| **UNITED STATES**SECURITIES AND EXCHANGE    COMMISSION  **WASHINGTON, DC 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, 2000  
Commission File Number:    0-26307  **Royal Finance, Inc.
(Exact name of small    business issuer as specified in its charter)    
Florida
65-0827278
(State or Other Jurisdiction    of Incorporation)
(IRS Employer Identification    No.)  
1481 South Military Trail, Suite 12,
West Palm Beach, Florida
33415
(Address of Principal    Executive Offices)
(Zip Code)  
561-649-3901
(Issuer's telephone number)  
Securities registered under Section 12 (b)    of the Exchange Act:
None
(Title of class)  
Securities registered under Section 12(g)    of the Exchange Act:
Common Stock, Par Value $.01
(Title of class)       
Check whether the issuer:    (i) 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 (ii) has been subject to the filing requirements for the past 90    days. Yes [X] No
Check if there is no    disclosure of delinquent filers in response 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. [X]
The aggregate market value    of the voting stock held by non-affiliates(*) of the Registrant based on the average bid    and asked prices of $2.68 and $2.88 respectively, of such common stock as of March 15,    2001, is approximately $1,554,732, based upon an average of $2.78 multiplied by 559,256shares of common stock as of such date    held by non-affiliates. As of March 15, 2001, the Registrant had a total of 3,949,425    shares of common stock, par value $.01 issued and outstanding.
Issuer’s revenues for    its most recent fiscal year: $522,015
DOCUMENTS INCORPORATED BY    REFERENCE
There are no documents    incorporated by reference in this report on Form 10-KSB except for certain previously    filed exhibits identified in Registrant’s Form 10-KSB, Forms 10-QSB and Form S-8.(*) Affiliates for the purposes of this Item    refer to the officers, directors and/or persons or firms owning 5% or more of the    Registrant's common stock, both record and beneficially.
 

 

 

 

 

TABLE OF CONTENTS

PART IPageItem 1. Description of Business.3Item 2. Description of Property.14Item 3. Legal Proceedings.15Item 4. Submission of Matters to a Vote of Security Holders.15
PART IIItem 5. Market for Common Equity and Related Stockholder    Matters.15Item 6. Management's Discussion and Analysis of Financial    Condition and Results of Operation.17Item 7. Financial Statements.19Item 8. Changes In and Disagreements With Accountants on    Accounting and Financial Disclosure.26
PART IIIItem 9. Directors, Executive Officers, Promoters and Control    Persons.26Item 10. Executive Compensation.28Item 11. Security Ownership of Certain Beneficial Owners and    Management.28Item 12. Certain Relationships and Related Transactions.29Item 13. Exhibits and Reports on Form 8-K.30
 

FORWARD LOOKING STATEMENTS: THIS FORM 10-KSB AND OTHER STATEMENTSISSUED OR MADE FROM TIME TO TIME BY ROYAL FINANCE, INC. OR ITS REPRESENTATIVES CONTAINSTATEMENTS WHICH MAY CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANINGOF THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND THE SECURITIESEXCHANGE ACT OF 1934 (THE "EXCHANGE ACT") BY THE PRIVATE SECURITIES LITIGATIONREFORM ACT OF 1995. 15 U.S.C.A. SECTIONS 77Z-2 AND 78U-5 (SUPP. 1996). THOSE STATEMENTSINCLUDE STATEMENTS REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE COMPANY ANDMEMBERS OF ITS MANAGEMENT TEAM AS WELL AS THE ASSUMPTIONS ON WHICH SUCH STATEMENTS AREBASED. PROSPECTIVE INVESTORS ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARENOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, AND THAT ACTUALRESULTS MAY DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS.IMPORTANT FACTORS CURRENTLY KNOWN TO MANAGEMENT THAT COULD CAUSE ACTUAL RESULTS TO DIFFERMATERIALLY FROM THOSE IN FORWARD-LOOKING STATEMENTS ARE SET FORTH IN THE SAFE HARBORCOMPLIANCE STATEMENT FOR FORWARD-LOOKING STATEMENTS INCLUDED AS EXHIBIT 99.1 TO THIS FORM10-KSB, AND ARE HEREBY INCORPORATED HEREIN BY REFERENCE. SEE ALSO THE DISCUSSION UNDER"RISK FACTORS" BELOW. 

 
**PART I**
ITEM 1. DESCRIPTION OF BUSINESS.

Background and Corporate History

The Registrant, Royal Finance, Inc., was organized under the laws ofthe State of Florida in April 1998. The Registrant entered into an agreement and plan amerger with the Registrant’s predecessor, GoNetgen.com, Inc. effective as of October28, 2000, pursuant to which Registrant merged with and into GoNetgen.com, Inc.GoNetgen.com, Inc. was the surviving corporation and changed its name to Royal Finance,Inc. in connection with the merger. 

GoNetgen.com, Inc., the Registrant’s predecessor, was organizedunder the laws of the State of Florida under the name "Netgen2000, Inc." underthe laws of the State of Florida in October 1998. From its organization until October2000, the Registrant’s predecessor was engaged in the development of its Internetmarketing services business. The Registrant’s predecessor specialized in designing,creating and marketing what we believed to be cost-effective Internet web and image sites,products and custom software and provided business customers with interactive Internetimage sites along with marketing services, to create exposure to audiences of prospectiveconsumers. The Registrant’s predecessor advertised its web site as a CommunityInformation Center, which offered free information to Internet users who clicked on itsweb site. The Registrant’s predecessor changed its name from Netgen2000, Inc. toGoNetgen.com, Inc. during the first quarter of 2000. 

The Registrant’s predecessor continued to develop its Internetmarketing services business during the first and second quarters of 2000. However, duringthe summer of 2000, the Chairman and Chief Executive Officer of GoNetgen.com, Inc., JulianFerretti, passed away. At the time of Mr. Ferretti’s death, GoNetgen.com’smanagement consisted of Derek Dunn, president, Lynn Dunn, vice president, and JenniferDunn, secretary. The management of GoNetgen.com evaluated its continuing Internetmarketing services business operations and potential, together with various shareholdersand the representatives of the estate of Mr. Ferretti. The management of GoNetgen.comdetermined to that it would be in the best interests of the shareholders of GoNetgen.comif the Internet related business was pursued as a private entity and that GoNetgen.comenter into a business combination and pursue alternative business opportunities. 

As a result of the evaluation of the management of GoNetgen.com, theydetermined that they would be able to increase shareholder value by entering into a mergerwith Royal Finance Inc., located in West Palm Beach, FL (hereinafter, the"Company"). The Company refers to Royal Finance, Inc. and/or to Royal Finance,Inc. and its consolidated subsidiaries, as applicable.

Business-General

The Company may sometimes be referred to as "we","us", "our" among other such words as may be appropriate. The Companyoriginates mortgage loans through its retail facilities, and its Internet site,www.royalfinance.net. In addition, the Company, through its wholly-owned subsidiary,American Florida Realty, Inc., lists, sell, leases and manages commercial and residentialproperties and through a 40% percent interest in American Title Services we close realestate transactions and issues title insurance. The Company also owns Royal InsuranceInc., which shall provide all types of insurance including homeowners, medical,disability, among other forms of insurance. 

See the discussion under "Recent Merger and Business" belowwith regard to the real-estate related business of the Company. Also, in connection withthe merger, the Company retained an insignificant equity interest in E-City, Inc.,formerly known as GoNetgen.com, Inc., the Company’s former name prior to the merger.

Some of the statements contained in this Form 10-KSB for the year endedDecember 31, 2000 discuss future expectations, contain projections of results ofoperations or financial condition or state other "forward-looking" information.These statements are subject to known and unknown risks, uncertainties, and other factorsthat could cause the actual results to differ materially from those contemplated by thestatements.

The forward-looking information is based on various factors and isderived using numerous assumptions. Important factors that may cause actual results todiffer from projections include, for example:
**-
the success or failure    of management's efforts to implement their business strategy;**-
the ability of the    Company to raise sufficient capital to meet operating requirements;**-
the ability of the    Company to compete with major established companies;**-
the effect of changing    economic conditions;**-
the ability of the    Company to attract and retain qualified employees; and other risks, which may be,    described in future filings with the SEC.
Present Business and Recent Merger

Effective on October 28, 2000 the agreement and plan of merger ofGoNetgen.com, Inc. and Royal Finance was executed. On November 28, 2000 Articles ofAmendment to the Articles of Incorporation of GoNetgen.com were adopted by the board ofdirectors of GoNetgen.com changing its name to Royal Finance, Inc. In connection with themerger, the management of the Company became the management of GoNetgen.com which was thesurviving corporation and the former management of GoNetgen.com resigned. See thedisclosure under Part II, Item 9, "Directors, Executive Officers, Promoters andControl Persons" below.

All references to the shares of common stock of the Company/RoyalFinance, Inc. in this Form 10-KSB for the year ended December 31, 2000 and as of the dateof filing of this annual report reflect a one (1) for thirty (30) common stock spliteffective in connection with the merger of Royal Finance, Inc. into Gonetgen.com, Inc.

The Company’s headquarters are located at 1481 S. Military Trail,Suite 14, West Palm Beach, FL 33415. Its telephone is 561-649-3901. See Item 2,"Description of Property" below.

Real Estate Business

The Company is a diversified financial services company and itsprincipal business activity involves providing and residential and commercial mortgagesmortgage-related services through a sales force of approximately 35 mortgage brokerassociates, loan officers and mortgage lenders, who solicit mortgage loans from realestate agents and builders and developers, among others. 

