# UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION 
WASHINGTON, DC 20549

# FORM 10-QSB

|[X] |  | Quarterly report pursuant section 13 or 15(d) of the Securities Exchange Act of 1934
|--- |  | ------------------------------------------------------------------------------------

| |  | For the
quarterly period ended June 30, 2004
| |  | --------------------------------------------

|[  ] |  | Transition report pursuant section 13 or 15(d) of the Securities Exchange Act of 1934
|---- |  | -------------------------------------------------------------------------------------

For the transition period from _____
to  _____

Commission File Number: 000-31182

The Neptune Society, Inc.

(Exact name of small business issuer as specified in its charter)

|Florida
(State or Other Jurisdiction of Incorporation) |  | 59-2492929
(I.R.S. Employer Identification No.)
|------------------------------------------------------ |  | -----------------------------------------------

4312 Woodman Avenue, Third Floor Sherman Oaks, California91423
(Address of Principal Executive Offices)

(818) 953-9995
(Registrants Telephone Number, Including Area Code)

(Former Name, Former Address and
Former Fiscal Year, if Changed Since Last Report)

State the shares outstanding of each
of the Registrants classes of common equity, as of the latest practicable date:
August 10, 2004: 7,014,637 shares of common stock

Transitional Small Business Disclosure Format (Check One): Yes   [  ]
       No    [X]

---

# THE NEPTUNE SOCIETY, INC 
FORM 10  QSB 
June 30, 2004 

TABLE OF CONTENTS

|                                     |                                                                                       |                                                                                                     |    | Page No.
|------------------------------------ | ------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | -- | --------
|Part IINTERIM FINANCIAL INFORMATION |                                                                                       |                                                                                                    
|ITEM 1.                              | FINANCIAL STATEMENTS                                                                  |                                                                                                     |   
|                                     |                                                                                       | Consolidated Balance Sheets
June 30, 2004 (Unaudited) and December 31, 2003 (Audited)               |    | 1       
|                                     |                                                                                       | Consolidated Statements of Operations (Unaudited)
Three and Six Months Ended June 30, 2004 and 2003 |    | 2       
|                                     |                                                                                       | Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 2004 and 2003           |    | 3       
|                                     |                                                                                       | Notes to Consolidated Financial Statements (Unaudited)                                              |    | 4       
|ITEM 2.                              | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |                                                                                                     | 8 
|ITEM 3.                              | CONTROLS AND PROCEDURES                                                               |                                                                                                     | 15
|Part IIOTHER INFORMATION            |                                                                                       |                                                                                                    
|ITEM 1.                              | LEGAL PROCEEDINGS                                                                     |                                                                                                     | 15
|ITEM 2.                              | CHANGES IN SECURITIES                                                                 |                                                                                                     | 16
|ITEM 3.                              | DEFAULTS UPON SENIOR SECURITIES                                                       |                                                                                                     | 16
|ITEM 4.                              | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   |                                                                                                     | 16
|ITEM 5.                              | OTHER INFORMATION                                                                     |                                                                                                     | 17
|ITEM 6.                              | EXHIBITS AND REPORTS ON FORM 8-K                                                      |                                                                                                     | 18
|SIGNATURES                           |                                                                                       | 22                                                                                                 

---

# FORWARD-LOOKING
STATEMENTS

This report contains forward-looking
statements within the meaning of the Securities Exchange Act of 1934, as amended. Any
statements that express or involve discussions with respect to predictions, expectations,
beliefs, plans, objectives, assumptions or future events or performance (often, but not
always, using words and phrases such as expects, believe,
believes, plans, anticipate, anticipates,
is anticipated, or stating that certain actions, events or results
will, may, should, or can be taken, occur
or be achieved) are not statements of historical fact and may be forward-looking
statements. Forward-looking statements are based on expectations, estimates and
projections at the time the statements are made that involve a number of risks and
uncertainties which could cause actual results or events to differ materially from those
anticipated by the Company. Such forward-looking statements reflect our current views with
respect to future events and are subject to certain risks, uncertainties and assumptions,
including competition for and availability of acquisitions, our ability to manage an
increasing number of sales offices and crematories, our ability to retain key management
personnel and to continue to attract and retain skilled funeral home and crematory
management personnel, state and federal regulations, changes in the death rate or
deceleration of the trend towards cremation, availability and cost of capital and general
industry and economic conditions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, believed, estimated or expected. Important factors
which could cause actual results of the Company to differ materially from those in
forward-looking statements include, among others, the following:

