS...........................................................................26

ITEM 8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...........27

ITEM 9.    DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS; SECTION 16(a) COMPLIANCE....................26

ITEM 10.   EXECUTIVE COMPENSATION.........................................................................29

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.37

ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................................................40

ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K...............................................................43

ITEM 14.   CONTROLS AND PROCEDURES........................................................................46

ITEM 15.   PRINCIPAL ACCOUNTANT FEES AND SERVICES.........................................................46

SIGNATURES ...............................................................................................47
</TABLE>


                                       i
<PAGE>

                           FORWARD-LOOKING STATEMENTS

     We use words like "expects," "believes," "intends," "anticipates," "plans,"
"targets,"  "projects" or "estimates" in this annual  report.  When used,  these
words and other,  similar words and phrases or statements that an event,  action
or result "will,"  "may,"  "could," or "should"  occur,  be taken or be achieved
identify "forward-looking"  statements.  Such forward-looking statements reflect
our  current  views  with  respect to future  events and are  subject to certain
risks, uncertainties and assumptions, including, but not limited to:

     o    our  ability  to manage an  increasing  number  of sales  offices  and
          crematories,

     o    our  ability to retain key  management  personnel  and to  continue to
          attract and retain skilled crematory management personnel,

     o    the  effect of state and  federal  regulations  on the death  care and
          pre-need cremation service industry,

     o    changes  in the  death  rate  or  deceleration  of the  trend  towards
          cremation,

     o    availability  and cost of capital  to finance  our growth and meet our
          capital requirements,

     o    our ability to meet our obligations as they become due, and

     o    general  economic  conditions  that affect the death care and pre-need
          cremation service industry.

     Should one or more of these risks or uncertainties  materialize,  or should
underlying assumptions prove incorrect,  actual results may vary materially from
those anticipated, believed, estimated or expected.

     Our  management  has  included  projections  and  estimates  in this annual
report,  which are based primarily on  management's  experience in the industry,
assessments  of our results of operations,  discussions  and  negotiations  with
third  parties and a review of  information  filed by our  competitors  with the
Securities and Exchange Commission or otherwise publicly available.

     We caution readers not to place undue reliance on any such  forward-looking
statements,  which speak only as of the date made.  We disclaim  any  obligation
subsequently  to revise any  forward-looking  statements  to  reflect  events or
circumstances  after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.

                                 ______________


     "The  Neptune  Society",  "Neptune  Society"  and  "Trident  Society" are a
registered trademarks of The Neptune Society, Inc. in the United States.





<PAGE>

ITEM 1. DESCRIPTION OF BUSINESS

     Summary of Our Business

     We, The Neptune  Society,  Inc.,  are the  holding  company for the Neptune
Society of America, Inc., a California corporation.  Neptune Society of America,
Inc. is the holding company for Neptune Management Corp., Heritage Alternatives,
Inc. and Trident Society, Inc., which are engaged in marketing and administering
Pre-Need  and  At-Need  cremation  services in  Arizona,  California,  Colorado,
Florida,  Illinois, Iowa, New York, Oregon and Washington. We also operate three
crematories  and licensed  holding  facilities in Los Angeles,  California;  one
licensed  holding  facility in Ventura,  California;  one crematory and licensed
holding  facility in Ankeny,  Iowa;  and one  crematory  and a licensed  holding
facility in Spokane,  Washington.  We provide cremation services in the areas in
which  we own  crematories.  We use  the  services  of  qualified  and  licensed
third-party  crematories and holding  facilities in locations in which we do not
own crematories.

     Our service programs include:

     o    Pre-need  programs  that allow our clients to pre-plan and pre-pay for
          cremation services; and

     o    At-need programs in which we arrange cremation services at the time of
          need.

     We  compete in the  cremation  services  sector of the death  care  service
industry.  Our primary  business  focus is on marketing  our pre-need  cremation
services using an integrated promotion and professional sales strategy to pursue
revenue  and  growth  opportunities  in the  cremation  sector of the death care
service  industry.  We operate our locations under one nationally  branded name,
"The Neptune  Society," where permitted,  and offer only cremation  services and
products  related to  cremation  services.  We do not offer  traditional  burial
funeral services,  and we do not own or operate cemeteries.  We do not intend to
evolve into a traditional  funeral burial services  company and do not intend to
compete directly with the larger  competitors that provide  traditional  funeral
and burial services.

Corporate Information

     Our principal  corporate and executive  offices are located at 4312 Woodman
Avenue,  Third Floor,  Sherman Oaks,  California  91423. Our telephone number is
(818)  953-9995.  We maintain a website at  www.neptunesociety.com.  Information
contained on our website is not part of this annual report.

Overview

     We were  incorporated  in the State of Florida on January 4, 1985 under the
name "L R Associates, Inc.", which subsequently changed its name to "Lari Corp."
on August 3, 1998. On March 31, 1999, Lari Corp., paid $1,000,000 cash, $310,000
in  transaction  costs,  125,000 shares of common stock valued at $5,000,000 and
$21,000,000 in promissory notes valued at $19,968,529  (for total  consideration
of  $26,278,529),  to acquire a group of privately  held  companies  and limited
partnerships  (collectively,  referred  to as the  "Neptune  Group")  that  were
engaged in the business of marketing and administering  Pre-Need and At-Need (at
the time of death)  cremation  services  under the name  "Neptune  Society." See
"Neptune Society Acquisitions" On April 26, 1999, Lari Corp. changed its name to
"Neptune Society, Inc."

     We  are  engaged  in  marketing  and  administering  Pre-Need  and  At-Need
cremation services in Arizona,  California,  Colorado,  Florida, Illinois, Iowa,
New York, Oregon and Washington. See "Description of Property" for a list of our
locations  and  a  description  of  their  operations.  We  also  operate  three
crematories  and licensed  holding  facilities in Los Angeles,  California;  one
licensed  holding  facility in Ventura,  California;  one crematory and licensed
holding  facility in Ankeny,  Iowa;  and one  crematory  and a licensed  holding
facility in Spokane,  Washington.  We provide cremation services in the areas we
own  crematories.  We use the  services of qualified  and  licensed  third-party
crematories and holding facilities in locations that we do not own crematories.

     Our principal  corporate and executive  offices are located at 4312 Woodman
Avenue,  Third Floor,  Sherman Oaks,  California  91423. Our telephone number is
(818) 953-9995.




                                       2
<PAGE>

The Neptune Society Business

     Our business strategy is to pursue revenue and growth  opportunities in the
cremation  sector  of the  death  care  service  industry.  We  operate  all our
locations under one nationally  branded name,  "The Neptune  Society," and offer
only cremation  services and products related to cremation  services.  We do not
intend to evolve into a traditional funeral burial services company.

Neptune Society Services

     Our primary  business is marketing and  administering  Pre-Need and At-Need
cremation  services in the states of  Arizona,  California,  Colorado,  Florida,
Illinois, Iowa, New York, Oregon and Washington.

The Neptune Society Pre-Need Program
------------------------------------

     The  Neptune  Group  started our  Pre-Need  program in 1988.  Our  Pre-Need
program is designed to eliminate  some of the emotional  and  financial  burdens
associated with death by allowing individuals to pre-arrange  cremation services
at a guaranteed fixed price. We offer the same standard Pre-Need Plan in all the
states that we conduct business.

     A Neptune Society Pre-Need Plan consists of the following:

     o    Merchandise:  At the time of sale,  we  deliver a Neptune  Information
          Book, personalized Neptune registration portfolio, membership card and
          specially designed Neptune urn.

     o    Administrative Services: At the time of sale, we also provide services
          related  to  the  administration  of  the  Pre-Need  Plan,   including
          registering  the  member  on our  permanent  database  and  processing
          documents related to third party administration, accounting and record
          delivery.

     o    Cremation  Services:  At the  time of  death,  we  provide  the  basic
          professional  services of a funeral  director and staff, the cremation
          and related items required for the cremation.

     The  Neptune  Pre-Need  Plan is a  guaranteed  price  plan,  which means we
guarantee  that  we will  provide  the  services  at the  time  of need  without
additional  payment for the service.  The purchase  price of a Pre-Need  Plan is
allocated to Merchandise,  Cremation Services and Administrative  Services based
on the regulatory  requirements and market  conditions of the states in which we
conduct business. See "Industry Regulation."

The Neptune Society At-Need Programs
------------------------------------

     We also  provide  cremation  services  on an At-Need  basis (at the time of
death).  We provide a full range of cremation  services and merchandise and care
for all aspects of the deceased's cremation needs according to the decisions and
plans of the decedent's heirs, including service planning, optional services for
scattering remains, and delivery of ashes to family members.  These services are
typically less expensive than traditional burials.

The Neptune Society Registration Service
----------------------------------------

     We offer a  registration  service  that  allows  individuals  to record and
register  their request to be cremated,  and we maintain a record of information
necessary  for us to provide  cremation  services at the time of death,  however
these  registration  services do not  provide  for a  guarantee  of price to the
individual unless such services are paid for in advance.

Other Services and Products
---------------------------

     We offer premium, upgraded services and products,  including higher quality
urns, and  memorialization  options.  These options include  upgraded  permanent
memorial urns or keepsakes,  memorial  record books,  memorial life  celebration
videos,  assistance  in  arranging  for  private  or public  memorial  services,
arranging for disposition of the ashes other than common  scattering at sea such
as delivery to cemeteries or other points of permanent disposition.  Our offices
in Arizona,  Fort  Lauderdale,  Ankeny,  Portland,  and Spokane have chapels for
cremation memorial services.




                                       3
<PAGE>

Pricing

     We define our pricing  strategy as a simple and  economical  alternative to
traditionally more expensive and elaborate funerals and burials. Our strategy is
to maintain a simple pricing structure for our products.

     We charge a one time $50 non-refundable  registration fee for customers who
chose only to register  their  cremation  wishes.  A customer  may remove  their
cremation wishes from the register at no charge.

     We offer a worldwide  guaranteed  travel plan to Pre-Need members for $329,
which guarantees  service  coverage  throughout the world if a member dies while
away from home.  Under our travel plan,  the travel plan provider will provide a
member  cremation  services at any place in the world,  regardless  of where the
Pre-Need Plan is purchased.

     The price of our basic  Pre-Need Plan  currently  ranges between $1,070 and
$1,499.  We price our  Pre-Need  Plans to enable us to provide  the  purchaser a
future fixed price  guarantee at our Neptune level of service and our assessment
of  market  conditions  in each  geographic  area that we  serve.  Our  standard
Pre-Need  service program  includes  services such as burial at sea, rose garden
scattering or delivery of ashes to family  members.  Our cremation  services are
typically less expensive than traditional funeral services.

Installment Payment Plans

     We offer two  installment  payment  programs,  which  allow  purchasers  to
finance the purchase of a Pre-Need Plan with a down payment and monthly payments
together with interest.  We currently  charge  interest of between 7% and 9% per
annum on balances  due under our  installment  payment  programs in those States
where permitted by State law.

Existing Facilities

     Our  strategy  is to  maintain  offices  within or near major  metropolitan
geographic  areas.  This  strategy is  designed to allow us to cost  effectively
market our products using  integrated  marketing  programs and to reduce general
expenses by  centralizing  administrative  functions  for multiple  offices in a
particular  metropolitan  area.  We  currently  have  locations in the states of
Arizona,  California,  Colorado,  Florida,  Illinois, Iowa, New York, Oregon and
Washington,  representing  approximately 40 major metropolitan  market areas. We
also have a national predictve  telemarketing center located in Tempe,  Arizona.
See "Description of Property."

Expansion and Growth Strategy

     Our  present  growth   strategy  is  to  expand  our   operations   through
establishing  new start-up  offices in major  metropolitan  market areas that we
believe provide opportunities based on demographic and other characteristics. In
addition,  we may acquire existing  cremation service providers with established
market  presence in certain  geographic  areas,  subject to the  availability of
financing.  Since March 31, 1999, we have acquired  existing  cremation  service
providers or established new start-up  offices in Illinois,  Arizona,  Colorado,
Iowa, Oregon,  Washington and Florida.  We are currently  exploring new start-up
opportunities in Missouri, Minnesota,  Michigan, Texas and additional offices in
California.

     Our strategy is to enter new geographic  market areas with large population
centers where  existing  cremation  rates are between 15% to 50%, with projected
rates increasing over the next 10 years. We evaluate opportunities for expansion
using a number of factors, including:

     o    population demographics;

     o    death and cremation rates for the area;

     o    competition in the market;

     o    forecasted growth in cremation rates for the area; and

     o    operating regulatory requirements.



                                       4
<PAGE>

     We cannot assure you that we will  successfully  implement new start-ups or
acquire  any  additional  cremation  service  providers  or  that  start-ups  or
acquisitions,  if any,  will  result  in  increased  operating  efficiencies  or
revenues to us.

     We may also  acquire  or  construct  additional  crematories  and  licensed
holding  facilities if we determine that the demand for cremation  services in a
particular geographic region warrants expansion. We anticipate that our existing
crematories  and third party service  providers have the capacity to service our
present cremation service needs.

Marketing

     We market our  services in all our  locations  under the name "The  Neptune
Society", except for San Diego, San Bernardino,  Riverside and Imperial Counties
in California,  where we market our services  under the name "Trident  Society."
Our marketing  strategy is focused on  maintaining  and further  developing  the
strength of our brand name and creating  consumer  awareness of our services and
products.  We promote our  services  and  products  using  targeted  advertising
campaigns,  including  Yellow  Pages  advertising,  local  television  and radio
advertising, our website and direct marketing campaigns.

     We market  our  Pre-Need  programs  using a  combination  of  direct  mail,
telemarketing and personal sales programs.

Direct Mail
-----------

     We use a monthly direct mail campaign to generate sales leads. We presently
mail a total of  approximately  7.8  million  pieces  of direct  mail  marketing
materials per year in the  geographic  areas we serve.  Our marketing  materials
provide information related to our Pre-Need programs, including a description of
the services,  pricing  information,  our toll free phone number, and a business
reply card to obtain  additional  information or to make an appointment with one
of our area sales representatives.

Telephone Appointment Center
----------------------------

     We have established a Predictive  Dialing  Telephone Center (PDS Center) in
Tempe,  Arizona.  Our  current  appointment  program is  primarily  designed  to
generate  leads from people who have not responded to our direct mail  marketing
campaigns.  Our call  center is  designed to provide  information  to  potential
customers  about  Neptune  Society  products  and services and to allow leads to
schedule  appointments with our area sales  representatives.  Our call center is
designed to consolidate our appointment efforts in one centralized  location and
allow us to implement a uniform promotional strategy using qualified personnel.

Personal Sales
--------------

     We use  commissioned  independent  contractors to provide  services as area
sales  representatives  to sell our Pre-Need  Plans. As of March 1, 2004, we had
approximately 100 commissioned area sales  representatives.  We provide our area
sales  representatives  with leads  generated from our direct mail campaigns and
PDS Center efforts,  and our sales  representatives  meet with potential clients
individually  to  determine  the  service  needs of the  individual.  Our  sales
representatives are paid on a commission. Each of our Pre-Need sales offices has
a sales  manager  who  recruits,  trains and  engages  commissioned  independent
contractors  to  provide  services  as area  sales  representatives  to sell our
Pre-Need Plans.

Internet Web Site
-----------------

     We  maintain  a fully  integrated  and  comprehensive  web site  located at
www.neptunesociety.com.  Visitors to our website may access information  related
to our services and  products.  Our website also  provides  general  information
related to cremation services and related topics.




                                       5
<PAGE>

Death Care Industry

     It is estimated that four publicly traded companies hold  approximately 20%
of the domestic death care market. The public companies are Service  Corporation
International, Stewart Enterprises, Alderwoods Group, and Carriage Services.

     There are estimated to be approximately  22,000 funeral homes in the United
States.

     There were approximately  2,400,000 deaths in the United States in the year
2000, or 8.7 deaths per thousand population. (National Vital Statistics Reports,
Vol 50,  No15).  The rate of  increase  in deaths in the United  States has been
nearly 1% annually  since  1980,  based on National  Vital  Statistics  Reports.
Johnson Rice & Company estimate the number of deaths will increase by 0.70% over
the years 2000 to 2010,  taking into account current  mortality rates.  Industry
wide it is  estimated  that  approximately  30% of all  funerals  are  currently
prearranged. (Johnson Rice & Company).

     We believe that the popularity  and  acceptance of cremation  services will
increase  in  the  future  as a  result  of the  differences  in  costs  between
traditional  burial  funerals and cremations and as a result of a consumer shift
in attitude towards cremation and perception of value.  According to a survey of
statistics compiled by the Cremation Association of North America:

     o    The  popularity  of  cremation  varies by  geographic  location in the
          United  States,  ranging from a low of 4.92% in Tennessee to a high of
          60.87% in Hawaii;

     o    In 2001,  cremation  services were chosen for approximately  27.12% of
          total deaths in the United States,  representing approximately 653,350
          cremations;

     o    The demand for cremation  services as a percentage  of death  services
          grew on average  approximately  4.6%  annually over the last ten years
          from 1989 to 1999 and approximately 3.8% over the last five years from
          1995 to 1999;

     o    Cremation  services as a percentage of death services grew from 21.20%
          in 1996 to 26.19% in 2000; and

     o    Cremation services are expected to account for approximately 39.24% of
          all death services in 2010 and 47.98% in 2025.

     We cannot assure you that the trend towards cremation will continue or that
we will  benefit  from the growth  demand for  cremation  services,  if any. Our
business  strategy is to provide  Pre-Need  and At-Need  cremation  services.  A
decline in the demand for such  services may have a material  adverse  affect on
our business and our results of operations.

Competition

     The death care industry as a whole is highly  fragmented.  Neptune operates
only in the cremation  segment of the death care industry.  We estimate that the
Company  performed  approximately  1% of all  cremations in the United States in
2002, while we operated in only 11 states.  Approximately  70% of our cremations
in 2003 were prearranged.

     Our  competitors  range from  nation-wide  large publicly held companies to
regional  independently  owned  chains  of  death  care  providers,   and  local
family-owned businesses.  The large public companies have much greater financial
resources and have by past consolidation  strategies  achieved greater economies
of scale in marketing and operations  than we have. The local family owned death
care  providers  have  competitive   advantages   based  on  established   local
reputations,  local  ownership and management and existing  capital  facilities.
Full  service  death  care  providers  of all  sizes  offer a  broader  range of
traditional  funeral and burial  products and  services,  including  traditional
burial, embalming services, plots, caskets,  tombstones and markers,  cremation,
plaques and urns, and pre-need arrangements.

     We intend to compete by focusing on the Pre-Need  cremation  segment of the
death  care  industry.  We  believe  that we can  effectively  market  cremation
services on a Pre-Need basis by offering a lower cost alternative to




                                       6
<PAGE>

burial  funerals.  In  addition,  we believe  that by  marketing  our company as
"America's  Cremation  Specialist"(R),  we can differentiate  ourselves from our
competitors.

     We cannot  assure you that we will  effectively  compete  against  existing
local death care service  providers or  corporate  consolidators.  Many of these
competitors  offer a full  range of death  care  services,  including  cremation
services and Pre-Need  service  plans.  Several of these  competitors  also have
significantly  greater  financial  and  other  resources  than us and have  long
established reputations in the markets they serve.

Industry Regulation

Licensing and Regulation

     The funeral  service  industry is regulated  primarily on a  state-by-state
basis with all jurisdictions  requiring licensing and supervision of individuals
who provide funeral-related services. Generally, our operations must be licensed
in each state in which we provide  services  or sell our  products.  To maintain
these licenses we are required to comply with the rules and  regulations of each
state,  which are usually  administered by a state  regulatory  board or funeral
board. Most states require us to pay annual licensing fees and renew our license
annually.

     When we acquired the Neptune  Group in 1999,  the Neptune Group was subject
to a Stipulation and Settlement and Decision in California. On April 9, 1999, in
connection  with our  acquisition  of the  Neptune  Group,  we  entered  into an
agreement  with the State of  California  and applied for an  assignment  of the
Neptune Group licenses. California approved the assignment,  subject to amending
the Neptune  Group's  Stipulation  and  Settlement and Decision to incorporate a
requirement  for us to complete audits of the Pre-Need trust funds in accordance
with the  California  Business  and  Profession  Code,  to comply with all other
requirements  for licensure,  and to be placed on probation  until June 2000. We
complied with the terms and  conditions of the  Stipulation  and  Settlement and
Decision  and the  Neptune  Group  licenses  were  assigned  to us in the fourth
quarter  of 2000.  As a  condition  of the  assignment,  we  agreed to remain on
probation  for a  period  of one  year,  until  June  2001,  or as  long  as Mr.
Weintraub, the controlling shareholder of the acquired business, continues to be
a shareholder of our company. Under the terms of our probation, we must continue
to comply  with the  California  regulatory  requirements  related  to  licensed
funeral  establishments  applicable  to  our  business  of  providing  cremation
services and  marketing  pre-need  cremation  services.  In the event we fail to
comply with these requirements,  our California funeral  establishment  licenses
may be revoked.

Regulation of prepaid services under pre-need contracts

     All   jurisdictions   regulate  the  sale  of  Pre-Need  services  and  the
administration of any resulting trust funds or insurance contracts.  Most states
require  pre-approval of pre-need  contracts entered into in connection with the
sale of Pre-Need  Plans.  Our Pre-Need Plans consists of a contract for the sale
of cremation services at the time of death,  administrative services at the time
of sale and for  merchandise  delivered  at the  time of sale.  When we refer to
"prepaid services" we refer to the portion of the pre-need contract allocated to
cover the cost of the cremation services at the time of death.

     All  states in which we  currently  operate  require  us to involve a third
party  fiduciary with respect to funds received for prepaid  services.  In every
State in which we sell pre-need arrangements, we maintain a master trust account
with a financial  institution  to secure these funds received from our customers
in that State.

     In most States, we can satisfy these requirements by placing funds in trust
or by  purchasing  fully  paid  life  insurance  policies  to cover the costs of
prepaid services. In California,  our trustees have purchased a fully paid group
life insurance  policy from the trust assets of our fully paid customers with us
as  beneficiary  on an  individual  customer  basis  at the  time of  death.  In
Washington  State,  approximately 44% of our fully paid customers have requested
we  withdraw  their  funds from  trust to  purchase  fully  paid life  insurance
policies  to cover the costs of prepaid  services,  which we have  done.  In the
future,  we  plan,  where  permitted  and  beneficial  to our  customers  and to
ourselves,  to purchase fully paid life insurance policies to cover the costs of
prepaid  services in lieu of maintaining  funds in trust in connection  with the
Pre-Need services we offer.



                                       7
<PAGE>


     In all of the states that we currently sell our Pre-Need Plans,  except for
New York and Florida, funds received for merchandise and administrative services
delivered  and  provided  to the  customer  at the  time  of the  sale  are  not
considered prepaid services.  Florida requires us to place the greater of 30% of
the price for  merchandise or 110% of the wholesale cost into trust and New York
requires us to place 100% of the price for  merchandise  into  trust.  The rules
related to  merchandise  stored for customers in connection  with Pre-Need Plans
differs  from  state-to-state,  but  generally,  merchandise  is  deemed  to  be
delivered at the time of sale if it is stored for the customer by a  third-party
or stored by the customer.  Effective  January 1, 2003, we began  delivering all
merchandise  to our  customers  at the time of sale,  except  in the  States  of
Florida, Illinois and New York.

     In addition,  all states in which we currently sell our Pre-Need Plans have
rules  and  regulations   governing  the  cancellation  of  pre-need   services.
Generally,  a client has the right to cancel a Pre-Need  plan  within 30 days of
the initial  purchase  (3 days in Iowa and  Oregon)  and receive a full  refund.
After this initial period, a Pre-Need contract may be cancelled by the purchaser
with  proper  notice to us, and in most  cases,  we are  required  to refund the
prepaid services portion only to the purchaser.  In most states, we can cancel a
Pre-Need  contract  where the  purchaser  is in  arrears in making  payments  on
Pre-Need Plans purchased on an installment  basis with proper notice and time to
cure the arrears.

Other Regulations

     Our  operations  must also comply with federal  legislation,  including the
laws  administered by the  Occupational  Safety and Health  Administration,  the
Americans  with  Disabilities  Act  and the  Federal  Trade  Commission  ("FTC")
regulations.  The FTC administers the Trade  Regulation Rule on Funeral Industry
Practices,  the  purpose  of which is to  prevent  unfair or  deceptive  acts or
practices in connection with the provision of funeral goods or services.

     In  addition,  concerns  regarding  lack  of  competition  have  led  a few
jurisdictions  to  enact  legislation  designed  to  encourage   competition  by
restricting  the common  ownership  of funeral  homes,  cemeteries  and  related
operations within a specific geographic region.

Prepaid Services Fiduciary Funds Administration

     We administer our Pre-Need trust funds in accordance with applicable  state
regulation.  Generally, the funds related to each Pre-Need contract are released
to us when we perform the crematory  service.  In Oregon,  Iowa,  Colorado,  New
York,  Illinois  and  Arizona,  we engage the  services  of a third  party trust
administrator,  American Funeral & Cemetery Trust Services (AFCTS) to administer
such trust funds. In the Florida and Washington State, we engage the services of
Forethought  Financial Services,  Inc. as Trustee of our trust funds for prepaid
services,  except for those  arrangements  in  Washington  State  funded by life
insurance  policies,  which are issued by Columbian Life Insurance  Company.  In
California, the Trustees for our prepaid services are Wells Fargo Bank, N.A. for
three  trusts,  and  Comerica  Bank  for one  trust.  Both  trusts  hold a group
insurance  policy  issued by National  Guardian Life  Insurance  Company to fund
fulfillments of pre-arrangements at the time of need, on an individual basis.

     These group life policies name us as beneficiary on an individual  customer
basis at the time of death.  We are  currently  evaluating  the  possibility  of
converting trust funds in a number of other States to insurance. We believe that
there  are  advantages  to  both  our  clients  and  Neptune  in  the  insurance
alternative. Based on our experience, a number of our prospective clients prefer
the insurance  alternative due to the involvement of a major insurance  carrier,
and the elimination of annual tax reporting  requirements for investment  income
on the trust funds. From our perspective, insurance policy funding requires less
annual  administration.  We anticipate  that the  management  and financing fees
earned on pre-need  trust funds will decline as a result of our increased use of
fully paid group life insurance policies.

     Neptune  receives  commissions on the acquisition of insurance  policies by
its members, as well as an indicated growth rate on the policy.

     Approximately  108,000  individuals  have  become  members of our  Pre-Need
programs since 1988, some of whom have since died or cancelled their membership.
Since  1988,  the  cancellation  rate of  active  Pre-Need  Contracts  has  been
approximately  0.2% on an annual  basis.  At December 31,  2003,  the balance of
pre-need  services funded was  approximately  $49 million and we had over 79,000
active members.



                                       8
<PAGE>

Personnel

     At December 31, 2003, we employed 31 full time  counselors  and 10 mortuary
personnel,  14 telemarketers,  and 38 administrative  personnel. In addition, we
had contracts with 97 independent  contractors  to serve as  commissioned  sales
representatives, including 16 in California, 16 in Florida, 9 in Colorado, 11 in
Oregon, 3 in Iowa, 28 in Washington, 7 in Illinois and 7 in Arizona.  Management
believes that our relationships  with our employees and independent  contractors
are good. None of our employees are members of collective bargaining units.

Neptune Society Acquisitions

Neptune Group Acquisition

     On March 31, 1999, we acquired a group of privately-held  companies engaged
in the business of marketing and  administering  Pre-Need and At-Need  cremation
services  in  California,  Florida  and New York  under  the  name the  "Neptune
Society." We paid the owners of the Neptune Group $1,000,000 in cash, a total of
125,000  common  shares  and  issued  two  promissory  notes in the  amounts  of
$2,000,000 and $19,000,000. The notes were guaranteed by the Neptune Society and
secured  by  the  assets  and  business  of  Neptune   Management  and  Heritage
Alternatives. We have satisfied our obligations under these notes.