We originate, process and fund residential and commercial mortgageloans, which are typically resold on an case-by-case basis to institutional and privateinvestors. The Company mainly originates loans that do not conform to agency guidelines(non-conforming loans). Non-conforming loans typically fail to meet agency guidelines dueto credit impairment, higher loan-to-value ratios and debt-to-income ratios, and arepriced to compensate for the additional credit risk. 

The Company's long-term strategy is to expand the operations in itsrespective fields by utilizing marketing through newspapers, Internet, direct mail,billboards, among other means. The Company’s web-site is www.royalfinance.com. Weoperate through commissioned loan officers, who source the business through realtors andbuilders or other contacts. 

Applications are taken primarily in face-to-face interviews. The loanofficer submitted the application to the branch office for processing either in hard copyor through electronic transfer via modem. For conforming loans, applications are thantransmitted through the Federal National Mortgage Association's ("FNMA")automated underwriting system. The applications are then processed in accordance with therequired conditions. For all other loan types, applications are processed in our officeswith verifications collected for key financial information with a complete credit file.Certain loan types require the investor to underwrite the loan. In these situations, wesubmit the application package to the Investor for approval. Once a loan is underwritten,we gather the conditions required by underwriting for approval. When all conditions aresatisfied, we compile all closing documents and the loans are then closed when approved byclosing agents who have executed closing agreements and provided insured closing lettersfrom title insurers.

The loan programs offered by the Company reflect guidelines and terms,which match those, published by approved investors. The loan pricing of the Company isgenerated from a pricing model, which should enable us to generate from our portfolio aspecific dollar profit on each loan regardless of loan size. That approach we believeshould allow us to price larger, more efficient loans and thereby increase our averageloan size. When rates and prices are committed to applicants, the interest rate risk istransferred to the ultimate investor by locking the rate and price with the investor basedupon an agreed to closed loan delivery date.

Conforming Closed Loans

Conforming closed loans are sent to institutional and private investorsin accordance with commitments made at the time that the rate and price were guaranteed.Investors then review the loan files and upon clearing any funding conditions, theinvestor wired the proceeds to the Company's loan bank account for distribution to pay offthe loan and the excess is deposited in the Company's operating account to use theseexcess funds for operations.

Non-Conforming Loans

Non-conforming loans are sold on either a flow or bulk basis with theCompany distributing listings of closed loans and their characteristics to institutionaland private investors who bid on such loan(s) on an auction basis. The bids are subject tothe review of the complete closed loan file, which normally took place on site. Oncefunding conditions are cleared, the investor's funding occurs as with conforming loans.The loan programs and guidelines offered to the brokers and lenders reflect conservativestandards offered by a variety of investors who purchase non-conforming loans routinelyfrom mid-size aggregators such as AFR. 

The pricing offered to brokers and lenders reflects differences basedupon credit grade and loan characteristics within the grade. These differences reflect theadjustments received from the investors for which the Company aggregates product. Theultimate price offered to the broker or lender allows for a specific profit percentage tobe earned on each loan. The Company also charges certain fees on each loan at closing toincrease revenue and offset operational costs.

Business and Marketing Strategy

The Company’s business objective is to be a diversified financialservice provider specializing in mortgage related services. The key elements of theCompany's business strategy are as follows:

- Controlling growth in    stable and improving geographic areas, specializing in the growing South Florida market    with our team of experienced mortgage professionals;
- Building customer    loyalty by providing superior service in our mortgage related business services;
- Managing loan quality in    a manner that allows the loans to command satisfactory pricing from investors;
- Selling additional    mortgage related products and services to our clients through its existing offices and    through the opening of additional real estate offices;
- Providing additional    services linked to the loan process; and
- Developing alternative    delivery channels, which allow for reduced cost through direct contact with the ultimate    customer.
In order to achieve our strategic goals, we may also seek to expand ourbusiness operations through the acquisition of other mortgage lending and real estatebrokerage companies. It is the Company's experience and continued understanding that SouthFlorida is and will remain one of the top growth real estate markets in the country. Itsability to accomplish these ends will depend, in part, on the Company's financialcondition, its available cash, its borrowing power and the value of its common shares.

Potential acquisitions shall be evaluated to determine if in theopinion of our management they would be likely to enhance the net income of the Company,that expected and projected growth rates in earnings and cash flows are attainable andconsistent with the costs associated with the acquisition (required return on equity"ROI" and total return to invested capital "ROIC" of our investors),and that management is capable of developing the growth of operations. 

The Company intends to grow through the acquisition of additional andcomplimentary businesses including acquisitions in the title insurance fields and in realestate sales. We expect to face competition for acquisition candidates, which may limitthe number of acquisition opportunities and may lead to higher acquisition prices. 

Marketing Strategy

The Company intends to fully utilize the Internet and its web-sitewww.royalfinance.com as a means of attracting more customers for its mortgage relatedbusiness services. Our e-business strategy includes on-line applications, competitivelending rates and desktop underwriting. We also intend to use television, newspaper adsand targeted direct mail as marketing tools. In addition the Company advertises on itsweb-site through the use of banner ads, e-mails and listings in search engines. Throughthe use of independent consultants, we will solicit other existing real estate companies,agents and commission brokers. 

We will also pursue acquisitions as noted above and will expand throughour subsidiaries operations in the areas of title insurance and insurance to consumers.The Company, through its wholly-owned subsidiary, American Florida Realty, Inc., lists,sell, leases and manages commercial and residential properties and through a 40% percentinterest in American Title Services, we close real estate transactions and issues titleinsurance. The Company also owns Royal Insurance Inc., which shall provide all types ofinsurance including homeowners, medical, disability, among other forms of insurance. 

Seasonality

The mortgage banking industry is subject to seasonal trends. Thesetrends reflect the general pattern of re-sales of homes, which sales typically peak duringthe spring and summer seasons and decline from January through March. In addition, theprimary home market in Florida tends to increase during the fourth quarter, while thesecond home market increases from October through April. Refinancing tends to be lessseasonal and more closely related to changes in interest rates. The mortgage servicingbusiness is generally not subject to seasonal trends, except to the extent that growth ofa mortgage-servicing portfolio is generally higher in periods of greater mortgage loanoriginations.

Competition

The mortgage banking industry is highly competitive. The Companycompetes with financial institutions, mainly mortgage companies, commercial banks andsavings and loan associations and, to a certain extent, credit unions and insurancecompanies, depending upon the type of mortgage loan product offered. We also competeprincipally by purchasing or originating a variety of types of mortgage loans, emphasizingthe quality of its service and pricing the loans at competitive rates. Many of ourcompetitors have financial resources substantially greater than that of the Company. Manyof the nation's largest mortgage companies and commercial banks have a significant numberof branch offices in areas in which the Company operates. Increased competition formortgage loans from larger lenders may result in a decrease in the volume of loansoriginated and purchased by the Company, thereby possibly reducing the Company's revenues.

The Company competes on the basis of its bundling of products and thequality of its services, which it offers to the consumer. The Company competes with othermortgage companies, servicing brokers, commercial banks, savings associations, creditunions, other financial institutions and various other lenders. Many of these competitorsor potential competitors have pre-existing relationships with established dealer networks.To the extent that any such dealers expand their activities into the Company's market, theCompany could be adversely affected. We also compete with numerous relatively small,regional consumer finance companies. In addition, many of the nation's largest mortgagecompanies, savings associations and commercial banks have a significant number of branchoffices in areas in which the Company operates.

The Company believes that it can provide the same or a better qualityservice than most of its competitors. We also believe that our business strategy willenable us to compete effectively. In addition, the Company competes for its brokerageactivities by recruiting qualified and experienced salespeople, by developing innovativesales techniques, by offering competitive interest rates and product types and byproviding a higher level of service than is furnished by its competitors. However, noassurance can be given that it will be able to do so. Aggressive pricing policies of theCompany's competitors, especially during a declining period of mortgage loan originationcould result in a decrease in the Company’s mortgage loan origination volume and/or adecrease in the profitability of the Company's loan origination, thereby reducing theCompany's revenues and net income. Our main competitors in our South Florida market areRemax/Century 21 and Nexus Financial, among others.

Government Regulation

The mortgage brokerage and lending industry is a regulated industry. InFlorida, the State Department of Banking and Finance administers and enforces the rulesand regulations governing the industry and the laws of the State of Florida law prohibitseither practice of mortgage brokerage and lending without current and active licenses.Conventional mortgage operations also are subject to State usury statutes.

There are various state and local laws and regulations affecting theCompany's operations. The Company is in possession of all licenses required by the Stateof Florida to conduct its business operations and for other states were it transactsbusiness. Conventional mortgage operations also may be subject to state usury statutes.The Company is subject to the rules and regulations of the Federal Housing Administration("FHA"), FNMA and the Department of Veteran Affairs (the "VA") andstate regulatory authorities with respect to originating, processing, underwriting,selling, securitizing and servicing mortgage loans. 

The Company is a correspondent mortgage lender in the State of Florida.The Company is licensed and bonded. To maintain a correspondent lender status the companymust file audited financial statements with the State of Florida on a yearly basis. TheCompany must maintain a minimum not worth of $25,000, with audited statements disclosingthat it has a verifiable and bona fide not worth pursuant to generally accepted accountingprincipals, of at least $25,000, which must be continuously maintained as a licensecondition and to remain in good standing with the State of Florida.