| | 1) |  | Changes
in general economic conditions impacting financial markets that could
          negatively affect the Company.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------

| | 2) |  | Changes
in credit relationships impacting the availability of credit and the           general
availability of credit in the marketplace.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------

| | 3) |  | Changes
in consumer demand and/or pricing for the Companys products and           services
caused by several factors, such as local death rates, cremation rates,
          competitive pressures and local economic conditions.
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4) |  | The
Companys ability to successfully finance and implement certain           strategic
growth initiatives that could result in increased pre-need contract           sales and
case volume.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5) |  | Changes
in domestic political and/or regulatory environments in which the           Company
operates, including tax and accounting policies.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------

Other specific risks and
uncertainties are set forth in the Companys annual report on Form 10-KSB filed with
the Securities and Exchange Commission. Our management has included projections and
estimates in this quarterly report, which are based primarily on managements
experience in the industry, assessments of our results of operations, discussions and
negotiations with third parties and a review of information filed by its competitors with
the Securities and Exchange Commission. Investors are cautioned against attributing undue
certainty to managements projections. The Company undertakes no obligation to
publicly release the results of any revision to these forward-looking statements that may
be made to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.

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

---

# PART I.    INTERIM
FINANCIAL INFORMATION

# Item 1.     Financial
Statements

NEPTUNE SOCIETY, INC. 
CONSOLIDATED BALANCE SHEETS

|                                                                | June 30, 2004
(Unaudited) | December 31, 2003
(Audited)
|--------------------------------------------------------------- | ------------------------- | ---------------------------
|ASSETS                                                          |                           |                            
|                                                                |                          
|Current assets:                                                 |                          
|Cash                                                            |                           | $   2,575,831              
|Accounts receivable, net of allowance of $200,000               |                           | 2,493,180                  
|Prepaid expenses and other current assets                       |                           | 151,757                    
|                                                                |                          
|Total current assets                                            |                           | 5,220,768                  
|                                                                |                          
|                                                                |                          
|Accounts receivable, net - non current                          |                           | 371,246                    
|                                                                |                          
|Property and equipment, net                                     |                           | 298,354                    
|                                                                |                          
|Names and reputations                                           |                           | 23,672,795                 
|                                                                |                          
|Deferred financing costs                                        |                           | 318,020                    
|                                                                |                          
|Deferred charges and other assets                               |                           | 6,286,596                  
|                                                                |                          
|Total assets                                                    |                           | $ 36,167,779               
|                                                                |                          
|LIABILITIES AND STOCKHOLDERS' EQUITY                            |                          
|Current liabilities:                                            |                          
|Accounts payable and accrued liabilities                        |                           | $   2,687,024              
|Income tax payable                                              |                           | 60,000                     
|Deferred sales tax payable                                      |                           | 56,385                     
|Current portion of long-term debt                               |                           | 134,466                    
|                                                                |                          
|Total current liabilities                                       |                           | 2,937,875                  
|                                                                |                          
|Deferred sales tax                                              |                           | 632,396                    
|                                                                |                          
|Notes payable                                                   |                           | 6,330,000                  
|                                                                |                          
|Deferred pre-need revenues                                      |                           | 18,441,777                 
|                                                                |                          
|Liabilities to be settled by issue of shares                    |                           | --                         
|                                                                |                          
|Total liabilities                                               |                           | 28,342,048                 
|                                                                |                          
|Stockholders' equity:                                           |                          
|Preferred stock, $.001 par value, 10,000,000 shares authorized, |                          
|none issued or outstanding                                      |                           | --                         
|Common stock, $.001 par value, 75,000,000 shares authorized,    |                          
|7,014,637 and 5,773,205 shares issued and outstanding           |                           | 7,015                      
|Additional paid-in capital                                      |                           | 33,692,252                 
|Accumulated deficit                                             |                           | (25,873,536                
|                                                                |                          
|Total stockholders' equity                                      |                           | 7,825,731                  
|                                                                |                          
|Total liabilities and stockholders' equity                      |                           | $ 36,167,779               
|                                                                |                          