Spokane, Washington Acquisition

     On December  31,  1999,  we acquired  all of the assets of the  business of
Cremation Society of Washington,  Inc. in Spokane,  Washington,  pursuant to the
terms of an asset purchase  agreement.  In connection with this acquisition,  we
agreed to pay Cremation Society of Washington a percentage of the gross revenues
(1% for 2003) and a percentage of earnings before income tax,  depreciation  and
amortization ("EBITDA") (7.5% for 2003) from our Spokane, Washington operations.
Our obligations to the above earnings based payments ended on December 31, 2003.
We also agreed to pay an earn out payment equal to 10% of EBITDA of our Spokane,
Washington  operations for so long as Charles S. Wetmore,  the general  business
manager of Cremation Society of Washington, continues to be employed by us.

Iowa Acquisition

     On March 15,  2000,  we acquired all of the issued and  outstanding  common
stock of  Cremation  Society  of  Iowa,  Inc.  in  Ankeny,  Iowa in a series  of
transactions  described  under the heading "Item 1.  Business - Neptune  Society
Acquisitions - Iowa  Acquisition" in our annual report on Form 10-K for the year
ended  December 31, 2001 filed with the  Securities  and Exchange  Commission on
April 1, 2002. As of December 31, 2003, we have no further  payment  obligations
in connection with our acquisition of Cremation Society of Iowa, Inc.

Oregon Acquisition and Disposition

     Effective July 17, 2000, we, through a wholly-owned subsidiary,  acquired a
funeral, burial and cremation business and real estate in Portland,  Oregon in a
series of  transactions  from a group of companies owned and controlled by David
Schroeder,  our former  President and director,  and Michael Ashe, a former Vice
President.  We also entered into employment  agreements with David Schroeder and
Michael Ashe.  See "Item 1.  Business - Neptune  Society  Acquisitions  - Oregon
Acquisition"  in our annual report on Form 10-K for the year ended  December 31,
2001 filed with the  Securities  and Exchange  Commission on April 1, 2002 for a
complete description of this transaction.

     During the fourth quarter 2001 as part of our overall business  strategy to
focus on our pre-need  marketing  and sales  operations,  we disposed of certain
physical  assets  related to our Portland  business in a series of  transactions
previously  described under "Item 1. Business - Neptune  Society  Acquisitions -
Disposition of Portland Assets and Related Transactions" in our annual report on
Form 10-K for the year ended  December  31, 2001 filed with the  Securities  and
Exchange  Commission  on April 1,  2002.  Under  these  transactions,  effective
December  31,  2001,  we sold  substantially  all of the  assets  related to our
Portland  business and  crematory to Western  Management  Services,  L.L.C.,  an
Oregon limited  liability  company managed by Michael Ashe, in  consideration of
among other things, the assumption of a $1,500,000 promissory note issued by our
Oregon  subsidiary and the assumption of the  $1,000,000  convertible  debenture
issued in connection with the original acquisition and entering into a service




                                       9
<PAGE>

agreement  to provide  Neptune  Society  at-need  services  in  connection  with
pre-need  services sold within 100 miles of Portland,  Oregon. We also agreed to
terminate Mr. Ashe's employment agreement with the Neptune Society.

Other Expansion

     Since 1999, we have opened the following offices:

    --------------------------------------------------------------------
             Location                             Year of Opening
    --------------------------------------------------------------------
             Lynwood, WA                              2001
    --------------------------------------------------------------------
             Portland, OR                             2001
    --------------------------------------------------------------------
             Denver, CO                               2002
    --------------------------------------------------------------------
             Phoenix, AZ                              2002
    --------------------------------------------------------------------
             Chicago, IL                              2002
    --------------------------------------------------------------------
             St. Louis, MO (Licensee)                 2003
    --------------------------------------------------------------------


                                  RISK FACTORS

     We have included  information in this annual report that contains  "forward
looking  statements."  Our  actual  results  may  materially  differ  from those
projected  in  the  forward  looking   statements  as  a  result  of  risks  and
uncertainties.  Although we believe that the assumptions  made and  expectations
reflected in the forward looking statements are reasonable, we cannot assure you
that the  underlying  assumptions  will,  in fact,  prove to be  correct or that
actual future results will not be different from the  expectations  expressed in
this report.  An  investment  in our  securities  is  speculative  in nature and
involves  a high  degree of risk.  You should  read this  Report  carefully  and
consider the following risk factors.


We have a history of losses and  anticipate  that we may continue to  experience
losses in the future.

     Since our  acquisition  of the Neptune  group of  companies,  we have had a
history of losses.  We incurred  losses of $6,705,576 and $33,201  respectively,
during the years ended December 31, 2002 and 2003. We had an accumulated deficit
of $27,585,544 at December 31, 2002 and $27,618,745 at December 31, 2003. We may
incur losses for the foreseeable  future until we are able to increase our sales
and reduce our level of debt.  See  "Management's  Discussion  and Analysis." We
cannot assure you that we will ever  successfully  achieve a sufficient level of
sales or reduce our level of debt to attain profitable operations.

     Failure to achieve  profitability  could have a material  adverse effect on
our business, results of operations and financial condition.


We have a limited operating  history as a stand-alone  company in the death care
industry.

     Although our  predecessors,  the Neptune Group of companies,  have operated
Pre-Need and At-Need cremation businesses,  we have operated the Neptune Society
only since April 1999. See  "Description  of Business - Overview."  Prior to our
acquisition  of the Neptune  Group of companies,  we had no operating  business.
Accordingly,  we have only a limited  operating history upon which an evaluation
of our business and its  prospects  may be based.  Although we have  experienced
revenue and net income growth in recent periods,  there can be no assurance that
our  operations  will be  profitable  in the  future  or that we will be able to
successfully   implement  our  operating   and  growth   strategy.   Failure  to
successfully  implement our operating and growth  strategy could have a material
adverse effect on our net revenue and earnings. See "Management's Discussion and
Analysis."




                                       10
<PAGE>

We may not be  able  to  execute  our  business  strategy  to  acquire  existing
crematory  service  providers and open new offices  unless we obtain  additional
financing.

     Our  business  strategy  is to grow  through  the opening of new offices or
start-ups and selective acquisitions of existing cremation service providers and
to  increase  the  performance  of our  existing  operations.  To date,  we have
financed the  acquisitions  of the Neptune  Group of companies  and our Spokane,
Washington and Ankeny, Iowa,  acquisitions through a combination of cash, common
stock and debt.  We may finance  future  acquisitions  through  debt,  cash from
operations,  issuing  common stock or other  securities,  or any  combination of
these. In the event that our common stock does not maintain a sufficient  market
value, or potential acquisition candidates are otherwise unwilling to accept our
common stock or other  securities as part of the  consideration  for the sale of
their businesses,  we may be required to use more of our cash resources or incur
substantial  debt in order to  finance  future  acquisitions.  If we do not have
sufficient cash resources,  our ability to open new offices  (start-ups) or make
selective  acquisitions could be limited unless we are able to obtain additional
capital through debt or equity financings.  We cannot assure you that we will be
able to  obtain  the  financing  we will  need in the  future  on  terms we deem
acceptable, if at all.


We may not be able to execute our business strategy to open new start-up offices
or selectively  acquire existing  crematory service providers unless we are able
to effectively  target new geographic market areas for start-ups or acquisitions
in a competing environment.

     We cannot  assure  you that our  current  management,  personnel  and other
corporate infrastructure will be adequate to effectively target acquisitions and
then integrate them into our business without substantial costs, delays or other
operational or financial problems. In connection with certain  acquisitions,  we
may need certain  licenses and approvals.  Obtaining such licenses and approvals
could delay the closing of an acquisition.

     Even though  several major death care  companies have reduced their ongoing
acquisition  activities,  we may be competing  with several  publicly held North
American death care  companies,  including  Service  Corporation  International,
Stewart  Enterprises,  Inc.,  Alderwoods  Group and Carriage  Services,  Inc. to
selectively  acquire cremation service providers.  Each of these other companies
has greater  financial  and other  resources  than we have and has, in the past,
actively  engaged in  acquiring  death  care  service  providers  in a number of
markets.  Because we are seeking to acquire only cremation service providers, we
limit  the  number  of  potential   acquisition  targets  available  to  us  and
consequently may not be able to execute our business acquisition strategy.


     The  success of our  start-up or  selective  acquisition  plans  depends on
several factors, including:

     o    our ability to identify  suitable  start-up or  selective  acquisition
          opportunities;

     o    our  ability  to obtain a license to open a  start-up  or operate  the
          target acquisition;

     o    the level of competition  for a start-up  geographic area or selective
          acquisition target;

     o    the start-up cost or purchase price for selective acquisitions;

     o    the financial performance of facilities after start-up or acquisition;
          and

     o    our  ability  to  effectively   integrate  the  start-up  or  acquired
          facilities' operations.

     If we fail to achieve our  start-up or  selective  acquisition  plans or to
operate start-up or acquired  facilities and integrate them into our operations,
such failure  could  materially  and adversely  affect our  business,  financial
condition and results of operations.


We will not become a profitable  business  until we are able to fully  integrate
our   start-ups   or   selective   business   acquisitions   into  our  existing
infrastructure.

     Assuming  that we are  successful  in  completing  start-ups  or  selective
acquisitions, we may not be able to effectively integrate them into our business
due to the  geographic  disparity  of  management  personnel  and  the  cost  of
centralizing  operations in our California head office. Part of our start-up and
acquisition  strategy  will  be to  recruit  and  retain  key  employees  at new
start-ups or locations acquired and our failure to do so may result in a decline
in the  performance  of the  continuing  operations  at those  newly  opened  or
acquired locations. We may also experience increased costs related to the hiring
and training of new personnel, which may adversely affect our ability to operate
our newly opened start-ups or acquired locations on a cost-effective basis.



                                       11
<PAGE>

We implemented a strategy to use pre-paid group life insurance  policies in lieu
of  pre-need  trust  funds,  which may  effect our  period-to-period  results of
operations.

     All   jurisdictions   regulate  the  sale  of  Pre-Need  services  and  the
administration of any resulting trust funds or insurance  contracts.  All states
in which we currently operate require us to involve a third party fiduciary with
respect to funds received for prepaid services.  In every State in which we sell
pre-need  arrangements,  we  maintain a master  trust  account  with a financial
institution  to secure  these funds from our  customers  in that State.  In most
States,  we can  satisfy  these  requirements  by  placing  funds in trust or by
purchasing  fully  paid life  insurance  policies  to cover the costs of prepaid
services.  In  California,  our trustees have  purchased a fully paid group life
insurance  policy from the trust assets of our fully paid  customers  with us as
beneficiary  on an individual  customer basis at the time of death In Washington
State,  approximately 44% of our fully paid customers have requested we withdraw
their funds from trust to purchase fully paid life  insurance  policies to cover
the costs of prepaid services, which we have done. In the future, we plan, where
permitted,  to purchase fully paid life insurance policies to cover the costs of
prepaid  services in lieu of maintaining  funds in trust in connection  with the
Pre-Need services we offer.

     We receive  commissions  on the  acquisition  of insurance  policies by its
members,  as well as an indicated growth rate on the policy.  Under the terms of
these  policies,  we are  required to refund any  commissions  we receive on the
policies  if a member  terminates  its  pre-need  contract  prior to death.  Our
historical termination rate is currently 0.2% annually. Any substantial increase
in cancellation of pre-need  contracts may have a material adverse effect on our
results of  operations.  In addition,  we  anticipate  that the  management  and
financing  fees earned on pre-need  trust funds will  decline as a result of our
increased use of fully paid group life insurance policies.


A decline  in death  rates may impair our  ability to become  profitable  in the
future.

     As we continue to see  improvements  in  technology  related to health care
that may prolong life expectancy,  we may experience a decline in expected death
rates.  Such a decline,  coupled  with our current  business  strategy to expand
through acquisitions and increased  performance of our existing operations,  may
result in a decrease  in the demand for our  cremation  services  and  adversely
affect our  ability  to become  profitable.  A decline  in demand  and  revenues
together with  increased  costs  resulting from our  acquisitions  may result in
increased losses and we may never achieve profitability.


A decline in the choice of cremation  rather than burial services may impair our
ability to be profitable in the future.

     Our  business  strategy is premised on the current  trend in the death care
industry  where  consumers  are  selecting  cremation  services  over  the  more
traditional  burial  services.  We may be unable to  achieve  the  growth in our
revenues  necessary  to  operate  profitably  as we expand  our  operations  and
increase our marketing and sales efforts.  Our acquisition  strategy is expected
to increase  our costs of  operations  and a decline in the number of  cremation
services may result in a decrease in our revenues, which may increase losses and
decrease the likelihood we will achieve profitability.


Our ability to execute our business  plan is predicated on our ability to retain
key personnel with experience in the death care industry.

     We depend to a large extent upon the  abilities  and  continued  efforts of
Marco Markin,  our Chief Executive Officer and a Director and Jerry Norman,  our
President to provide  overall  direction and decision  making in developing  and
implementing our business strategy and identifying and opening new start-ups and
selectively  acquiring  existing  cremation  service  providers.  We  may  incur
additional  costs and  delays in our  expected  growth  should we lose these key
personnel.  In  addition,  our success is also  determined  by offering  quality
Pre-Need and At-Need  cremation  services,  which are  supervised  by our senior
management  team.  The loss of the  services  of the key  members  of our senior
management  could have a material  adverse  effect on our  continued  ability to
compete in the death care  industry  through  delivery  of quality  services  to
consumers.


New legislative  restrictions impacting telemarketing  activities may reduce the
number of sales leads.

     Currently we have an  appointment  (PDS)  center in Arizona that  schedules
more than 1,100  appointments  per month for our sales  force.  This  represents
approximately 35% of the monthly leads currently  obtained by us;  specifically,
the remainder are generated from direct mail, web site and advertising. On March
11, 2003,  President Bush signed into law a national "Do Not Call" list. The law
has been subject to legal challenge and several court




                                       12
<PAGE>

rulings have  delayed its  implementation.  A number of states have  implemented
similar  initiatives.  While we believe we are not subject to restrictions based
on these  legislative  changes as we do not sell  products or services  over the
telephone,  the popular support for the initiatives has made it a more difficult
environment in which to operate,  and to maintain our flow of quality leads from
our PDS activities. Unless we can develop other cost effective sources of leads,
or  improve  our rate of  success  on a reduced  number  of leads  such that our
overall  sales  are  not  affected,  the  restrictions  on  telemarketing  could
indirectly have a material adverse effect on our results of operations.


In the event  that we are not able to comply  with the  substantial  regulations
under which we operate, we may be subject to business operation closures,  fines
and penalties.

     The death care industry is subject to regulation, supervision and licensing
under  numerous  federal,  state and local  laws,  ordinances  and  regulations,
including  extensive  regulations  concerning  prepaid services (trust funds and
insurance), pre-need sales of cremation products and services, and various other
aspects of our business.  The impact of such regulations varies depending on the
location  of our  offices  and  facilities  and  failure  to  comply  with  such
regulations may result in business closures,  fines and penalties,  all of which
may affect the profitability of our business.

     From time to time, states and other regulatory agencies have considered and
may enact additional legislation or regulations that could affect the death care
industry and in  particular  our ability to be  profitable.  For  example,  some
states and regulatory  agencies have considered or are  considering  regulations
that could require more liberal  refund and  cancellation  policies for Pre-Need
sales of products and services,  prohibit door-to-door or telephone solicitation
of potential  customers,  increase  trust  requirements  and prohibit the common
ownership of funeral homes and  crematoriums  in the same market.  If adopted in
the states in which we operate,  these and other possible proposals could have a
material adverse effect on our profitability.


Your  investment  in our  shares  may be  diluted  in the  event  that we may be
required  to sell  additional  common  stock,  or parties  exercise  options and
warrants, or convertible debentures are converted.

     As of December 31, 2003, we had the following  warrants,  options and other
share acquisition rights outstanding:

     o    options  exercisable  to acquire  up to  767,671  shares of our common
          stock at prices  ranging from $0.65 to $10.00 per share and an average
          price  per  share  of  $3.16  granted  to  our  employees,   officers,
          directors, and area sales representatives;

     o    options to acquire a further 261,364 shares at a price of $4.40 are to
          be granted pursuant to an existing employment agreement

     o    warrants  exercisable  to acquire  up to 333,083  shares of our common
          stock at prices  ranging  from $0.72 to $0.79 per share and an average
          price per share of $0.76  issued to  investors  in  private  placement
          transactions and debt holders holding pre-emptive rights,

     o    warrants for the issue of up to  1,724,167  shares of our stock at the
          price of $3.00 per share granted in  connection  with  debenture  debt
          issuances and refinancing.

     o    convertible debentures in the aggregate principal amount of $1,071,653
          mandatorily  convertible to acquire up to 893,044 shares of our common
          stock on March  31,  2004  under the  terms of  Mandatory  Convertible
          Debentures,  subject to our right to redeem the Debentures for cash by
          the payment of a premium of 50% of the  principal  amount by March 31,
          2004.

     We also have agreed to issue a total of 215,500  shares of our common stock
for payment of deferred executive  compensation totaling $140,076, at the market
value of our  stock  ($0.65  per  share) at the time of our  agreement  with the
executive. Holders of the options and warrants are likely to exercise them when,
in all likelihood,  we could obtain  additional  capital on terms more favorable
than those  provided by the  options.  This will  increase  the supply of common
stock and  dilute  your  investment  in our  shares.  However,  we  cannot  make
assurances that such options will be exercised.  Further,  while the options are
outstanding,  our ability to obtain additional  financing on favorable terms may
be adversely  affected as  investors  may not invest  given the  possibility  of
dilution through exercise of options.




                                       13
<PAGE>

We have agreed to pay certain  persons a  percentage  of the  revenues  from the
operations  of  our  Spokane,   Washington  business,   which  will  affect  the
profitability of these operations.

     In connection with our acquisition of Spokane,  Washington  facilities,  we
agreed  to pay  the  former  owners  of this  business  10% of  earnings  before
interest, taxes and depreciation expense from our Spokane, Washington operations
for so long as Charles S.  Wetmore  continues  to be  employed by us during each
year ending December 31 commencing after January 1, 2005.

     In the future, we may negotiate  additional  acquisitions where we agree to
share our revenues  and/or  profits.  We cannot assure you that we will generate
sufficient  profits from our  operations to meet these  obligations  and achieve
profitability.


We have substantial debt obligations that may affect our future profitability

     We had approximately  $8.7 million of debt outstanding,  at an average cost
of 16% per annum at December 31,  2003.  Of our total debt at December 31, 2003,
approximately $3.0 million (including $1.1 million mandatorily  convertible into
stock)  becomes due in the upcoming 12 months,  $4.7 million  becomes due in the
next 13 to 36 months, and $1.0 million becomes due within 48 months.  During the
years ended December 31, 2002 and 2003,  our total interest and finance  expense
was approximately $2,579,000 and $1,864,000, respectively.

     Our  debt  may  increase  if  we  acquire  additional  death  care  service
operations  or open new  offices.  In the future,  we may also issue  additional
notes or convertible debentures. There can be no assurance that we will generate
sufficient   cash  flow  or  obtain   sufficient   financing  to  satisfy  these
obligations.  If we are unable to satisfy these  obligations as they become due,
there  can be no  assurance  that we will be able to  obtain  extensions  on the
maturity dates of the notes or of the convertible debenture.


Cancellations of existing Pre-Need  contracts may have a material adverse effect
on our future profitability.

     We  anticipate  that a significant  portion of our future  revenues will be
derived when we perform services under our Pre-Need  contracts.  We are required
to place a  percentage  of the funds we  receive  from the sale of our  Pre-Need
programs in trust or insurance  policies until we perform the cremation service.
On  fulfillment we earn revenue to the extent we receive funds from the maturity
of the  trust  arrangement  or  life  insurance  policy.  Currently,  we  manage
approximately $50 million in trust funds or insurance  purchased for the benefit
of our  members.  Although  each  state has  different  regulatory  requirements
regarding the trust funds, the states in which we conduct business,  California,
Colorado,  Iowa, Florida,  Oregon, New York,  Illinois,  Arizona and Washington,
require us to refund all or a portion of trust monies to our members that cancel
their  Pre-Need  contracts.  See  "Government  Regulation."  Historically,   our
cancellation  rate is  approximately  0.2% on an annual basis.  Any  substantial
increase  in  cancellations  may have a  material  adverse  effect on our future
revenues and results of operations.


Our employment  agreement with our CEO may require us to pay him 13% of the fair
value of our company under certain circumstances.

     We entered an amended and restated employment agreement with our CEO, which
requires us to  purchase a total of 538,818  shares and  convertible  securities
exerciseable to acquire an addition 457,692 shares a owned by him and/or certain
related parties,  unless such shares are acquired by debentureholders which hold
a right of first refusal related to such securities,  for a purchase price equal
to 13%  of the  value  of  our  company  ("Purchase  Price")  in  the  event  of
termination of his employment (i) by Neptune  Society,  (ii) by our CEO for good
reason,  (iii) on a change of control of our  company,  or (iv) on the expiry of
the employment agreement. See "Executive  Compensation,  Marco Markin Employment
Agreement." If one or more of the events requiring payment of the Purchase Price
occurs,  we may be required to pay the Purchase Price from working capital or to
raise  additional  capital  to make such  payments,  which  may have a  material
adverse  effect on our  liquidity  and result of  operations.  The  issuance  of
additional  equity  securities under such  circumstances  may cause  substantial
dilution to existing shareholders. The payment of the Purchase Price will result
in a compensation  expense,  which will likely have a material adverse effect on
our result of operations. The existence of the employment agreement is likely to
deter third parties from  acquiring our company and may have a material  adverse
effect on the value of our equity securities.



                                       14
<PAGE>


Broker-dealers  may be  discouraged  from effecting  transactions  in our shares
because  they are  considered  penny  stocks and are  subject to the penny stock
rules

     Rules 15g-1 through 15g-9 promulgated under the Securities  Exchange Act of
1934, as amended,  impose sales  practice and  disclosure  requirements  on NASD
brokers-dealers  who make a market in "a penny  stock." A penny stock  generally
includes any  non-NASDAQ  equity  security  that has a market price of less than
$5.00 per share and stock quoted on the NASD OTCBB. Our shares are quoted on the
NASD OTCBB,  and the price of our shares ranged from $0.52 (low) to $2.25 (high)
during the year ended  December  31,  2003.  The closing  price of our shares on
March 26,  2004 was  $1.05.  Purchases  and sales of our  shares  are  generally
facilitated by NASD  broker-dealers who act as market makers for our shares. The
additional  sales  practice  and  disclosure  requirements  imposed upon brokers
dealers may discourage broker-dealers from effecting transactions in our shares,
which could  severely  limit the market  liquidity  of the shares and impede the
sale of our shares in the secondary market.

     Under the penny stock regulations,  a broker-dealer  selling penny stock to
anyone other than an established customer or "accredited  investor"  (generally,
an  individual  with net  worth in  excess of  $1,000,000  or an  annual  income
exceeding  $200,000,  or $300,000  together  with his or her spouse) must make a
special  suitability  determination  for the  purchaser  and  must  receive  the
purchaser's  written  consent  to the  transaction  prior  to sale,  unless  the
broker-dealer or the transaction is otherwise exempt.

     In  addition,  the penny stock  regulations  require the  broker-dealer  to
deliver, prior to any transaction involving a penny stock, a disclosure schedule
prepared  by the  Commission  relating  to the penny  stock  market,  unless the
broker-dealer  or the transaction is otherwise  exempt.  A broker-dealer is also
required to disclose commissions payable to the broker-dealer and the registered
representative   and  current   quotations  for  the  securities.   Finally,   a
broker-dealer  is required to send monthly  statements  disclosing  recent price
information  with  respect to the penny stock held in a  customer's  account and
information with respect to the limited market in penny stocks.


Trading  on the OTC  Bulletin  Board may be  sporadic  because it is not a stock
exchange, and stockholders may have difficulty reselling their shares.

     Our  common  stock is quoted on the OTC  Bulletin  Board.  Trading in stock
quoted  on the OTC  Bulletin  Board is  often  thin  and  characterized  by wide
fluctuations in trading  prices,  due to many factors that may have little to do
with the company's  operations or business prospects.  For example, the reported
trading  volume for our common stock during the year ended December 31, 2003 was
a total of  503,860  shares.  Moreover,  the OTC  Bulletin  Board is not a stock
exchange,  and trading of  securities  on the OTC  Bulletin  Board is often more
sporadic than the trading of securities listed on a quotation system like Nasdaq
or a stock  exchange  like NYSE or AMEX.  Accordingly,  you may have  difficulty
reselling any of the shares you purchase from the selling stockholders.


Our ability to be profitable  is premised on our ability to compete  effectively
in a highly competitive industry.

     The death care  service  industry  is  intensely  competitive  and  rapidly
evolving with the  consolidation  efforts of our  competitors.  Unless we can be
competitive,  we will lose revenue to our competitors and will not be able to be
profitable.  Our competitors are small  independent death care service providers
and large publicly traded companies,  including  Carriage Services which owns or
operates  more than 176  funeral  homes  and over 38  cemeteries  in the  United
States,  Service  Corporation  International,  which  operates  more than  3,700
funeral service locations worldwide,  and Stewart Enterprises,  Inc., which owns
and operates over 700 funeral homes and cemeteries worldwide.  These competitors
also offer  cremation  services  that  compete  directly  with our  services and
products.  We also compete on a local basis to provide  services in  communities
with service  providers that have established  reputations and long histories of
operations.


ITEM 2.  DESCRIPTION OF PROPERTY

     We lease properties in eighteen locations in Arizona, California, Colorado,
Florida, Illinois, Iowa, New York, Oregon and Washington.  There are three sales
offices in  California,  three in Florida,  one in Iowa, two in New York, one in
Oregon and two in  Washington.  Two of the  offices in Florida and the office in
Iowa have  chapels for funeral  services.  We lease two  properties  for holding
facilities, one of which also stores merchandise inventory and



                                       15
<PAGE>


the other has the crematory.  We also lease our corporate office in Los Angeles.
All of our leases are on standard  terms and  conditions,  and we do not rely on
any one  lease for its  continuing  operations.  The  operations  are  currently
concentrated at the following locations:

<TABLE>
                                      Summary of our operational locations
-----------------------------------------------------------------------------------------------------------------
Location                                Operation                             Term of Lease   Expiration Date
-----------------------------------------------------------------------------------------------------------------
<S>                       <C>                                                   <C>             <C>
Arizona
Tempe                     Pre-Need/At-Need sales and administrative office and   5 years        9/30/2007
                          Telemarketing Center
-----------------------------------------------------------------------------------------------------------------
California
 Sherman Oaks -           Administration and operations headquarters             7 years        7/31/2009
Corporate                 Pre-Need/At-Need sales and administrative office       5 years        3/31/2007
     San Pedro            Pre-Need/At-Need sales and administrative office       1 year         7/31/2004
     Santa Barbara        Pre-Need/At-Need sales and administrative office       5 years        1/31/2007
     Los Angeles -        Holding facility, crematory and viewing room           Monthly
Heritage                  Holding facility and inventory warehouse               Monthly
     Santa                Inventory warehouse                                    Monthly
Barbara/Ventura
     Canoga Park
-----------------------------------------------------------------------------------------------------------------
Colorado
     Arvada               Pre-Need/At-Need sales and administrative office       4 years         9/1/2005
-----------------------------------------------------------------------------------------------------------------
Florida
     Fort Lauderdale      Pre-Need/At-Need sales and administrative office and   10 years        9/3/2006
                          chapel
     St. Petersburg       Pre-Need/At-Need sales and administrative office       5 years        8/31/2006
-----------------------------------------------------------------------------------------------------------------
Iowa
     Ankeny               Pre-Need/At-Need sales and administrative office, and  1 year        05/31/2004
                          chapel
     Ankeny               Crematory                                              5 years       10/14/2004
-----------------------------------------------------------------------------------------------------------------
Illinois
     Chicago              Pre-Need/At-Need sales and administrative office       4 years        5/31/2006
-----------------------------------------------------------------------------------------------------------------
Oregon
      Portland            Pre-Need sales and administrative office               5 Years        1/31/2008
-----------------------------------------------------------------------------------------------------------------
New York
     Long Island          At-Need sales and administrative office                Monthly
     Yonkers              At-Need sales and administrative office                Monthly
-----------------------------------------------------------------------------------------------------------------
Washington
     Spokane              Pre-Need/At-Need sales and administrative office,      6 years        1/01/2005
                          holding facility, crematory and viewing room
    Lynnwood              Pre-Need/At-Need sales and administrative office       3 years        4/30/2005
-----------------------------------------------------------------------------------------------------------------
</TABLE>

We do not  currently  maintain  any  investments  in real  estate,  real  estate
mortgages  or persons  primarily  engaged in real estate  activities,  nor do we
expect to do so in the foreseeable future.