The operations of the Company are subject to extensive regulation byfederal and state governmental authorities and are subject to various laws and judicialand administrative decisions that, among other things, regulate credit activities, requiredisclosures to customers, govern secured transactions and establish collection,repossession and claims handling procedures and other trade practices. 

In addition, there are other federal and state statutes andregulations, as well as judicial decisions, affecting the Company’s operations. Thoserules and regulations, among other things, impose licensing obligations on theCompany’s, establish eligibility criteria for mortgage loans, prohibit discriminationand establish underwriting guidelines which include provisions for inspections andappraisals, require credit reports on prospective borrowers and fix maximum loan amounts,and with respect to the VA loans, fix maximum interest rates. Moreover, lenders such asthe Company are required to submit annually to the FHA, FNMA and VA audited financialstatements, and each regulatory entity has its own financial requirements. The Company'saffairs also are subject to examination by the FHA, FNMA and VA at all times to assurecompliance with all applicable regulations, policies and procedures. Mortgage originationactivities are subject to, among other regulatory requirements, the Equal CreditOpportunity Act, the Federal Truth-in-Lending Act, the Home Mortgage Disclosure Act andRESPA and the regulations promulgated thereunder which prohibit discrimination and requirethe disclosure of certain basic information to mortgagors concerning credit terms andsettlement costs. Many of the aforementioned regulatory requirements are designed toprotect the interests of consumers, while others protect the owners or insurers ofmortgage loans. Failure to comply with these requirements can lead to loss of approvedstatus, termination of servicing contracts without compensation to the servicer, demandsfor indemnification or loan repurchases, class action lawsuits and administrativeenforcement actions.

Environmental Matters

To date, the Company has not been required to perform any investigationor re-mediation activities, nor has it been subject to any environmental claims. There canbe no assurance, however, that this will remain the case in the future. In the ordinarycourse of its business, the Company from time to time forecloses on the propertiessecuring loans. Although the Company primarily lends to owners of residential properties,there is a risk that the Company could be required to investigate and clean up hazardousor toxic substances or chemical releases at such properties after acquisition by theCompany, and may be held liable to a governmental entity or to third parties for propertydamage, personal injury and investigation and clean up costs incurred by such parties inconnection with the contamination. In addition, the owner or former owners of acontaminated site may be subject to common law claims by third parties based on damagesand costs resulting from environmental contamination emanating from such property.

Employees

As of March 23, 2001, the Company has 6 employees, including 5officers. None of the Company's employees are represented by a union and therefore theCompany is not subject to a collective bargaining agreement. The Company considers itsrelations with its employees to be satisfactory.
**RISK FACTORS**
You should carefully consider the following risks relating to ourbusiness and our common stock, together with the other information described elsewhere inthis Form 10-KSB. If any of the following risks actually occur, our business, results ofoperations and financial condition could be materially affected, the trading price of ourcommon stock could decline, and you might lose all or part of your investment. We haveexperienced losses and we expect future losses and we may not become profitable. 

We have incurred substantial net losses in the last fiscal year.

Although we may experience strong revenue growth, we anticipate furtherquarterly and annual losses until at least the latter half of 2002. As of December 31,2000, we had an accumulated deficit of $7,487,297. We incurred net losses of $4,917,519for the year ended December 31, 2000, and net losses of $2,569,778 for the year endedDecember 31, 1999. Net losses may continue to increase. We may not become profitable. Ifwe do not achieve profitability, we may not be able to sustain operations and generatesufficient revenues to fulfill our business plan. If we do become profitable, we expect toincrease our general and administrative expenses. As a result, we will need to generatesignificant additional revenues to achieve and maintain profitability. We have only alimited operation history, so you may experience difficulty in evaluating our business. Webegan operations in October 1998 and accordingly, we have a limited operating history onwhich you can base your evaluation of our business and prospects. In addition, we haverecently changed our business model to focus primarily on the mortgage market. Ourprospects are subject to the risks, expenses and uncertainties frequently encountered bycompanies in the early stages of development. 

We have only limited operating history, so you may experiencedifficulty in evaluating our prospects.

We began our mortgage operations in October 2000. Our Web site was notidentified as "www.royalfinance.com" until January 2001. Accordingly, we have alimited operating history on which you can base your evaluation of our business andprospects. 

Our prospects are subject to the risks, expenses and uncertaintiesfrequently encountered by companies in the early stages of development. These risksinclude the following:

- our ability to develop    further our business model;
- our ability to develop    further awareness and loyalty for our services;
- our ability to maintain    funding sources for mortgage loans; 
- our ability to attract    and retain qualified personnel; and 
- our ability to    anticipate and adapt to the changes in the evolving electronic commerce market. 
We may need additional capital in the future and additional financingmay not be available.

We currently anticipate that our available cash resources will besufficient to meet our anticipated working capital and capital expenditure requirementsfor at least the next 6 months. However, if economic conditions in the mortgage marketimproves rapidly, we may need to raise additional capital to fund more rapid expansion, toenhance existing services to respond to competitive pressures, and to acquirecomplementary businesses or technologies.

We may not be able to obtain additional financing on terms favorable tous, if at all. If adequate funds are not available or are not available on terms favorableto us, we may not be able to effectively execute our business plan.

We will originate and fund fewer mortgage loans if interest ratescontinue to rise.

Interest rates continued to rise in 1999 and through 2000. In periodsof rising interest rates, demand for mortgage loans typically declines. During thoseperiods, our clients and we will likely originate and fund fewer mortgage loans and ourrevenues will decline.

Demand for refinancing mortgages declines more significantly than fornew home purchase mortgages during periods of rising interest rates. 

Our gains and losses on sales of mortgage loans in the secondary marketare affected by rising interest rates and our hedging strategy may not offset the risk.

Our ability to generate net gains on the sale of loans in the secondarymarket may be adversely affected by increases in interest rates. Usually, we establishinterest rates on the loans at the same time we obtain commitments from the anticipatedpurchasers of the loans. The mortgage loan purchase commitments we obtain are contingentupon delivery of the loans to the purchasers within specified periods. If we are unable todeliver closed loans on time and interest rates increase, we may experience no gain, oreven a loss, on the sale of these loans. We currently do not use derivative financialinstruments to hedge these risks and are therefore exposed to losses caused by risinginterest rates.

Management employs a hedging strategy to protect us against this risk.Hedging strategies involve buying and selling mortgage-backed securities so that ifinterest rates increase and we expect to suffer a loss on the sale of those loans, ourbuying and selling of mortgage-backed securities will offset the loss. An effectivehedging strategy is complex and no hedging strategy can completely eliminate our risk. Tothe extent that we are unable to effectively match our purchases and sales ofmortgage-backed securities with the sale of the loans we originate, our gains on sales ofmortgage loans may be reduced. See also "Disclosures About Market Risk" in"Management's Discussion and Analysis of Financial Condition and Results ofOperation."

Selling loans in the secondary market could expose us to losses ifinterest rates decline.

Selling loans to a secondary market investor at a price we agree upon,regardless of whether the loans close involves risk. This strategy potentially generatesgreater revenue for us because secondary market investors are willing to pay more for thistype of commitment. However, it also exposes us to penalties if interest rates decline andborrowers choose not to close on the higher interest rate loans that we promised investorsbefore the decline in interest rates.

Our net interest income may be reduced by fluctuations inintermediate-term and short-term interest rates.

When intermediate-term interest rates approach or sink below short-terminterest rates, our net interest income is reduced or we suffer net interest losses. Weearn net interest income or suffer net interest losses from the time we fund a mortgageloan until it is delivered to an investor in the secondary market. That time periodgenerally consists of 18-40 days. Whether we earn net interest income or suffer netinterest losses depends on the difference between the interest rates on mortgage loans wefund and the interest rates on the money we borrow to fund those mortgage loans.

The interest rates on mortgage loans we fund are affected byintermediate-term rates in the United States. The interest rates on the money we borrow tofund mortgage loans are affected by short-term rates based on the London Interbank OfferedRate (LIBOR). If the intermediate-term rates in the United States approach the LIBOR rate,our net interest income is reduced or we suffer net interest losses.

Fluctuations may occur in our operating results due to seasonality andother factors, any of which may reduce the price of our common stock.

Our revenue is subject to seasonal and other fluctuations. Due to thesefactors, our operating results during any given period may suffer, which could result in areduction in the trading price of our common stock.

Home sales typically peak during the spring and fall seasons anddecline in the summer and winter. Our operating results may fluctuate significantly as aresult of a variety of other factors, many of which are outside our control. These factorsinclude the following:

- a decline in    residential home buying that decreases the demand for purchase mortgage loans; 
- an increase    in interest rates that decreases the demand for refinancing existing mortgage loans; and 
- the number    of applications generated through our Web site. 
Our business may grow significantly and we may have difficulty managingthe growth.

We may experience periods of rapid growth that may place a significantstrain on our resources. If we fail to manage our growth effectively, the quality of ourservices will be impaired and our financial performance will suffer.

If we are unable to maintain adequate financing sources, our ability tooriginate and fund mortgage loans will be impaired and our revenues will suffer.

Our ability to fund mortgage loans depends to a large extent upon ourability to secure financing on acceptable terms. We currently fund most of the loans weoriginate through large lines of credit known as warehouse lines of credit, or undercollateralized loan repurchase agreements. Several commercial banks and institutionalinvestors provide these funding sources. Most of these financing arrangements haveone-year terms and some are cancellable by the lenders at any time.

If we are not successful in renewing our borrowings or in arranging newfinancing with terms as favorable as the terms of our current financing arrangements, wemay have to curtail our origination and funding activities, which would reduce ourrevenue.