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

-1-

---

NEPTUNE SOCIETY, INC. 
CONSOLIDATED STATEMENTS OF OPERATIONS

|                                             | Three months ended | Six months ended
|-------------------------------------------- | ------------------ | ----------------
|
|Revenue                                      |                    |                 
|Services and merchandise                     |                    | $ 5,218,386     
|Management and finance fees                  |                    | 241,134         
|                                             |                    |                 
|Total revenue                                |                    | 5,459,520       
|                                             |                   
|Costs and expenses                           |                    | 1,112,170       
|                                             |                    |                 
|Gross profit                                 |                    | 4,347,350       
|                                             |                   
|Sales commissions and obtaining costs        |                    | 1,863,374       
|                                             |                   
|Operating Expenses                           |                   
|Salaries and payroll costs                   |                    | 1,018,621       
|Compensation-stock based                     |                    | --              
|Premises rent and utilities                  |                    | 252,836         
|Insurance                                    |                    | 177,946         
|Communications                               |                    | 108,549         
|Other operating services and supplies        |                    | 467,991         
|Amortization and depreciation                |                    | 45,653          
|Professional fees                            |                    | 80,059          
|Employee settlements                         |                    |                 
|                                             |                    |                 
|Total operating expenses                     |                    | 2,151,655       
|                                             |                    |                 
|Operating profit                             |                    | 332,321         
|                                             |                   
|Other income (expense)                       |                   
|Gain (loss) on assets held for disposal      |                    | 416,352         
|Insurance marketing allowances               |                    | --              
|Trust placement fees                         |                    | 390,295         
|Interest and finance expense                 |                    | (897,041        
|                                             |                    |                 
|Net income (loss), before income tax         |                    | 241,927         
|                                             |                    |                 
|Income tax expense-current                   |                   
|Income tax expense                           |                    | --              
|                                             |                    |                 
|                                             |                    | --              
|                                             |                    |                 
|Net income (loss) for the period             |                    | $    241,927    
|                                             |                    |                 
|Net income (loss) per share (basic)          |                    | $          0.04 
|                                             |                   
|Net income (loss) per share (diluted)        |                    | $          0.03 
|                                             |                   
|Weighted average numbers of shares (basic)   |                    | 6,837,970       
|                                             |                   
|Weighted average numbers of shares (diluted) |                    | 7,033,567       