                                       16
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

     There are no material  litigation  proceedings  currently  pending,  and no
material litigation  proceedings were terminated during the fourth quarter ended
December 31, 2003.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were  submitted to a vote of our  securities  holders during the
fourth quarter ended December 31, 2003.


ITEM 5.  MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
         BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

     On August 26, 1998, our shares of common stock were listed under our former
name Lari Corp. on the NASD OTC Bulletin Board under the symbol  "LREE".  On May
3, 1999, Lari Corp.  changed its name to the Neptune Society and on May 4, 1999,
the symbol was changed to "NPTN". In March, 2000, our common stock was de-listed
from the NASD OTCBB, and began quotation on the National Quotation Bureau's pink
sheets.  On May 19, 2000,  after affecting a reverse stock split, the symbol for
our common  stock was  changed to "NTUN".  On August 2, 2001,  our common  stock
began quotation on the OTCBB. On March 22, 2002, we effected a 4:1 reverse stock
split and the symbol for our common stock was changed to "NPTI".

     The  high  and low bid  quotations  of our  common  stock  on the  NASD OTC
Bulletin Board as reported by the NASD and the National  Quotation Bureau's pink
sheets were as follows:

Period                                       High(1)                Low(1)
------                                       -------                ------
2003
First Quarter                                 $1.01                  $0.68
Second Quarter                                $0.80                  $0.52
Third Quarter                                 $2.25                  $0.79
Fourth Quarter                                $1.50                  $0.70


2002
First Quarter                                 $2.15                  $1.28
Second Quarter                                $3.15                  $1.01
Third Quarter                                 $1.08                  $0.55
Fourth Quarter                                $1.08                  $0.60

2001
First Quarter(2)                             $36.50                  $6.40
Second Quarter(2)                            $24.80                  $8.50
Third Quarter(2)                             $24.72                  $5.60
Fourth Quarter                                $6.72                  $1.60

(1)  Gives  effect to the two for one reverse  stock split that  occurred on May
     19, 2000, and the four for one reverse split effected on March 22, 2002.
(2)  Based on National Quotation Bureau pink sheet quotation.


     The above quotations reflect inter-dealer  prices,  without retail mark-up,
markdown or commission and may not necessarily represent actual transactions.

     As of March 26, 2004,  the closing bid  quotation for our common shares was
$1.05 per share as quoted by the NASD OTCBB.

     As of March 19, 2004,  we had  5,841,593  shares of common stock issued and
outstanding, held by 106 registered shareholders.



                                       17
<PAGE>

     The  declaration of dividends on our shares is within the discretion of our
board of directors and will depend upon the  assessment of, among other factors,
earnings,  capital  requirements  and the operating  and financial  condition of
Neptune Society.  The Board has never declared a dividend.  At the present time,
we anticipate that all available funds will be invested to finance the growth of
our business.

     Recent Sales of Unregistered Securities

     During the quarter  ended  December  31,  2003,  we issued no  unregistered
securities.

     On February 1, 2004 we issued 40,000 shares to Jerry Norman, our President,
under the terms of his  Employment  Agreement  with the Company.  The securities
were  issued  in a  private  transaction  pursuant  to  an  exemption  from  the
registration  requirements available under Section 4(2) of the Securities Act of
1933, as amended.

     On March 10, 2004 we issued  28,388  shares to Green Leaf  Investors I, LLC
for consideration of $0.65 per share under pre-emptive rights previously granted
to them with respect to share issuances in 2003. The securities were issued in a
private transaction pursuant to an exemption from the registration  requirements
available under Section 4(2) of the Securities Act of 1933, as amended.

     Purchases of Equity Securities by the Small Business Issuer and Affiliates

     None


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     The following discussion and analysis is provided to increase understanding
of,  and  should  be  read  in  conjunction  with,  the  consolidated  financial
statements and accompanying notes.

Overview

     We are in the  business of  providing  pre-arranged  and at-need  cremation
services  in 11 States.  Approximately  70% of the  cremations  we  perform  are
pre-arranged.  There  is  approximately  $49  million  in  trust  funds  or life
insurance policies with us as beneficiary to satisfy our pre-arrangement service
obligations.  These  assets  are  held  by  independent  third  party  financial
institutions  until the time of need, which we estimate to be on average a 10-12
years for our  pre-arrangements.  The trust  assets are in excess of our service
obligations,  and are not included in our  financial  statements  until they are
released  to us  over  the  anticipated  10-12  year  period.  The  $49  million
trust/insurance value was accumulated both prior to and after our acquisition of
the business.

Critical Accounting Policies:

Revenue Recognition
-------------------

     Pre-need cremation arrangements - From January 1, 2000 to December 31, 2002
(with the  exception of a four month period in the second and third  quarters of
2001), our pre-need  merchandise  delivery and handling  procedures in virtually
all  locations  did not meet the test for  revenue  recognition  at the point of
sale.  Rather,   revenue  related  to  the  merchandise  component  of  pre-need
arrangements was generally  recorded as deferred pre-need  revenue.  Commissions
paid with respect to obtaining  pre-need  arrangements were also deferred.  Both
the revenue  received and costs paid by us during the life of the contract  were
accordingly  not taken into account until the  cremation  services were actually
performed.  At that point, these deferred amounts,  together with the previously
trusted funds for the cremation service, were matched and recorded in operations
in accordance  with  generally  accepted  accounting  principles.  Over the next
estimated  12  years  we  expect  to  bring  into  income  deferred  revenue  of
approximately  $19.5  million and  deferred  expenses of $6.5  (without any cash
receipts or disbursements)  related to prearrangements  made during this period,
over and  above  trust  funds or  insurance  policy  proceeds  (cash)  on actual
provision of the cremation services, as discussed above.



                                       18
<PAGE>

     Effective  January 1, 2003,  we  implemented  a full  merchandise  delivery
policy for new pre-need arrangement  contracts sold in all locations,  except in
the states of Florida,  Illinois and New York.  In all states,  except  Florida,
Illinois and New York, we now  irrevocably  deliver to the purchaser at the time
of sale all the  merchandise  purchased in  connection  with the  contract.  The
effect  of this  revised  business  practice  is that the  selling  price of all
merchandise   sold  in  connection  with  pre-need   contracts,   together  with
administrative  charges for set-up of the contract, are recognized as revenue in
accordance with generally accepted  accounting policies at the time the contract
is entered into and the  merchandise is delivered.  Also, all sales  commissions
paid relating to the obtaining of such  contracts are recognized as expense when
the  revenue  associated  with such  contract is  recognized,  rather than being
deferred until fulfillment (the time the cremation services are performed).

     The portion of the pre-need contract relating to the cremation  services to
be  performed  in the future  continues  to be paid into  trust to  support  our
obligations in accordance with applicable  state  regulations and is released to
the Company once the cremation  services are  performed.  These receipts are not
recognized in income until earned through the provision of the actual cremation.

     For the majority of prearrangements  made by our customers after January 1,
2003,  there is no element of  deferred  revenue  or  expenses  to be taken into
income.  Accordingly,  over the next  10-12  years as the  pre-January  1,  2003
arrangements  are  serviced,  the  amount of  revenue  recognized  (but not cash
received) for services on fulfillment will decrease steadily as more and more of
our  cremations  are  derived  from the post  January  1, 2003  pool.  For these
customers,  the revenue  related to  merchandise  delivered  and  administrative
services  provided will already have been  recognized at the time of sale,  with
only the cash received from  trust/insurance to be recognized at the time of the
cremation  services.  The cash expected to be received from  trust/insurance  is
expected  to be  sufficient  to meet our costs of the  services,  as well as our
existing profit margin.

     The change to a full  delivery  policy in the majority of our locations has
affected the  comparability of our 2003 operating  results with the 2002 figures
in the  accompanying  consolidated  financial  statements  for the  years  ended
December 31, 2003 and 2002.

At-need cremation  services - all merchandise and services revenue is recognized
at the time services are provided.

Installment sales - we recognize an account  receivable for the unpaid amount of
the  pre-need  arrangement  at the time of sale,  to the extent the  installment
payments will not be required to be trusted.

Travel plan sales- we recognize  revenue  related to the sale of travel plans at
the time of sale. We also  concurrently  recognize the premium cost to the third
party carrier obligated to provide the services if required.

Trust placement fees -- The company has earned revenue of approximately $721,000
during  2003 in  exchange  for  transfer  of  certain  of its trust  assets to a
different  asset  manager.  Management  considered  the  accounting for the fees
received  from  this  transfer  and  concluded  that  revenue  recognition  upon
completion  of the  transfer,  as  opposed  to  deferral  and  recognition  upon
performance  of the cremation  service,  was  appropriate.  The fees were not in
exchange for any future  services to be performed by the company,  their payment
did not represent a sacrifice of future economic benefits to be derived from the
trusts,  reserves  for  cancellations  were  practicably  determinable,  and the
transfer  represented a culmination of an earnings process.  Accordingly Neptune
has met the revenue  recognition  criteria of Statement on Financial  Accounting
Concepts No. 5 Recognition and  Measurement in Financial  Statements of Business
Enterprises, and the SEC Staff Accounting Bulletin No. 104, Revenue Recognition.

     The company also earns marketing  allowances,  which are in the nature of a
commission  on sales of an  insurance  contract  as opposed to the  trusting  of
assets. Such commissions are earned upon the sale, will continue to be earned in
the future, augmenting the management fees which Neptune has earned in the past.




                                       19
<PAGE>

Recent Accounting Pronouncements

Goodwill (Names and Reputations)
--------------------------------

     In July 2001 the Financial  Accounting Standards Board issued Statement No.
142,  "Goodwill and other Intangible  Assets",  which requires that goodwill and
intangible  assets with  indefinite  useful  lives no longer be  amortized,  but
instead tested for impairment at least  annually.  We adopted FASB 142 effective
January 1, 2002.  The asset  "Names and  Reputations"  meets the  definition  of
goodwill under FASB 142.

     On implementation of FASB 142, management determined that the fair value of
the Company as a single  reporting  unit under FASB 142  exceeded  the  carrying
value of the net assets,  including  goodwill.  We completed the required annual
evaluation  of the  implied  value of our  goodwill on December  31,  2003,  and
determined that there was no impairment in value.

     The carrying  value of goodwill  (Names and  Reputations)  constitutes  the
single most significant asset of the company.  At December 31, 2003 the carrying
value of the asset was $24,406,000 (2002: $24,398,000). The difference of $8,000
represents  contingent  consideration  paid  in  2003  on one  of  our  previous
acquisitions.  No  amount  of  amortization  was  required  in  the  opinion  of
management for either 2003 or 2002 as the implied value of goodwill exceeded its
carrying value.

     For the 2001 and  prior  fiscal  years,  the  Company  amortized  Names and
Reputations  over  a  period  of  20  years  from   acquisition,   resulting  in
amortization  expense  of  approximately  $  1,500,000  annually.  There  was no
amortization  recorded in 2002 as the implied  value of  goodwill  exceeded  its
carrying value.

     With the requirement to adopt FASB 142, the Company will no longer amortize
its acquired  goodwill on a systematic  basis.  Rather it will test the value of
Goodwill  annually,  and if it is  determined  that  goodwill is  impaired,  the
carrying  value of Names and  Reputations  will be written  down to its  implied
value by a charge to operations in the year that such determination is made.

Results of Operations

Year Ended December 31, 2003 Compared with the Year Ended December 31, 2002

     The following  discussion  compares our results of operations  for the year
ended December 31, 2003 ("2003") to our results of operations for the year ended
December 31, 2002 (" 2002").

Revenue

     Services and  merchandise  revenue was  approximately  $19,599,000 for 2003
compared with $10,899,000 for 2002, an increase of approximately $8,700,000.

     The  increase  is  attributable  mainly  to our  delivering  ownership  and
possession  of purchased  merchandise  to our pre-need  customers at the time of
sale and recognizing in income the related proceeds and administrative  handling
charges commencing  January 1, 2003 in all but three States.  Under our previous
merchandise delivery policy in effect in 2002, the merchandise was not delivered
until the actual cremation services contracted for were performed, and therefore
the revenue  received was deferred.  We recognized  $8,150,000 in revenue on the
sale of pre-need  contracts in the year ended December 31, 2003 which would have
been deferred as to recognition if title and possession of the  merchandise  had
not been delivered,  as was the case in the comparative  year ended December 31,
2002.

     The value of new  pre-need  contracts  sold,  both  recognized  as  revenue
currently and deferred, was approximately the same in 2003 compared with 2002. A
decrease  of  approximately  14% in the  number of new  sales was  offset by the
effects of a price increase implemented  effective January 1, 2003. We attribute
the decrease in the number of pre arrangements sold in 2003 to two main factors;
slow sales in the first six months of the year due to the



                                       20
<PAGE>

tension  of  war  with  Iraq  resulting  in  unwillingness  of  people  to  make
appointments  with us to  review  our  product,  and a record  sales  volume  in
December 2002 compared December 2003 results.

     Revenue from  cremation  services,  representing  both funds  released from
trust for services for pre-arranged  services and for cremation services for new
clients without pre-arrangements, was approximately $6,598,000 for 2003 compared
with $6,386,000 for 2002. Our case volume was up 10% for the year ended December
31, 2003  compared  with 2002.  Strong  competition  in the death care  industry
resulted in a decrease in the number of full price cremations we performed.

     Travel plan revenue was  $2,783,000  for 2003 compared with  $3,149,000 for
2002,  a decrease of  $366,000  or 11%.  We believe our members and  prospective
members have a diminished  inclination to travel  internationally  due to global
terrorist  threats and world  tensions of recent  years.  We do not  consider it
possible to  determine  whether  this will be an on going trend  affecting  this
revenue component.

     Management  and  finance  fee  income  was  relatively  constant  for  2003
($872,000)  compared  to 2002  ($868,000).  We earn  management  and finance fee
income  for  the  management   services  we  provide  in  connection   with  the
administration  of pre-need  trust funds.  Management  and finance fee income is
expected to decline in 2004 as a result of the  conversion  of certain  pre-need
trust funds into insurance  policies.  Consequently,  historical  management and
finance fee income may not be indicative of future results.

     We received  approximately  $240,000 in  commissions  on the  conversion of
certain  pre-arranged trust funds to insurance products in 2003 (2002: Nil). The
choice of providing for pre arranged  cremations by means of an insurance policy
naming the  company as the  beneficiary  is a popular  alternative  to  trusting
arrangements  in the  death  care  industry.  Neptune  has in  the  past  relied
exclusively  on the  trust  fund  alternative.  In the  future,  we plan,  where
permitted,  to purchase fully paid life insurance policies to cover the costs of
prepaid  services in lieu of maintaining  funds in trust in connection  with the
Pre-Need  services we offer. It is anticipated  that we will continue to convert
our  pre  arranged  trusts  to  insurance  policies  where  there  are  benefits
identified  for both the contract  holder and  ourselves,  and that we will earn
conversion  commissions  whenever  existing and new trusts are  converted.  As a
result, revenue from commissions on the conversion of certain pre-arranged trust
funds to insurance products is expected to increase substantially in 2004.

Costs and expenses and Gross Profit

     Direct  costs  and  expenses   relate  to  the  providing  of  at-need  and
fulfillment cremation services,  the cost of travel plan premiums,  and the cost
of  merchandise  delivered.  Total direct costs and expenses were  approximately
$4,711,000  for 2003  compared  with  $4,315,000  for 2002,  for an  increase of
$396,000 or 9%.

     Premium costs associated with travel plan sales were approximately  $85,000
lower for 2003  compared  with 2002,  due to decreased  sales of travel plans in
2003 and our selecting a lower cost provider.

     Direct  costs of  merchandise  increased  by  approximately  $460,000 as we
commenced delivering merchandise to pre-need contract purchasers in 2003.

     The cost of our cremation  services  increased  overall by a modest $21,000
for 2003 ($4,711,000) compared with 2002 ($4,315,000), along with a 10% increase
in the number of cremations performed.  We were able to achieve what we consider
to be our optimal cost per cremation going forward through the implementation of
operating efficiencies.

     Gross profit was $16,000,000 or 77% of total revenue for 2003 compared with
$7,451,000  or 63% of total  revenue  for 2002.  The  increase  in gross  profit
realized was due mainly to our being able to recognize  revenue from the sale of
merchandise  which was delivered under new pre-need  arrangements sold beginning
January 1, 2003 as discussed above under the heading "Revenue".


Sales commissions and obtaining costs

     Selling and costs of obtaining pre-need arrangement  contracts increased to
$5,575,000  for the year ended  December 31, 2003 from  $2,938,000  for the year
ended  December 31, 2002, an increase of $2,637,000.  Substantially  all of



                                       21
<PAGE>

this increase relates to the matching of expenses to the same time period as the
related revenue is recognized.  Prior to 2003,  sales costs directly  related to
contracts sold would be deferred together with the contract revenue, to be taken
into income on fulfillment  (provision of the cremation service).  Commencing in
2003, revenue from merchandise and administrative  services is recognized at the
time of sale, accordingly  commissions and other costs of obtaining the sale are
also fully  recognized  immediately.  Selling and obtaining costs also increased
marginally  in 2003  over  2002 due to  increased  competition  and the costs of
obtaining sales leads.

Operating expenses

     Salaries  and  payroll  costs  were   $4,334,000  for  2003  compared  with
$3,828,000 for 2002, an increase of 13%. We added two new locations in 2002, and
one in 2003.  We also added more  management  staff at our  corporate  office in
2003.  This was  required  for the  administration  of the  increased  number of
locations,   and  to  maintain  our  current  level  of  pre-need  sales  in  an
increasingly competitive market.

     Stock based compensation decreased by $113,000 in 2003 from 2002. We issued
shares for  compensation  totaling  $118,000 in 2003,  compared  with $59,000 in
2002,  for an increase of $59,000.  This was offset by $172,000 in  compensation
expense  related to stock option expense in 2002  (2003:nil)  related to options
granted  to  our  former  Chief  Financial   Officer  (See,  Item   10-Executive
Compensation, Bagley Settlement Agreement).

     Premises rent and utilities expense was approximately $932,000 for the year
ended  December 31, 2003  compared  with  $784,000 for 2002,  for an increase of
$148,000. This increase is primarily due to our adding 2 locations mid-2002, and
one location in 2003.

     Insurance costs increased by approximately $99,000 in 2003 over 2002 due to
an  increase  in risk  premiums  charged by our  insurance  carriers  which they
attribute to the events of 9-11. We continue to face increased  insurance  costs
as existing policies come up for renewal.

     Other operating services and supplies were reduced by $179,000 (9%) in 2003
compared with 2002.  This was as a result of  initiatives to reduce company wide
general overhead expenses.

     Professional  fees were reduced  approximately  $229,000 for 2003  compared
with  2002,  as a result  of our  efforts  to reduce  our  reliance  on  outside
professionals by undertaking more administrative duties in-house in 2003.

     Employee settlements expense of $306,000 in 2003 (2002 Nil).  Substantially
all of this  amount  relates  to the terms of a  separation  agreement  with our
former  Chief  Financial  Officer  under  which  his  employment  agreement  was
cancelled.

     Total  operating  expenses were  $9,315,000 for the year ended December 31,
2003  compared with  $8,805,000  for the year ended  December 31, 2002.  The net
increase in  operating  expenses of  $510,000  relates to the reasons  described
above.

Operating profit (loss)

     Operating profit was $1,110,000 for 2003 compared with an operating loss of
$4,291,000 for 2002.  The difference in operating  results was due mainly to our
being  able to  recognize  revenue  from  the sale of  merchandise  which is now
delivered  under new pre-need  arrangements  sold  beginning  January 1, 2003 as
discussed above under the heading "Revenue".

Other revenue and expenses

     Trust placement fees of $721,000 were received in 2003 as  consideration of
our entering into an agreement to retain Forethought Federal Savings Bank as the
new trustee for our Florida and Washington State trusts (2002:Nil).  This is not
anticipated to be an on going source of annual income.

     Lawsuit  settlement  proceeds.  In 2002 the  Company  received  $165,000 to
settle a lawsuit for service mark infringement (2003: Nil).



                                       22
<PAGE>

Interest and finance expense

     Interest and finance expense was $1,864,000 for the year ended December 31,
2003 compared with $2,579,000 for the year ended December 31, 2002. Interest and
finance expense  decreased as a consequence of the  restructuring of a number of
long term liabilities during 2003.

Net loss

     Net loss for the year ended December 31, 2003 was $33,000 ($0.01 per share)
compared with $6,706,000 ($1.88 per share) for the year ended December 31, 2002.
The decrease of $6,673,000 in loss for the year relates to the reasons described
above.

Liquidity and Capital Resources

     At  December  31, 2003 we had  current  assets of $2.7  million and current
liabilities  of $4.4,  for a working  capital  deficiency  of $1.7  million.  In
February 2004 we received  $1.9 million as marketing  allowance for the purchase
of group insurance for the majority of our pre-arranged California customers, as
well as a refund of $0.7 million for prior years' overpayment of sales tax. This
placed us in a working capital positive position.  After making a pre payment of
a portion of our current  maturities of debentures ($1.2 million),  we have cash
assets of approximately $2.0 million at March 29, 2004.

     We anticipate that cash flow from operations will be sufficient to meet our
working  capital  requirements  during  2004.  We  expect  to end the year  with
approximately  the same amount ($2.0  million) of cash on hand. We have budgeted
$1.1 million for the start up losses and costs  associated with the opening of 4
new  offices,  and new  marketing  initiatives  which we expect will allow us to
reduce the selling and obtaining  costs per sale,  and  ultimately  increase our
sales  volume.   The  costs  associated  with  the  new  offices  and  marketing
initiatives  are  expected  to be  paid  from  cash  flow  from  operations.  We
anticipate  that we will not be  required  to incur  additional  debt nor  raise
additional capital through the sale of shares.

     Our long term debt at December 31, 2003 comprises:

     o    Debentures in the principal amount of $7.0 million bearing interest at
          13% per annum,  maturing in July 2007.  At March 29, 2004 we have paid
          $1.2  million of the  principal  payments of $1.7 million due in 2004.
          Total debt  maturities for each of the years 2005,  2006, and 2007 are
          $1.9 million, $2.5 million and $0.9 million respectively

     o    Convertible  Debentures in the principal amount of $1.1 million, which
          are mandatorily  convertible  into shares of our common stock on March
          31,  2004 at the price of $1.20 per share.  We will not be  exercising
          our right to settle these debenture in cash,

     o    $510,000 payable in equal  installments of $10,000 per month under the
          terms of a  settlement  agreement  with  our  former  Chief  Financial
          Officer.

     We project we will realize  sufficient cash from operating  activities over
the  upcoming  12 months to satisfy  in full our  existing  obligations  as they
become due.

     Our only internal  sources of liquid assets are cash flows from operations.
We have no standby  line of credit,  nor have we been able to make  arrangements
for such line of credit. We have no external sources of liquid assets.

     As at December 31, 2003, we had the following  contractual  obligations and
commercial commitments:



                                       23
<PAGE>

<TABLE>
     ----------------------------------------------------------------------------------------------------
         Contractual                                   Payments Due by Period
         Obligations
     ----------------------------------------------------------------------------------------------------
                                 Total        Less Than One      1-3 Years     4-5 Years    After 5 Years
                                                   Year
     ----------------------------------------------------------------------------------------------------
    <S>                      <C>               <C>             <C>            <C>
        Long-Term Debt        $8,651,517        $2,991,145      $4,612,144     $1,048,228        Nil
         Obligations
     ----------------------------------------------------------------------------------------------------
        Capital Lease             Nil              Nil              Nil           Nil            Nil
         Obligations
     ----------------------------------------------------------------------------------------------------
       Operating Leases       $2,564,990          $739,042      $1,309,441       $516,507        Nil
     ----------------------------------------------------------------------------------------------------
     Employment Contracts     $3,941,148        $1,466,916      $1,674,232       $800,000        Nil
     ----------------------------------------------------------------------------------------------------
      Total Contractual      $15,157,655        $5,197,103      $7,595,817     $2,364,735        Nil
         Obligations
     ----------------------------------------------------------------------------------------------------
</TABLE>

     We intend to finance any  acquisitions or start ups from  operational  cash
flow, or a combination of operational cash flow and vendor financing. We have no
material commitments for capital expenditures at this time.

     We do not anticipate that we will have to raise new capital during the next
12 months.  We  anticipate we will be able to meet our  contractual  obligations
from operating cash flow. In the event that operating cash flow is  insufficient
to meet our contractual obligations,  we will be required to raise new financing
to cover the  shortfall  through  the issue of debt or  equity.  There can be no
assurance  such new  financing  will be available or  accessible  on  reasonable
terms.

     Subsequent  to  December  31,  2004,  we entered an  amended  and  restated
employment  agreement  with our CEO,  which  requires  us to purchase a total of
538,818 shares and  convertible  securities  exerciseable to acquire an addition
457,692 shares a owned by him and/or certain related parties, unless such shares
are acquired by debentureholders  which hold a right of first refusal related to
such  securities,  for a purchase price equal to 13% of the value of our company
("Purchase  Price") in the event of termination of his employment (i) by Neptune
Society,  (ii) by our CEO for good  reason,  (iii) on a change of control of our
company, or (iv) on the expiry of the employment agreement on December 31, 2010.
See  "Executive  Compensation,  Marco Markin  Employment  Agreement." If such an
event were to occur,  we may be required to pay the Purchase  Price from working
capital or to raise additional  capital to make such payments,  which may have a
material adverse effect on our liquidity and result of operations.  The issuance
of additional equity  securities under such  circumstances may cause substantial
dilution to existing shareholders. The payment of the Purchase Price will result
in a compensation  expense,  which will likely have a material adverse effect on
our result of operations. The existence of the employment agreement is likely to
deter third parties from  acquiring our company and may have a material  adverse
effect on the value of our equity securities.

     In February  2004, we received $1.9 million as marketing  allowance for the
purchase of group  insurance  for the  majority of our  pre-arranged  California
customers.  Under the terms of these  policies,  we are  required  to refund any
commissions  we receive on the  policies  if a member  terminates  its  pre-need
contract  prior to death.  Our  historical  termination  rate is currently  0.2%
annually.  Any substantial  increase in  cancellation of pre-need  contracts may
have a material  adverse  effect on our results of operations.  In addition,  we
anticipate that the management and




                                       24
<PAGE>

financing  fees earned on pre-need  trust funds will  decline as a result of our
increased use of fully paid group life insurance policies.