All of the financing arrangements we use to fund mortgage loans aresubject to financial covenants and other restrictions. Because we are an early stage, weare at times not in compliance with those covenants and restrictions and rely on waiversfrom the various lenders. If we are unable to operate within the covenants or obtainwaivers, all amounts that we owe under the financing arrangements could become immediatelypayable. The termination of a financing arrangement by a lender, or the acceleration ofour debt, would have a significant negative effect on our business.

Additional pricing pressures resulting from increased onlinecompetition could reduce our revenues.

Pricing of mortgage loans on the Internet is also highly competitive.Pricing to borrowers involves a number of factors, including the interest rate on theloan, up-front origination fees and processing, underwriting and document preparationfees. Increased competition in the online arena has forced mortgage lenders, including us,to reduce our prices to borrowers, thus reducing revenue.

Our competitors in the mortgage banking market are often larger, moreexperienced and have greater financial resources than we do, which will make it difficultfor us to successfully compete.

We compete with other mortgage banking companies, commercial banks,savings associations, credit unions, insurance companies and other financial institutionsin every aspect of our business. Many of these companies and financial institutions arelarger, more experienced and have greater financial resources than we do. Accordingly, wemay not be able to compete successfully in the mortgage banking market. Our competitorsmay be able to respond more quickly to take advantage of new or changing opportunities,technologies and customer requirements. They also may be able to undertake more extensivepromotional activities, offer more attractive terms to borrowers and adopt more aggressivepricing policies.

A discontinuation or reduction in secondary market programs would hurtour financial performance.

Our ability to sell mortgage loans to institutional investors in thesecondary market is largely dependent upon the continuation of programs administered byFannie Mae, Freddie Mac, Ginnie Mae and private mortgage investors. These entitiesfacilitate the sale of mortgage loans and mortgage-backed securities through the secondarymarket. Any discontinuation of or reduction in the operation of those programs or anysignificant impairment of our eligibility to participate in those programs would hurt ourfinancial performance. In addition, any significant adverse change in the secondary marketlevel of activity or the underwriting criteria of Fannie Mae, Freddie Mac, Ginnie Mae orother private mortgage investors would reduce our revenues.

If the economy of Florida experiences a downturn, our business may besignificantly affected.

Although we expect our mortgage loan business to have a greaternational scope in the future, our short-term results of operations and financial conditionwill be negatively affected by poor economic conditions in Florida, particularly in theirresidential real estate markets.

If we are unable to comply with mortgage banking rules and regulations,our ability to originate and fund mortgage loans may be restricted.

Our mortgage banking business is subject to the rules and regulationsof various federal, state and local regulatory agencies in connection with originating,processing, underwriting and selling mortgage loans. These rules and regulations, amongother things, impose licensing obligations on us, prohibit discrimination, establishunderwriting guidelines and mandate disclosures and notices to borrowers. We also arerequired to comply with each regulatory entity's financial requirements. If we do notcomply with these rules, regulations and requirements, the regulatory agencies mayrestrict our ability to originate and fund mortgage loans.

We also must comply with state usury laws. If we fail to comply withthese laws, the states can impose civil and criminal liability and restrict our ability tooperate in those states. In addition, secondary market investors may demandindemnification or require us to repurchase loans sold in the secondary market. We alsomay be subject to class action lawsuits. Any of these events could impair our ability tooriginate and fund loans, which would reduce our revenue.

Changes in regulatory requirements or the interpretations of thoserequirements could increase our costs of doing business or otherwise hurt our financialperformance.

Regulatory and legal requirements are subject to change and may becomemore restrictive, making our compliance more difficult or expensive or otherwiserestricting our ability to conduct our business as it is now conducted. Changes in theseregulatory and legal requirements could increase our costs of doing business.

Many states prohibit non-employees of a licensed mortgage company fromconducting business under that licensed mortgage company's name. Our clients often hire usto provide back office functions, such as processing and underwriting. Because providingthese back office services is a relatively new concept in the industry, most stateregulations do not specifically address the provision of back office services. As stateregulators become more familiar with these practices, it is possible that they mayinterpret current regulations or enact new regulations to restrict our ability to performthese back office services for our clients, either of which would adversely affect ourfinancial performance.

If we fail to maintain mortgage-banking authority in the states wherewe do business, we may incur liability.

We are authorized to originate loans for first mortgages on homes in  states. If we fail to maintain our licensing approvals and exemptions in thosejurisdictions, we may incur liability and may be unable to transact business in thosejurisdictions.

We have authority in seven states to originate loans for mortgages thatwould be subordinate to first mortgages in a foreclosure proceeding. In those states inwhich we do not have authority to originate subordinate lien mortgages, or in which ourauthority to do so is limited, we do not originate subordinate lien mortgage loans. If wewere to originate a subordinate lien mortgage loan in a state without authority to do so,we might incur liability.

Some states require us to obtain prior approval before a change ofcontrol of our company occurs. As a public company, we may not have advance notice of achange of control occasioned by a stockholder's purchase of our stock in the open market.We also are not able to control who purchases our voting stock in the open market. If anyperson holding 10% or more of our stock fails to meet a state's criteria, or refuses tocomply with state regulatory requirements, we could lose our authority to originatemortgage loans in that state, which could hurt our business, results of operations andfinancial condition.

Early mortgage loan payment defaults may cause losses.

If borrowers default in the first few months after the loan isoriginated, we may be required to repurchase those loans from the secondary marketinvestors to whom we sold those loans. We may not be able to resell those loans in thesecondary market. Our financial performance may be adversely affected during economicdownturns when the frequency of loan defaults tends to increase.

We may be required to repurchase loans or indemnify investors if webreach representations and warranties.

When we sell a mortgage loan to a secondary market investor, we makerepresentations and warranties about characteristics of the mortgage loan, the borrowerand the underlying property. If we breach any of these representations and warranties, wemay be required to repurchase the loan from the investor or indemnify the investor for anydamages caused by the breach.

With some loan sales, we may be required to return a portion of thepremium paid by the investor for the loan if the loan is prepaid within the first yearafter its sale. If we are regularly required to repurchase loans, indemnify investors orreturn loan premiums, it would have an adverse effect on our financial performance.

A delay in the receipt of services from third parties may reduce ourrevenues.

We rely on third party sources for some of the information used in themortgage loan underwriting process, including credit reports, appraisals and titlesearches. Any interruptions or delays in obtaining these services may cause delays in ourprocessing and closing of mortgage loans, which could create customer dissatisfaction andinjure our market position.

Because our executive officers and directors beneficially own amajority of the voting stock, they have the ability to control all matters submitted tostockholders for approval, which will limit your ability to control the company.

Our officers and directors beneficially own or control3,500,000 shares of common stock, which represents approximately 88.62 % of theoutstanding shares of common stock outstanding as of March 31, 2001. As of the dateof this Form 10-KSB, if executive officers and directors act together, they will have theability to control all matters submitted to our stockholders for approval, including (1)the election and removal of directors and (2) any merger, consolidation or sale of all orsubstantially all of our assets.

Future sales of our common stock may depress our stock price.

Sales of a substantial number of shares of our common stock in thepublic market could cause a reduction in the market price of our common stock. Moreover,we may issue additional shares in acquisitions and may grant additional stock options toour employees, officers, directors and consultants under our stock option plan.

ITEM 2. DESCRIPTION OF PROPERTY

The Company currently maintains its administrative offices at 1481South Military Trail, Suite 14, West Palm Beach, Fl 33415, telephone (561) 649-3901. Thisis leased for a term of 24 months, and at present the rent is $2,200 a month. AmericanFlorida Realty, a wholly-owned subsidiary, maintains a real estate office in Suite 12 atthe same address, telephone (561) 966-7666. The Company has an additional office at4956-21 Le Chalet Blvd. Boynton Beach, Florida 33436, telephone (561) 735-0711, whichserves as a mortgage and real estate sales office. This office is leased for a term of 36months at a monthly rental of $1,956. We believe that our facilities are adequate for ourcurrent needs and anticipated future needs. However, in the near future, the Companyexpects to open or acquire office facilities in the additional cities in Florida of NorthPalm Beach, Jupiter, Lake Worth and Boca Raton, in order to support our anticipatedgrowth. This expansion will require us to raise additional capital and/or generateadditional revenues. 

Prior to the merger and its commencement of its real estate business,the Company’s facilities from 1999 and through November 2000 consisted ofapproximately 1400 square feet of office space at 6685 Forrest Hill Boulevard, Suite 211,West Palm Beach, Florida 33415. These offices were used for the Company’s thenInternet business, operated under the name "GoNetgen.com" which were leased froma non-affiliated party at a monthly rental of $1,200. The Company also leased during 1999and through March 2000 approximately 2,400 square feet on a month-to-month basis from anon-affiliate at 324 Datura Way, West Palm Beach, FL 33415 for $1,800 per month, whichlatter premises were used for GoNetgen.com’s marketing activities. 

ITEM 3. LEGAL PROCEEDINGS

There are no legal proceedings presently pending or threatened against the Company.

