U.S. SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-KSB
 
 x
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]For the fiscal year ended March 31, 2004.o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]For the transition period from to .
 
 Commission file number 2-87738
 
 T.H. LEHMAN & CO., INCORPORATED(Exact name of small business issuer as specified in its charter)
 
 Delaware

22-2442356(State or other jurisdiction
of incorporation or organization)

(I.R.S./Employer
Identification Number)
 
 1155 Dairy Ashford Rd., Suite 806, Houston, Texas 77079(Address of principal executive offices)
 
 Issuer's telephone number, including area code:
(281) 870-1197
 
 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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
o
 
 State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.
 
 Class

Outstanding at May 19, 2004Common Stock, par value $.01 per share

6,945,118 Shares
 
 Preferred Stock, $.01 Par.
 (Title of Class)
 
 Transitional Small Business Format (check one):
Yes
o
No
x
 
 Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10- KSB or any amendment to this Form 10-KSB.   x
 
 Issuer's revenues for its most recent fiscal year were $907,070.
 
 The aggregate market value of the voting stock held by nonaffiliates of the registrant is approximately $1,164,911 as of May 19, 2004.
 
 6,970,118
 _________
 (Number of shares of common stock outstanding as of May 19, 2004)
 
  
 PART I
 
 BUSINESS ITEM 1. DESCRIPTION OF BUSINESS
 
 **Introduction:**
 
 T.H. Lehman & Co., Incorporated (referred to as the "Company or Registrant"), was organized in March, 1983 as a Small Business Development Company ("SBDC") and was an SBDC until April, 1988. From April, 1988 to August, 1990 it operated through subsidiaries as a broker/dealer and investment advisor. Although it is no longer an SBDC and has sold its broker/dealer and investment advisory business, the Company continues to maintain certain of its investments.
 
 **Medical Financial Services:**
 
 The Company in August 1992 began operations in the area of medical financial services, such services being provided through specific subsidiaries. The primary focus of these operations is the financing and collection of accounts receivable generated by medical practitioners through their provision of diagnostic services and patient treatment.
 
 MedFin Management Corp. was created to provide medical practitioners with non- medical general and administrative functions such as accounting, marketing, management, non-medical staffing, facilities, equipment, and billing and collection of receivables. Revenues are derived from fees charged for these services. Presently, the company has one client, which operates a specialty clinic in the Los Angeles, California area. This client concentrated its practice on workers' compensation medicine and treatment for personal injury victims, providing services primarily on a lien basis. Beginning in June 2000, the client decided to stop practicing medicine and transfer his clients and files to another provider. In April 2000, Med-Fin Management Services, Inc. was created to provide the new client with the same service.
 
 MedFin Management Corporation and Med-Fin Management Services, Inc. receive, as a fee for their clinic management services, revenues that are indirectly related to the overall collections of their client practitioners' receivables. MedFin Management Corporation and Med-Fin Management Services, Inc. also provide working capital on an as-needed basis to those clients with receivables as collateral for such advances and UCC filings made thereon. However, the Company is not engaged in the practice of medicine which, for non- doctor controlled entities, is not legally allowed in California.
 
 As a further adjunct to the financing/management services provided through subsidiaries to medical practitioners, effective February 1, 1993, the Company purchased Healthcare Professional Billing Corp. (HPB), in Broomfield, Colorado a billing and collection service that is utilized by doctors in the metropolitan Denver and surrounding areas.
 
 In a transaction that was effective October 1, 1996, the Company transferred 50% of the outstanding stock and substantially all of the control of Healthcare Professional Billing Corp. to certain key employees of that company. Until that time, Healthcare Professional Billing Corp. was a wholly-owned subsidiary of the Company. As a result of the transfer, the subsidiary's financial position, results of operations and cash flows are not consolidated with that of the Company's subsequent to the transfer date, however, until advances made to HPB are paid off the Company will receive part of HPB's positive cash flow.
 
 The Company expects to wind down its medical business management office by February 2005, the date its medical office lease expires. The Company will provide medical business management services through that time to providers it manages related to existing patients and possible new patients for physical therapy only. By February 2005 the Company expects that it will have closed all its patients cases and final billed all the services rendered by the providers and for the patients that can not be finalized, refer them to other providers but bill through the date that the providers have rendered services. At that time it will engage a collection service to follow up on collections for all its receivables that have been assigned to the medical business management entity. The collection of these receivables is expected to take several years as with previous provider receivables. The Company does not expect a significant change in realization rate of provider receivables that it manages. The valuation of the existing receivables as of March 31, 2004 takes into consideration the expected future collection costs. There were no long-lived assets related to the discontinued operation nor are there expected to be gains or losses from the discontinuance of the medical business management segment.
 
  
 **Environmental Matters:**
 
 The company is subject to various laws and regulations with respect to employee health and safety and the protection of the environment. The Company believes that it is in substantial compliance with such laws and regulations. Employees:
 
 The Company employs 7 persons in the medical management field who are engaged in executive, administrative and clerical positions. The Company believes that its employee relations are satisfactory. Employees are not subject to any collective bargaining agreement and work stoppages have not yet materially affected the Company's business.
 