Inflation

     We do not  believe  that  inflation  has had a  significant  impact  on our
consolidated results of operations or financial condition.

Off Balance Sheet Arrangements

     We have no off  balance  sheet  arrangements  that  have or are  reasonably
likely to have a current or future effect on our business,  financial condition,
changes in financial  condition,  revenues or expenses,  results of  operations,
liquidity,  capital  expenditures  or  capital  resources  that is  material  to
investors.






                                       25
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS


                   THE NEPTUNE SOCIETY, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2003 AND 2002




                                    CONTENTS


                                                                     Page

Independent Auditors' Report                                            F-1

Consolidated Financial Statements:
     Consolidated Balance Sheets                                        F-2
     Consolidated Statements of Operations                              F-3
     Consolidated Statements of Stockholders' Equity                    F-4
     Consolidated Statements of Cash Flows                              F-5
     Notes to Consolidated Financial Statements                         F-7




<PAGE>


INDEPENDENT AUDITORS' REPORT


Board of Directors
The Neptune Society, Inc.
Sherman Oaks, California



We have  audited the  accompanying  consolidated  balance  sheets of The Neptune
Society, Inc. and subsidiaries as of December 31, 2003 and 2002, and the related
consolidated  statements of operations,  stockholders' equity and cash flows for
the years then ended.  These financial  statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audit.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material  misstatement.  An audit includes  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 provides a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of The Neptune Society,  Inc. and
subsidiaries  as of  December  31,  2003  and  2002,  and the  results  of their
operations  and their cash flows for the year then  ended,  in  conformity  with
accounting principles generally accepted in the United States of America.




/s/ Stonefield Josephson, Inc.
Santa Monica, California
March 12, 2004
CERTIFIED PUBLIC ACCOUNTANTS


                                      F-1
<PAGE>


                      NEPTUNE SOCIETY INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
                                                                        December 31, 2003       December 31, 2002
                                                                        -----------------       -----------------
<S>                                                                      <C>                      <C>
                    ASSETS
Current assets:

  Cash                                                                   $     537,997            $    775,966
  Accounts receivable, net of reserves of $200,000                           2,048,490               1,818,162
  Prepaid expenses and other current assets                                    124,814                 106,642
                                                                        -----------------       -----------------
        Total current assets                                             $   2,711,301            $  2,700,770
                                                                        -----------------       -----------------
Accounts receivable, net - non current                                         395,125                 252,305

Property and equipment, net                                                    340,934                 520,759

Names and reputations                                                       24,406,031              24,397,696

Deferred financing costs                                                       762,033                 810,347

Deferred charges and other assets                                            6,797,974               6,963,738
                                                                        -----------------       -----------------
                                                                         $  35,413,398            $ 35,645,615
                                                                        =================       =================
               LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued liabilities                               $   2,425,285            $  2,688,839
  Current portion of long-term debt                                          1,950,582               2,357,265
                                                                        -----------------       -----------------
          Total current liabilities                                          4,375,867               5,046,104
                                                                        -----------------       -----------------
Notes payable                                                                6,700,935               6,754,965
                                                                        -----------------       -----------------
Other long-term liabilities                                                          -                 389,662
                                                                        -----------------       -----------------
Deferred pre-need revenues                                                  19,546,478              19,702,742
                                                                        -----------------       -----------------
Liabilities to be settled by issue of shares                                   140,076                 260,525
                                                                        -----------------       -----------------

Stockholders' equity:
  Preferred stock, $.001 par value, 10,000,000 shares authorized,
    none issued or outstanding                                                       -                       -
  Common stock, $.001 par value, 75,000,000 shares authorized,
    5,773,205 and 4,280,423 shares issued and outstanding at
     December 31, 2003 and 2002 respectively                                     5,773                   4,280
  Additional paid-in capital                                                32,263,014              31,072,881
  Accumulated deficit                                                      (27,618,745)            (27,585,544)
                                                                        -----------------       -----------------
           Total stockholders' equity                                        4,650,042               3,491,617
                                                                        -----------------       -----------------
                                                                         $  35,413,398            $ 35,645,615
                                                                        =================       =================
</TABLE>




See accompanying notes which form an integral part of these consolidated
financial statements.




                                      F-2
<PAGE>

                      NEPTUNE SOCIETY INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS



<TABLE>
                                                                                 YEAR ENDED
                                                                    December 31, 2003     December 31, 2002
                                                                    ----------------------------------------
<S>                                                                  <C>                    <C>
Revenue
   Services and merchandise                                          $  19,598,889          $ 10,899,026
   Management and finance fees                                             872,438               867,583
   Insurance marketing allowances                                          239,862                     -
                                                                    ----------------------------------------
                   Total revenue                                        20,711,189            11,766,609

Costs and expenses                                                       4,711,096             4,315,199

Gross profit                                                            16,000,093             7,451,410

Sales commissions and obtaining  costs                                   5,574,750             2,937,667

Operating Expenses
      Salaries and payroll costs                                         4,333,702             3,828,143
      Compensation - stock based                                           290,877               404,101
      Premises rent and utilities                                          931,726               783,600
      Insurance                                                            456,780               357,726
      Communications                                                       494,630               493,226
      Other operating services and supplies                              1,828,652             2,007,624
      Amortization and depreciation                                        224,301               253,428
      Professional fees                                                    448,452               677,009
      Employee settlements                                                 306,378                     -
                                                                    ----------------------------------------
                   Total operating expenses                              9,315,498             8,804,857

Operating profit (loss)                                                  1,109,845            (4,291,114)

Other income (expenses)
     Trust placement fees                                                  720,915                     -
     Lawsuit settlement proceeds                                                 -               165,000

      Interest and finance expense                                      (1,863,961)           (2,579,462)
                                                                    ----------------------------------------
Net loss for the period                                              $     (33,201)         $ (6,705,576)
                                                                    ========================================

Loss per share - Basic and Diluted                                           (0.01)                (1.88)

Weighted average numbers of shares                                       5,233,747             3,576,100
</TABLE>



See  accompanying  notes  which  form an  integral  part of  these  consolidated
financial statements.


                                      F-3
<PAGE>

                   THE NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY



<TABLE>
                                                        Common Stock          Additional        Accum-           Total
                                                                                Paid-In         ulated       Stockholders'
                                                     Shares        Amount       Capital        Deficit          Equity
                                                 -------------------------------------------------------------------------
<S>                                               <C>             <C>         <C>           <C>                <C>
Balance at December 31, 2001                         2,152,952       2,153     27,901,241    (20,879,968)       7,023,426

Net Loss                                                                                      (6,705,576)      (6,705,576)

Shares issued for:
     Settlement of accrued liabilities                  21,250          21        406,321              -          406,342

     Restructuring fees on long term debt              327,083         327        389,673              -          390,000

     Cash                                            1,388,889       1,389      1,498,611              -        1,500,000

     Conversion of debenture                           225,000         225         74,775              -           75,000

     Acquisitions and other                              6,559           7          2,282              -            2,289

     Compensation - shares issued                       51,250          51         59,050              -           59,101

     Settlement of debenture interest                  107,440         107        115,928              -          116,035

     Compensation related to stock options                   -           -        345,000              -          345,000

     Beneficial conversion feature on
     convertible debt                                        -           -        280,000              -          280,000
                                                 -------------------------------------------------------------------------
Balance at December 31, 2002                         4,280,423       4,280     31,072,881    (27,585,544)       3,491,617

Net Loss                                                                                         (33,201)         (33,201)

Shares issued for:
     Cash                                              307,692         307        199,693              -          200,000

     Settlement of liabilities                         339,540         340        222,512              -          222,852

     Settlement of debenture interest                   63,432          64         41,166              -           41,230

     Compensation - shares issued                      182,118         182        118,195              -          118,377

     Refinancing fee                                   600,000         600        419,400              -          420,000

     Compensation related to stock options                   -           -        172,500              -          172,500

     Refinancing fees related to warrants                    -           -         16,667              -           16,667
                                                 -------------------------------------------------------------------------
Balance at December 31, 2003                         5,773,205       5,773     32,263,014    (27,618,745)       4,650,042
                                                 =========================================================================
</TABLE>




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



                                      F-4
<PAGE>


                     NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
                                                                                         YEAR ENDED
                                                                           December 31, 2003     December 31, 2002
                                                                           ---------------------------------------
                                                                                   $                      $
<S>                                                                            <C>                 <C>
Cash flows provided by (used in)

Operating Activities
Net loss for the period                                                        (33,201)            (6,705,576)
Adjustments to reconcile net loss to
     net cash provided by (used in) operating activities:
          Depreciation and amortization                                        224,301                253,428
          Accretion of discount on notes payable                               174,568                135,239
          Non-cash interest and amortization of deferred
               finance costs                                                   734,000              1,098,993
          Stock compensation                                                   290,877                404,101
          Compensation expense to be settled by stock                                -                160,525
          Compensation expense deferred                                        155,338
          Changes in operating assets and liabilities:
          Accounts receivable                                                 (373,148)              (319,191)
          Prepaid expenses and other current assets                            (18,172)                 7,002
          Deferred financing costs                                             (36,000)                     -
          Deferred charges and other assets                                    165,764             (2,620,579)
          Accounts payable and accrued liabilities                            (161,152)               306,506
          Deferred pre-need revenues                                          (156,264)             8,013,790
                                                                           ---------------------------------------
           Net cash provided by operating activities                           966,911                734,238
                                                                           ---------------------------------------
Investing activities
     Acquisitions, net of cash acquired                                         (8,335)               (33,224)
     Purchase of property and equipment                                        (44,476)              (175,096)
                                                                           ---------------------------------------
           Net cash used in investing activities                               (52,811)              (208,320)
                                                                           ---------------------------------------
Financing activities
     Proceeds of common stock issued                                           200,000              1,500,000
     Payments on notes payable                                              (1,352,069)            (1,954,862)
     Increase in long term liabilities                                                                291,691
     Proceeds from issuance of debt, net                                                              200,000
                                                                           ---------------------------------------
           Net cash used in (provided by) financing activities              (1,152,069)                36,829
                                                                           ---------------------------------------
(Decrease) increase in cash in the year                                       (237,969)               562,747
                                                                           ---------------------------------------
Cash, beginning of year                                                        775,966                213,219
                                                                           ---------------------------------------
Cash, end of year                                                              537,997                775,966
                                                                           =======================================
</TABLE>



See  accompanying  notes  which  form an  integral  part of  these  consolidated
financial statements.



                                      F-5
<PAGE>


                     NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED



<TABLE>
                                                                                         YEAR ENDED
                                                                           December 31, 2003     December 31, 2002
                                                                           ---------------------------------------
<S>                                                                            <C>                 <C>
Supplemental disclosure of cash flow information
   Cash paid during the year for Interest                                    1,129,961              1,147,469
                                                                           =======================================
Supplemental disclosure of non-cash investing and financing activities
   Acquisition debt refinanced with other long term debt                     1,500,000                      -
                                                                           =======================================
   Discount on debenture payable                                                     -                280,000
                                                                           =======================================
   Accrued liabilities settled by issue of stock                                     -                796,342
                                                                           =======================================
   Other long-term liability settled by note payable                           389,662                      -
                                                                           =======================================
   Stock issued on conversion of debentures                                          -                 75,000
                                                                           =======================================
   Stock issued to settle deferred compensation                                120,450                      -
                                                                           =======================================
   Stock issued in payment of accrued interest on notes payable                 41,230                116,035
                                                                           =======================================
   Stock issued for acquisitions                                                     -                  2,289
                                                                           =======================================
   Deferred compensation to be settled by stock                                      -                100,000
                                                                           =======================================
   Stock issued in settlement of accounts payable                              102,402                      -
                                                                           =======================================
   Stock and stock purchase warrants issued as refinancing fees                436,667                      -
                                                                           =======================================
</TABLE>




See accompanying notes which form an integral part of these consolidated
financial statements.



                                      F-6
<PAGE>


                   THE NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



(1)  The Business, Basis of Presentation and Liquidity:

     The Neptune Society,  Inc., a Florida  Corporation,  is the holding company
     for Neptune America,  Inc., a California  Corporation.  Neptune  Management
     Corporation,  Heritage  Alternatives,  Inc., and Trident Society,  Inc. are
     wholly owned subsidiaries of Neptune America,  Inc. and engage in marketing
     and administering pre-need and/or at-need cremation services in California,
     Colorado,   Florida,  New  York,  Arizona,   Illinois,   Iowa,  Oregon  and
     Washington.  The Neptune Society,  Inc. operates crematories in California,
     Washington, Oregon and Iowa.

     As of December  31,  2003,  the Company  has a working  capital  deficit of
     approximately  $1.6 million.  In February,  2004 the Company  received cash
     proceeds  of $1.9  million  in  marketing  allowances  on the  purchase  of
     insurance  policies by certain of its pre-need trusts, and proceeds of $0.7
     million on the recovery of prior years' excise tax  overpayments  (total of
     $2.6 million). It currently has positive working capital of $1.1 million.

(2)  Summary of Significant Accounting Policies:

     Principles of Consolidation:

          The consolidated financial statements as of December 31, 2003 and 2002
          and for the years then ended present the consolidated  accounts of The
          Neptune Society, Inc. and subsidiaries.  All significant  intercompany
          balances and transactions have been eliminated in consolidation.

     Revenue Recognition

          The  Company   derives  revenue  from  the  sale  of  merchandise  and
          administrative services and travel plans (pre-arrangements), cremation
          services (at-need services), management fees for trust administration,
          marketing  allowances for the purchase of group insurance coverage for
          pre-arrangements, and consumer financing.

          Pre-arrangements revenue recognition

          On January 1, 2003 the Company implemented a full merchandise delivery
          policy for new  pre-need  contracts  sold in all  locations  except in
          three States where  merchandise  delivery under pre-need  contracts is
          not permitted.  The effect of this revised  business  practice is that
          the portion of the  pre-arrangement  revenue  allocable to merchandise
          sold,  travel  contracts  placed and  administrative  fees  charged is
          recognized as revenue at the time the pre-need  contracts are sold and
          the  merchandise  delivered  in all  locations  except in those  three
          States.


                                      F-7
<PAGE>

                   THE NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



(2)  Summary of Significant Accounting Policies, Continued:

     Revenue Recognition, Continued

          Pre-arrangements revenue recognition, continued

          For the  year  ended  December  31,  2002  and  prior,  the  Company's
          merchandise sales policy did not meet the revenue recognition criteria
          under  generally  accepted  accounting  principles,   and  accordingly
          merchandise sales revenue was deferred until the cremation service was
          provided  and the at need revenue was  recognized.  The same policy is
          followed  in those  three  States  where we do not  currently  deliver
          merchandise due to regulatory restrictions.

          Cremation Services Revenue

          Cremation  Services  revenue is earned  both from the  fulfillment  of
          pre-arranged services, and from services performed on an at-need basis
          for non-members.

          Revenue  related to  fulfillments  for  pre-arrangements  entered into
          commencing January 1, 2003 comprises the amount of money received from
          trust  funds   allocated   to  the   member.   For   fulfillments   of
          pre-arrangements  made prior to January  1, 2003,  cremation  services
          revenue  comprises  the  amount  received  from  trust  as well as the
          merchandise revenue portion not previously delivered nor recognized.

          At-need services performed for non-members,  where no pre-arrangements
          nor  trusting is involved,  are  recognized  at the time  services are
          performed.

          Installment sales

          The  paid  and  receivable   portion  for   merchandise,   travel  and
          administrative  services  are  recorded  at the time the  contract  is
          signed and the merchandise is delivered,  and recognized in accordance
          with the Company's revenue recognition policy for pre-arrangements.

          Sales commissions and obtaining costs

          These costs are expensed in the period incurred commencing January, 1,
          2003 except for sales  commissions  incurred and  directly  related to
          pre-arrangements in the three States where merchandise delivery is not
          allowed.  In  these  States,  the  sales  commissions  continue  to be
          deferred.

          Sales  commissions  and  obtaining  costs for the 2002 and prior years
          included  sales  commissions  only to the  extent  they were  directly
          related to  pre-arrangements  fulfilled in the year. Sales commissions
          for all  pre-arrangements  still in effect were deferred.  Accordingly
          for 2003 and subsequent years, sales commissions  expense for the year
          includes commissions on new pre-arrangements as well as 2002 and prior
          contracts fulfilled.



                                      F-8
<PAGE>

                   THE NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



(2)  Summary of Significant Accounting Policies, Continued:

     Revenue Recognition, Continued:

          Comparative figures

          The direct  comparability  of the amounts  shown in the  Statement  of
          Operations for Revenue,  Gross Profit, Sales Commissions and Obtaining
          Costs,  and Loss from Operations  between the years ended December 31,
          2003 and 2002 is affected by the new  merchandise  delivery policy for
          the above reasons.

          Management fees, financing income and marketing allowances

          Fees derived from the management, administration and investment of its
          trust funds,  and interest  charged on  pre-arrangement  financing are
          recognized as income in the year earned.

     Trust Funds:

          In all States in which it sells pre-need arrangements,  the Company is
          required  to place in trust or  purchase  a group or  individual  life
          insurance  policy  sufficient  to  cover  the  costs  of it  providing
          fulfillment  cremation services ("Trust Funds").  The trustors of such
          trusts are the  purchasers of the pre-need  arrangements.  The Company
          does not have title to nor control of the trust fund or escrow  corpus
          and,  therefore,  such amounts are not  reflected in the  accompanying
          consolidated  financial  statements.  Earnings  on the trust funds and
          escrow deposits generally accumulate in the trust fund or escrow until
          the  cremation  service is performed and the funds are released to the
          Company.  The  earnings on the trust funds are provided to the Company
          to  offset  inflation  in costs to  provide  the  cremation  services.
          Accordingly,  the  Company  recognizes  such  earnings  as  additional
          revenue  at the time of the  cremation  service is  performed  and the
          funds  are  released  to the  Company.  However,  California  and  one
          "grandfathered"   Florida   trust   allow  the   Company  to  withdraw
          nonrefundable  fees from the trust on an annual basis in consideration
          for administering the trust funds.  California allows a maximum fee of
          four percent of beginning year trust fund corpus, subject to the trust
          fund's annual  performance.  The Florida trust fund allows the Company
          to  withdraw  the  annual  earnings  of the fund as a fee,  subject to
          meeting  certain  funding  requirements.   Such  fees  are  recognized
          currently  as  management  fees  in  the   accompanying   consolidated
          statements of operations.

          The fair value of pre-need trust funds and the face value of insurance
          policies are approximately $49 million at December 31, 2003. All trust
          funds are either held in cash or invested in Government investments or
          high grade fixed income investments and equities.




                                      F-9
<PAGE>

                   THE NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



(2)  Summary of Significant Accounting Policies, Continued:

     Cash and Cash Equivalents:

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

     Property and Equipment:

          Property  and  equipment  are  stated at cost.  The costs of  ordinary
          maintenance  and repairs are charged to operations as incurred,  while
          renewals and betterments are capitalized. Depreciation of property and
          equipment  is  computed  based on the  straight-line  method  over the
          following estimated useful lives of the assets:

          Leasehold improvements                 Useful life or remaining lease
                                                   term, whichever is shorter
          Furniture and fixtures                 5 to 7 years
          Equipment                              5 years
          Nautical equipment                     5 years
          Automobiles                            5 years

     Names and Reputations:

          In July 2001 the Financial Accounting Standards Board issued Statement
          No. 142, "Goodwill and other Intangible  Assets",  which requires that
          goodwill and intangible  assets with indefinite useful lives no longer
          be amortized, but instead tested for impairment at least annually. The
          Company adopted FASB 142 effective January 1, 2002. The classification
          "Names and  Reputations"  meets the  definition of goodwill under FASB
          142. For the 2001 and prior fiscal years, the Company  amortized Names
          and Reputations over a period of 20 years from acquisition.

     Advertising:

          Costs of advertising are expensed as incurred. Advertising expense was
          $2,275,919  and  $1,877,078  for the years ended December 31, 2003 and
          2002, respectively.



                                      F-10
<PAGE>

                   THE NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



(2)  Summary of Significant Accounting Policies, Continued:

     Income Taxes:

          Income taxes are accounted  for under the asset and liability  method.
          Deferred  tax assets and  liabilities  are  recognized  for future tax
          consequences  and  attributable  to differences  between the financial
          statement  carrying  amounts of existing  assets and  liabilities  and
          their   respective  tax  basis,   operating   losses  and  tax  credit
          carryforwards.  Deferred tax assets and liabilities are measured using
          enacted tax rates  expected to apply to taxable income in the years in
          which those  temporary  differences  are  expected to be  recovered or
          settled. The effect on deferred tax assets and liabilities of a change
          in tax rates is  recognized  in income in the period that includes the
          enactment  date. A valuation  allowance is recorded to reduce deferred
          tax assets to their estimated net realizable value.

          As a result of the Company's  continuing losses during the years ended
          December 31, 2003 and 2002, the Company recorded a valuation allowance
          of 100%

     Stock Based Compensation:

          SFAS No. 123, "Accounting for Stock-Based  Compensation,"  establishes
          and  encourages  the use of the fair value based method of  accounting
          for stock-based  compensation  arrangements  under which  compensation
          cost is determined  using the fair value of  stock-based  compensation
          determined as of the date of grant and is recognized  over the periods
          in which  related  services are rendered.  The statement  also permits
          companies  to elect to  continue  using the  current  intrinsic  value
          accounting  method  specified in Accounting  Principles  Board ("APB")
          Opinion No. 25,  "Accounting for Stock Issued to Employees" to account
          for  stock-based  compensation.  The  Company  has  elected to use the
          intrinsic value based method and has disclosed the pro forma effect of
          using the fair  value  based  method to  account  for its  stock-based
          compensation  issued  to  employees.   For  non-employee  stock  based
          compensation the Company recognizes an expense in accordance with SFAS
          No. 123 and values  the equity  securities  based on the fair value of
          the security on the day of grant.



                                      F-11
<PAGE>

                   THE NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



(2)  Summary of Significant Accounting Policies, Continued:

     Stock Based Compensation, Continued:

          If the  Company  had elected to  recognize  compensation  cost for its
          stock options and warrants based on the fair value at the grant dates,
          in accordance with SFAS 123, net earnings and earnings per share would
          have been as follows:

<TABLE>
                                                               2003                    2002
                                                           -------------         -------------
         <S>                                             <C>                   <C>
          Net loss as reported                             $    (33,201)         $ (6,705,576)
               Compensation cost measured by fair
               value method                                $    (10,783)         $   (447,775)
                                                           -------------         -------------
           Pro forma net loss                              $    (43,984)         $ (7,153,351)
                                                           =============         =============

          Basic and diluted loss per common share:
               As reported                                 $      (0.01)         $      (1.88)
                                                           =============         =============
               Pro forma                                   $      (0.01)         $      (2.00)
                                                           =============         =============
</TABLE>

          The fair value of each option is  estimated on the date of grant using
          the Black-Scholes option pricing model. The following weighted-average
          assumptions  were  used  in the  Black-Scholes  option-pricing  model;
          dividend yield nil,  expected  volatility  21%(2002:  32%),  risk free
          interest rate 6.0%, and expected life of 3 years.

          The  weighted-average  fair value of options  granted during the years
          ended December 31, 2003 and 2002 were $0.10 and nil, respectively.

     Deferred Revenue:

          For the 2002 and prior years,  the Company deferred all of the revenue
          allocated to the merchandise and administrative services components of
          pre-arranged  contracts  sold. For 2003 and future years,  deferral is
          only made in those  States where the  delivery of  merchandise  is not
          permitted.

     Deferred Charges:

          Deferred  charges  includes sales  commissions paid which are directly
          related to pre-arrangement revenue deferred.  These deferred costs are
          to be charged to operations in the same period as the fulfillments are
          performed and the deferred revenue is recognized.



                                      F-12
<PAGE>

                   THE NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



(2)  Summary of Significant Accounting Policies, Continued:

     Deferred Financing Costs:

          Costs  incurred  with  respect to  financing  and  refinancing  of the
          Company's  long-term  debt are  deferred  and expensed as interest and
          finance cost over the life of the respective debt instrument.

     Computation of Loss Per Common Share:

          Basic and diluted  loss per share is computed by dividing  net loss by
          the weighted  average number of common shares  outstanding  during the
          year.  For the years  ended  December  31,  2003 and 2002,  options to
          purchase 1,029,035 and 608,728 shares,  respectively,  of common stock
          at prices  ranging from $0.65 to $57.00 per share were not included in
          the  computation of diluted loss per share because the effect would be
          anti-dilutive.

          Additionally, warrants and conversion rights to purchase 2,950,294 and
          2,617,211  shares at  December  31,  2003 and 2002,  respectively,  at
          prices  ranging from $0.72 to $3.00 per share were not included in the
          computation  of diluted  loss per share  because  the effect  would be
          anti-dilutive.

     Fair Value of Financial Instruments:

          The  carrying  amounts  of cash,  current  receivables,  and  accounts
          payable and accrued  liabilities  approximate  their fair value due to
          the  short-term  nature of these  instruments.  The fair  value of the
          Company's  long-term  fixed rate debt is  estimated  using future cash
          flows discounted at rates for similar types of borrowing  arrangements
          and approximates its carrying value.

     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 consolidated  financial  statements
          and the reported amounts of revenues and expenses during the reporting
          period. Actual results could differ from those estimates.



                                      F-13
<PAGE>

                   THE NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



(2)  Summary of Significant Accounting Policies, Continued:

     Comprehensive Income (Loss):

          Except for net loss,  the Company  does not have any  transactions  or
          other economic events that enter into other  comprehensive loss during
          the years presented.

     Recent Accounting Pronouncements:

          In October 2002, the FASB issued  Statement No. 147,  "Acquisitions of
          Certain Financial Institutions--an amendment of FASB Statements No. 72
          and 144 and FASB  Interpretation  No.  9. In  January  2003,  the FASB
          issued  Interpretation  No. 46,  "Consolidation  of Variable  Interest
          Entities."  These  pronouncements  will not affect the Company because
          they are not relevant to our business.

          In November 2002, the FASB issued  Interpretation No. 45, "Guarantor's
          Accounting  and  Disclosure  requirements  for  Guarantees,  Including
          Indirect  Guarantees of  Indebtedness  of Others." Among other things,
          the Interpretation  requires  guarantors to recognize,  at fair value,
          their obligations to stand ready to perform under certain  guarantees.
          Interpretation 45 is effective for guarantees issued or modified on or
          after January 1, 2003. The adoption of this pronouncement did not have
          a material  impact to the Company's  financial  position or results of
          operations.

          In December 2003, the FASB issued a revised SFAS No. 132,  "Employers'
          Disclosures  about Pensions and Other  Postretirement  Benefits" which
          replaces  the  previously  issued  Statement.  The  revised  Statement
          increases the existing  disclosures  for defined benefit pension plans
          and other defined benefit  postretirement  plans. However, it does not
          change the measurement or recognition of those plans as requires under
          SFAS No.  87,  "Employers'  Accounting  for  Pensions,"  SFAS No.  88,
          "Employers'  Accounting for  Settlements  and  Curtailments of Defined
          Benefit Pension Plans and for Termination Benefits," and SFAS No. 106,
          "Employers'   Accounting  for   Postretirement   Benefits  Other  Than
          Pensions."  Specifically,  the revised Statement requires companies to
          provide  additional  disclosures  about  pension plan assets,  benefit
          obligations,  cash flows, and benefit costs of defined benefit pension
          plans and other defined benefit  postretirement plans. Also, companies
          are required to provide a breakdown  of plan assets by category,  such
          as debt, equity and real estate, and to provide certain expected rates
          of  return  and  target   allocation   percentages   for  these  asset
          categories.  The Company has implemented  this  pronouncement  and has
          concluded  that the adoption has no material  impact to the  financial
          statements.