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

None

**PART II**

ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHERSHAREHOLDER MATTERS

The Company’s common stock is traded on the OTC Bulletin Boardmarket under the symbol "ROYA". As of March 27, 2001, there were fourteen marketmakers in the Company’s stock. The following information with respect to the high andlow market prices was obtained from the Company’s records. Trading the inCompany’s shares commenced in December 1999, under the symbol "NTGI" andits shares were quoted under such symbol until November 21, 2000, when the symbol waschanged to ROYA as a result of the merger with Royal Finance.
**Fiscal Year 1999****High**LowFourth Quarter Ending December 31,
$1.12
$1.00  **Fiscal Year 2000**First Quarter Ending March 31,
$3.50
$1.00Second Quarter Ending June 30,
$2.50
$0.87Third Quarter Ending September 30,*
$1.32
$0.19Period Ending December 31,
$1.81
$1.12  **Fiscal Year 2001**First Quarter Ending March 31,$3.00$1.12(*) During the third quarter of    2000, the Company had a 1 for 30 recapitalization by action of the board of directors.
The Company has approximately 200 common shareholders. Holders ofCommon Stock are entitled to dividends when, as, and if declared by the Board ofDirectors, out of funds legally available therefore. The Company has never paid cashdividends on its Common Stock. The Board of Directors does not anticipate paying cashdividends in the foreseeable future as it intends to retain future earnings to finance thegrowth of the Company's businesses. The payment of future cash dividends will depend onsuch factors as earnings levels, anticipated capital requirements, the operating andfinancial condition of the Company and its subsidiaries and such other factors that theBoard of Directors of the Company may deem relevant.

RECENT SALES OF UNREGISTERED SECURITIES

The following information is given with regard to unregisteredsecurities sold by the Company during the past three years, including the dates andamounts of securities sold; the persons or class of persons to whom we sold thesecurities; the consideration received in connection with such sales and if the securitieswere issued or sold other than for cash, the description of the transaction and the typeand amount of consideration received.

At the time of the Company's formation in October 1998, we issued600,000 shares of common stock to Derek Dunn in exchange for $30,700 and servicesrendered. This transaction was in reliance on Section 4(2) of the Securities Act of 1933as it did not involve a public offering. 

In January 1999, $39,000 of bridge loans were advanced by five (5)lenders ("Lenders"). The Lenders received convertible notes which required theloans be repaid within twelve (12) months or, at the option of the Lenders, be convertedinto the Company's common shares for a maximum 13,000 shares. On April 2, 1999, theLenders exercised their conversion rights. This transaction was in reliance on RegulationD, Rule 504.

In January 1999, we engaged U.S. Realty Group, Inc. as a consultantregarding the management and operations of the Company, as well as future financings, andacquisitions. The consultant is to devote up to one day per month at the request of theCompany for advice and assistance. In exchange for the consultant's services, we havegranted the consultant options to purchase four hundred thousand (13,333) shares of ourcommon stock at a price of $.01 per share. These options were exercised on March 31, 1999.An identical consulting agreement was entered with Fidelity MFG, Inc. for 400,000 options.Fidelity MFG is solely owned by Julien Ferretti, the Company's board chairman. We alsoissued Mr. Ferretti an additional 30,000 options exercisable at $.01 per share, uponjoining the Company. These options were exercised on April 2, 1999. These transactionswere in reliance on Regulation D, Rule 504. 

On March 25, 1999, we commenced a private placement of 7,833 Units,Each Unit consists of one (1) share of common stock, $.01 par value, and one (1)redeemable Warrant, which when exercised entitles the holder to one (1) share of commonstock at an exercise price of one ($1.00) dollar, subject to adjustment under certaincircumstances. The Warrants are redeemable by the Company at any time after one year fromJuly 23, 2000, on thirty (30) days written notice (which notice may not be given prior tothe one year period) at a price of $.0001 per Warrant, subject to prior exercise, shouldthe common stock trade at a closing bid price of at least three ($3.00) dollars per sharefor twenty (20) consecutive trading days. The Warrants may not be exercised for one (1)year from July 23, 2000, and shall expire on or before the close of business two (2) yearsthereafter, July 23, 2002, unless extended. This private placement was in reliance onRegulation D, Rule 504.

On April 5, 1999, the Company issued B Warrants in the followingamounts at $0.01 per warrant and for services rendered to the Company, in reliance onRegulation D, Rule 504: David Brandes 10,000, E-Z Mortgage Finance Co. 10,000, JulianFerretti 8,333, Doug Meyers 1,666 and Sherri Simpson 1,666.

In January 2000, the Companyauthorized and issued 1,000 shares of Class A Preferred Stock at $10 par value. Each shareof Class A Preferred Stock has one vote for every 3,000 shares of Common Stock. ThePreferred Stock is non - participating with respect to dividends.

The Chief Financial Officerreceived an additional 500 shares in exchange for services. Compensation of $15,000 basedon the private placement value of $1 each share at the time have been recorded in thesefinancial statements as consulting fees.

In March 2000, the Companyentered into an agreement with a consultant and issued 26,667 shares. Valued at theprivate placement offering.

In March and June 2000, theCompany raised an additional $60,000 in private placement by selling 2,000 shares ofcommon stock.

In June 2000, the Company issued667 shares to a consultant in exchange for services rendered at the private placementoffering of $1 per share.

In July 2000, various consultantsexercised their options to purchase a total of 21,513 shares in lieu of compensation atthe private placement offering of $1 per share.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

General

Effective October 20, 2000, Royal Finance Inc., a privately held entity combined itsoperations into a publicly held corporation gonetgen.com. This business combination wasaccounted for as an equity transaction and not as a merger. In addition, this transactionwas accompanied by a reserve stock recapitalisation of 1 for 30. In conjuction with thisbusiness combination, the Company discontinued its internet related business.The netassets of the web business were immaterial at the time of the discontinuation. See alsonote B to the notes to the consolidated financial statements.

The Company is a holding company, which currently has one wholly ownedoperating subsidiary. We own all outstanding shares of American Florida Realty, a licensedreal estate corporation. American Florida Realty is a wholly owned subsidiary of theCompany. In addition to its conventional real estate brokering business, we also utilizeAmerican Florida Realty for providing additional services to real estate foreclosures. Thecompany plans on opening addition's real estate offices or acquire existing real estateoffices. By increasing the number of real estate outlets, the company will capitalize onthe revenue sharing structure it has created. An example of this would be referring amortgage to Royal Finance in addition Royal Finance would refer a title policy to AmericanTitle Service. This cross selling strategy will increase the company revenues while at thesame time keep expenses down.

The Company is a rapidly growing mortgage business engaged inoriginating, purchasing and selling conventional loans on properties through its financedivisions. We operate primarily in the State of Florida. Our business strategy is toincrease the volume of our loan origination's, purchase and selling conventional loans onproperties. We are a leading mortgage business in Palm Beach County in originatingmortgage loans. Through a sales force of approximately 35 mortgage broker associates andloan officers, we solicit mortgage loans from real estate agents and builders. 

We intend to grow through the acquisition of additional andcomplimentary businesses, which can be acquired at reasonable earnings multiples andpresent opportunity for growth and profitability through the application of improvedaccess to financing and management expertise by utilizing synergistic relationships. Weintend to consolidate existing mortgage brokers, title insurance and real estate officesin the South Florida area. The average real estate office is typically a four-personoperation, without proper funding for advertising or expansion. It is the Company's intentto retain all essential personnel and consolidate to a central location.

Potential acquisitions are evaluated to determine that they would beaccretive to earnings and equity, that the expected and projected growth in earnings andcash flows are attainable and consistent with the required return on equity (ROI) andtotal return to investors (ROIC), and that management is capable of developing the growthof operations. 

The Company expects to face competition for acquisition candidates,which may limit the number of acquisition opportunities and may lead to higher acquisitionprices. 

There can be no assurance that the Company will be able to identify,acquire or manage profitably additional businesses or to integrate any acquired businessesinto the Company without substantial costs, delays or other operational or financialproblems. Further, acquisitions involve a number of risks, including possible adverseeffects on the Company's operating results, diversion of management's attention, failureto retain key personnel of the acquired business and risks associated with unanticipatedevents or liabilities, some or all of which could have a material adverse effect on theCompany's business, financial condition and results of operations. The timing, size andsuccess of the Company's acquisition efforts and the associated capital commitments cannotbe readily predicted. The Company currently intends to finance future acquisitions byusing shares of its common stock and other forms of financing as the consideration to bepaid.

In the event that the common stock does not maintain a sufficientmarket value, or potential acquisition candidates are otherwise unwilling to accept commonstock as part of the consideration for the sale of their businesses, the Company may berequired to seek other forms of financing in order to maintain its acquisition program. Ifthe Company does not have sufficient cash resources, its growth could be limited unless itis able to obtain additional equity or debt financing.

New Accounting Pronouncements

Derivative and Hedging Activities - In June 1998, the FASB issued SFASNo. 133, "Accounting for Derivative Instruments and Hedging Activities"("SFAS 133"). SFAS 133 requires companies to recognize all derivative contractsas either assets or liabilities in the balance sheet and to measure them at fair value.SFAS 133 is effective for the fiscal year ended December 31, 2000. The Company does notexpect adoption of the new standard on January 1, 2001 to affect its financial statements.
**Consolidated Results of Operations

Year Ended December 31, 2000

Our revenues for the year ended December 31, 2000 were $522,015 ascompared to no revenues for the period ended December 31, 1999. Our Selling and Generaland Administrative expenses during the year ended December 31, 2000 were $3,905,235. Thisincludes expenses for non-cash compensation of services provided of $1,530,400. Our lossfrom continuing operations for the year ended December 31, 2000 $3,383,220. We had a netloss of $4,917,519 for the year ended December 31, 2000. This resulted in a loss per shareof $1.45 or $1.0 from continuing operations and a loss per share of $.45 fromdiscontinuing operations. Our net loss per share for the year ended December 31, 1999 was$.86.