 ITEM 2. DESCRIPTION OF PROPERTY
 
 The Company presently has an administrative sharing arrangement which, among other things, provides use of other office facilities in Houston, Texas. MedFin Management Corporation leases office space in Burbank, California, which is utilized by Med-Fin Management Services, Inc., under an operating lease that expires on February 28, 2005. Monthly rental payments are $8,580, including all utilities.
 
 ITEM 3. LEGAL PROCEEDINGS
 
 Neither the Company nor its subsidiaries is currently party to any other material legal proceeding.
 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
 The Company did not have any matters to submit to a vote of the security holders.
 
 
 PART II
 
 ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
 a)  Market Information
 
 The Company's Common Stock (symbol THLM) is traded in the Over-The-Counter Market, on the Electronic Bulletin Board. The range of high and low bid quotations as reported by the NASDAQ Inter-Dealer Quotation System for the two year period ended March 31, 2004 are as follows:
 
 For the Quarter Ended

High

LowJune 30, 2002

$
.51

$
.51September 30, 2002

$
.51

$
.51December 31, 2002

$
.51

$
.51March 31, 2003

$
.51

$
.51June 30, 2003

$
.15

$
.15September 30, 2003

$
.20

$
.20December 31, 2003

$
.20

$
.20March 31, 2004

$
.20

$
.20 
 The above quotations do not include commissions, markups, or markdowns and may not represent actual transactions.
 
 b)  Number of Holders of Common Stock
 
 As of May 19, 2004 the Company had approximately 137 shareholders of record. Cede & Co. was the registered holder of 1,041,471 shares. Because many of the shares are registered in street name, the Company believes that there are a substantially greater number of beneficial owners.
 c) Dividends on Common Stock
 
 The Company's Board of Directors does not currently intend to pay cash dividends and has not paid any in the two year period ended March 31, 2004.
   ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 
 Critical Accounting Policies:
 
 The discussion of the financial condition and results of operations are based upon the audited consolidated condensed financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States. As such, management is required to make certain estimates, judgments and assumptions that are believed to be reasonable based on the information available. These estimates and assumptions affect the reported amount of assets and liabilities, revenues and expenses, and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results may differ from these estimates under different assumptions or conditions.
 
 Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. The Company has determined that the following accounting policies and estimates are critical to the understanding of the Company's consolidated financial statements.
 
 Revenue Recognition and Allowance for Doubtful Accounts:
 
 The Company derives it management fee (discontinued operations) revenue under the contractual provisions between the Company as the manager and the professional health care provider. The Company earns its management fee based on a percentage of net revenue to be derived by the health care provider. This management fee is recorded in the accounting records on an accrual basis as a percentage of the professional health care company's net revenues, which gives effect to the difference between, established charges and estimated third-party payer payments. The Company further provides an allowance for doubtful accounts to reduce its receivables to their net realizable value based on estimates by management for general factors such as the aging of the receivables and historical collection experience.
 
 Statements of Operations for continuing operations:
 
 Fiscal Year Ended March 31, 2004 Compared to Fiscal Year Ended March 31, 2003
 
 Revenues totaled $43,675 during the fiscal year ended March 31, 2004, 2% lower than the prior year's revenues of $44,622. Included in the total 2004 revenues is $39,245 related to the Company's portion of net income of Healthcare Professional Billing Corp. (HPB) under the 1996 transfer agreement. The Company recorded $36,958 in 2003 related to its portion. Interest expense increased from $9,882 for the fiscal year ended March 31, 2003 to $27,078 for the fiscal year ended March 31, 2004. This was due to note payables issued in exchange for the acquisition of shares in a publicly traded company in November 2002 and a full year of interest being accrued for the fiscal year ending March 31, 2004. General and Administrative expenses were $88,382 for 2004 and $89,242 for 2003.
 
 Fiscal Year Ended March 31, 2003 Compared to Fiscal Year Ended March 31, 2002
 
 Revenues totaled $44,622 during the fiscal year ended March 31, 2003, 42% lower than the prior year's revenues of $76,809. Included in the total 2003 revenues is $36,958 related to the Company's portion of net income of Healthcare Professional Billing Corp. (HPB) under the 1996 transfer agreement. The Company recorded $52,626 in 2002 related to its portion. Interest expense increased from $16 for the fiscal year ended March 31, 2002 to $9,882 for the fiscal year ended March 31, 2003. This is due to note payables issued in exchange for the acquisition of shares in a publicly traded company in November 2002. General and Administrative expenses were $89,242 for 2003 and $88,473 for 2002.
 
  
 Statements of Operations for discontinued operations:
 
 Fiscal Year Ended March 31, 2004 Compared to Fiscal Year Ended March 31, 2003
 
 Revenues totaled $863,395 during the fiscal year ended March 31, 2004, 9% lower than the prior year's revenues of $950,631. Management fees decreased due to less patient activity. General and Administrative expenses decreased 13.6% to $790,733 from $914,917 mainly due to managements opinion that net receivables are realistic and an increase to the allowance account is not needed for the fiscal year ending March 31, 2004, compared to the bad debt expense of $131,065 for the fiscal year ended March 31, 2003.
 
 Fiscal Year Ended March 31, 2003 Compared to Fiscal Year Ended March 31, 2002
 
 Revenues totaled $950,631 during the fiscal year ended March 31, 2003, 46% higher than the prior year's revenues of $649,725. Management fees increased due to more patient activity for the year ending March 31, 2003. General and Administrative expenses increased 2.1% to $914,917 from $799,577 mainly due to higher payroll related to increased management fees and collections.
 