                                      F-14
<PAGE>

                   THE NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



(2)  Summary of Significant Accounting Policies, Continued:

     Recent Accounting Pronouncements, Continued:

          In January 2003, the FASB issued interpretation No. 46, "Consolidation
          of Variable Interest Entities." Interpretation 46 changes the criteria
          by which one  company  includes  another  entity  in its  consolidated
          financial statements.  Previously,  the criteria were based on control
          through  voting  interest.   Interpretation  46  requires  a  variable
          interest  entity to be  consolidated  by a company if that  company is
          subject to a majority of the risk of loss from the  variable  interest
          entity's  activities or entitled to receive a majority of the entity's
          residual  returns  of both.  A company  that  consolidates  a variable
          interest entity is called the primary beneficiary of that entity.

          In December 2003 the FASB concluded to revise certain  elements of FIN
          46, which will be issued shortly. The FASB also modified the effective
          date of FIN 46.  For all  entities  that  were  previously  considered
          special purpose  entities,  FIN 46 should be applied in periods ending
          after  December  15,  2003.  Otherwise  FIN  46 is to be  applied  for
          registrants  who file under  Regulation  S-X in periods  ending  after
          March 15, 2004, and for registrants  who file under  Regulation SB, in
          periods  ending after  December 15, 2003.  The Company does not expect
          the  adoption  to have a material  impact on the  Company's  financial
          position or results of operations.

          In April, 2003 the FASB issued SFAS No.149 "Amendment of Statement 133
          on Derivative Instruments and Hedging Activities.  FASB 149 amends and
          clarifies   financial   accounting   and  reporting   for   derivative
          instruments,   including  derivative  instruments  embedded  in  other
          contracts and for hedging  activities under FASB 133. The Company does
          not  expect  the  adoption  of this  pronouncement  to have a material
          impact to the Company's financial position or results of operations.

          In May,  2003 the FASB  issued  SFAS No. 150  "Accounting  for Certain
          Financial  Instruments  with  Characteristics  of both Liabilities and
          Equity"  This  Statement  established  standards  for  how  an  issuer
          classifies   and   measures   certain   financial   instruments   with
          characteristics  of both  liabilities and equity.  It required that an
          issuer  classify a financial  instrument that is within its scope as a
          liability  (or  an  asset  in  some  circumstances).   Many  of  these
          instruments  were previously  classified as equity.  The provisions of
          this Statement were effective for financial  instruments  entered into
          or modified  after May 31, 2003, and otherwise at the beginning of the
          first interim  period  beginning  after June 15, 2003. The adoption of
          this  pronouncement  did not have a material  impact to the  Company's
          financial position or results of operations.



                                      F-15
<PAGE>

                   THE NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



(3)  Changes in Accounting Principles:

     Goodwill (Names and Reputations):

          In  July,  2001,  the  Financial  Accounting  Standards  Board  issued
          Statement  No. 142,  "Goodwill  and Other  Intangible  Assets",  which
          requires that goodwill and intangible  assets with  indefinite  useful
          lives no longer be  amortized,  but instead  tested for  impairment at
          least  annually.  The Company  adopted FASB 142  effective  January 1,
          2002.  The asset  "Names  and  Reputations"  meets the  definition  of
          goodwill under FASB 142.

          On  implementation  of FASB 142,  management  determined that the fair
          value  of the  Company  as a  single  reporting  unit  under  FASB 142
          exceeded the carrying value of the net assets, including goodwill. The
          Company  has  subsequently  completed  the annual  evaluations  of the
          implied  value  of its  goodwill,  and  determined  that  there  is no
          impairment in value at December 31, 2003 and 2002.

          For 2001 and prior  fiscal  years,  the  Company  amortized  Names and
          Reputations over a period of 20 years from  acquisition,  resulting in
          amortization expense of approximately  $1,500,000 annually.  There was
          no amortization  recorded in 2003 and 2002 due to the adoption of SFAS
          No. 142.

          With the  requirement  to adopt FASB 142,  the Company  will no longer
          amortize its acquired goodwill on a systematic  basis.  Rather it will
          test the value of goodwill annually,  and if it is determined that the
          goodwill is impaired,  the carrying value will be adjusted by a charge
          to operations in the year that such determination is made.

          An  analysis  of the  historical  carrying  value  of  goodwill  is as
          follows:

<TABLE>
                                                                          2003               2002
                                                                     --------------     -------------
          <S>                                                       <C>                <C>
          Cost
               Names and Reputations recorded on acquisition
               Of predecessor companies and businesses               $ 28,366,930       $ 28,358,595

          Less:
               Accumulated amortization (1999 to 2001)                 (3,960,899)        (3,960,899)
                                                                     --------------     -------------
                   Net Book Value                                    $ 24,406,031       $  24,397,696
                                                                     ==============     =============
</TABLE>



                                      F-16
<PAGE>


                   THE NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



(4)  Property and Equipment

     Property and equipment is summarized as follows:

<TABLE>
                                                              2003                2002
                                                          --------------     --------------
     <S>                                                   <C>               <C>
     Furniture and fixtures                                   204,306           195,344
     Automobiles                                              152,100           154,208
     Equipment                                                511,521           496,532
     Leasehold improvements                                   202,439           194,931
                                                          --------------     --------------

     Total property and equipment                           1,070,366         1,041,015
     Less accumulated depreciation and amortization          (729,432)         (520,256)
                                                          --------------     --------------
     Property and equipment, net                           $  340,934         $ 520,759
                                                          ==============     ==============
</TABLE>



                                      F-17
<PAGE>


                   THE NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



(5)  Notes Payable:

<TABLE>
                                                                                       2003              2002
                                                                                  -------------      ------------
    <S>                                                                          <C>                <C>
     13% Debentures
     Amortizing at $125,000 per month principal and interest with
     scheduled balloon payments to July 31, 2007. Secured by a first
     trust deed on substantially all assets of the Company See (a)
     below.                                                                       $ 6,952,743        $ 5,788,202

     Acquisition debt
     Promissory notes bearing interest at 13% per annum, payable in
     monthly installments of $78,471, including interest due July 31,
     2003. See (b) below.                                                                   -          1,782,057

     Acquisition debt - 2001
     Promissory  note,  non-amortizing,  13%  interest due July
     2003.  Includes accrued interest of $45,208  (December 31,
     2001: nil).  See (b) below.                                                            -            395,208

     13.75% mandatory convertible debentures
     Interest only payable monthly.  See (c) below.                                 1,040,563            896,653

     Professional services debt
     Notes payable,  non-interest  bearing,  payable in monthly
     installments  of $15,000,  due November  2003 and February
     2004.  See (d) below.                                                            148,211            250,110

     Employee settlement note
     Payable in monthly installments of $10,000                                       510,000                  -
                                                                                  -------------      ------------
                                                                                    8,651,517          9,112,230

     Less current portion                                                          (1,950,582)        (2,357,265)
                                                                                  -------------      ------------
                                                                                  $ 6,700,935        $ 6,754,965
                                                                                  =============      ============
</TABLE>



                                      F-18
<PAGE>

                   THE NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



(5)  Notes Payable, Continued:

     (a)  13% Convertible debentures

     Under the terms of the  debentures,  interest at the rate of 6.5% per annum
     was  deferred as to payment  until May 31, 2003.  Commencing  June 1, 2003,
     monthly  interest  payments  increased to 13% per annum,  accrued  interest
     representing  the 6.5% per annum  interest  deferred in prior years  became
     payable commencing on June 1, 2003 at the rate of $15,000 per month.

     During 2002, the note holders  exercised their pre-emptive right to acquire
     the amount of $71,563 of 13.75%  convertible  debentures,  which debentures
     are  automatically  convertible  into  common  shares at $1.20 per share on
     March 31, 2004. The note holders also exercised their pre-emptive rights to
     acquire 107,440 common shares at a cost of $116,035.

     In 2003 the note  holders  exercised  their  pre-emptive  right to  acquire
     63,432 common shares at a cost of $41,230.  The  acquisition  of the shares
     was in reduction of accrued interest owing to them.

     By an  agreement  dated  July  31,  2003 the  Company  borrowed  a  further
     $1,500,000  for the purpose of making the final  payment of $1.8 million in
     acquisition  debt  related  to its 1999  purchase  of the  Neptune  Society
     business.  In  connection  with  the  debt  financing,   the  Company  also
     restructured its obligations under the 13% Debentures.

     This  restructuring  favorably  amended the previous fixed charge  coverage
     ratio obligation and cured certain possible conditions of default under the
     debentures.  The  restructured  debentures  are repayable by July 31, 2007,
     with the  Company  holding the right to prepay the  debentures  at any time
     without penalty.

     Amended  payments  of  principal  under  the  additional  and  restructured
     debentures are as follows, by fiscal year ended December 31:

                        2004            $1,682,371
                        2005            $1,855,284
                        2006            $2,516,860
                        2007            $898,228
                                        -----------
                                        $6,952,743
                                        ===========

     The  company  issued  600,000  shares  of its  stock  to the  lenders  as a
     refinancing  fee.  A term of the  refinancing  was the  replacement  of the
     conversion  rights of the original  debentures  (whereby the lenders  could
     convert  the debt into stock at a price of $3.00 per share  until  February
     24,  2005) into  detached  warrants  for the purchase of the same number of
     shares at the same  price for a period of 5 years.  The value of the shares
     and warrants  issued  ($420,000 and $16,667  respectively)  were charged to
     deferred  financing  costs and are being  amortized to operations  over the
     extended maturity of the financing.



                                      F-19
<PAGE>

                   THE NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



(5)  Notes Payable, Continued:

     (b)  Acquisition debt

     In December  2001,  the Company  executed an agreement to  restructure  the
     remaining $2.7 million of acquisition debt, previously due January 2002. On
     December 28, 2001, the Company paid $333,000 of note principal,  and agreed
     to  amortize  $963,000  over 18  months  and  make a  lump-sum  payment  of
     $1,429,000 on July 31, 2003. As a part of the  agreement,  the Company paid
     $168,000 in loan fees related to previous loan restructurings, issued a 13%
     non-amortizing  note payable of $350,000  due July 31, 2003 for  additional
     loan fees  related to this  restructuring  ("Acquisition  debt - 2001") and
     issued the creditors  75,000 shares of the Company's common stock valued at
     $126,000. The value of the shares and the cash loan fees is being amortized
     to interest  expense over the life of the note.  The Company also agreed to
     release  the  creditors   with  respect  to  liability   under  the  Leneda
     litigation,  which was settled  during the year.  The Company also paid-out
     the remainder of all payments due under the creditor's consulting agreement
     in the amount of $355,000 and terminated the agreement.

     (c)  13.75% mandatory convertible debenture

     In 2002,  the Company  issued face value  $1,071,653 of 13.75%  convertible
     debentures  in  consideration  for  cash  (including   satisfaction  of  an
     outstanding  note payable of  $800,000) of  $1,000,000  and  settlement  of
     $71,653 of accrued  interest  payable to a debenture holder holding certain
     pre-emptive rights to all corporate financings.

     The debenture holders may exercise their rights to acquire common shares at
     the price of $1.20 per share at any time prior to March 31, 2004,  at which
     date the debentures automatically convert to common shares.

     The  Company  may retire the  debentures  for cash prior to  conversion  by
     paying  the  debenture  holders a premium  of 50% on the face  value of the
     debt.

     The Company is to issue 83,333 shares as a loan fee valued at $107,000. The
     loan fee, together with the amount of $173,000  allocated to the beneficial
     conversion feature, are being accreted as interest and finance expense on a
     straight  line  basis  over  the term to  maturity  of the  debenture.  The
     unaccreted  amounts  of  $31,000  and  $175,000  have  been  recorded  as a
     reduction of the carrying  value of the debt at December 31, 2003 and 2002,
     respectively.



                                      F-20
<PAGE>

                   THE NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



(5)  Notes Payable, Continued:

     (d)  Professional services debt

     In November 2001, the Company issued non-interest  bearing notes payable of
     $360,000 and $70,000, due November 2003 and February 2004, respectively, in
     payment of  professional  fees due.  The  $360,000  note is  amortizing  at
     $15,000 per month.  The Company also issued 25,000 shares valued at $72,000
     in connection with the debt settlement.  The notes were discounted  $65,000
     to their  approximate  fair market  value.  The value of the shares and the
     discount is being amortized to interest  expense over the respective  lives
     of the  notes.  To the extent the  Company  complies  with the terms of the
     notes,  the note holder has agreed to forgive the $70,000  obligation.  The
     notes are collateralized by certain assets of the Company.

     The carrying  value of the debt is net of  unamortized  discount of nil and
     $30,658 at December 31, 2003 and 2002, respectively.

     (e)  Employee Settlement Liability

     The Company in 2003  entered into a  separation  agreement  with its former
     Chief  Financial  Officer,   under  which  his  employment   agreement  was
     cancelled.  The  agreement  requires  the payment of a total of $600,000 in
     equal monthly  payments over a five year period  beginning  April 2003. The
     Company had previously made provision for deferred compensation and related
     costs totaling approximately $ 390,000 with respect to the former officer's
     services.  The separation  agreement also provides for a final  conditional
     payment of $100,000 if the Company has net free cash of at least $1,000,000
     after all normal  operating  expenses for the final year of the  agreement.
     There is also  provision for the  acceleration  of payments in the event of
     certain specified events, such as change of control of the Company, sale of
     substantially  all of  our  assets,  sale  of a  location,  or  payment  of
     dividends to stockholders.

     (f) The aggregate  maturities of long-term debt at December 31, 2003 are as
     follows:

     Year Ended December 31, 2004

                                                            $
       (Including $ 1,040,563 of debt mandatorily             2,991,145
       convertible into shares)
       2005                                                   1,975,284
       2006                                                   2,636,860
       2007                                                   1,018,228
       2008                                                      30,000
                                                            -------------
                                                            $ 8,651,517
                                                            =============



                                      F-21
<PAGE>


                   THE NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



(6)  Stockholders' Equity:

     Common Stock

     Effective  March 22,  2002,  the Company  completed a reverse  split of its
     common  stock on the basis of one share  for each  four  shares  previously
     issued. All references in these consolidated  financial statements to share
     numbers and per share amounts give retroactive  effect to the reverse stock
     split.

     On May 31, 2002,  the  authorized  capital of the Company was  increased to
     75,000,000  shares of common stock,  $0.001par value, and 10,000,000 shares
     of preferred stock, $0.001 par value.

     In February 2003, the Company issued 307,962 Units, each Unit consisting of
     one share of common stock and one warrant for the purchase of an additional
     one share,  exercisable  at the price of $0.72 per share until February 19,
     2004, and $0.79 per share  exercisable to February 19, 2005. The Units were
     issued to a  private  company  controlled  by the  family  of an  executive
     officer and director.

     Liabilities To Be Settled By Issue of Shares
     --------------------------------------------

<TABLE>

                                                   December 31, 2003                December 31, 2002
                                                  Number                         Number
                                                of Shares         Amount        of Shares        Amount
                                                -----------    -----------     -----------    -----------
         <S>                                    <C>            <C>             <C>            <C>
         Deferred compensation to executives      215,500        140,076         400,807        $260,525
                                                ===========    ===========     ===========    ===========
</TABLE>

     Employee Stock Option Plan
     --------------------------

     In 1999,  the Board of  Directors  of the  Company  adopted  the 1999 Stock
     Incentive  Plan (Stock  Option Plan) for the grant of  qualified  incentive
     stock  options  (ISO),  non-qualified  stock  options,  deferred  stock and
     restricted stock. The exercise price for any option granted may not be less
     than fair value (110% of fair value for ISOs granted to certain employees).
     Under the Stock Option Plan, 225,000 shares are reserved for issuance.

     Effective April 12, 2002, the Board of Directors of the Company adopted the
     2002 Stock Incentive Plan (2002 Plan) for the grant of qualified  incentive
     stock  options  (ISO),  non-qualified  stock  options,  deferred  stock and
     restricted stock. The exercise price for any option granted may not be less
     than fair value (110% of fair value for ISOs granted to certain employees).
     Under the 2002 Plan, 750,000 shares are reserved for issuance.



                                      F-22
<PAGE>

                   THE NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



(6)  Stockholders' Equity:

     Executive Stock Options
     -----------------------

     Under the terms of five year employment  agreements  commencing  January 1,
     2001,  each of three  Executive  Officers  were granted  options to acquire
     130,682 shares at a price of $4.40 per share annually for the term of their
     contracts.  One  executive  terminated  his  employment in 2002 and options
     granted to him in 2001 and 2002 were cancelled. At December 31, 2003, stock
     options  representing 653,410 shares have vested and are unexercised (2002:
     522,728) at the exercise price of $4.40 per share.

     Stock Options
     -------------

     The following table is a summary of the Company's stock options outstanding
     as of  December  31,  2003 and 2002 and the  changes  during the years then
     ended.

<TABLE>
                                                              2003                         2002
                                                              ----                         ----
                                                                   Average                       Average
                                                                  Exercise                       Exercise
                                                     Number         Price          Number         Price
                                                   ---------------------------------------------------------
         <S>                                       <C>           <C>             <C>           <C>
         Outstanding, beginning of year              608,728       $  7.19         607,296       $  14.52
         Granted                                     460,682       $  1.73         392,046       $   4.40
         Cancelled and expired                      (301,739)      $     -        (390,614)      $     -
                                                   ---------------------------------------------------------
         Outstanding, end of year                    767,671       $  3.50         608,728       $   7.19
                                                   ---------------------------------------------------------
         Exercisable, end of year                    467,671       $  5.31         608,728       $   7.19
                                                   =========================================================
</TABLE>


     The  following   table  further   describes  the  Company's  stock  options
     outstanding as of December 31, 2003:

<TABLE>
               Number of            Weighted average        Weighted average
                 Options             remaining life             average                Number
              Outstanding               (years)              exercise price         exercisable
              -----------               -------              --------------         -----------
              <S>                    <C>                     <C>                   <C>
                   75,625                  .5                    10.00                 75,625
                  150,000                 2.2                     0.65                      -
                  150,000                 2.2                     0.70                      -
                  392,046                 2.0                     4.40                392,046
             --------------                                                      --------------
                  767,671                                                             467,671
             ==============                                                      ==============
</TABLE>



                                      F-23
<PAGE>


                   THE NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



(6)  Stockholders' Equity, Continued:

     Warrants and conversion rights outstanding
     ------------------------------------------

     The following stock purchase warrants are outstanding at December 31, 2003:

<TABLE>
                                                                                              Number of shares
                                                                                                subject to
                                                                                                warrants and
                                                  Expiration Date                Price        conversion rights
                                                  ---------------                -----        -----------------
<S>                                               <C>                      <C>                 <C>
   Granted in connection with:

   13.0% Debentures                               July 31, 2007                   $3.00            1,716,667

   13.75% Mandatory Convertible Debenture         March 31, 2004                  $1.20              893,044

   12.0% Convertible Debenture                    December 21, 2005               $3.00                7,500

   Unit offering of Common Stock                  February 19, 2004/5       $0.72/$0.79              333,083
                                                                                              --------------
                                                                                                   2,950,294
                                                                                              ===============
</TABLE>



                                      F-24
<PAGE>

                   THE NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



(7)  Commitments and Contingencies:

     Employment and Consultant Agreements
     ------------------------------------

     The Company has entered into Employment and Consulting Agreements extending
     for periods in excess of one year with the following:

     Chief Executive  Officer - Agreement for a five year period ending December
     31, 2005 at an annual base salary of  $200,000,  a minimum  annual bonus of
     $100,000,  stock  options to  purchase  130,682  shares at a price of $4.40
     annually, automobile, business and entertainment allowances of a minimum of
     $24,000 annually,  and a housing allowance totaling  approximately  $83,000
     annually.  In the event of termination by the Company  without cause, or by
     the executive with cause, the agreements  provide for a lump sum payment to
     the executive equal to three times the annual base salary, plus the greater
     of $500,000 or three times the highest annual bonus paid. The agreement was
     amended in March 2004 as detailed in Note 10(a)-Subsequent Events.

     Two officers and two  executive  officers  are  retained  under  employment
     agreements,  cancelable upon six months notice.  The agreements provide for
     compensation and expenses  allowances totaling  approximately  $792,000 and
     $798,000 for 2004 and 2005 respectively. The agreements expire in the first
     quarter of 2006.


                                      F-25
<PAGE>

                   THE NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



(7)  Commitments and Contingencies:

     Leases
     ------

     The Company leases  facilities  under operating lease  agreements  expiring
     through  July  2009.  The  Company  also  leases   certain   equipment  and
     automobiles under operating lease agreements expiring at various dates.

     Future   minimum   lease   payments  for  the  upcoming  four  years  under
     non-cancelable operating leases in effect December 31, 2003 are as follows:

          Year ending December 31,

                   2004                               $   739,042
                   2005                                   689,257
                   2006                                   620,184
                   2007                                   516,506

     Litigation
     ----------

     The Company is from time to time subject to routine  litigation  arising in
     the  normal  course  of  business.  Management,  with the  advice  of legal
     counsel,  believes that the results of any such routine litigation or other
     pending legal proceedings will not have a material effect on the Company.


(8)  Comparative Figures:

     Certain of the amounts for the 2002 comparative year have been reclassified
     to conform to the presentation adopted for 2003.


(9)  Income Taxes:

     Income tax expense (benefit) differs from the expected  statutory amount as
     follows:


<TABLE>
                                                                          2003                  2002
                                                                    -------------       ---------------
         <S>                                                       <C>                  <C>
         Expected income tax expense (benefit)                      $    (5,000)         $ (2,347,000)
         State income tax, net of federal benefit                   $    (1,000)         $   (382,000)
         Change in valuation allowance                              $      6,000         $  2,136,000
         Other                                                      $          -         $    593,000
                                                                    -------------       ---------------
         Income tax expense per financial statements                $          -         $          -
                                                                    =============       ===============
</TABLE>



                                      F-26
<PAGE>

                   THE NEPTUNE SOCIETY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



(9)  Income Taxes, Continued:

     The tax  effects of  temporary  differences  that give rise to  significant
     portions of deferred tax assets and deferred tax  liabilities  is presented
     below:

<TABLE>
                                                                          2003                  2002
                                                                     --------------      ---------------
         <S>                                                         <C>                 <C>
         Deferred tax assets:
              Deferred revenue                                        $  6,841,000        $   6,896,000
              Net operating loss                                         2,663,000            3,764,000
              Other                                                         64,000               64,000
                                                                     --------------      ---------------
         Total gross deferred tax assets                                 9,568,000           10,724,000
         Valuation allowance                                            (7,237,000)          (7,939,000)
                                                                     --------------      ---------------
              Net deferred tax assets                                    2,331,000            2,785,000

         Deferred tax liability - deferred commissions                  (2,331,000)          (2,785,000)
                                                                     --------------      ---------------
              Net deferred taxes                                      $          -         $          -
                                                                     ==============      ===============
</TABLE>


     The  Company's  deferred  tax  asset is offset  by a  valuation  allowance.
     Management  will  continue  to assess the  valuation  allowance  and to the
     extent it is determined that such allowance is no longer required,  the tax
     benefit of the  remaining net deferred tax assets will be recognized in the
     future.

     The net operating  loss  carryforwards  for federal  income tax purposes of
     approximately $7,609,000 start to expire in the year 2019. State income tax
     loss carryforwards of approximately  $5,976,000 start to expire in the year
     2006.


(10) Subsequent Events:

     Marketing Allowances Received

     On  February  4, 2004,  the  Company  entered  into an  arrangement  with a
     national  insurance company whereby it received  approximately $1.9 million
     as a marketing  allowance  in  connection  with the  purchase of group life
     insurance coverage for fully paid members of certain of its pre-need trusts
     in California.

     Amended Employment Agreement-Chief Executive Officer

     The Company and its Chief Executive Officer ("CEO") entered into an Amended
     and  Restated  Agreement  dated March 12, 2004 to  supercede  his  existing
     employment  arrangements.  The March 12, 2004  Agreement  restructures  the
     amount to be paid tour CEO in the event of termination or change of control
     of the Company, and extends the term of the employment arrangement.

     The Agreement is for an initial term expiring December 31, 2007, renewal in
     successive one-year increments to December 31, 2010. Annual compensation is
     unchanged from the previous employment  agreement,  except that there is to
     be a 5% increase in compensation for each renewal year after 2007.

     The terms of the Amended Agreement provide that in the event of termination
     of his employment by the Company,  by our CEO for good reason,  on a change
     of control of the company,  or on the expiry of the  employment  agreement,
     the following terms will come into effect:

     -    a total  of  538,818  shares  owned  by our CEO and  related  parties,
          together with stock options and warrants to acquire a further  457,692
          shares  at prices  ranging  from  $0.65  and  $0.79 per share  will be
          purchased by the company at fair market value,  unless such shares are
          acquired by a Debentureholder  which holds a right of first refusal to
          the equities, and

     -    in the event the  Debentureholder  does not acquire the equities,  the
          Company is to do so by paying to our CEO the amount of 13% of the fair
          value of the Company.

     With respect to a change of control of the company the provisions above are
     operative  for all changes in control  after March 10,  2006,  and prior to
     that date, all changes of control except for certain named stockholders.

     Employment Agreement-Chief Marketing Officer

     On February 1, 2004,  we entered into an agreement  for the services of our
     President  and  Chief  Marketing  Officer  (formerly,  our CEO was also our
     President,  the position of Chief Marketing  Officer is new). The agreement
     provides for annual base compensation of $200,000 per annum and an expenses
     allowance  of $24,000 per annum.  We agreed to issue  40,000  shares of our
     common stock as a signing bonus.  We also agreed to grant options under our
     stock option plan to purchase  150,000  shares of common stock at $0.70 per
     share vesting at the rate of 50,000 shares on each of the first, second and
     third anniversary of the agreement.  The executive will also be entitled to
     a  yearly  bonus  of 30% of his  annual  salary,  such  bonus  based on the
     achievement of specific defined goals, and payable in cash or shares of our
     common  stock as  determined  by the  board of  directors.  The term of the
     agreement  extends to January 31, 2007. The agreement is cancelable on six,
     seven  or  eight  months  notice  in  the  first,  second  or  third  years
     respectively.



                                      F-27
<PAGE>


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE

     We had no changes in or  disagreements  with  accountants on accounting and
financial disclosure during the two most recently completed fiscal years.


ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS;
         SECTION 16(a) COMPLIANCE

     The  following  table sets forth  certain  information  with respect to our
current  directors,  executive  officers  and key  employees.  The term for each
director  expires at our next annual  meeting or until his or her  successor  is
appointed.  The ages of the directors,  executive officers and key employees are
shown as of December 31, 2003.