Liquidity and Capital Resources

Total assets at December 31, 1999, were $12,922 as compared to $49,210at December 31, 2000. The increase was mainly due an increase in receivables and propertyand equipment.

Total liabilities at December 31, 1999 were $12,000 compared to $24,024at December 31, 2000.  Our liabilities at December 31, 2000 consisted of accountspayable and accrued expenses.

Cash flows used by operating activities during 1999 was $250,103compared to 34,089 during 2000. The declining cash flows used by operating activities wasprincipally due to two non-cash transactions.

Cash flows used by investing activities were $15,376 in 1999 comparedto $40,445 used in 2000.

Cash flows provided by financing activities were $265,700 in 1999compared to $75,000 in 2000. This decrease is primarily due to a reduction in the sale ofstock for cash in 2000. The Company received proceeds from the sale of common stock of$60,000 and the sale of preferred stock of $15,000. See also note H to the notes to theconsolidated financial statements.

Our plan to hopefully generate increased sales and achieveprofitability, of which there can be no assurance, anticipates the establishment andexpansion of our marketing operation.

There can be no assurance that this goal will be timely achieved, if at all. Currently,we have established our marketing in the West Palm Beach area.

ITEM 7. FINANCIAL STATEMENTS.

ROYAL FINANCE INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
TABLE OF CONTENTS
INDEPENDENT AUDITOR'S REPORT19CONSOLIDATED BALANCE SHEETS20CONSOLIDATED STATEMENT OF OPERATIONS21CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY21CONSOLIDATED STATEMENTS OF CASH FLOWS22NOTES TO CONSOLIDATED FINANCIAL STATEMENTS23
 
MARK ESCOFFERY, P.A.Certified Public Accountant4241A Northlake BoulevardPalm Beach Gardens, FL 33410INDEPENDENT AUDITOR'S REPORTTo the Board of DirectorsRoyal Finance, Inc.West Palm Beach, FL 33401
Ihave audited the accompanying Consolidated Balance Sheets of Royal Finance, Inc. as ofDecember 31, 2000 and 1999, and related Statements of Operations, Stockholders' Equity andCash Flows for the year ended December 31, 2000 and from October 22, 1998 (inception) toDecember 31, 1999. These financial statements are the responsibility of the Company'sManagement. My responsibility is to express an opinion on these financial statements basedon my audits.

Iconducted my audits in accordance with auditing standards generally accepted in the UnitedStates of America. Those standards require that I plan and perform the audits to obtainreasonable assurance about whether the financial statements are free of materialmisstatements. An audit includes examining on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation. I believe that my audits providea reasonable basis for my opinion.

In myopinion, the financial statements referred to above present fairly, in all materialrespects, the financial position of Royal Finance, Inc. as of December 31, 2000 and 1999and the results of its operations and its cash flows for the years ended December 31, 2000and 1999 and from October 22, 1998 (inception) to December 31, 1999 in conformity withaccounting principles generally accepted in the United States of America.

Theaccompanying financial statements have been prepared assuming that the Company willcontinue as a going concern. As discussed in NOTE J to the financial statements, theCompany has suffered substantial losses since inception. This raises substantial doubtabout the Company's ability to continue as a going concern. Management's plan in regard tothese matters are also described in NOTE J. The financial statements do not include anyadjustments that might result from the outcome of this uncertainty.

PalmBeach Gardens

Florida

March27, 2001

 
**Royal Finance, Inc.**Consolidated Balance Sheets    December 31, 2000 and 1999ASSETS2000
1999Current Assets
   Cash
$687
$
221   Commission    Receivable14,939
-Total Current Assets15,626
221
Property and Equipment, Net30,884
10,701   Deposits2,700
2,000
TOTAL ASSETS
$49,210
$
12,922
LIABILITIES AND STOCKHOLDERS'    EQUITY

Current Liabilities

   Accounts Payable    and Accrued Expenses
$24,024
$
12,000
TOTAL CURRENT LIABILITIES
$24,024
$
12,000
Preferred Stock $10 par value    1,000 shares authorized, issued 
and outstanding10,000
-Common Stock, $.01 par value    10,000,000 shares authorized 3,403,045 shares issued and outstanding in 2000 and 4,510,000    issued and outstanding in 1999 
34,030
 

45,000Additional Paid-In Capital7,468,453
2,525,600Accumulated Deficit during    Development Stage(7,487,297)
(2,569,778)
Total Stockholders' Equity25,186
922
TOTAL LIABILITIES AND STOCKHOLDERS'    EQUITY
$49,210
$
12,922See Notes to Financial    Statements
 
**Royal    Finance, Inc.**Consolidated    Statements of Operation Year Ended December 31, 2000 and from October 22, 1998 (Inception)    to December 31, 1999
For    the Year Ended 12/31/00
For    the Year Ended 12/31/99Commission Income$522,015$-522,015Selling and General and    Administrative(3,905,235)
-Loss from Continuing Operations3,383,220-Loss from Discontinued Operations1,534,299-Net Loss$4,917,519$2,569,778Loss Per Common Share-Basic and    Diluted from:   Continued Operations$(1.00)$   Discontinued    Operations$(0.45)$   Net Loss$(1.45)$(0.86)Weighted Average Shares    Outstanding3,378,5443,000,000See Notes to Financial    Statements
 

**Royal Finance,    Inc.**
Statement of    Stockholders' Equity
Year Ended December 31,    2000 and from October 22, 1998 (Inception) to December 31, 1999   
Preferred    Stock
Common stockAdditional    Paid-In CapitalAccumulated    Deficit during Dev. StageTotalSharesAmountSharesAmountIssuance of stock at inception600,0006,00024,700-30,700Stock restated at inception2,700,02727,0003,309,383-3,336,383Net Loss-----(27,200)(27,200)Balance at 12/31/19983,300,02733,0003,334,083(27,000)(27,000)Debt converted to common stock13,000130389,870-390,000Stock Options Exercised27,667277829,723-830,000Stock Issued as Compensation for    Service1,5001544,985-45,000Common Stock Issued for Private    Placement7,83378234,922-235,000Stock Warrants issued as    compensation--1,040,000-1,040,000Net Loss---
(2,542,578)
(2,542,578)Balance at 12/31/1999$3,350,027$33,500$5,873,583$(2,569,778)$3,337,305Preferred stock issued1,00010,0005,00015,000Stock Issued as Compensation for    Service28,833288864,712-865,000Common Stock Issued for Private    Placement2,0002059,980-60,000Stock Issued as Compensation for    Service667719,993-20,000Stock Warrants issued as    compensation21,513215645,185645,400Net Loss(4,917,519)(4,917,519)Balance at 12/31/20001,000$10,000$3,403,045$34,030$7,468,453$(7,487,297)$25,186See Notes to Financial    Statements
 
**Royal    Finance**Consolodated    Statement of Cash FlowsYear Ended    December 31, 2000 and From October 22, 1998 (Inception) Trough December 31, 1999For    the Year Ended 12/31/2000For    the Year Ended 12/31/1999CASH FLOW FROM    OPERATING ACTIVITIES:Net Loss$(4,917,519)$(2,569,778)Adjustment to    reconcile net loss to net cash used for Operating Activities:Depreciation3,7592,675Loss from sale of    Securities4,627-Convertible Debt-390,000Stock Options issued    as compensation-830,000Compensation for    services1,530,40045,000Stock warrants    issued as compensation-1,040,000Stock    Recapitalization3,347,559-Changes in operating    assets and liabilities:Increase (Decrease)    in Communications receivable(14,939)-Increase in Accounts    Payable and Accrued Expenses12,02412,000NET CASH USED OF    OPERATING ACTIVITIES(34,089)(250,103)CASH FLOWS FROM    INVESTING ACTIVITIES:Purchase of    Securities(145,891)(2,000)Proceeds from Sale    of securities(141,264)-Purchase of Property    & Equipment(35,118)(13,376)Deposits(700)(2,000)NET CASH USED FOR    INVESTING ACTIVITIES(40,445)(15,376)CASH FLOWS FROM    FINANCING ACTIVITIES:Common Stock Issued    for Cash60,000265,700Preferred Stock    Issued for Cash15,000-Proceeds From Loans-39,000Conversion of Loans-(39,000)NET CASH PROVIDED BY    FINANCING ACTIVITIES75,000265,700NET INCREASE IN CASH466221CASH AT BEGINNING OF    PERIOD221-CASH AT END OF    PERIOD$687$221SUPPLEMENTARY    DISCLOSURES OF CASH FLOWS INFORMATION:Conversion of Loan-$39,000See Notes to Financial    Statements
 
**ROYAL FINANCE,    INC.
Year Ended    December 31, 2000 and from October 22, 1998 (Inception) through December 31, 1999
NOTES TO    CONSOLIDATED FINANCIAL STATEMENTS**NOTE A - SUMMARY OF SIGNIFICANTACCOUNTING POLICIES**
Nature of Operations

The Company was incorporated inthe State of Florida on October 22, 1998 and changed its name from GoNetgen.COM to RoyalFinance, Inc. in October 2000 when it entered into a business combination agreement.

From October 22, 1998 to October2000 the operations of the Company were devoted primarily to developing a corporate website, raising capital, obtaining financing, marketing and administrative functions.

From October 2000 the Companyoperates as a mortgage broker. It is a loan correspondent for closing Federal HousingAgency (FHA) loans and is also licensed as a loan correspondent in the State of Florida.