 Liquidity, Capital Resources and Income Taxes
 
 At March 31, 2004 cash amounted to $8,773 a decrease of $103,559 over the cash balance of $112,332 at March 31, 2003.
 
 The Company's primary source of liquidity has been the cash it has obtained from the liquidation of its investment portfolio, distribution of HPB's profit, and collection of medical accounts receivable.
 
 The Company anticipates that internally generated cash and its lines of credit will be sufficient to finance overall operations.
 
 The Company is continually seeking to acquire businesses and may be in various stages of negotiations at any point in time which may or may not result in consummation of a transaction. To provide funding for such acquisitions it may take a number of actions including (i) selling of its existing investments (ii) use of available working capital (iii) seeking short or long term loans (iv) issuing stock. In addition, the Company may seek additional equity funds if needed. These sources of capital may be both conventional and non-traditional. The Company has no existing funding commitments and is presently under no contractual obligation to make any investment or acquisition.
 
 At March 31, 2004, the Company had an operating tax loss carryforward of approximately $5,893,000.
 
 Impact of Inflation and Other Business Conditions
 
 Generally, increases in the Company's operating costs approximate the rate of inflation. In the opinion of management, inflation has not had a material effect on the operation of the Company. The Company has historically been able to react effectively to increases in labor or other operating costs through a combination of greater productivity and selective price increases where allowable.
 
 ITEM 7. FINANCIAL STATEMENTS
 
 The financial statements and supplementary data are listed at "ITEM 13: EXHIBITS AND REPORTS ON FORM 10-KSB" in this document.
 
 (See Index Exhibits Part IV Item 13 (a) Financial Statements: F1)
 
 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
 Not Applicable.
 
  
 PART III
 
 ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
 
 The Directors and Executive Officers of the Company are as follows:
 
 Name

Age

Director Since

PositionElliot Gerstenhaber

58

1996

DirectorRaffaele Attar

31

2000

DirectorGary Poe

37



Secretary/Treasurer 
 The term of office of each director is until the next Annual Meeting of Shareholders, or until such time as their successors shall have been duly elected and qualified. Officers serve at the pleasure of the board. There are no family relationships between any of the Company's directors or officers.
 
 Background of Officers and Directors:
 
 Elliot Gerstenhaber is a 1968 graduate of the University of Pennsylvania. He received a juris doctorate degree from South Texas College of Law in 1975. In 1995 he left the private practice of law to develop real estate throughout the southeastern United States. He is President of Segue, Inc., a privately-held company.
 
 Raffaele Attar graduated from St. John's College in 1995 with a degree in Philosophy and Mathematics. Mr. Attar has 7 years of experience as an investment analyst including 5 years experience in the medical financing industry. Mr. Attar currently sits on the Board of Directors of Rollouts, Inc., a privately held multi-site equipment deployment company based in Minneapolis, MN.
 
 Gary Poe is a 1989 graduate of Sam Houston State University holding a B.A. degree in General Business. Mr. Poe has been associated with Woodco Fund Management (WFM) since March 1999. Prior to joining WFM, Mr. Poe worked as an assistant controller with a hotel management company in Houston, Texas. Mr. Poe has over 15 years of financial accounting experience.
 
 ITEM 10. EXECUTIVE COMPENSATION
 
 Compensation of Officers and Directors:
 
 Set forth below is the aggregate remuneration paid to the Company's officers during the fiscal years ended March 31, 2004, 2003, and 2003.
 
 Name and Principal Position

Year

Salary

Restricted Stock AwardsNone


2004

$
0

$
0None


2003

$
0

$
0None


2002

$
0

$
0 
  
 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
 Principal Shareholders
 
 The following table lists, to the best of the Company's knowledge, the beneficial stock ownership of those persons owning beneficially more than 5% of the Company's outstanding common stock, as well as the stock ownership of executive officers and each director as of May 19, 2004:
 
 Name and Address Of Beneficial Owner

Amount and Nature Of Beneficial Owner

Percent of ClassTitle of Class(a) Common StockMonahan Corporation, N.V.2Landhuis Joonchi


3,144,238


45.11
%Kaya Richard J. Beaujon z/nP.O. Box 837Curacao, Netherlands AntillesBurton, N.V.2Landhuis Joonchi


281,383


4.04
%Kaya Richard J. Beaujon z/nP.O. Box 837Curacao, Netherlands AntillesRussell Molina36616 Sewanee


480,000


6.89
%Houston, Texas 77005Beech Glen, Inc.1c/o Capital Holdings, Inc.


598,164


8.58
%1155 Dairy Ashford, Suite 806Houston, TX 77079New Horizons Investments Fund N.V.2Landhuis Joonchi


610,538


8.76
%Kaya Richard J. Beaujon z/nP.O. Box 837Curacao, Netherlands, Antilles(b) Security Ownership of ManagementDibo Attar1


200,000Elliot Gerstenhaber


-0-Raffaele Attar


90,400Directors and Officers as Group 5 persons123


5,404,723


77.54
%
 
  
 Notes to Table of Beneficial Owners and Management:
 
 1 Dibo Attar is a consultant to Capital Holdings, Inc., parent to Beech Glen, Inc. and father of Raffaele Attar.
 
 2 Monahan Corporation, N.V., Burton, N.V., and New Horizons Investments Fund, N.V. are each Netherlands Antilles corporations whose shareholders comprise groups of European investors, none of which are otherwise affiliated with the Company. None of the individual shareholders holds an effective ownership of the Company exceeding 4.9%.
 