<TABLE>
-------------------------------------------------------------------------------------------------------------------
                                                                                     Director/              Age
Name                                  Position                                       Officer Since
-------------------------------------------------------------------------------------------------------------------
<S>                                   <C>                                            <C>                  <C>
Marco P. Markin                       CEO and Director of each of Neptune Society,   June 1999                 39
                                      Neptune of America, Neptune Management, and
                                      Trident Society, Inc.
-------------------------------------------------------------------------------------------------------------------
Matthew J. Hoogendoorn                Director, Chief Financial Officer, Corporate   February 2003             51
                                      Secretary, Treasurer and Vice President
                                      Finance of all Neptune Group companies
-------------------------------------------------------------------------------------------------------------------
Bryan G. Symington Smith              Director of Neptune Society                    March 2002                64
-------------------------------------------------------------------------------------------------------------------
Brent Lokash                          Director of Neptune Society                    May 30, 2003              35
-------------------------------------------------------------------------------------------------------------------
Douglas J. Irving                     COO of  Neptune Society and Neptune            May 2002                  53
                                      Management
-------------------------------------------------------------------------------------------------------------------
Gary I. Harris                        National Sales Manager, Neptune Group          March 2002                62
-------------------------------------------------------------------------------------------------------------------
Barry Maynes                          Chief Information Officer, Neptune Group       March 2003                50
-------------------------------------------------------------------------------------------------------------------
Matthew Markin                        Vice President Operations and Real Estate,     April 2002-               38
                                      Neptune Management                             November 2003
-------------------------------------------------------------------------------------------------------------------
Anthony George                        Director of Neptune Society                    March, 2002 -             39
                                                                                     May 2003
-------------------------------------------------------------------------------------------------------------------
Jerry A. Norman                       President of Neptune Society, Neptune          February 1, 2004          53
                                      Management, Neptune Society of America and
                                      Trident Society, Inc.
-------------------------------------------------------------------------------------------------------------------
(1)  Mr. Matthew Markin resigned effective December 1, 2003.
(2)  Mr. George resigned as a director on May 30, 2003.
</TABLE>


     Marco P.  Markin - Mr.  Markin  joined  Neptune  Society  full  time as our
Chairman of the Board and Chief Executive  Officer in September 1999. Mr. Markin
serve as President of Neptune Society on January 31, 2004. From November 1994 to
September  1999,  Mr. Markin was the Executive  Vice President of TPP Management
Inc., a private  investment  company,  having a diverse portfolio  consisting of
residential/commercial  real  estate,  merchant  banking,  and  securities.  His
expertise included corporate management, and corporate development, research and
marketing.  From January 1991 to November  1995,  Mr. Markin was the founder and
CEO of a commercial real estate  company,  which secured and managed a portfolio
of 400,000 square feet of real estate.  He was also the co-founder of one of the
largest direct marketing companies in Canada, which was subsequently sold to the
Financial  Post.  From 1985 - 1990, Mr. Markin was the founder and CEO of Markin
Development Group, a growing



                                       26
<PAGE>

development company focusing on construction of multi-family apartment buildings
and commercial offices.  Mr. Markin graduated from Bishop College in Montreal in
1982. He also attended the University of British Columbia's Science Program.

     Jerry A. Norman - Mr.  Norman was  appointed  as  President  on February 1,
2004.  Mr.  Norman  has over 30 years  experience  in  business  management  and
marketing. Prior to his appointment at Neptune, he worked as a Private Marketing
Consultant  providing  death care  industry  and final  expense  life  insurance
marketing and sales to clients such as Service Corporation  International (SCI),
Fortis U.S./American Memorial Life Insurance Co., and Farmer's Life Insurance to
name a few. From  1998-2002,  Mr. Norman was the Managing  Director of Marketing
and  Corporate  Alliances at SCI where he managed all forms of marketing and all
Life Insurance  company relations for both Europe and the United States. He also
served as chairman of MeM.com, an internet memorial company. From 1986-1998, Mr.
Norman was Sr. Vice President of American Memorial Life Insurance.

     Matthew  Hoogendoorn  -  Mr.  Hoogendoorn  was  appointed  as  Senior  Vice
President  of Finance on February 1, 2003 and Chief  Financial  Officer on April
28, 2003..  Mr.  Hoogendoorn  was appointed to the Board of Directors on May 30,
2003 and was re-elected as a Director at our annual meeting of  shareholders  on
July 28,  2003.  Mr.  Hoogendoorn  is a  Chartered  Accountant  in Canada  and a
Certified Public Accountant in the United States (Illinois). He has operated his
own Chartered  Accountancy  practice  continually from 1980 through the present.
Mr. Hoogendoorn graduated from Simon Fraser University in Burnaby, BC in 1976.

     Bryan G.  Symington  Smith - Mr. Smith has served as a Director for Neptune
Society  since March 2002.  He started his career in 1967 with Nesbitt  Thomson,
served as Vice President and Director of Draper Dobie Limited from 1973-1977, as
Senior  VP of  Gardiner  Watson  Limited  from  1977-1987.  In  1990  Mr.  Smith
co-founded Burgundy Asset Management.  Although Mr. Smith retired in 1998, he is
currently   serving  as  a  director  of  several   companies   and   non-profit
organizations.

     Brent  Lokash - Mr.  Lokash was  appointed to the Board of Directors of the
Company on May 30, 2003.  Since being  called to the Bar of British  Columbia in
1995,  Mr.  Lokash has been and remains a current  practicing  member of the Law
Society of British  Columbia.  From 1996 to 1998 Mr. Lokash practiced  municipal
and administrative law with Jonathan Baker & Associates in Canada. Since 1998 to
present, Mr. Lokash has been practicing  administrative and commercial law, as a
sole practitioner in Vancouver, British Columbia.

     Douglas  J.  Irving  - Mr.  Irving  joined  Neptune  Society  as its  Chief
Operating Officer in May 2002. Prior to joining Neptune Society,  Mr. Irving had
his own  management  consulting  business.  From  1997-1998,  he  served as Vice
President  of  Operations  for  Service  Corporation  International,   and  from
1988-1996 Mr. Irving had several positions including  Operations  Controller for
The Loewen Group, Inc. Mr. Irving is also a Licensed Funeral  Director,  holds a
Bachelor of Commerce  Degree from the  University  of British  Columbia and is a
Professional Accountant.

     Gary I.  Harris - Mr.  Harris is the  National  Sales  Manager  of  Neptune
Society.  Prior to joining  Neptune  Society in March 2000,  Mr.  Harris was the
Senior   Vice-President  in  charge  of  the  print  division  at  T.V.  Fanfare
Publication,  an international  advertising company, where he worked since 1985.
He attended both the University of Toledo and New York University.

     Barry Maynes - Mr. Maynes was appointed as Chief Information  Officer (CIO)
of Neptune Society on March 1, 2003. Mr. Maynes joined Neptune in March, 2002 as
Vice President-Technical Services and Administration.  Prior to joining Neptune,
Mr. Maynes was employed by Bowne Global Solutions as Central  Services  Manager,
Americas,   where  his   responsibilities   included  all  aspects  of  Finance,
Information Technology, Human Resources and Administration. From 1975 to 1997 he
was employed by the Origin Group, the consulting arm of Phillips Industries,  in
progressively responsible positions to Technical Support Manager.

     Matthew  Markin - Mr.  Markin joined  Neptune  Society in April 2002 as the
National  Pre-Need  Manager.  From 1999 - 2002, Mr. Markin was Vice President of
Abacus Equities  Corporation  which  specialized in raising capital and advising
outside firms on matters involving mergers and acquisitions. Mr. Markin resigned
effective December 1, 2003.



                                       27
<PAGE>

     David L. Schroeder - Mr.  Schroeder  served as Chief  Operating  Officer of
Neptune  Society  from June 2000 to May 2002,  as a Director  and  Secretary  of
Neptune  Society from November 2000 to September  2002,  and as President of all
Neptune  companies from January 2001 to September  2002. On October 1, 2002, Mr.
Schroeder resigned as a director of The Neptune Society, Inc. and on October 21,
2002,  resigned as  president  of The Neptune  Society,  Inc. and entered into a
consulting  agreement  to provide  services  as our  Senior  Vice  President  of
Operations and Development. Prior to his work with Neptune, Mr. Schroeder worked
as the CEO of Community  Memorial  Centers,  LLC, an Oregon  cremation  services
company from May 1998 to July 2000.  He has served on the board of directors for
The Loewen Group, Inc., from August 15, 1990 to May 1, 1993, he was president of
Universal  Memorial  Centers  from 1984 to 1993,  president  and COO of  Skyline
Memorial  Gardens & Crematory,  and he worked for 7 years as a licensed  funeral
director and embalmer.  Mr.  Schroeder has served on the board and as an officer
of the Oregon State Funeral Directors  Association and as Chairman of the Oregon
State Mortuary-Cemetery Licensing Board.

     Anthony  George - Mr.  George  served as a Director of the Neptune  Society
from March 2002 to May 2003.

     None of our  executive  officers  or key  employees  are  related by blood,
marriage or adoption to any director or other executive officer.

Board Committees

     Our board of directors has the following committees:

Compensation Committee.

     The  Compensation   Committee  consists  of  three  members:  Marco  Markin
(director), Bryan G. Symington Smith (director) and Kathryn Witter, a consultant
to  Neptune  Society.   The  Compensation   Committee  is  responsible  for  the
establishment  and  revision  of our  compensation  policy,  the  review  of the
compensation  (including  stock  options)  of  our  senior  management  and  its
subsidiaries,  and for  recommendations  to the  Board for  adjustments  to such
compensation.  The Committee is also responsible for the  administration  of our
stock option plan and its benefit plans.

     Our compensation  committee  submits  compensation  recommendations  to our
board of  directors  for its  approval.  Compensation  for our  chief  executive
officer was determined  considering  his efforts in assisting in the development
of our business strategy,  the salaries of executives in similar positions,  the
development  of  business,  and our general  financial  condition.  Our Board of
Directors  believes that the use of direct stock awards is at times  appropriate
for  employees,  and in the future  intends to use direct stock awards to reward
outstanding service or to attract and retain individuals with exceptional talent
and  credentials.  The use of stock  options  and other  awards is  intended  to
strengthen  the  alignment  of  interests  of  executive  officers and other key
employees with those of our stockholders.

Board and Committee Meetings

     During the year ended December 31, 2003, our Board of Directors met 9 times
including  meetings by telephone  conference,  and  approved  actions by written
consent 5 times.

     To our knowledge,  there are no arrangements or understandings  between any
of our executive  officers and any other person  pursuant to which the executive
officer was selected to serve as an executive officer.

Nomination of Board Members by Security Holders

     Candidates  for our  board  of  directors  are  nominated  by our  board of
directors.  We currently do not have a nominating committee.  There have been no
material  changes to our shareholder  nominee process for member of our board of
directors.



                                       28
<PAGE>


Section 16(a) Beneficial Ownership Reporting Compliance

     Section  16(a) of the  Securities  and  Exchange  Act of 1934  requires any
person who is our director or executive  officer or who beneficially  holds more
than 10% of any class of our  securities  which  have been  registered  with the
Securities  and Exchange  Commission,  to file reports of initial  ownership and
changes in ownership with the Securities and Exchange Commission.  These persons
are  also  required  under  the  regulations  of  the  Securities  and  Exchange
Commission to furnish us with copies of all Section 16(a) reports they file.

     To our  knowledge,  based solely on our review of the copies of the Section
16(a) reports furnished to us and information  provided by certain affiliates of
our company, all Section 16(a) filing requirements  applicable to our directors,
executive  officers and holders of more than 10% of any class of our  registered
securities were complied with in a timely manner.

Code of Conduct

     We are in the process of adopting a Code of Conduct  that will apply to our
principal executive officer,  principal financial officer,  principal accounting
officer, controller or persons performing similar functions (including our Chief
Executive Officer, Chief Financial Officer and Corporate Controller).  We intend
to post  the  Code of  Conduct  on our Web  site.  Our  Board  of  Directors  is
evaluating the proper scope of our code of ethics, and anticipates  adopting the
Code of  Conduct  during the second  quarter of 2004.  We intend to satisfy  the
disclosure  requirement  under Item 10 of Form 8-K relating to  amendments to or
waivers from any provision of our Code of Conduct,  when adopted,  applicable to
our Chief Executive Officer, Chief Financial Officer and Corporate Controller by
posting this information on our Web site located at www.neptunesociety.com.

     The  information  on our Web site is not,  and shall not be deemed to be, a
part of this report or incorporated into any other filings we make with the SEC.


ITEM 10.  EXECUTIVE COMPENSATION

Summary Compensation Table

     The following table sets forth compensation paid to each of the individuals
who served as our Chief Executive Officer and our other most highly  compensated
executive officers (the "named executives  officers") for the fiscal years ended
December 31, 2000, 2001, 2002 and 2003. The  determination as to which executive
officers  were most highly  compensated  was made with  reference to the amounts
required to be disclosed under the "Salary" and "Bonus" columns in the table.




                                       29
<PAGE>

<TABLE>
===================================================================================================================================
                                                    SUMMARY COMPENSATION TABLE
-----------------------------------------------------------------------------------------------------------------------------------
                                         ANNUAL COMPENSATION                               LONG-TERM COMPENSATION
                                  ------------------------------                 ---------------------------------
                                                                                          AWARDS
                                                                                 ------------------------
                                                        Other                    Restricted    Securities                 All
        Name &                                         Annual        Deferred       Stock      Underlying                 Other
      Principal                   Salary    Bonus   Compensation   Compensation   Awards(s)   Options/SAR's   LTIP    Compensation
       Position          Year      ($)       ($)        ($)            ($)           ($)          (#)        Payouts       ($)
------------------------------------------------------------------------------------------------------------------------------------
<S>                     <C>       <C>        <C>     <C>             <C>           <C>         <C>           <C>         <C>
Marco Markin (1)         2003     200,000             107,400        100,000                    280,682
CEO and                  2002     174,616             105,750        125,384(3)                 130,682
Director of Neptune      2001     145,233              98,287        154,767(3)                 130,682
Society
------------------------------------------------------------------------------------------------------------------------------------
Matthew Hoogendoorn      2003     146,000              43,500         36,500                     50,000
Director, Senior Vice
President - Finance,
and Chief Financial
Officer of Neptune
Society
------------------------------------------------------------------------------------------------------------------------------------
Douglas J. Irving        2003     146,000              43,500         36,500                     50,000
Chief Operating          2002      74,160                  --         26,125                         --
Officer
of Neptune Society
------------------------------------------------------------------------------------------------------------------------------------
Gary Harris              2003      75,000             170,750         20,225                     30,000
National Sales Manager   2002      75,000             140,769         15,000                     11,250
Neptune Management       2001      75,000             134,619            --                       7,500

------------------------------------------------------------------------------------------------------------------------------------
Barry Maynes             2003      98,000              21,750         14,700                     20,000
Chief Technology         2002      70,615                  --             --                         --
Officer
------------------------------------------------------------------------------------------------------------------------------------
Matthew Markin(6)        2003     116,000              37,000         29,000                     30,000
Vice President of        2002      63,125                  --             --                         --
Operations and Real
Estate
------------------------------------------------------------------------------------------------------------------------------------
David Schroeder (2)      2003      63,900                  --             --                        --
Consultant, Senior       2002     128,738                  --             --                        --
Vice                     2001     134,616              21,355        138,263                    149,432
President of
Operations
and Development
------------------------------------------------------------------------------------------------------------------------------------
Rodney Bagley (4)        2003      82,672              90,000        540,000                         --
Chief Financial          2002     175,270              24,000        124,730                    130,682
Officer,                 2001     161,737              23,355        138,263                    149,432
Secretary and
Director of
Neptune Society
===================================================================================================================================
</TABLE>



                                       30
<PAGE>

<TABLE>
===================================================================================================================================
                                                    SUMMARY COMPENSATION TABLE
-----------------------------------------------------------------------------------------------------------------------------------

                                         ANNUAL COMPENSATION                               LONG-TERM COMPENSATION
                                  ------------------------------                 ---------------------------------
                                                                                          AWARDS
                                                                                 ------------------------
                                                        Other                    Restricted    Securities                 All
        Name &                                         Annual        Deferred       Stock      Underlying                 Other
      Principal                   Salary    Bonus   Compensation   Compensation   Awards(s)   Options/SAR's   LTIP    Compensation
       Position          Year      ($)       ($)        ($)            ($)           ($)          (#)        Payouts       ($)
------------------------------------------------------------------------------------------------------------------------------------
<S>                     <C>       <C>        <C>     <C>             <C>           <C>         <C>           <C>         <C>
Jerry Norman(7)          2003     37,075                             10,000
President of
Neptune Society
====================================================================================================================================
(1)  Mr.  Markin was  appointed  as an Officer and  Director  of our  subsidiary
     companies in April 1999.  He was appointed as Neptune  Society's  President
     and CEO in October 1999.  Other  compensation  represents lease payments on
     Mr.  Markin's home and for personal use of an  automobile.  The services of
     Mr. Markin were provided  directly and through his private company,  Spiral
     Marketing,  Inc., in 2003.  Securities  underlying Options for 2003 include
     his annual  options under his  employment  agreement  plus 150,000  options
     under the 2002 Stock Option Plan granted  February,  2003.  Mr.  Markin was
     resigned as President effective January 31, 2004.

(2)  Mr.  Schroeder  served as our Chief Operating  Officer from June 1, 2000 to
     October  2002.  In 2002,  we paid Mr.  Schroeder  for  lease  payments  for
     personal  use of an  automobile.  Effective  October  2002,  Mr.  Schroeder
     entered into a Consulting  Agreement to provide services as our Senior Vice
     President of Operations and Development.

(3)  Mr. Markin has agreed to accept  payment of this deferred  compensation  in
     stock.  To  December  1, 2003,  215,501  shares have been issued to him for
     payment of 50% of this amount. A further 215,500 shares remain to be issued
     to him for compensation deferred to December 31, 2002.

(4)  Mr. Bagley was appointed as Chief  Financial  Officer of Neptune Society in
     November  2000. Mr. Bagley  resigned as a director and our Chief  Financial
     Officer in April  2003.  Other  annual  compensation  for 2003  comprises 9
     monthly  payments of $10,000.00  under the Separation  Agreement.  Deferred
     Compensation  consists of the unpaid portion of all monthly  payments still
     due to Mr. Bagley under the Separation Agreement.

(5)  The services of Mr.  Irving are provided  through DSI  Holdings  Ltd.,  his
     private company.

(6)  Mr. Markin resigned effective December 1, 2003.

(7)  Mr.  Norman was  contracted  as a consultant  to the Company  commencing in
     October , 2003.  Effective February 1, 2004 he was appointed  President and
     Chief Marketing Officer.
</TABLE>


Director and Officer Stock Option/Stock Appreciation Rights ("SARs") Grants

     The following table sets forth information regarding stock option grants to
our named  executive  officers and directors  during the year ended December 31,
2003:

<TABLE>
                                                                                          Potential Realized
                                                                                           Value at Assumed
                                                                                        Annual Rates of Stock
                                                                                          Price Appreciation
Individual Grants                                                                          for Option Term
--------------------------------------------------------------------------------------------------------------
            (a)              (b)            (c)           (d)              (e)              (f)         (g)
                          Number of
                          Securities
                          Underlying    % of Total    Exercise or
                           Options        Options     Base Price
            Name         Granted (#)    Granted (1)    ($/Sh)(2)     Expiration Date      5% ($)      10% ($)
--------------------------------------------------------------------------------------------------------------
<S>                        <C>            <C>           <C>           <C>                 <C>         <C>
Marco Markin               150,000        45.45%        $0.65         Feb. 24, 2006       $15,378     $32,273
Matthew Hoogendoorn         50,000        15.15%        $0.70         Feb. 11, 2006       $ 5,517     $11,585
Douglas Irving              50,000        15.15%        $0.70         Feb. 11, 2006       $ 5,517     $11,585
Gary Harris                 30,000         9.09%        $0.70         Feb. 11, 2006       $ 3,310     $ 6,951
Barry Maynes                20,000         6.07%        $0.70         Feb. 28, 2006       $ 2,207     $ 4,634
Matthew Markin              30,000         9.09%        $0.70         Feb. 11, 2006       $ 3,310     $ 6,951
</TABLE>



                                       31
<PAGE>

     The potential  realizable  value in the tables above is calculated based on
the  assumption  that the common  stock  appreciates  at the annual  rate shown,
compounded annually,  from the date of grant until the expiry of the term of the
option.  These  numbers  are  calculated  based on SEC  requirements  and do not
reflect  our  projection  or estimate of future  stock price  growth.  Potential
realizable values are computed by:

     o    multiplying  the number of shares of common  stock  subject to a given
          option by the exercise price;

     o    assuming that the aggregate stock value derived from that  calculation
          compounds  at the  annual  5% or 10% rate  shown in the  table for the
          entire term of the option; and

     o    subtracting from that result the aggregate option exercise price.


Aggregated  Option/SAR  Exercises  in Last  Fiscal  Year-  and  Fiscal  Year-End
Option/SAR Values

     The  table  below  sets  forth  information  on the  aggregated  option/SAR
exercises  during our fiscal year end  December 31, 2003 and  option/SAR  values
related to options/SARS outstanding as of December 31, 2003.

<TABLE>
---------------------------------------------------------------------------------------------------------------------------
                                                                     Unexercised Options     Value of Unexercised in the
                                Securities        Aggregate             At FY-End (#)          Money-Options at FY-End
                                Acquired on    Value Realized           Exercisable/             ($) Exercisable/
       Name                     Exercise (#)         ($)               Unexercisable              Unexercisable (1)
---------------------------------------------------------------------------------------------------------------------------
<S>                                <C>          <C>                  <C>                     <C>
Marco Markin                        Nil             Nil              420,796 (exercisable)   $ nil (exercisable)
                                                                     150,000                 $ 75,000 (unexercisable)
                                                                     (unexercisable)
---------------------------------------------------------------------------------------------------------------------------
Matthew Hoogendoorn                 Nil             Nil              nil (exercisable)       $ nil (exercisable)
                                                                     50,000 (unexercisable)  $ 22,500 (unexercisable)
---------------------------------------------------------------------------------------------------------------------------
Douglas Irving                      Nil             Nil              nil (exercisable)       $ nil (exercisable)
                                                                     50,000 (unexercisable)  $22,500 (unexercisable)
---------------------------------------------------------------------------------------------------------------------------
Gary Harris                         Nil             Nil              11,250 (exercisable)    $ nil (exercisable)
                                                                     30,000 (unexercisable)  $ 13,500 (unexercisable)
---------------------------------------------------------------------------------------------------------------------------
Barry Maynes                        Nil             Nil              nil (exercisable)       $ nil(exercisable)
                                                                     20,000 (unexercisable)  $ 9,000 (unexercisable)
---------------------------------------------------------------------------------------------------------------------------
Matthew Markin                      Nil             Nil              nil (exercisable)       $ nil (exercisable)
                                                                     30,000 (unexercisable)  $ 13,500 (unexercisable)
---------------------------------------------------------------------------------------------------------------------------
</TABLE>


     Long Term Incentive Plans

     No long-term incentive awards have been made by us to date.

     Defined Benefit or Actuarial Plan Disclosure

     We do not provide retirement benefits for the directors or officers.



                                       32
<PAGE>

Compensation of Directors

     None of our directors received  compensation for their service as directors
during the fiscal  year ended  December  31,  2003,  except for our  independent
directors:  Mr.  Smith,  an  independent  director  received  30,000  shares for
directors  fees, and Mr. Lokash,  an independent  director  received  $7,500 for
directors fees.

     Mr. Lokash also received $10,000 for legal fees in 2003.

     An  independent  member  of the  Compensation  Committee  of the  Board  of
Directors,  Kathryn  Witter,  received 25,000 shares for services as a committee
member.

Employment  Contracts  and  Termination  of  Employment  and   Change-In-Control
Arrangements

Marco Markin Employment Agreement

     On June 6, 2001,  we entered into an  employment  agreement  with Mr. Marco
Markin,  the Chairman of the Board and Chief Executive  Officer,  for employment
through December 31, 2005.

     Under the terms of the Agreement, Mr. Markin receives an annual base salary
of $200,000,  a minimum of 130,682 share options  annually  exercisable at $4.40
per share,  vesting over the  employment  period,  and a minimum annual bonus of
$100,000, and automobile,  business and entertainment allowances of a minimum of
$24,000 annually.  The Agreement  provides that if the officer resigns with good
reason or if we terminate their  employment  other than for cause or disability,
then they will be entitled  to receive an  immediate  lump sum cash  payment and
certain installment payments equal to the sum of:

     *accrued, but unpaid, base salary or other payment and vacation through the
     date of termination

     *two or three times their base  salary,  depending  upon period of service,
     and

     *the higher of $500,000  or three times the highest  annual  bonus paid for
     any fiscal year during the employment period

     Mr.  Markin will also  receive  continued  benefits for the longer of three
years or the remainder of the employment period. If his employment is terminated
due to  disability,  or in the event of death,  he or his  estate  will  receive
continued payments of the base salary for the remainder of the scheduled term of
the  Agreement  less any  disability  benefits.  If Mr.  Markin's  employment is
terminated for any other reason, he will be entitled to receive his accrued, but
unpaid,  base  salary  and  other  payments  and  vacation  through  the date of
termination.

     We issued a signing  bonus of up 17,000  options to purchase  shares of our
common stock at a discount.

     In  February,  2003,  our board of  directors  approved  amendments  to Mr.
Markin's employment  agreement that extended his employment through December 31,
2007. In addition, the board of directors approved a plan under which Mr. Markin
could elect to convert past deferred compensation into shares of common stock at
a price equal to fair market value less 10%. The Company also granted Mr. Markin
additional options to acquire 150,000 shares for a three year period.

     On March 12,  2004,  we entered  into an amended  and  restated  employment
agreement with Mr. Markin.  The amended and restated  agreement restated certain
provisions of Mr. Markin's  employment  agreement and removed Mr. Markin's right
to convert deferred  compensation  into shares of common stock at a 10% discount
to market  price.  Under  amended and restated  employment  agreement we will be
required  to  purchase a total of  538,818  shares  and  convertible  securities
exerciseable to acquire an addition 457,692 shares a owned by him and/or certain
related parties,  unless such shares are acquired by debentureholders which hold
a right of first refusal related to such securities,  for a purchase price equal
to 13%  of the  value  of  our  company  ("Purchase  Price")  in  the  event  of
termination of his employment (i) by Neptune  Society,  (ii) by our CEO for good
reason,  (iii) on a change of control of our  company,  or (iv) on the expiry of
the  employment  agreement.  The change of control  provisions do not apply to a
change of control  involving  certain existing  shareholders of our company that
occurs on or before March 10, 2006,



                                       33
<PAGE>

unless such entity  would not  continue to  beneficially  own 50% or more of the
common  stock and voting  interest  after  completion  of the  acquisition.  The
Purchase  Price shall be  determined by an  independent  valuation in accordance
with the provisions of the  agreement.  We entered into the agreement to resolve
any future  disputes  related to our CEO's  right to acquire  additional  common
stock of our  company  under his right to  convert  deferred  compensation  into
shares of common stock at a 10% discount to market price.

Doug Irving Employment Agreement

     On July 1, 2002, we entered into an agreement for Doug Irving to act as our
Chief Operating Officer.  Mr. Irving's annual base compensation was $144,000 per
annum,  and a bonus of no less  than 25% of base  compensation  upon  successful
performance  as defined by us. We were further  obligated to grant stock options
to purchase  50,000  shares of our common  stock at $2.00 per share,  vesting on
June 30, 2003. The term of the agreement was until June 30, 2005.

     On March 1, 2003, we entered into a new  agreement  with Doug Irving to act
as our Chief  Operating  Officer.  Mr.  Irving's  annual  base  compensation  is
$146,000 per annum, subject to annual adjustment, and an annual bonus of no less
than 25% of base compensation,  Mr. Irving will have a car and expense allowance
and standard  employee  benefits.  We also agreed to issue 30,000  shares of our
common  stock as a signing  bonus and to grant Mr.  Irving  options  to  acquire
50,000 shares of common stock at $0.70 per share, subject to adjustment, vesting
March 1, 2004.  Mr.  Irving agreed to defer $2,000 per month of his salary until
August 31, 2003,  at which time the deferred  salary shall be paid in cash.  The
term of the agreement  extends to January 31, 2006,  unless  terminated prior to
that date. We may terminate the agreement upon written notice and the payment of
accrued salaries due under the agreement and, provided that there has not been a
breach  of the  agreement,  a lump sum  payment  of six  months  salary  in full
satisfaction  of all claims Mr. Irving may have under the agreement.  Mr. Irving
may terminate  the agreement  upon four weeks  written  notice.  This  agreement
supersedes the employment agreement dated July 1, 2002.