Principles of Consolidation

The accompanying ConsolidatedFinancial Statements include the accounts of the Company and its wholly owned subsidiary.Intercompany transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financialstatements in conformity with generally accepted accounting principles requires Managementto make estimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expenses during thereporting period. Actual results could differ from those estimates.

Property and Equipment

Property and equipment arerecorded at cost and are depreciated, using the straight-line method, over their estimateduseful lives of the assets.
**NOTE A - SUMMARY OF SIGNIFICANTACCOUNTING POLICIES (Continued)

Fair Value of FinancialInstruments

The fair value of the Company'sfinancial instruments, consisting of commissions receivable and accounts payable,approximate their carrying value.

Loss Per Share

Basic loss per share fromcontinuing operations, discontinued operations and net loss is computed by dividing theloss from continuing operations, discontinued operations and net loss by the weightedaverage number of common shares outstanding during the year. Fully diluted loss per shareis not calculated as the net effect would be anti-dilutive.
**NOTE B - BUSINESS COMBINATION

Effective October 20, 2000, RoyalFinance Inc., a privately held entity combined its operations into a publicly heldcorporation GONETGEN.COM. The business combination was accounted for as an equitytransaction and not as a merger. The surviving entity changed its name to Royal Finance,Inc.

At the time of the businesscombination a reverse stock recapitalization was effectuated and each Stockholder inGONETGEN.COM received one share of Common Stock for every 30 shares of Common Stock heldprior to the business combination. The Stockholders in Royal Finance, Inc. prior to thetransaction were issued one share of Common Stock for every two shares held. This amountedto 80% of the Company.

In conjunction with the businesscombination, the Company discontinued its internet design of web and image sites productsand custom software as of October 20, 2000. The net assets of the web business wereimmaterial at the time of discontinuance. The following represents the data on thediscontinued operation.:
**NOTE B - BUSINESS COMBINATION(Continued)
**2000**
**1999**Revenues$87,339
$37,856
Loss from    Discontinued Operation$1,534,299
$2,569,778
Prior period financial statementshave been retroactively restated, for the stock, for the recapitalization and thediscontinued operations.
**NOTE C - PROPERTY AND EQUIPMENT****2000**
**1999**Furniture, Fixtures & Equipment $30,033 
$    1,104 
Computer    Equipment 5,086
12,27235,119
13,376Less: Accumulated Depreciation4,235
2,675$30,884
$10,701**NOTE D - STOCKHOLDERS' EQUITY**
The Company was capitalizedinitially with a $30,700 investment from its Founder and Sole Stockholder at October 22,1998.

In January 1999, loans of $39,000were obtained from five non affiliated lenders for working capital purposes. The lendersreceived convertible notes which required the loans to be repaid within twelve months orat the option of the lenders, to be converted into 13,000 shares of common stock. Thelenders exercised their options. The shares were valued at a price equivalent to asubsequent private placement.
**NOTE D - STOCKHOLDERS' EQUITY(Continued)

In January 1999, the Companygranted a consultant options for 13,333 shares at an option price of $1 per share forservices rendered. The shares were valued at $1 per share based upon the price paid in asubsequent private placement. Consulting fees expensed relating to these options were$400,000 for the period ended December 31, 1999.

The Company entered into aconsulting agreement with a company controlled by the Chairman of the Board of Directors.The agreement granted that Company options of 13,334 shares of common stock. In addition,the Chairman received an option to purchase 1,000 shares on joining the company. Theconsulting expenses relating to exercising the options relating to the shares and thewarrants have been accounted for at the market value determined at the time of thecontract at approximately $430,000 for the period to December 31, 1999.

In April 1999, the Companyauthorized 2,000 shares to be issued to the Chief Financial Officer in exchange forservices rendered under a one year employment agreement. At December 31, 1999, 1,500shares had been issued to the Chief Financial Officer and compensation of $45,000 forthese services, based on the market value of the shares at the time, has been recorded inthe financial statements as consulting fees.

In March and July 1999, privateplacement offerings were completed and $235,000 was raised by selling 7,833 unitscontaining one share of common stock, and one redeemable warrant (A). The warrants areredeemable by the Company at any time after one year from July 23, 2001, at a price of$.0001 per warrant, subject to prior exercise, should the common stock trade at a closingbid price of at least $3 per share for twenty consecutive trading days. The warrants maynot be exercised July 23, 2001 and expire on the close of business two years thereafter,July 23, 2002.
**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS

(Continued)
**NOTE D - STOCKHOLDERS' EQUITY(Continued)

During 1999 the Company issued atotal of 2,000,000 B Warrants to purchase common stock at $.03. At December 31, 1999 theCompany had issued 34,667 B Warrants and $1,040,000 was expensed. These Warrants wereissued to the Chairman and consultants for their services. The warrants were valued usingthe private placement price of $1.

In January 2000, the Companyauthorized and issued 1,000 shares of Class A Preferred Stock at $10 par value. Each shareof Class A Preferred Stock has one vote for every 3,000 shares of Common Stock. ThePreferred Stock is non - participating with respect to dividends.

Form S-8 also provided for theissuance of 1,667 shares to the Company's Corporate Securities Counsel in considerationfor continuing services in connection with the preparation and review of all corporatesecurities filings with the Securities and Exchange Commission and such other contractsand agreements between the Company and third parties as were requested.

An expense of $50,000 was chargedto expenses in these financial statements.

The Chief Financial Officerreceived an additional 500 shares in exchange for services. Compensation of $15,000 basedon the private placement value of $1 each share at the time have been recorded in thesefinancial statements as consulting fees.

In March 2000, the Companyentered into an agreement with a consultant and issued 26,667 shares. An expense relatedto these shares of $800,000 was expensed in these financial statements. Valued at theprivate placement offering.

In March and June 2000, theCompany raised an additional $60,000 in private placement by selling 2,000 shares ofcommon stock.
**NOTE D - STOCKHOLDERS' EQUITY(Continued)**
In June 2000, the Company issued667 shares to a consultant in exchange for services rendered. Expenses related to theissuance of these shares have been accounted for at the private placement offering of $1per share.

In July 2000, various consultantsexercised their options to purchase a total of 21,513 shares in lieu of compensation. Theexpenses related to the exercise of the options have been accounted for at the privateplacement offering of $1 per share.
**NOTE E - ACQUISITION**
The Company acquired its whollyowned subsidiary in January 2000 at a price which was $5,844 less than the net assetsacquired. This difference was applied by reducing the carrying value of the Subsidiary'sproperty and equipment.
**NOTE F - INCOME TAXES

At December 31, 2000, the Companyhad available a net operating loss carryforward of approximately $7,500,000 which can beapplied against taxable income through 2015. The tax effect of the operating losscarryforward is approximately $2,850,000 and a full valuation allowance due to theuncertainty of its recognition has been provided.
**NOTE G - OPERATING LEASE

The Company leases its officefacilities under a two year lease agreement which expires in February 2002. Total rentexpense for the year ended December 31, 2000 was $17,652 and the period ended December 31,1999 was $14,400.

Future minimum lease payments areapproximately as follows:
2001
$15,0002002
8,000
$23,000**NOTE H - SUBSEQUENT EVENTS

In March 2001, the Company raisedan additional $50,000 by selling 100,000 shares of Common Stock. The stock was purchasedby an employee. In addition the employee was given options to purchase 100,000 shares at$1; 100,000 shares at $1.50 and 100,000 shares at $2. The options are exercisable untilFebruary 15, 2002. The sale of the Common Stock was made at a price approximately $.75lower than the price the Company's stock was trading.

In March 2001 the Company adopteda non-qualified stock option plan and agreement for employees, officers, directors andconsultants for an aggregate of up to one million shares of the Company's Common Stock.

In addition, the Company intends to issue 100,000shares of Common Stock to the family of the former Chairman of the Board of Directors.

NOTE I - CONTINGENCY

As a loan correspondent withHousing and Urban Development (HUD) the Company is required to maintain certain financialratios, a net worth of $50,000 and liquid assets of 20% of net worth. The Company did notachieve these ratios as at December 31, 2000. However, there was an inflow of cash inMarch 2001 (see Subsequent Events, NOTE H) of $50,000 which allowed the Company to achieveboth financial ratios as of March 31, 2001.
**NOTE J - GOING CONCERN**
As shown in the accompanyingfinancial statements the Company has suffered substantial losses since inception. Thisraises substantial doubt about the Company's ability to continue as a going concern.

Management has projected that theCompany will generate significant revenue in 2001 and subsequent years because it haschanged the direction of the business.

 

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIALDISCLOSURE.

There have been no changes or disagreements with accountants.

 
**PART III**
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

The following sets forth certain information with respect to directorsand executive officers of the Company with the year in which each director's term expiresin parentheses.

Position with 

Name
Age
Position with the Company
TermDouglas Meyers
44
C.E.O, Chairman
1999-2002Martin P. Bolodian
39
President, Director
1999-2002Eric Anderson
47
Vice-President
1999-2002Lisa Wilde
38
Secretary, Director
1999-2002Leon Wilde
40
CFO, Director
1999-2002
Directors serve for a term of three (3) year or until their successorsare elected and qualified. Executive officers are appointed by and serve at the will ofthe Board of Directors. Each of the officers serves at the discretion of the Board ofDirectors.

Douglas Meyers

Mr. Meyers has been an Officer and Director of the company sinceinception. Prior to Royal Finance becoming a publicly traded company, Mr. Meyers served onthe Board of Periotec. Inc., as acting President. Mr. Meyers has been a private RealEstate Investor for more than 10 years. Mr. Meyers was an owner in a manufacturing mirrorcompany in 1982. He graduated from Fairleigh Dickinson University Magna Cum Lauda in 1978.