 3 Russell Molina resigned as Director and President of T.H. Lehman & Co., Inc. effective October 3, 2002.
 
 Except as otherwise indicated, the address for each of the above persons is c/o T.H. Lehman & Co., Incorporated, 1155 Dairy Ashford Rd., Suite 650, Houston, Texas 77079.
 
 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
 During the years ended March 31, 2004 and March 31, 2003, the Company incurred management fees for facilities and services provided by GTD Capital Holdings Management Company, in the amount of $139,350 and $139,342 respectively. Such services are believed to have been provided on terms no less favorable than available from a third party.
 
 On August 11, 2003, the Company signed a Convertible Promissory Note (Note) Purchase Agreement, effective August 11, 2003 with Rollouts Incorporated (Rollouts). The Company has agreed to advance up to $250,000 of principal at an interest rate of 10%, computed on the date of the advances as simple annual interest. Rollouts must pay unpaid interest accrued on the Note upon conversion of such Note into shares of Rollouts Common Stock. Interest only payments are due on January 1, April 1, July 1, and October 1. Rollouts may prepay in cash the outstanding principal upon written notice to the Company. The Company has 60 days to consider whether to accept or reject the prepayment. The Company may reject any such prepayment, provided, however, that any such rejection shall cause an automatic conversion of the entire principal amount outstanding under the Note. The Company shall also have the right at its option to convert the outstanding principal amount under the Note or any portion thereof, into that number of fully paid and non-assessable shares of Common Stock obtained by dividing the outstanding principal amount under the Note surrendered for conversion by the Conversion Price. The beginning conversion price to be $.50 subject to certain adjustments during the term of the Note. To fund this investment, the Company will use existing working capital and may seek additional funding through short and long term notes. Mr. Raffaele Attar, the Companys chairman, is a member of the board of directors of Rollouts, Inc. As of March 31, 2004, the Company has advanced $25,000 under this agreement.
 
 Stock Transaction Reports by Officers, Directors and 10% Stockholders:
 
 Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's directors, executive officers and holders of more than 10% of the Company's common stock to file with the Commission initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. To the Company's knowledge, based solely on copies of reports furnished to the Company and representation that no other reports were required, during the fiscal year ending March 31, 2004 all Section 16(a) filing requirements were complied with in a timely manner.
 
 PART IV
 
 ITEM 13. EXHIBITS AND REPORTS ON FORM 10-KSB
 
 The following documents are filed as a part of this report:
 
 Independent Auditor's Report
 
 Consolidated Balance Sheets
 As of March 31, 2004 and 2003
 
  
 Consolidated Statements of Operations
 Years Ended March 31, 2004 and 2003
 Consolidated Statements of Changes in Stockholders' Equity
 Years Ended March 31, 2004 and 2003
 Consolidated Statements of Cash Flows
 Years Ended March 31, 2004 and 2003
 Notes to Consolidated Financial Statements
 
 (a)
Financial Statements - See Index to Financial Statements at Page F-1.(b)
Reports on Form 8-K. - Form 8-K was filed October 8, 2002 disclosing Russell S. Molina's resignation during fiscal year ending March 31, 2003.(c)
Exhibits:Exhibit No.
Exhibit3.1
Certificate of Incorporation of T.H. Lehman & Co., Incorporated (the Company) as amended.*3.2
By-laws of the Company. Incorporated by reference from the Company's Form 8-A dated October 31, 1984 for Registration of Certain Classes of Securities Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934.*
 
 *These items have been previously submitted and are therefore incorporated only by reference.
 
 Individual financial statements of the Company are not furnished because consolidated financial statements are furnished.
   **Controls and Procedures:**
 
 Within 90 days prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of our management including the Company's Acting Chief Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Acting Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures are effective.
 
 There have been no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date we carried out this evaluation.
 
  
 SIGNATURES
 
 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 DATE: June 25, 2004T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIESBy:
/s/ Raffaele AttarRaffaele AttarActing Chairman andChief Executive OfficerBy: /s/ Gary PoeGary PoePrincipal Financial Officerand Secretary
 
  T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
 CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED MARCH 31, 2004 AND MARCH 31, 2003
 
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS:
 
 Report of Independent Auditor
F-2Consolidated Balance SheetsAs of March 31, 2004 and 2003
F-3Consolidated Statements of Operations and Comprehensive Income (Loss)Years Ended March 31, 2004 and 2003
F-4Consolidated Statements of Stockholders' EquityYears Ended March 31, 2004 and 2003
F-5Consolidated Statements of Cash FlowsYears Ended March 31, 2004 and 2003
F-6Notes to Consolidated Financial Statements
F-7 
  
 REPORT OF INDEPENDENT AUDITOR
 
 To the Board of Directors
 T.H. Lehman & Co., Incorporated
 
 I have audited the consolidated balance sheets of T.H. Lehman & Co., Incorporated and subsidiaries as of March 31, 2004 and 2003, and the related consolidated statements of operations and comprehensive income (loss), stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audits.
 