Barry Maynes Employment Agreement

     On March 1, 2003, we entered into an agreement  with Barry Maynes to act as
our Chief Information  Officer.  Mr. Maynes' annual base compensation is $98,000
per annum for the first  twelve  months,  $103,000  during the  second  year and
$108,000  during the third year.  We agreed to issue Mr. Maynes 15,000 shares of
our common stock as a signing  bonus.  We also agreed to grant options under our
stock option plan to purchase  20,000 shares of common stock at $0.70 per share,
subject to adjustment,  vesting on March 1, 2004. Mr. Maynes will be entitled to
a yearly  bonus of no less than 15% of his  annual  salary,  payable  in cash or
shares of our common stock, as determined by the board of directors. The term of
the  agreement  extends to February 28, 2006,  unless  terminated  prior to that
date. We may terminate the agreement  upon written notice and the payment of the
accrued salaries due under the agreement and, provided that there has not been a
breach  of the  agreement,  a lump sum  payment  of four  months  salary in full
satisfaction  of all claims Mr. Maynes may have under the agreement.  Mr. Maynes
may terminate the agreement upon four weeks written notice.

Gary Harris Employment Agreement

     On February 1, 2003,  we entered into an agreement  with Gary Harris to act
as our National Sales Manager.  Mr. Harris' annual base  compensation is $75,000
per annum plus an override of $10 on each  pre-need  contract  sold.  Mr. Harris
will have a car and expense allowance and standard employee benefits.  We agreed
to issue 30,000 shares of our common stock as a signing bonus. We also agreed to
grant  options  under our stock option plan to purchase  30,000 shares of common
stock at $0.70 per share,  subject to  adjustment,  vesting on February 1, 2004.
Mr.  Harris will be entitled to a yearly bonus of no less than 10% of his annual
salary,  net of reimbursement  and car expenses,  , payable in cash or shares of
our common stock, as determined by the board of directors.  Mr. Harris agreed to
defer $2,000 per month of his salary  under  August 31, 2003,  at which time the
deferred  salary  shall be paid in cash.  The term of the  agreement  extends to
January 31, 2006,  unless  terminated  prior to that date.  We may terminate the
agreement upon written notice and the payment of the accrued  salaries due under
the agreement and, provided that there has not been a breach of the agreement, a
lump sum  payment of six months  salary in full  satisfaction  of all claims Mr.
Harris may have under the agreement. Mr. Harris may terminate the agreement upon
four weeks written notice.



                                       34
<PAGE>

Matthew Markin Employment Agreement

     On March 1, 2003, we entered into an agreement  with Matthew  Markin to act
as our Vice President of Operations  and Real Estate.  Mr. Markin is the brother
of  Marco  Markin,  our  Chief  Executive  Officer.  Mr.  Markin's  annual  base
compensation is $116,000 per annum for the first twelve months,  $124,000 during
the second year and $132,000  during the third year.  Mr. Markin will have a car
and expense allowance and standard employee benefits.  We agreed to issue 20,000
shares of our common stock as a signing  bonus.  We also agreed to grant options
under our stock option plan to purchase  30,000  shares of common stock at $0.70
per share,  subject to adjustment,  vesting on March 1, 2004. Mr. Markin will be
entitled to a yearly bonus of no less than 25% of his annual salary,  payable in
cash or shares of our common stock, as determined by the board of directors. Mr.
Markin  agreed to defer $2,666 per month of his salary until August 31, 2003, at
which time the deferred salary shall be paid in cash . The term of the agreement
extends to February  28,  2006,  unless  terminated  prior to that date.  We may
terminate  the  agreement  upon  written  notice and the  payment of the accrued
salaries due under the agreement and,  provided that there has not been a breach
of the agreement,  a lump sum payment of six months salary in full  satisfaction
of all claims Mr. Markin may have under the agreement.  Mr. Markin may terminate
the agreement upon four weeks written notice.

     Mr. Matthew Markin resigned effective December 1, 2003.

Matthew Hoogendoorn Employment Agreement

     On February 1, 2003, we entered into an agreement with Matthew  Hoogendoorn
to act as our Senior Vice President of Finance.  Mr.  Hoogendoorn's  annual base
compensation is $146,000 per annum. Mr.  Hoogendoorn will have a car and expense
allowance and standard  employee  benefits.  We agreed to issue 30,000 shares of
our common stock as a signing  bonus.  We also agreed to grant options under our
stock option plan to purchase  50,000 shares of common stock at $0.70 per share,
subject to  adjustment,  vesting on February 1, 2004.  Mr.  Hoogendoorn  will be
entitled to a yearly bonus of no less than 25% of his annual  salary  payable in
cash or shares of our common stock, as determined by the board of directors. The
term of the agreement  extends to January 31, 2006,  unless  terminated prior to
that date. We may terminate the agreement upon written notice and, provided that
there has not been a breach of the  agreement,  a lump sum payment of six months
salary in full  satisfaction  of all claims Mr.  Hoogendoorn  may have under the
agreement.  Mr.  Hoogendoorn may terminate the agreement upon four weeks written
notice.

David Schroeder Consulting Amendment

     In October 2002, we agreed with Mr.  Schroeder to terminate his  employment
agreement.  We were released from all  obligations  to pay  previously  deferred
compensation  under his  employment  agreement and all stock options  previously
granted to Mr. Schroeder were cancelled.  We continued to retain Mr. Schroeder's
services,    including    continuing    development   of   suitable   operating,
administrative,  industry compliance  reporting systems and new market research,
under  the  terms of a  consultant  agreement  with Mr.  Schroeder  and  Western
Management Services,  LLC dated October 1, 2002. We pay Mr. Schroeder consulting
fees of  $7,100  per  month  under  the  consulting  agreement.  The  consulting
arrangement will expire January 31, 2004.

Jerry Norman Employment Agreement

     On February 1, 2004, we entered into an agreement  with Jerry Norman to act
as  our  President  and  Chief  Marketing  Officer.  Mr.  Norman's  annual  base
compensation is $200,000 per annum. Mr. Norman will receive a housing  allowance
of $2,000 per month and standard  employee  benefits.  We agreed to issue 40,000
shares of our common stock as a signing  bonus.  We also agreed to grant options
under our stock option plan to purchase  150,000 shares of common stock at $0.70
per share vesting at the rate of 50,000 shares on each of the first,  second and
third  anniversary  of the  agreement.  Mr.  Norman will be entitled to a yearly
bonus of 30% of his  annual  salary,  such  bonus  based on the  achievement  of
specific  defined  goals,  and payable in cash or shares of our common  stock as
determined  by the board of  directors.  The term of the  agreement  extends  to
January 31, 2007,  unless  terminated  prior to that date.  We may terminate the
agreement upon written notice and,  provided that there has not been a breach of
the  agreement,  a lump sum payment of six,  seven or eight months salary in the
first, second or third year of the agreement respectively,  in full satisfaction
of all claims Mr. Norman may have under the agreement.  Mr. Norman may terminate
the agreement upon four weeks notice.



                                       35
<PAGE>

Bagley Settlement Agreement

     On April 18, 2003, we entered into a separation  agreement with Mr. Bagley,
under which his employment  agreement was canceled.  Mr. Bagley  resigned as our
Chief Financial Officer and as a director. We agreed to pay Mr. Bagley severance
pay in the amount of $600,000, payable in equal monthly installments over a five
year period  beginning  on April 18,  2003.  We also agreed to pay Mr.  Bagley a
final  conditional  payment  of  $100,000  if we have net free  cash of at least
$1,000,000 after all of our normal operating  expenses the final year. We agreed
to pay Mr. Bagley for certain  insurance  costs until Mr. Bagley becomes covered
under another health insurance  program or our obligations  under the separation
agreement are satisfied.  The separation  agreement  contains  provision for the
acceleration  of payments in the event of certain  specified  events,  such as a
change of control,  sale of substantially all of our assets, sale of a location,
or payment of dividends to stockholders.

Report on Repricing of Options/SARs

     We did not reprice any options or SARs outstanding during the most recently
completed fiscal year ended December 31, 2003.

Additional  Information  with Respect to Compensation  Committee  Interlocks and
Insider Participation in Compensation Decisions

     The  Compensation   Committee  consists  of  three  members:  Marco  Markin
(director),   Bryan  G.  Symington  Smith  (director)  and  Kathryn  Witter,  an
independent human resource consultant. The Compensation Committee is responsible
for the establishment and revision of our compensation policy, the review of the
compensation  (including  stock  options)  of  our  senior  management  and  its
subsidiaries,  and to make  recommendations to the Board for adjustments to such
compensation.  The Committee is also responsible for the  administration  of our
stock option plan and its benefit plans.

Board Compensation Committee Report on Executive Compensation

     The primary objectives of the Company's executive  compensation program are
to enable the Company to attract,  motivate and retain  outstanding  individuals
and to align their success with that of the Company's  shareholders  through the
achievement of strategic corporate objectives and creation of shareholder value.
The level of  compensation  paid to an individual  is based on the  individual's
overall  experience,  responsibility  and performance.  The Company's  executive
compensation  program consists of a base salary,  performance  bonuses and stock
options.  The Company  furnishes  other  benefits to certain of its officers and
other employees.

     The  Compensation   Committee  determined  the  compensation  paid  to  its
executive officers based on several factors,  including the compensation paid to
executive  officers of  similarly  situated  companies,  our revenue  growth and
expansion  growth over the past  twelve  months,  our  financial  position,  our
success in raising  financing to meet our capital  obligations and our financial
performance.  Mr.  Markin  did  not  participate  in  the  determination  of his
compensation.

Incentive Stock Option Plans

     On October 8, 1999, our  shareholders  approved our 1999 Stock Option Plan,
as approved by the Board of Directors on June 1, 1999.  The Option Plan provides
for the grant of incentive and  non-qualified  options to purchase up to 225,000
shares of Neptune  Society  common stock to our employees and such other persons
as the Plan  Administrator  (which  currently  is the  Board of  Directors)  may
select.  The Plan is intended to help attract and retain key  employees and such
other persons as the Plan  Administrator  may select and to give such persons an
equity incentive to achieve the objectives of our shareholders.

     Effective  April 12, 2002,  our Board  unanimously  approved our 2002 Stock
Plan,  which  provides for the grant of incentive and  non-qualified  options to
purchase  up to 750,000  shares of our common  stock to our  employees  and such
other  persons  as the  Plan  Administrator  (which  currently  is the  Board of
Directors) may select.  The 2002 Plan is intended to help attract and retain key
employees  and such other  persons as the Plan  Administrator  may select and to
give  such  persons  an  equity  incentive  to  achieve  the  objectives  of our
shareholders. Our shareholders ratified the 2002 Plan on May 22, 2002.



                                       36
<PAGE>

     Incentive  stock options may be granted to any individual  who, at the time
the  option is  granted,  is an  employee  of  Neptune  Society  or any  related
corporation. Non-qualified stock options may be granted to employees and to such
other persons as the Plan Administrator may select. The Plan Administrator fixes
the exercise price for options in the exercise of its sole  discretion,  subject
to certain minimum  exercise prices in the case of Incentive Stock Options.  The
exercise price may be paid in cash,  certified check or cashier's check. Options
will  not be  exercisable  until  they  vest  according  to a  vesting  schedule
specified by the Plan Administrator at the time of grant of the option.

     Options  are  non-transferable  except by will or the laws of  descent  and
distribution.  Except as otherwise  specified by the Plan  Administrator  or the
employee's stock option agreement, vested but unexercised options terminate upon
the earlier of:

     o    the expiration of the option term specified by the Plan  Administrator
          at the date of  grant  (generally  ten  years;  or,  with  respect  to
          Incentive   Stock  options   granted  to   greater-than   ten  percent
          shareholders, a maximum of five years); or

     o    the  expiration  of ninety  (90)  days from the date of an  employee's
          termination  of  employment   with  Neptune  Society  or  any  related
          corporation for any reason whatsoever.

     Unless accelerated in accordance with the Plan,  unvested options terminate
immediately  upon termination of employment of the optioned by us for any reason
whatsoever, including death or disability.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
          AND RELATED STOCKHOLDER MATTERS

     The following table sets forth certain information regarding the beneficial
ownership of shares of our common stock as of December 31, 2003 by:

     o    each person who is known by us to beneficially own more than 5% of our
          issued and outstanding shares of common stock;

     o    our chief executive officer and our five executive officers during our
          last fiscal year,  individually  named in the  executive  compensation
          table below;

     o    our directors; and

     o    all of our executive officers and directors as a group.

<TABLE>
-------------------------------------------------------------------------------------------------------------
Name of Shareholder             Address                                Number of         Percent of Class (1)
                                                                       Common
                                                                       Shares Owned
-------------------------------------------------------------------------------------------------------------
<S>                             <C>                                     <C>                    <C>
5% or greater shareholders

CapEx, L.P.                     518 17th Street, Suite 1700             1,638,910(2)           24.58%(2)
                                Denver, CO 80202
-------------------------------------------------------------------------------------------------------------
Bow River Entities              1490 Lafayette St., Suite 400             905,282(3)           14.06%(3)
                                Denver, CO  80218
-------------------------------------------------------------------------------------------------------------
Greenleaf Investors I, L.L.C.   c/o The Apogee Companies                  311,448(4)            5.39%(4)
                                4444 Lakeside Drive, Suite 340,
                                Burbank, California 91505
-------------------------------------------------------------------------------------------------------------
The Apogee Companies, Inc.      c/o The Apogee Companies                  174,302(4)            3.02%(4)
                                4444  Lakeside   Drive,   Suite  340,
                                Burbank, California 91505
-------------------------------------------------------------------------------------------------------------
</TABLE>



                                       37
<PAGE>

<TABLE>
-------------------------------------------------------------------------------------------------------------
Name of Shareholder             Address                                Number of         Percent of Class (1)
                                                                       Common
                                                                       Shares Owned
-------------------------------------------------------------------------------------------------------------
<S>                             <C>                                     <C>                    <C>
CCD Consulting Commerce         Glockengasse 4, Postfach 1220              1,091,203(5)        16.52%(5)
Distribution AG                 CH-4001 Basel, Switzerland
-------------------------------------------------------------------------------------------------------------
570421 BC, Ltd.                 Sherman Oaks, CA 91423                       615,364(6)(7)     10.12%(6)(7)
-------------------------------------------------------------------------------------------------------------
Directors and Named Executive Officers
-------------------------------------------------------------------------------------------------------------
Marco P. Markin                 4312 Woodman Avenue, 3rd Floor             1,171,035(7)(8)     17.18%
                                Sherman Oaks, CA 91423
-------------------------------------------------------------------------------------------------------------
Matthew Hoogendoorn             4312 Woodman Avenue, 3rd Floor                80,000(9)         1.37%
                                Sherman Oaks, CA 91423
-------------------------------------------------------------------------------------------------------------
Douglas J. Irving               4312 Woodman Avenue, 3rd Floor               122,385(10)        2.10%
                                Sherman Oaks, CA 91423
-------------------------------------------------------------------------------------------------------------
Gary Harris                     4312 Woodman Avenue, 3rd Floor                71,250(11)        1.23%
                                Sherman Oaks, CA 91423
-------------------------------------------------------------------------------------------------------------
Barry Maynes                    4312 Woodman Avenue, 3rd Floor                41,250(12)            *
                                Sherman Oaks, CA 91423
-------------------------------------------------------------------------------------------------------------
Matthew Markin                  4312 Woodman Avenue, 3rd Floor                37,538(13)            *
                                Sherman Oaks, CA 91423
-------------------------------------------------------------------------------------------------------------
Bryan G. Symington Smith(14)    396 King Street                               60,000            1.04%
                                Terra Cotta, Ontario L0P 1N0
-------------------------------------------------------------------------------------------------------------
Brent Lokash                    4312 Woodman Avenue, 3rd Floor                   nil                *
                                Sherman Oaks, CA 91423
-------------------------------------------------------------------------------------------------------------
Officers and Directors                                                     1,583,458
 as a group
(includes 7 persons)

-------------------------------------------------------------------------------------------------------------
*Less than one percent (1%).
-------------------------------------------------------------------------------------------------------------
(1)  Based on 5,841,593 shares issued and outstanding as of December 31, 2003.

(2)  RBP, LLC,  CapEx,  L.P.'s general  partner,  has ultimate  voting power and
     control over these shares.  Includes  603,797 shares of common stock issued
     and  outstanding  on December  1, 2003;  1,030,000  shares of common  stock
     acquirable  upon the exercise of warrants at $3.00 per share until July 31,
     2007; 14,286 shares of common stock acquirable upon exercise of warrants at
     $0.72 per share  until  February  19,  2004 and $0.79 per share  thereafter
     until February 19, 2005; and 35,827 shares of common stock  acquirable upon
     conversion of  convertible  debentures in the principal  amount of $42,992,
     due and converting on March 31, 2004.

(3)  Bow River  Capital Fund, LP and Bow River Capital Fund II, LP (together the
     "Bow River  Entities")  acquired  all of the rights  title and  interest in
     these  securities  from  D.H.  Blair  Investment  Banking  Corp.  effective
     February 6, 2004.  Bernard C. Darre has  ultimate  voting power and control
     over these  shares.  Consists of 238,615  shares of common stock issued and
     outstanding  on  December  1,  2003 and  666,667  shares  of  common  stock
     acquirable  upon the exercise of warrants at $3.00 per share until July 31,
     2007.

(4)  The Apogee Management Company,  Inc. is the manager of Green Leaf Investors
     I, LLC and has  ultimate  voting  power  and  control  over  these  shares.
     Includes  303,948 shares of common stock issued and outstanding on December
     1, 2003; and 7,500 shares of common stock  acquirable  upon the exercise of
     warrants at $3.00 per share until December 31, 2005.
</TABLE>



                                       38
<PAGE>

(5)  Includes of 257,870  shares of common  stock and  833,333  shares of common
     stock  acquirable  upon  conversion  of  convertible  debentures  which are
     immediately convertible.

(6)  Karla  Markin,  the spouse of Marco Markin,  has ultimate  voting power and
     control  over these  shares.  Includes  307,682  shares of common stock and
     307,682  shares  acquirable  upon  exercise  of warrants at $0.72 per share
     until February 19, 2004 and $0.79 per share  thereafter  until February 19,
     2005.

(7)  Marco Markin is deemed to beneficially own the shares beneficially owned by
     Karla  Markin,  and Karla Markin is deemed to  beneficially  own the shares
     beneficially  owned by Marco  Markin.  Karla  Markin,  the  spouse of Marco
     Markin,  has ultimate voting power and control over these shares.  Includes
     307,682  shares of common  stock and 307,682  acquirable  upon  exercise of
     warrants  at $0.72 per share  until  February  19, 2004 and $0.79 per share
     until February 19, 2005.

(8)  Marco  Markin is our  Chief  Executive  Officer  and a  director.  Includes
     123,375 shares of common stock issued and  outstanding on December 1, 2003;
     150,000 shares of common stock  acquirable  upon the exercise of options at
     $0.65 per share until  February  28, 2006;  653,410  shares of common stock
     acquirable  upon the  exercise  of options at $4.40 per share to be granted
     annually at the rate of 130,682  shares per year for the years 2001 through
     2005 and  expiring  December  31,  2005;  28,750  shares  of  common  stock
     acquirable  upon the  exercise  of options  at $10 per share  until June 5,
     2004;  and  215,500  shares   issuable  at  the  order  of  Mr.  Markin  in
     consideration  of deferred  compensation  through  December 31,  2002.  Mr.
     Markin's spouse,  Karla Markin,  has ultimate voting power and control over
     K.M.  Lifestyles Inc. and 570421 BC Ltd., which  beneficially  owns 723,114
     shares of common stock of The Neptune  Society,  Inc.  Collectively,  Marco
     Markin and Karla Markin  beneficallly  own a total of  1,894,169  shares of
     common  stock,  constituting  26.57% of our issued and  outstanding  common
     stock as of December 1, 2003.

(9)  Matthew Hoogendoorn is our Chief Financial Officer and director.  Comprises
     30,000  shares of common stock issued and  outstanding  on December 1, 2003
     and 50,000 shares of common stock  acquirable  upon the exercise of options
     at $0.70 per share until February 28, 2006.

(10) Douglas Irving is our Chief  Operating  Officer.  Includes 72,385 shares of
     common stock issued and  outstanding on December 1, 2003, and 50,000 shares
     of common stock  acquirable upon the exercise of options at $0.70 per share
     until February 28, 2008.

(11) Gary I. Harris is our National  Sales  Manager.  Includes  30,000 shares of
     common stock issued and  outstanding  at December 1, 2003,  7,500 shares of
     common stock  acquirable upon exercise of options at $10.00 per share until
     June 5, 2004;  3,750 shares of common stock acquirable upon the exercise of
     options  at $48.48 per share  until  March 2,  2003,  and 30,000  shares of
     common  stock  acquirable  upon the  exercise of options at $0.70 per share
     until February 28, 2006.

(12) Barry Maynes is our Chief  Technology  Officer.  Includes  21,250 shares of
     common stock and 20,000 shares of common stock  acquirable upon exercise of
     options at $0.70 per share until March 1, 2006.

(13) Matthew  Markin is the brother of Marco Markin.  Matthew Markin is our Vice
     President  Operations and Real Estate.  Stock options granted to Mr. Markin
     prior to his  resignation  will not vest.  Mr.  Markin  resigned  effective
     December 1, 2003.

(14) Bryan G. Symington Smith is a director of The Neptune Society, Inc.


     We have no  knowledge  of any  arrangements,  including  any  pledge by any
person of  securities  of the Neptune  Society,  the operation of which may at a
subsequent date result in a change in our control.

     We are not, to the best of our knowledge,  directly or indirectly  owned or
controlled by another corporation or foreign government.


Equity Compensation Plan Information

     The  following  table  sets  forth   information   related  to  our  equity
compensation plans as of December 31, 2003.



                                       39
<PAGE>

<TABLE>
--------------------------------------------------------------------------------------------------------------
      Plan Category        Number of Securities     Weighted average        Number of securities remaining
                           to be issued upon        exercise price of       available for future issuance under
                           exercise of              outstanding options,    equity compensation plans
                           outstanding options,     warrants and rights     (excluding securities reflected in
                           warrants and rights                              column (a))
                           (a)                      (b)                     (c)
--------------------------------------------------------------------------------------------------------------
<S>                              <C>                      <C>                           <C>
Equity Compensation              75,625                   $10.00                        899,375
Plans approved by
security holders
--------------------------------------------------------------------------------------------------------------
Equity Compensation            692,046                    $ 2.78                        261,364
Plans not approved by
Security Holders
--------------------------------------------------------------------------------------------------------------
Total                          767,671                    $ 3.50                      1,160,739
--------------------------------------------------------------------------------------------------------------
(1)  Stock  Options  approving the issuance by our  shareholders  under our 1999
     stock option plan and 2002 stock option plan.

(2)  Stock Options issued under employment agreements. See "Employment Contracts
     and Termination of Employment and Change-in-Control Arrangements."
</TABLE>



ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Except for the transactions  described below, none of our directors,  named
executive officers or principal shareholders,  nor any associate or affiliate of
the foregoing have any interest, direct or indirect, in any transaction,  during
the year ended  December  31,  2001 and  through  December  1,  2003,  or in any
proposed transaction which has materially affected or will materially affect us.

CapEx L.P. and Bow River Entities.
----------------------------------

     Effective  December  31,  2001,  we  amended  the terms of our  convertible
debentures  dated  December  24, 1999,  due  February  24, 2005,  in the initial
principal  amounts of  $3,000,000  issued to CapEx,  L.P.,  a  Delaware  limited
partnership, and $2,000,000 issued to D.H. Blair Investment Banking Corp., a New
York  corporation  and warrants  issued to CapEx  exercisable to purchase 30,000
shares of common stock and warrants issued to D.H. Blair exercisable to purchase
20,000  shares of common stock.  The  convertible  debentures  contained a "full
ratchet"  anti-dilution  provision  that  reset  the  conversion  price  of  the
convertible  debenture in the event we issued equity securities at a price lower
than  the  effective  conversion  price  of  the  convertible   debenture.   The
convertible debentures also contained certain debt coverage ratios (requiring us
to maintain  certain levels of cash flow in excess of debt  obligations),  which
were in material  default and  constituted  events of default under the terms of
the  convertible  debentures.  We determined that it was in our best interest to
amend the  convertible  debentures  to delete the "full  ratchet"  anti-dilution
provision to provide us with  flexibility  in future  equity  financings  and to
adjust the debt coverage ratios to achievable  levels. We also granted CapEx and
D.H.  Blair  preemptive  rights to participate  in future  offerings.  We issued
101,250 shares to Capex and 67,500 shares to D.H. Blair as restructuring fees in
connection with this amendment.

     In April, 2002, we issued 64,449 shares of common stock to CapEx and 42,992
shares of common stock to D.H. Blair at $1.08 per share in connection with their
exercise of preemptive rights in connection with our private placement of common
stock.  In addition,  we issued 13.75%  convertible  debentures in the principal
amount of $42,992 to CapEx and $28,661 to D.H.  Blair in  connection  with their
exercise  of  preemptive  rights in  connection  ith our  private  placement  of
convertible  debentures.  The convertible debentures are convertible into common
stock at $1.20 per share.  We granted  registration  rights with  respect to the
shares issued to CapEx and D.H. Blair and the shares issuable upon conversion of
the convertible debenture.



                                       40
<PAGE>

     In February 2003, we issued a total of 23,810 units to CapEx and D.H. Blair
at $0.65 per unit,  each unit  consisting  of one share of common  stock and one
warrant  exercisable to acquire one  additional  common share at $0.72 per share
thereafter  until February 19, 2004 and $0.79 per share until February 19, 2005.
The units were issued  pursuant to the exercise of  preemptive  rights,  and the
consideration  for the units was paid by canceling  deferred interest payable to
the holders of the preemptive rights in the amount of $15,476.

     By an agreement dated July 31, 2003 with Capex., we borrowed $1,500,000 for
the  purposes of making the final  payment of $1.8 million in  acquisition  debt
related to our 1999 purchase of our pre-need  cremation  service.  In connection
with the debt financing,  we also restructured our obligations under certain 13%
debentures  in the  aggregate  principal  amount of $5 million held by Capex and
D.H. Blair. This restructuring  amended the previous fixed charge coverage ratio
obligation  and cured possible  conditions of default under the 13%  debentures.
The restructured debentures,  in the aggregate principal amount of $7.4 million,
are  repayable  over the  next  four  years;  we hold the  right to  prepay  the
debentures at any time without penalty.  In connection with this  restructuring,
we issued  400,000  shares of common stock to Capex and 200,000 shares of common
stock to D.H.  Blair as  restructuring  fees.  We also issued  warrants  for the
purchase of a total of 1,666,667 shares  (1,000,000  shares to CapEx and 666,667
shares to D.H. Blair up to July 31, 2008 at a price of $3.00 per share, with the
number of shares subject to increase in connection with future equity  issuances
by us. We also extended the expiry date of 50,000 warrants  previously issued to
CapEx (30,000) and D.H. Blair (20,000) to July 31, 2008.