Martin P. Bolodian

Mr. Bolodian became a Director and President of the company inSeptember 1999. Mr. Bolodian is a licensed mortgage broker with Royal Finance and holds aninactive series 7 securities license, From January 1998 to September 1999, Mr. Bolodianwas a loan officer at Mortgage Express. From 1985 to 2000 Mr. Bolodian was an InvestmentConsultant for such firms as Sterling Financial Group, Josephthal and Co., Dean Witter andLehman Brothers, to name a few, where he provided public and private financing tocompanies. In 1964 Mr. Bolodian graduated from Bentley College, Waltham M.A. with a B.S.in Marketing-Management. Mr. Bolodian was also an Officer in a family-owned jewelrybusiness.

Eric Anderson

Mr. Anderson became an Officer of the Company in October 1998. Mr.Anderson has been a mortgage broker registered with the State of Florida since 1990. Mr.Anderson has been and is presently employed as a mortgage broker with Royal Finance sinceFebruary 1998. Prior to that time, between March 1995 and February 1998, he was employedas a mortgage broker with City Mortgage in Palm Beach Gardens, Florida. Mr. Anderson alsoholds real estate license in both Colorado and Florida. Mr. Anderson has ten (10) yearsexperience in the mortgage brokerage industry. Mr. Anderson filed a personal bankruptcypetition in June 1997 and was discharged in October 1997.

Lisa Wilde

Lisa Wilde has been an Officer and Director since inception. Mrs. Wildehas been a licensed Real Estate Agent since August 1994 and currently is the President ofAmerican Florida Realty. Mrs. Wilde was employed as an Agent for American Investors/Keller Williams Realty. Prior to this Mrs. Wilde had worked in the customer relationsdepartment at MTS Systems Corp. (NY) for eight (8) years. Mrs. Wilde is the wife of LeonWilde.

Leon P. Wilde

Mr. Wilde became the Chief Financial Officer of the company in October2000. Mr. Wilde is a Certified Public Accountant, holding certifications in both New Yorkand Florida. He has operated his own public accounting firm, Leon P. Wilde, CPA, Inc., inFlorida since 1993. From September 1989 to January 1993 he worked as an accounting managerat a Florida public accounting firm. Prior to this he worked as a Senior Accountant at aNew York public accounting firm from June 1984 to August 1989. Mr. Wilde earned a Bachelorof Business Administration degree from Pace University in Pleasantville, New York. Mr.Wilde is the husband of Secretary Lisa Wilde.

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth all cash compensation paid by thecompany to the Chief Executive Officer and the most highly compensated Executive Officersand key employees, whose total remuneration exceeded $100,000 for services rendered in allcapacities to the company during the 1999 completed fiscal year, the only period since itsinception in which any compensation was paid.
          
Long Term Compensation        
Annual Compensation
Awards
Payouts  
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
Name and Principal    Position
Year
Salary
Bonus 
Other Annual    Compensation
Restricted Stock    Award(1) 
Securities Underlying    Options/SAR 
LTIP Payouts 
All other compensation      
($)($)($)($)(#)($)($)
Douglas Meyers, C.E.O,    Chairman2000
000050,000(1)00
Martin P. Bolodian,    President, Director2000
000050,000(1)00
Eric Anderson,    Vice-President2000
000050,000(1)00
Lisa Wilde, Secretary,    Director
2000
000050,000(1)00
Leon P. Wilde CFO,    Director
2000
000050,000(1)00(1) The Option were granted for services    rendered at an exercise price of $1.00 and expire in September 2003
The Company entered into a three year employment agreement with each of its officerexecutive officer. Officers and Directors currently receive no cash compensation for theirservices in that capacity. Reasonable out of pocket expenses may be reimbursed todirectors in connection with attendance at meetings. 

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information, as of December 31, 2000,with respect to the number of shares of Common Stock (the only class of stock issued bythe Company) beneficially owned by individual directors, by all directors and officers ofthe Company as a group, and by persons known to own more than 5% of the Company's CommonStock. The Company has no other class of voting stock outstanding. 

The Company is not aware of any arrangement, which might result in a change in controlin the future.
Name and Address of Beneficial    Owner
Number of    Shares Held
PercentageMartin P. Bolodian, 1481 S    Military Trail #14, West Palm Beach, FL 33415
250,000(*)
7.14Eric Anderson, 1481 S Military    Trail # 14, West Palm Beach F1 33415
250,000(*)
7.14Lisa Wilde, 1481 S Military Trail    # 14, West Palm Beach Fl 33415
250,000(*)
7.14Doug Meyers, 1481 S Military Trail    # 14, West Palm Beach Fl 33415
1,150,000(*)
32.86Sherry Muller, 1481 S Military    Trail # 14, West Palm Beach Fl 33415
1,000,000
28.57Derek Dunn, 1481 S Military Trail    #14, West Palm Beach Fl 33415
250,000
7.14Jeanette Dunn, 1111 New Park View    Drive, West Palm Beach 33415
350,000
10.00All Executive Officers, Directors    and 5% Beneficial Owners as a Group
3,500,000
88.62(*) Includes 50,000    options granted based on the Company's stock option plan.
(B) COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT 

Section 16(a) of the Securities Exchange Act of 1934 requires that theCompany's officers and directors, and persons who own more that ten percent of aregistered class of the Company's equity securities, to file reports of ownership andchanges in ownership with the Securities and Exchange Commission and with any exchange onwhich the Company's securities are traded. Officers, directors and persons owning morethan ten percent of such securities are required by Commission regulation to file with theCommission and furnish the Company with copies of all reports required under Section 16(a)of the Exchange Act. Based solely upon its review of the copies of such reports receivedfrom officers, directors and greater than ten percent shareholders, the Company reportsthe following failures to file reports under Section 16(a) of the Exchange Act: 
Name of Officer/Director
Forms Not    FiledMartin P. Bolodian, Forms 3 and    4Eric AndersonForms 3 and 4Lisa WildeForms 3 and 4Doug MeyersForms 3 and 4Sherry MullerForms 3 and 4Derek DunnForms 3 and 4Jeanette DunnForms 3 and 4
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company issued the following restricted shares of common stock officers, directors,key employees and affiliates. See the discussion under Items 10 and 11above with respect to the grant of options.
Martin P. Bolodian, 1481 S    Military Trail #14, West Palm Beach, FL 33415
200,000Eric Anderson, 1481 S Military    Trail # 14, West Palm Beach F1 33415
200,000Lisa Wilde, 1481 S Military    Trail # 14, West Palm Beach Fl 33415
200,000Doug Meyers, 1481 S Military    Trail # 14, West Palm Beach Fl 33415
1,000,000Sherry Muller, 1481 $Military    Trail # 14, West Palm Beach Fl 33415
1,000,000Derek Dunn, 1481 S Military    Trail #14, West Palm Beach Fl 33415
250,000Jeanette Dunn, 1111 New Park    View Drive, West Palm Beach 33415
350,000
 

PART III

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No.Description3(i)Articles of Incorporation (filed as an exhibit    to Form 10-SB/12g on June 9, 1999)3(i)Articles of Amendment to Articles of    Incorporation (filed as an exhibit to Form 10-SB/12g on June 9, 1999)3(ii)By-laws (filed as an exhibit to Form 10-SB/12g    on June 9, 1999)4.1 Royal finance Inc., Employee Stock Option Plan    2001 filed as an exhibit to Form S-8 on March 5, 2001, File No. 0-26307
 

SIGNATURES

In accordance with Section 12 of the Securities Exchange Act of 1934,the registrant has duly caused this Registration Statement to be signed on its behalf bythe undersigned, thereunto duly authorized.

Royal Finance Inc., a Florida Corporation

Date: March 31, 2001

/s/ Martin Bolodian, President

Chief Executive Officer

 

EXHIBIT 99 (i)

PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 SAFE HARBOR COMPLIANCESTATEMENT FOR FORWARD-LOOKING STATEMENTS

In passing the Private Securities Litigation Reform Act of 1995 (the"Reform Act"), 15 U.S.C.A. Sections 77z-2 and 78u-5 (Supp. 1996), Congressencouraged public companies to make "forward-looking statements" by creating asafe harbor to protect companies from securities law liability in connection withforward-looking statements. Royal Finance, Inc. ("the Company") intends toqualify both its written and oral forward-looking statements for protection under theReform Act and any other similar safe harbor provisions.

"Forward-looking statements" are defined by the Reform Act.Generally, forward-looking statements include expressed expectations of future events andthe assumptions on which the expressed expectations are based. All forward- lookingstatements are inherently uncertain as they are based on various expectations andassumptions concerning future events and they are subject to numerous known and unknownrisks and uncertainties which could cause actual events or results to differ materiallyfrom those projected. Due to those uncertainties and risks, the investment community isurged not to place undue reliance on written or oral forward-looking statements of theCompany. The Company undertakes no obligation to update or revise this Safe HarborCompliance Statement for Forward-Looking Statements (the "Safe HarborStatement") to reflect future developments. In addition, the Company undertakes noobligation to update or revise forward-looking statements to reflect changed assumptions,the occurrence of unanticipated events or changes to future operating results over time.

The Company provides the following risk factor disclosure in connectionwith its continuing effort to qualify its written and oral forward-looking statements forthe safe harbor protection of the Reform Act and any other similar safe harbor provisions.Important factors currently known to management that could cause actual results to differmaterially from those in forward-looking statements include the following:********************************************** |
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