 I conducted my audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion.
 
 In my opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of T.H. Lehman & Co., Incorporated and subsidiaries as of March 31, 2004 and 2003, and the consolidated results of their operations, stockholders'equity and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
 
 Jeffrey S. Gilbert, CPA
 
 
 Los Angeles, California
 June 25, 2004
 
 F-2 
 T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
 MARCH 31, 2004 AND MARCH 31, 2003
 
 
 2004

2003ASSETSCURRENT ASSETSCash

$
8,773

$
112,332Accounts receivable


12,000


10,189Current portion of non-current receivablerelated party (Note 9)


2,795


20,000Current portion of non-current receivablesfrom discontinued operations (Note 4)


493,160


347,440TOTAL CURRENT ASSETS


516,728


489,961PROPERTY AND EQUIPMENT AT COST, less accumulated depreciation of $148,531 at March 31, 2004 and $148,531 at March 31, 2003 (Note 5)


0


0OTHER ASSETSSecurities available for sale (Notes 3 and 9)


366,333


324,357Investments in non-public companies (Note 9)


56,500


56,500Non-current receivables  related party (Note 9)


46,000


0Non-current receivables (Note 9)


25,000


0Non-current receivables from discontinuedOperations (Note 4)


544,044


432,878Deposits


16,676


11,676TOTAL OTHER ASSETS


1,054,553


825,411TOTAL ASSETS

$
1,571,281

$
1,315,372LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIESManagement fees  related party (Note 9)

$
461,675

$
402,475Accrued liabilities


3,450


1,376Current portion of long-term debt (Note 6)-related


36,960


9,882Current portion of long-term debt (Note 6)-related


84,000


0Management fees  related party (Note 9)from discontinued operations


272,262


187,262Account payable and accrued liabilitiesfrom discontinued operations


17,943


87,729TOTAL CURRENT LIABILITIES


876,290


688,724LONG-TERM LIABILITIESLong-term debt, less current portion related parties (Note 6)


453,848


428,848TOTAL LIABILITIES


1,330,138


1,117,572COMMITMENTS AND CONTINGENCIES (Note 8)STOCKHOLDERS' EQUITYCommon stock-par value $.01; authorized 20,000,000 shares, issued 6,970,118 shares at March 31, 2004 and 2003


69,701


69,701Preferred stock-par value $.01; authorized 10,000,000 shares, issued 0 shares at March 31, 2004 and 2003


0


0Additional paid-in capital


8,076,340


8,075,850Unrealized gain on investments


(11,100
)

(53,076
)Accumulated deficit


(7,845,360
)

(7,846,237
)Treasury stock at cost - 25,000 shares


(48,438
)

(48,438
)TOTAL STOCKHOLDERS' EQUITY


241,143


197,800$
1,571,281

$
1,315,372 
 See accompanying Notes to Consolidated Financial Statements
 
 F-3 
 T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
 YEARS ENDED MARCH 31, 2004 AND MARCH 31, 2003
 
 2004

2003REVENUESInterest and dividends

$
4,430

$
0Realized gain from sales of securities available for sale


0


7,664Miscellaneous income (Note 2)


39,245


36,958TOTAL REVENUES


43,675


44,622OPERATING EXPENSESSelling, general and administrative


88,382


89,242Interest expense


27,078


9,882TOTAL OPERATING EXPENSES


115,460


99,124INCOME / (LOSS) FROM CONTINUING OPERATIONS


(71,785
)

(54,502
)PROVISION FOR INCOME TAXES (Note 7)


0


0INCOME / (LOSS) FROM CONTINUING OPERATIONS


(71,785
)

(54,502
)INCOME / (LOSS) FROM DISCONTINUED OPERATIONS


72,662


35,714NET INCOME / (LOSS)


877


(18,788
)OTHER COMPREHENSIVE INCOME:Unrealized gain (loss) on securities


41,976


( 55,138
)Less:   reclassification adjustment for
Gain included in net income


0


( 7,664
)TOTAL OTHER COMPREHENSIVE INCOME


41,976


( 62,802
)COMPREHENSIVE INCOME (LOSS)

$
42,853

$
( 81,590
)PER SHARE DATA:WEIGHTED AVERAGE NUMBER OF COMMONSHARES OUTSTANDING


6,945,118


6,945,118NET LOSS PER COMMON SHARE FROM CONTINUING OPERATIONS

$
(0.01
)
$
(0.01
)NET LOSS PER COMMON SHARE FROM DISCONTINUED OPERATIONS

$
0.01

$
0.01 
 See accompanying Notes to Consolidated Financial Statements
 
 F-4 
 T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
 YEARS ENDED MARCH 31, 2004 AND MARCH 31, 2003
 BALANCE
  Common Stock







Unreal.