     Effective on February 6, 2004,  Bow River  Capital  Fund,  LP and Bow River
Capital Fund II, LP  (together  the "Bow River  Entities")  acquired all of D.H.
Blair's  right title and  interest  in (i) that  certain  Amended  and  Restated
Debenture  dated July 31, 2003 in the original  principal  amount of $2,352,896;
(ii) that certain Warrant dated August 1, 2003 exercisable to acquire a total of
666,667  shares of our Common Stock at an exercise price not to exceed $3.00 per
share;  (iii) 238,615 shares of our Common Stock and (iv) D.H. Blair's rights in
the Debenture and Warrant Purchase  Agreement,  as amended.  We consented to the
assignment of such securities.

Green Leaf Investors I, LLC and The Apogee Management Company, Inc.
-------------------------------------------------------------------

     In August 2001, Wilhelm Mortuary,  Inc., our subsidiary,  obtained a bridge
loan in the  principal  amount of $1,575,000  from Green Leaf  Investors I, LLC,
evidenced  by a promissory  note due January 31, 2002,  and secured by a deed of
trust on our  Portland  real  estate  and a security  interest  in assets of our
Portland business.  Green Leaf is a California limited liability company managed
by The Apogee  Management  Company,  Inc. Tom Camp, a former director of Neptune
Society,  who resigned on February  28, 2002 is an officer of Apogee.  Under the
terms of the loan  agreement,  we issued  Green  Leaf a warrant  exercisable  to
acquire  7,500  shares  of common  stock at  $24.00  per  share,  which  expired
unexercised after one year and we issued Green Leaf 3,948 shares of common stock
as a loan fee. We granted piggy-back registration rights on any of our shares of
common stock held by Green Leaf. . We also granted  Greenleaf  preemptive rights
to participate in future offerings

     During the fourth quarter 2001 as part of our overall business  strategy to
focus on our pre-need marketing and sales operations,  we determined that it was
in our best interest to restructure our Oregon  operations to dispose of certain
physical  assets  related to our Portland  business and our Portland real estate
for the purposes of reducing our  liabilities.  To facilitate the disposition of
our Portland  operations,  we restructured  the obligation  under the Green Leaf
promissory  note to permit the  assumption  of the note by the  purchaser and to
extend the due date to July 31, 2002. In consideration for the restructuring, we
issued  Green  Leaf a loan  fee of  75,000  shares  of  our  common  stock  with
piggy-back  registration and preemptive rights and paid $75,000 of the principal
due under the note payable by issuing Green Leaf a convertible  debenture in the
principal  amount of $75,000,  which was  converted  into 225,000  shares of our
common stock on July 31, 2002.

     On  August  25,  2003,  we  entered  a letter  of  intent  with The  Apogee
Companies,  Inc.,  a  private  company  affiliated  with The  Apogee  Management
Company, Inc. to sell substantially all of our operating assets. The transaction
was subject to certain conditions which were not satisfied or waived, and we and
Apogee agreed to terminate the letter of intent on October 14, 2003.



                                       41
<PAGE>

Community Memorial Centers Convertible Debenture Restructuring
--------------------------------------------------------------

     In connection with our sale of the Portland business,  we amended the terms
of a $1 million  convertible  debenture  issued to Community  Memorial  Centers,
L.L.C., a limited liability company.  David Schroeder,  our former President and
Director  (November 2000 through October 1, 2002),  and Michael Ashe, our Former
Vice President of Operations,  are principals of the Prestige Group, a member of
Community Memorial Centers, L.L.C.

     Effective  December  31,  2001,  we sold  substantially  all of the  assets
related  to the  Portland  business  and the  Portland  real  estate to  Western
Management Services,  L.L.C., an Oregon limited liability company managed by Mr.
Ashe under the terms of an asset  purchase  agreement.  In  connection  with the
transaction, Mr. Ashe's employment agreement with Neptune Society was terminated
in its entirety and Mr. Ashe  entered into a consulting  agreement  with Neptune
Management to provide consulting services to us.

CCD Consulting Commerce Distribution AG
---------------------------------------

     On April 1, 2002,  we completed a private  placement of 13.75%  convertible
debentures in the principal  amount of  $1,000,000  to CCD  Consulting  Commerce
Distribution AG in  consideration  of $200,000 in cash and the satisfaction of a
promissory note in the principal amount of $800,000. We paid a commitment fee of
83,333 shares of common stock for CCD's agreement to convert the promissory note
into convertible debentures.  The convertible debentures are due and mandatorily
convertible  on March 31,  2004 into  shares  of our  common  stock at $1.20 per
share. We granted CCD registration rights related to our issuance of shares upon
conversion of the convertible debenture.

570421BC, Ltd.
--------------

     In February,  2003 we issued  307,962  units,  each unit  consisting of one
share of common stock and one warrant to acquire an  additional  share of common
stock to 570421  BC,  Ltd.,  a private  company  controlled  by the spouse of an
executive officer and director. The units were issued at $0.65 per unit, and the
proceeds of $200,000 we received  were used for working  capital  purposes.  The
warrants  are  exercisable  at the price of $0.72 per share by February 19, 2004
and thereafter until February 19, 2005 at the price of $0.79 per share.

     Transactions with Named Executive Officers and Directors

     In June  2002 we issued  6,250  shares to Barry  Maynes  in  settlement  of
deferred compensation.

     In September,  2002 we issued 30,000  shares to Bryan  Symington  Smith and
10,000  shares to  Anthony  George,  Directors  of the  Company,  in  payment of
Directors fees.

     In February  2003,  we issued  81,000  shares of common  stock at $0.65 per
share in settlement of deferred  compensation  in the amount of $52,650 to three
senior executives as follows: Gary Harris: 23,077 shares, Douglas Irving: 40,385
shares, and Matthew Markin:  17,538 shares. We registered these shares of common
stock in the  registration  statement filed with the SEC to register such shares
for resale.

     On April 25, 2003,  we issued  107,750  shares of common stock at $0.65 per
share in settlement of deferred  compensation  in the amount of $70,037 to Marco
Markin, our Chief Executive Officer.  We registered these shares of common stock
in the  registration  statement  filed with the SEC to register  such shares for
resale.

     On April 25, 2003, we issued a total of 55,000  shares of common stock:  to
Kathryn Witter, a member of the Compensation  committee for her services (25,000
shares) and Bryan Symington Smith, a director for directors fees (30,000 shares.
as. We  registered  these shares of common stock in the  registration  statement
filed with the SEC to register such shares for resale.

     On April 30, 2003,  we issued a total of 125,000  shares of common stock to
five  officers  of the  Company  as  signing  bonus  under  the  terms  of their
employment or consulting  agreements with the Company.  These shares were issued
to  Matthew  Markin  (20,000  shares),  Doug  Irving  (30,000  shares),   Mathew
Hoogendoorn  (30,000  shares),  Barry  Maines  (15,000  shares)  and Gary Harris
(30,000 shares).  We registered these shares of common stock in the registration
statement filed with the SEC to register such shares for resale.



                                       42
<PAGE>

     On May 29,  2003,  we issued  107,751  shares of common  stock at $0.65 per
share to K.M.  Lifestyle  Inc. in  settlement  of deferred  compensation  in the
amount of $70,037 due to Marco Markin, our Chief Executive Officer. Karla Markin
is the spouse of Marco Markin,  our Chief  Executive  Officer,  and has ultimate
voting power and control over K.M. Lifestyles, Inc.

     On June 18,  2003,  we issued  2,118  shares of common  stock at a price of
$0.65 per share in consideration of compensation to Doug Irving, an employee. We
registered these shares of common stock in the registration statement filed with
the SEC to register such shares for resale.

     Subsequent  to December 31,  2003,  we entered into an amended and restated
agreement with our CEO, Marco Markin. See "Executive Compensation,  Marco Markin
Employment Agreement."

     We believe  that the  foregoing  transactions  were  entered  into terms as
favorable as would have been entered into with unrelated third parties.


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

Exhibits

        Exhibit
        Number      Description
        ------      -----------
         3.1(1)     Articles of  Incorporation  of L R Associates,  Inc.,  filed
                    January 4, 1985
         3.2(1)     Articles of Amendment of L R Associates,  Inc. changing name
                    to Lari Corp., filed August 3, 1998
         3.3(1)     Articles of Amendment of Lari Corp. changing name to Neptune
                    Society, filed April 26, 1999
         3.4(1)     Articles of Amendment of The Neptune Society, Inc. filed May
                    9, 2000, effecting a combination of the Corporation's shares
                    of common stock
         3.5(1)     Articles of Amendment of The Neptune Society, Inc. effective
                    as of  March  22,  2002,  related  to a  combination  of the
                    Corporation's shares of common stock
         3.6(6)     Articles of Amendment of The Neptune Society, Inc.
         3.7(1)     Bylaws of Neptune Society (previously filed as Exhibit 3.6)
        10.1(1)     Form of Stock Option Plan
        10.2(1)     Share Purchase  Agreement dated for reference March 26, 1999
                    by and  between  Lari  Acquisition  Company,  Inc.,  Emanuel
                    Weintraub  Inter Vivos  Trust,  Emanuel  Weintraub,  Neptune
                    Management  Corp.,  Heritage  Alternatives,   Inc.,  Neptune
                    Pre-Need Plan, Inc. and Lari Corp.
        10.3(1)     Share Purchase Agreement dated March 31, 1999 by and between
                    Lari  Acquisition  Company,  Inc.,  Lari Corp.  and  Stanley
                    Zicklin
        10.4(1)     Share Purchase Agreement dated March 31, 1999 by and between
                    Lari Acquisition Company, Inc., Lari Corp. and Jill Schulman
        10.5(1)     Agreement   dated   August  1,  1999  by  and  between  Lari
                    Acquisition  Company,  Inc.,  Neptune  Society  and  Stanley
                    Zicklin
        10.6(1)     Agreement   dated   August  1,  1999  by  and  between  Lari
                    Acquisition   Company,   Inc.,  Neptune  Society,   Emmanuel
                    Weintraub and Emmanuel Weintraub Inter Vivos Trust
        10.7(1)     Interest  Purchase  Agreement  dated for reference March 31,
                    1999 by and between  Neptune  Management  Corp.  Lari Corp.,
                    Lari Acquisition  Company,  Inc. and the limited partners of
                    Neptune-Los  Angeles,  Ltd.,  Neptune-Santa  Barbara,  Ltd.,
                    Neptune-Miami,    Ltd.,   Neptune-St.    Petersburg,   Ltd.,
                    Neptune-Ft.   Lauderdale,   Ltd.,   Neptune-Nassau,    Ltd.,
                    Neptune-Yonkers, Ltd.



                                       43
<PAGE>

        Exhibit
        Number      Description
        ------      -----------
        10.8(1)     Interest  Purchase  Agreement  dated for reference March 31,
                    1999 by and between Heritage Alternatives, Inc., Lari Corp.,
                    Lari Acquisition  Company,  Inc. and the limited partners of
                    Heritage Alternatives, L.P.
        10.9(1)     Consulting  Agreement  dated  March 31,  1999 by and between
                    Lari Acquisition Company, Inc. and Emanuel Weintraub
        10.10(1)    Amendment to  Consulting  Agreement  dated August 1, 1999 by
                    and  between  Lari  Acquisition  Company,  Inc.  and Emanuel
                    Weintraub
        10.11(1)    $19,000,000  Promissory  Note dated  March 31,  1999 by Lari
                    Acquisition Company, Inc.
        10.12(1)    Amendment  to  $19,000,000  Promissory  Note dated August 1,
                    1999 by Lari Acquisition  Company,  Inc. in favor of Emanuel
                    Weintraub Inter Vivos Trust
        10.13(1)    $2,000,000  Promissory  Note  dated  March 31,  1999 by Lari
                    Acquisition Company, Inc.
        10.14(1)    Amendment to $2,000,000 Promissory Note dated August 1, 1999
                    by Lari  Acquisition  Company,  Inc.  in  favor  of  Emanuel
                    Weintraub Inter Vivos Trust
        10.15(1)    Pre-Need  Trust  Agreement  dated  October  1,  1993  by and
                    between Neptune Management Corp. and Sunbank/South  Florida,
                    N.A.
        10.16(1)    Asset Purchase Agreement dated March 31, 1992 by and between
                    Heritage  Cremation  Services,  Inc., Joseph Estephan,  Elie
                    Estephan and Emanuel Weintraub
        10.17(1)    Form of Commissioned Contractor Agreement
        10.18(1)    Agency  Agreement  dated for reference  July 22, 1999 by and
                    between  Neptune  Society and  Standard  Securities  Capital
                    Corporation
        10.19(1)    Amendment  to Agency  Agreement  dated August 5, 1999 by and
                    between  Neptune  Society and  Standard  Securities  Capital
                    Corporation
        10.20(1)    Form of Subscription Agreement
        10.21(1)    Form of Registration Rights Agreement
        10.22(1)    Debenture and Warrant Purchase  Agreement dated November 24,
                    1999.
        10.23(1)    Form of Convertible Debenture
        10.24(1)    Asset  Purchase  Agreement  dated  December 31, 1999, by and
                    among  Neptune  Society,  Crematory  Society of  Washington,
                    Inc., and John C. Ayres.
        10.25(1)    Asset Purchase  Agreement dated March 15, 2000, by and among
                    Neptune  Society,  Cremation  Society  of Iowa,  Inc.,  Dave
                    Noftsger, and John Bethel
        10.26(1)    Asset Purchase Agreements and Merger Agreement dated July 5,
                    2000,  by and  among  Neptune  Society,  Heritage  Memorial,
                    Community  Memorial  Centers,  David Schroeder,  and Michael
                    Ashe
        10.27(1)    Agency  Agreement  dated for reference  July 31, 2000 by and
                    between  Neptune  Society and  Standard  Securities  Capital
                    Corporation
        10.28(2)    Employment  Agreement  by and  between the Company and Marco
                    Markin
        10.29(2)    Employment  Agreement  by and  between the Company and David
                    Schroeder
        10.30(2)    Employment  Agreement  by and between the Company and Rodney
                    M. Bagley
        10.31(2)    Memorandum of  Understanding  by and between the Company and
                    Private Investment Company
        10.32(2)    Loan  Agreement   dated  August  8,  2001  with  Green  Leaf
                    Investors I, LLC, a California limited liability company
        10.33(2)    Warrant issued to Green Leaf
        10.34(2)    Guaranty issued to Green Leaf
        10.35(3)    Second Debt Restructuring Agreement
        10.36(3)    Third Debt Restructuring Agreement
        10.37(4)    Asset Purchase Agreement effective as of January 31, 2002 by
                    and between Western Management  Services,  L.L.C., an Oregon
                    limited  liability  company,   Wilhelm  Mortuary,   Inc.,  a
                    corporation  incorporated  under  the  laws of the  State of
                    Oregon,   and  The   Neptune   Society,   Inc.,   a  Florida
                    corporation,   and  Neptune  Society  of  America,  Inc.,  a
                    California corporation .



                                       44
<PAGE>

        Exhibit
        Number      Description
        ------      -----------
        10.38(4)    Service  Agreement  effective  as of March 8,  2002,  by and
                    between  Western  Management  Services,  L.L.C.,  an  Oregon
                    limited liability company, and The Neptune Society,  Inc., a
                    Florida Corporation.
        10.39(4)    Note  Extension  And  Assumption  Agreement  effective as of
                    January  31,  2002,  and  is  made  by and  between  Western
                    Management  Services,  L.L.C.,  an Oregon limited  liability
                    company, Wilhelm Mortuary, Inc., an Oregon corporation,  The
                    Neptune  Society,  Inc.,  a  Florida  corporation,   Neptune
                    Society of America,  Inc.,  a  California  corporation,  and
                    Green Leaf Investors I, LLC, a California  limited liability
                    company.
        10.40(4)    Convertible  Debenture in the  principal  amount of $75,000,
                    due July 31, 2002,  issued to Green Leaf Investors I, LLC, a
                    California limited liability company.
        10.41(4)    Debenture and Warrant  Amendment  Agreement  effective as of
                    December 31, 2001, by and between The Neptune Society, Inc.,
                    a Florida  corporation,  CapEx,  L.P.,  a  Delaware  limited
                    partnership,  and D.H. Blair Investment Banking Corp., a New
                    York corporation.
        10.42(4)    Form of CapEx, L.P. Debenture Amendment
        10.43(4)    Form  of  D.H.  Blair  Investment  Banking  Corp.  Debenture
                    Amendment
        10.44(4)    Form of Warrant Amendment
        10.45(5)    Form of Debenture
        10.46(8)    Employment  Agreement by and between the Company and Douglas
                    Irving
        10.47(8)    Employment  Agreement  by and  between  the Company and Doug
                    Irving
        10.48(8)    Employment  Agreement  by and  between the Company and Barry
                    Maynes
        10.49(8)    Employment  Agreement  by and  between  the Company and Gary
                    Harris
        10.50(8)    Employment  Agreement by and between the Company and Matthew
                    Markin
        10.51(8)    Employment  Agreement by and between the Company and Matthew
                    Hoogendoorn
        10.52(8)    Amendment to Employment Agreement by and between the Company
                    and Marco Markin
        10.53(9)    Debenture Purchase and Amendment  Agreement  effective as of
                    July 31,  2003 by and between  The  Neptune  Society,  Inc.,
                    CapEx, L.P. and D.H. Blair Investment Banking Corp.
        10.54(9)    Form of Amended and Restated  Debenture  dated July 31, 2003
                    issued to CapEx, L.P. in the principal amount of $5,029,344
        10.55(9)    Form of Amended and Restated  Debenture  dated July 31, 2003
                    issued  to  D.H.  Blair  Investment  Banking  Corp.  in  the
                    principal amount of $2,352,896
        10.56(9)    Form of Warrant issued to CapEx, L.P.
        10.57(9)    Form of  Warrant  issued to D.H.  Blair  Investment  Banking
                    Corp.
        10.58(9)    Form of Security Agreement
        10.59       Amended and Restated Employment Agreement by and between the
                    Company and Marco Markin dated March 12, 2004
        31.1        Section  302  Certificates  of Chief  Executive  Officer and
                    Chief Financial Officer
        32.2        Section  906  Certificates  of Chief  Executive  Officer and
                    Chief Financial Officer
_____________________

(1)  Previously filed on February 12, 2001.
(2)  Previously  filed as an exhibit to Form 10-Q (for the Period ended June 30,
     2001) on August 14, 2001.
(3)  Previously  filed as an exhibit to Form 10-Q/A  (for the Period  ended June
     30, 2001) on August 20, 2001.
(4)  Previously  filed as an exhibit to Form 10-K (for the period ended December
     31, 2001) on April 2, 2002.
(5)  Previously  filed on Form 10-Q (for the period ended March 31, 2002) on May
     15, 2002.
(6)  Previously filed on Form 8-K on June 3, 2002.
(7)  Previously  filed on Form 10-Q (for the period ended September 30, 2002) on
     November 14, 2002.
(8)  Previously  filed on Form 10-K (for the period ended  December 31, 2002) on
     May 1, 2003.
(9)  Previously  filed on Form  10-QSB (for the period  ended June 30,  2003) on
     August 19, 2003.



                                       45
<PAGE>

Current Reports on Form 8-K

     During the quarter ended  December 31, 2003, we filed one current report on
Form 8-K.  Subsequent to December 31, 2003, we filed one current  report on Form
8-K with the SEC on February 19, 2004.


ITEM 14.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures
------------------------------------------------

     Under  the  supervision  and  with  the  participation  of our  management,
including our Chief Executive Officer and Chief Financial Officer,  we evaluated
the  effectiveness  of the design and operation of our  disclosure  controls and
procedures  (as defined in Rule  13a-15(e)  or  15d-15(e)  under the  Securities
Exchange Act of 1934 (the  "Exchange  Act")).  Based upon that  evaluation,  the
Chief Executive  Officer and Chief Financial  Officer  concluded that, as of the
end of the period covered by this report, our disclosure controls and procedures
were adequately designed to ensure that information  required to be disclosed by
us in the  reports  we  file or  submit  under  the  Exchange  Act is  recorded,
processed,  summarized  and  reported  within  the  time  periods  specified  in
applicable rules and forms.

     The Company's  management,  including the Chief Executive Officer and Chief
Financial Officer,  does not expect that its disclosure  controls and procedures
will  prevent  all error and all  fraud.  A control  system,  no matter how well
conceived and operated,  can provide only  reasonable,  not absolute,  assurance
that the  objectives  of the control  system are met.  Further,  the design of a
control  system must reflect the fact that there are resource  constraints,  and
the benefits of controls must be considered relative to their costs.  Because of
the inherent  limitations in all control systems,  no evaluation of controls can
provide  absolute  assurance that all control issues and instances of fraud,  if
any, within the Company have been detected.  These inherent  limitations include
the  realities  that  judgments  in  decision-making  can be  faulty,  and  that
breakdowns can occur because of simple error or mistake. Additionally,  controls
can be circumvented by the individual acts of some persons,  by collusion of two
or more people,  or by  management  override of the  control.  The design of any
system of  controls  also is based in part upon  certain  assumptions  about the
likelihood of future events,  and there can be no assurance that any design will
succeed in achieving  its stated goals under all  potential  future  conditions;
over time,  control may become inadequate  because of changes in conditions,  or
the degree of  compliance  with the  policies  or  procedures  may  deteriorate.
Because  of  the  inherent  limitations  in  a  cost-effective  control  system,
misstatements due to error or fraud may occur and not be detected.

Changes in internal control over financial reporting
----------------------------------------------------

     During the most recent fiscal  quarter ended  December 31, 2003,  there has
been no change in our internal  control over financial  reporting (as defined in
Rule  13a-15(f)  or  15d-15(f)  under  the  Exchange  Act)  that has  materially
affected,  or is reasonably  likely to materially  affect,  our internal control
over financial reporting.


ITEM 15.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

     The  aggregate  fees  billed by the  Company's  auditors  for  professional
services  rendered  in  connection  with  the  audit  of  the  Company's  annual
consolidated  financial  statements  for fiscal 2003 and 2002 and reviews of the
consolidated  financial  statements  included in the Company's  Forms 10-KSB for
fiscal 2003 and 2002 were approximately $ 78,223 and $73,508, respectively.

AUDIT-RELATED FEES

     The aggregate fees billed by the Company's auditors for any additional fees
for  assurance  and  related  services  that  are  reasonably   related  to  the
performance of the audit or review of the Company's financial statements and are
not   reported   under  "Audit  Fees"  above  for  fiscal  2003  and  2002  were
approximately $25,407 and $35,220, respectively.

TAX FEES

     The  aggregate  fees  billed by the  Company's  auditors  for  professional
services for tax  compliance,  tax advice,  and tax planning for fiscal 2003 and
2002 were approximately $37,809 and $41,195, respectively.

ALL OTHER FEES

     The aggregate fees billed by the Company's auditors for all other non-audit
services  rendered  to  the  Company,  such  as  attending  meetings  and  other
miscellaneous financial consulting,  for fiscal 2003 and 2002 were approximately
$Nil and $1900, respectively.

     Our audit committee has the sole authority to review in advance,  and grant
any appropriate  pre-approvals,  of all non-audit services to be provided by our
independent auditors and, in connection therewith, to approve all fees and other
terms of engagement.



                                       46
<PAGE>

                                   SIGNATURES

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report to be signed by the following  persons on behalf of The Neptune  Society,
Inc. in the capacities and on the dates indicated.


Signature                          Title                           Date
---------                          -----                           ----

                             Chief Executive Officer and
                             Director
/s/ Marco Markin             (principal executive officer)      March 30, 2004
-------------------------
Marco Markin


                             Senior Vice President of
                             Finance and Secretary
/s/ Matthew Hoogendoorn      (Acting Chief Financial Officer)   March 30, 2004
-------------------------
Matthew Hoogendoorn

                             Director
/s/ Bryan G. Symington Smith                                    March 30, 2004
----------------------------
Bryan G. Symington Smith

                             Director
/s/ Anthony George                                              March 30, 2004
-------------------------
Anthony George


                             Director
/s/ Brent Lokash                                                March 30, 2004
-------------------------
Brent Lokash



                                       47
<PAGE>

                                                                    Exhibit 31.1

                                 CERTIFICATIONS


     I, Marco Markin, certify that:

     1. I have  reviewed  this  annual  report  on Form  10-KSB  of The  Neptune
Society, Inc.;

     2. 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;

     3. 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;

     4. 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:

     a)   Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  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;

     c)   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and  procedures  and presented in this annual  report our  conclusions
          about the effectiveness of the disclosure controls and procedures,  as
          of the end of the period  covered by this annual  report based on such
          evaluation;

     d)   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  that  has  materially  affected,  or is
          reasonably  likely to materially  affect,  the  registrant's  internal
          control over financial reporting; and

     5. The registrant's other certifying  officers and I have disclosed,  based
on our most recent evaluation of internal control over financial  reporting,  to
the  registrant's  auditors  and the audit  committee of  registrant's  board of
directors (or persons performing the equivalent function):

     a)   All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.


Date:        March 30, 2004

By:          /s/ Marco Markin
             ------------------------
             Marco Markin
             Chief Executive Officer
             (Principal Executive Officer)




<PAGE>


                                 CERTIFICATIONS


     I, Matthew Hoogendoorn, certify that:

     1. I have  reviewed  this  annual  report  on Form  10-KSB  of The  Neptune
Society, Inc.;

     2. 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;

     3. 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;

     4. 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:

     a)   Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  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;

     c)   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and  procedures  and presented in this annual  report our  conclusions
          about the effectiveness of the disclosure controls and procedures,  as
          of the end of the period  covered by this annual  report based on such
          evaluation;

     d)   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  that  has  materially  affected,  or is
          reasonably  likely to materially  affect,  the  registrant's  internal
          control over financial reporting; and

     5. The registrant's other certifying  officers and I have disclosed,  based
on our most recent evaluation of internal control over financial  reporting,  to
the  registrant's  auditors  and the audit  committee of  registrant's  board of
directors (or persons performing the equivalent function):

     a)   All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.


Date:        March 30, 2004

By:          /s/ Matthew Hoogendoorn
             ----------------------------------
             Matthew Hoogendoorn
             Chief Financial Officer
             (Principal Financial Officer)





<PAGE>


                                                                    Exhibit 32.1


                            CERTIFICATION PURSUANT TO
                               18 U.S.C. ss.1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In  connection  with  the  Annual  Report  of The  Neptune  Society,  Inc.  (the
"Company") on Form 10-KSB for the year ended December 31, 2003 as filed with the
Securities and Exchange Commission on the date here of (the "Report"),  I, Marco
Markin,  Chief Executive Officer,  certify,  pursuant to 18 U.S.C.  ss.1350,  as
adopted pursuant to Section 906 of the  Sarbanes-Oxley  Act of 2002, that to the
best of my knowledge:

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

     (2)  The  information  contained  in this Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.



Date:  March 30, 2004                    By:  /s/ Marco Markin
                                              ---------------------------------
                                              Name:    Marco Markin
                                              Title:   Chief Executive Officer
                                              (Principal Executive Officer)



A signed  original 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.



                                       50
<PAGE>

                            CERTIFICATION PURSUANT TO
                               18 U.S.C. ss.1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In  connection  with  the  Annual  Report  of The  Neptune  Society,  Inc.  (the
"Company") on Form 10-KSB for the year ended December 31, 2003 as filed with the
Securities  and  Exchange  Commission  on the date  here of (the  "Report"),  I,
Matthew  Hoogendoorn,  Chief Financial Officer,  certify,  pursuant to 18 U.S.C.
ss.1350,  as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002,
that to the best of my knowledge:

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

     (2)  The  information  contained  in this Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.



Date:  March 30, 2004                   By: /s/ Matthew Hoogendoorn
                                            ------------------------------------
                                            Name:    Matthew Hoogendoorn
                                            Title:   Chief Financial Officer
                                            (Principal Financial Officer)




A signed  original 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.