Treasury StockAdditional




Gain onShares




Paid-in

Accumulated

Sec Avail.

for SharesIssued

Amount

Capital

Deficit

for sale

Held

Amount

Total6,970,118

$
69,701

$
8,075,850

$
(7,827,450
)
$
9,727


25,000

$
(48,438
)
$
279,390Unrealized gain on securities available for sale:














(62,803
)







(62,803
)Net loss











(18,787
)










(18,787
)BALANCE, March 31, 2003:


6,970,118

$
69,701

$
8,075,850

$
(7,846,237
)
$
(53,076
)

25,000


($48,438
)
$
197,800Unrealized gain on securities available for sale














41,976








41,976Additional paid inCapital








490














490Net loss











877











877BALANCE, March 31, 2004:


6,970,118

$
69,701

$
8,076,340

$
(7,845,360
)
$
(11,100
)

25,000


($48,438
)
$
241,143
 See accompanying Notes to Consolidated Financial Statements
 
 F-5 
 T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 YEARS ENDED MARCH 31, 2004 AND MARCH 31, 2003
   
 2004

2003CASH FLOWS FROM OPERATING ACTIVITIESNet loss from continuing operations

$
( 71,785
)
$
( 54,502
)Net income from discontinued operations


72,662


35,714Adjustments to reconcile net loss to net cash used in operating activities:Provision for bad debts


0


131,065Realized gain from sales of securities available for sale


0


7,664Deposits (paid) received


( 5,000
)

595Changes in operating assets and liabilities:(Increase) decrease in:Accounts receivable


( 1,811
)

4,073Value of marketable securities


( 41,976
)

(321,794
)Increase (decrease) in:Accounts payable


158,414


123,462Accrued liabilities


71,128


( 60,256
)Minority interest


0


72,600NET CASH PROVIDED BY (REQUIRED FOR)OPERATING ACTIVITIES


181,632


( 61,379
)CASH FLOWS FROM INVESTING ACTIVITIESLoans made evidenced by notes receivable


( 932,049
)

(1,046,687
)Collection of notes receivable


785,076


848,105(Increase) decrease in non current receivables (136,166)


(61,588
)Loan made evidenced by notes receivable-related party


18,458


(56,500
)(Increase) decrease in non-current receivables related party


(46,000
)

0Increase (decrease) in ownership of subsidiary


490


0NET CASH USED IN INVESTING ACTIVITIES


(310,191
)

(316,670
)CASH FLOWS FROM FINANCING ACTIVITIESProceeds of long-term debt


25,000


428,848Repayment of long-term debt


0


0NET CASH PROVIDED BY FINANCING ACTIVITIES


25,000


428,848INCREASE (DECREASE)IN CASH


(103,559
)

50,799CASH - BEGINNING


112,332


61,533CASH - END

$
8,773

$
112,332
 See accompanying Notes to Consolidated Financial Statements
 
 F-6 
 T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2004 AND 2003
 
 
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Description of the Business - T.H. Lehman & Co., Incorporated, a Delaware corporation, has provided medical business management services including billing and collection in California through one of its wholly-owned subsidiaries.
 
 During June 2004 the management of the Company decided to disengage itself from the medical business management segment of its business. This is the only significant operation of the Company. Management based its decision in part on the expected negative impact of Californias new workers compensation legislation on the medical providers that the Company manages. Therefore the medical business management operations are reflected on the statement of operations as discontinued operations.
 
 The Company expects to wind down its medical business management office by February 2005, the date its medical office lease expires. The Company will provide medical business management services through that time to providers it manages related to existing patients and possible new patients for physical therapy only. By February 2005 the Company expects that it will have closed all its patients cases and final billed all the services rendered by the providers and for the patients that can not be finalized, refer them to other providers but bill through the date that the providers have rendered services. At that time it will engage a collection service to follow up on collections for all its receivables that have been assigned to the medical business management entity. The collection of these receivables is expected to take several years as with previous provider receivables. The Company does not expect a significant change in realization rate of provider receivables that it manages. The valuation of the existing receivables as of March 31, 2004 takes into consideration the expected future collection costs. There were no long-lived assets related to the discontinued operation nor are there expected to be gains or losses from the discontinuance of the medical business management segment.
 
 Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated.
 
 Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
 
 Securities - Marketable securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealized gains and losses included in earnings. Marketable securities not classified as either investment securities (which are held to maturity) or trading securities are classified as securities available for sale and reported at fair value, with unrealized gains and losses affecting comprehensive income and reported in a separate component of stockholders' equity. Average cost is used to determine cost when calculating realized gains or losses from sales of securities available for sale.
 
 Investment in 50% owned Corporation - Investment in 50% owned corporation is accounted for under the equity method. Currently this investment is carried at $0.
 
 Receivables - Assigned medical billings represent the contractual percentage of medical provider receivables of medical practices to which the Company provides management services. Revenues are recognized when the medical services are provided, according to the contractual percentage after uncollectible allowances.
 
 Property and Equipment - Property and equipment is stated at cost. Depreciation is computed over the estimated useful lives of the assets using both the accelerated and straight-line methods. Expenditures for repairs and maintenance are charged to expense as incurred, while expenditures for betterments and renewals are capitalized.
 
 F-7 
 Property and equipment are reviewed for impairment whenever events or circumstances indicate that the asset's undiscounted expected cash flows are not sufficient to recover its carrying amount. The company measures an impairment loss by comparing the fair value of the asset to its carrying amount. Fair value of an asset is calculated as the present value of expected future cash flows.
 
 Stock-Based Compensation - The Company elected to account for employee stock options based on the provisions of APB Opinion No. 25, "Accounting for Stock Issued to Employees" and adopted only the disclosure requirements of SFAS No. 123, "Accounting for Stock-Based Compensation". There are no employee stock options.
 
 Basic Income/Loss Per Share - Basic income/loss per common share is calculated by dividing earnings available to common stockholders by the weighted average number of common shares outstanding during the period.
 
 Segments of an Enterprise - The Company only has one segment, the medical business management services.
 
 2. NON CONSOLIDATED ENTITY
 
 In a transaction that was effective October 1, 1996, the Company transferred 50% of the outstanding stock and substantially all of the control of Healthcare Professional Billing Corp.("HPB") to certain key employees of HPB. Until that time, HPB was a wholly-owned subsidiary of the Company. As a result of the transfer, the subsidiary's financial position, results of operations and cash flows are not consolidated with that of the Company subsequent to the transfer date. The summarized unaudited financial information of HPB at March 31, 2004 and March 31, 2003 is as follows:
 
 March 31, 2004

March 31,2003Financial Position:Current Assets

$
123,613

$
122,618Property and equipment


0


180Total assets

$
123,613

$
122,798Current liabilities(including due to the Company of $135,739)

$
239,442

$
262,434Long-term obligations (a)


103,719


103,719Stockholders' deficiency


(219,548
)

(243,355
)Total liabilities and stockholders' deficiency

$
123,613

$
122,798Results of Operation:Revenues

$
265,480

$
267,897Operating Expenses


241,673


229,065Net income

$
23,807

$
38,832 
 (a)  Certain creditors of HPB are also creditors of the Company.
 
 Under the 1996 transaction the Company and/or related entities of the Company are to receive 90% of HPB's net income as defined, until the advances made by the Company and/or related entities of the Company have been paid. The Company with the concurrence of the related entities of the Company, has elected that it's advances (non-interest bearing) are to be liquidated in most part, before the other related entities. The remaining outstanding due from HPB to the Company is $135,739, although fully reserved by the Company. During the year ended March 31, 2004 the Company received $34,018 and $44,447 for the year ended March 31, 2003.
 
 F-8 
 3. SECURITIES AVAILABLE FOR SALE
 
 2004

2003KSW, Inc.


366,333


324,357$
366,333

$
324,357 
 Unrealized gains and losses for marketable equity securities at March 31, 2003 and 2002 are as follows:
 
 2004

2003Current

Non-Current

Current

Non-CurrentAggregate Cost

$
0

$
377,434

$
0

$
377,434Aggregate Market Value $ 0

$
366,334

$
0

$
324,358Net Unrealized Gains

$
0

$
(11,100
)
$
0

$
(53,076
) 
 
 4. NON-CURRENT RECEIVABLES
 
 Non-current receivables at March 31, 2004 and March 31, 2003 consisted of the following:
 
 2004

2003Assigned medical billings net of allowances of which $495,955 of the unpaid is expected to be collected during the current fiscal year.

$
1,757,283

$
1,447,093Working capital advances at 12% per annum interest to a provider of medical services who has contracted with the Company to provide management services. None of these advances are expected to be collected during the current fiscal year, nor is interest being accrued.


1,037,530


1,037,5302,794,813


2,484,623Less Allowance for Uncollectible


(1,683,814
)

(1,684,305
)1,110,999


800,318Less Current Portion


(495,955
)

(367,440
)$
615,044

$
432,878 
 During October 2003 the Company entered into an agreement to purchase the minority interest shares of a medical management subsidiary that was owned by a medical provider (seller) whose provider entity is managed by the Company. Under the terms of the agreement the Company is to pay an aggregate of $137,000, an initial payment of $25,000 plus 12 payments without interest of $9,333 through October 2004. Under the terms of the agreement the seller released all claims against the assigned medical receivables which the Company manages. As of March 31, 2004 the Company owes $84,000 to the seller. The sellers relationship with the Company terminates on December 31, 2004.
 
 F-9 
 T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2004 AND 2003
 
 5. PROPERTY AND EQUIPMENT
 
 Property and equipment at March 31, 2004 and March 31, 2003 consisted of the following:
 
 Life

2004

2003Machinery and Equipment

5-10 Years

$
6,730

$
6,730Leasehold Improvements

5-10 Years


500


500Furniture and Fixtures

5-10 Years


141,301


141,301148,531


148,531Less Accumulated Depreciation





(148,531
)

(148,531
)$
0

$
0 
 6. LONG-TERM DEBT
 
 Long-term debt including accrued interest at March 31, 2004 and March 31, 2003 consisted of the following:
 
 2004

2003Related Party:Note payable of $10,000 principal plus accrued interest at 6%, payable in annual installments of interest only, all due on November 6, 2005 for acquisition of certain public shares. (Note 10)

$
10,838

$
10,237Note payable of $121,805 principal plus accrued nninterest at 6%, payable in annual installments of interest only, all due on November 6, 2005 for acquisition of certain public shares. (Note 10)


132,017


124,688Note payable of $97,043 principal plus accrued interest at 6%, payable in annual installments of interest only, all due on November 6, 2005 for acquisition of certain public shares. (Note 10)


105,179


99,340Note payable of $34,000 principal plus accrued interest at 6%, payable in annual installments of interest only, all due on November 6, 2005 for acquisition of certain public shares. (Note 10)


36,850


34,805Note payable of $13,000 principal plus accrued interest at 6%, payable in annual installments of interest only, all due on November 6, 2005 for acquisition of certain public shares. (Note 10)


14,090


13,308Note payable of $17,000 principal plus accrued interest at 6%, payable in annual installments of interest only, all due on November 6, 2005 for acquisition of certain public shares. (Note 10)


18,425


17,402Note payable of $79,500 principal plus accrued interest at 6%, payable in annual installments of interest only, all due on November 6, 2005 for acquisition of certain public shares. (Note 10)


86,165


81,382Note payable of $56,500 principal plus accrued interest at 6%, payable in annual installments of interest only, all due on December 5, 2005 for acquisition of certain non-public shares. (Note 10)


60,967


57,568Note payable of $25,000 principal plus accrued interest at 8%, payable in annual installments of interest only, all due on August 10, 2006 for acquisition of certain non-public shares. (Note 10)


26,277


0$
490,808

$
438,730Less Current Portion


( 36,960
)

( 9,882
)$
453,848

$
428,848 
 The amounts of long-term debt maturing in each of the years ending March 31 are as follows: 2005 - $36,960; 2006 - $453,848.
 
 F-10 
 7. INCOME TAXES
 
 At March 31, 2004, for income tax reporting purposes, the Company has a consolidated net operating loss carryforward of approximately $5,893,000 available to reduce future taxable income, if any, expiring through 2024. As a result of a 51% change in ownership in a prior year, certain of the net operating loss will be subject to an annual limitation and may not be fully utilized in any one year. Because of histories of losses, the estimate for future tax benefits has been offset by an equal asset valuation allowance.
 
 8. COMMITMENTS AND CONTINGENCIES
 
 Leases - The Company leases medical provider facility and a billing facility under noncancelable operating leases expiring February 28, 2005. Minimum annual future rentals on each of the years ending March 31 are as follows: 2005 - $86,426
 
 Rent expense amounted to $107,757 and $106,917 for the years ended March 31, 2004 and 2003, respectively.
 
 Medical Management Agreement - The Company has entered into an agreement with a medical provider whereby the Company provides management and marketing services and the leasing of facilities, furniture, fixtures and equipment for a fee equal to 70% of the provider's medical fee revenues (net of allowance for uncollectible accounts), plus 100% of the office lease rent expense. The agreement is automatically renewed from year to year unless either party gives 90 days notice of non-renewal prior to the renewal term. (See Note 4)
 
 9. RELATED PARTY TRANSACTIONS
 
 The Company has its corporate headquarters in Houston, Texas, where it shares office space and personnel with an entity for which a principal stockholder of the Company serves as a consultant. The Company has entered into agreements with this entity whereby that entity will provide various accounting, administrative and managerial services for the Company and certain of its subsidiaries for stipulated monthly fees. The agreements are for 12 months and they automatically renew for an additional 12 month period if not terminated within 60 days of the end of the current term. The Company incurred fees to this entity under the agreements totaling $139,350 and $139,342 for the years ended March 31, 2004 and 2003, respectively.
 
 On August 11, 2003, the Company signed a Convertible Promissory Note (Note) Purchase Agreement, effective August 11, 2003 with Rollouts Incorporated (Rollouts). The Company has agreed to advance up to $250,000 of principal at an interest rate of 10%, computed on the date of the advances as simple annual interest. Rollouts must pay unpaid interest accrued on the Note upon conversion of such Note into shares of Rollouts Common Stock. Interest only payments are due on January 1, April 1, July 1, and October 1. Rollouts may prepay in cash the outstanding principal upon written notice to the Company. The Company has 60 days to consider whether to accept or reject the prepayment. The Company may reject any such prepayment, provided, however, that any such rejection shall cause an automatic conversion of the entire principal amount outstanding under the Note. The Company shall also have the right at its option to convert the outstanding principal amount under the Note or any portion thereof, into that number of fully paid and non-assessable shares of Common Stock obtained by dividing the outstanding principal amount under the Note surrendered for conversion by the Conversion Price. The beginning conversion price is to be $.50 per shares subject to certain adjustments during the term of the Note. To fund this investment, the Company will use existing working capital and may seek additional funding through short and long term notes. Mr. Raffaele Attar, the Companys chairman, is a member of the board of directors of Rollouts, Inc. As of March 31, 2004, the Company has advanced $25,000 under this agreement.
 
 On December 6, 2003 the Company borrowed $56,500 from a related entity in exchange for an interest-bearing, nonrecourse note. The note bears interest at 6% per annum and is payable in annual interest only installments and is due and payable in full on or before December 5, 2005. The Company will repay the Note from its working capital. With the proceeds, the Company acquired 80,000 convertible preference shares of Famoice (Famoice) Technology Pty Ltd. The purchase price was $56,500. The Company secured the Note with the convertible preference shares of Famoice.
 
 Certain of the Company's creditors (See Note 6) are related as a result of one of the Company's principal stockholders being a consultant to these entities.
 
 During the current fiscal year the Company entered into a formal note arrangement with its chairman regarding advances made by the Company to an entity controlled by the chairman. The term of the notes require annual 6% interest payments and all remaining balances are due at the end of three years (2006). The aggregate principal balances of the notes is $46,000.
 
 F-11