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

-2-

---

NEPTUNE SOCIETY, INC. 
CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                       | Six months ended
|---------------------------------------------------------------------- | ----------------
|
|Cash flows provided by (used in)                                       |                 
|                                                                       |                 
|Operating Activities                                                   |                 
|Net income (loss) for the period                                       |                 
|Adjustments to reconcile net income (loss) to                          |                 
|net cash provided by operating activities:                             |                 
|Depreciation and amortization                                          |                 
|Accretion of discount on notes payable                                 |                 
|Non-cash interest and amortization of deferred                         |                 
|finance costs                                                          |                 
|Loss on assets held for disposal                                       |                 
|Stock compensation                                                     |                 
|Forgiveness of debt                                                    |                 
|Compensation expense to be settled by stock                            |                 
|Compensation expense deferred                                          |                 
|Deferred sales tax                                                     |                 
|Changes in operating assets and liabilities:                           |                 
|Accounts receivable                                                    |                 
|Prepaid expenses and other current assets                              |                 
|Income tax payable                                                     |                 
|Deferred charges and other assets                                      |                 
|Accounts payable and accrued liabilities                               |                 
|Deferred pre-need revenues                                             |                 
|                                                                       |                 
|Net cash provided (used) by operating activities                       |                 
|                                                                       |                 
|Investing activities                                                   |                 
|Proceeds from assets held for disposal                                 |                 
|Purchase of names and reputations                                      |                 
|Purchase of property and equipment                                     |                 
|                                                                       |                 
|Net cash used in investing activities                                  |                 
|                                                                       |                 
|Financing activities                                                   |                 
|Proceeds of common stock issued                                        |                 
|Payments on notes payable                                              |                 
|Proceeds of note payable                                               |                 
|                                                                       |                 
|Net cash used in financing activities                                  |                 
|                                                                       |                 
|Increase (decrease) in cash in the period                              |                 
|                                                                       |                 
|Cash, beginning of period                                              |                 
|                                                                       |                 
|Cash end of period                                                     |                 
|                                                                       |                 
|                                                                       |                 
|Supplemental disclosure of cash flow information                       |                 
|                                                                       |                 
|Cash paid during the period for interest                               |                 
|                                                                       |                 
|Supplemental disclosure of non-cash investing and financing activities |                 
|                                                                       |                 
|Stock issued on conversion of debentures                               |                 
|Stock issued for deferred financing costs                              |                 
|Stock issued to settle deferred compensation                           |                 
|Stock issued in payment of accrued interest on notes payable           |                 
|Stock issued in settlement of accounts payable                         |                 

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

-3-

---

NEPTUNE SOCIETY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|(1) |  | Basis
of Presentation
|--- |  | ---------------------

| | These
unaudited interim financial statements have been prepared in accordance with the
instructions to SEC Form 10  QSB. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant to such
instructions. These unaudited financial statements should be read in conjunction with the
audited financial statements and notes thereto included in the Companys annual
report on Form 10-KSB for the year ended December 31, 2003.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
the opinion of the Companys management, all adjustments considered necessary for a
fair presentation of these unaudited interim financial statements have been included and
all such adjustments are of a normal recurring nature. Operating results for the six month
period ended June 30, 2004 are not necessarily indicative of the results that can be
expected for the year ended December 31, 2004.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | 11.0%
Debentures
|--- |  | ----------------

| | The
Company entered into an Agreement dated June 18, 2004 pursuant to which it issued Brooklyn
Holdings LLC a $6,000,000 11% debenture, due June 18, 2014. The Debenture provides for
monthly interest only payments through June 18, 2014 and the full payment of the
$6,000,000 principal due on June 18, 2014. The Company has the right to convert any or all
of the outstanding principal into shares of common stock at a rate of $1.65 per share at
anytime until June 18, 2014. Beginning on June 18, 2009, the debenture holder also has a
right to convert any or all of the outstanding principal into common shares at $1.65 per
share, subject to the Companys right to pre-pay the Debenture within 30 days of
receiving the holders conversion notice. The Company issued Brooklyn Holdings LLC
250,000 shares of common stock as a commitment fee in connection with the financing. The
Company granted Brooklyn Holdings LLC registration rights related to the shares of common
stock issued as the commitment fee and issuable upon conversion of the Debenture.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company used approximately $5,600,000 of the $6,000,000 in proceeds to pay off the
outstanding principal and interest of its 13% debentures, due July 31, 2007. The remainder
of the proceeds was used to increase working capital.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Insurance
marketing allowances income
|--- |  | -------------------------------------

| | The
Company has recorded income of approximately $1,901,000 in respect of marketing allowances
from National Guardian Life Insurance Company, a Wisconsin mutual
insurance company, in connection with the purchase of group life insurance coverage for
fully paid members of its California pre-need trusts during the first quarter of 2004.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-4-

---

| | The
purchase of group life coverage involves the insurer issuing a fully paid life insurance
certificate in consideration of the receipt of a premium equal to the trusted amount of
the pre-need contract. The face amount of the insurance purchased, which is always greater
than the premium paid, is paid to the company at the time the cremation services are
performed. The Company received a marketing allowance at the time of issuance of the
certificate based upon the face value of the insurance purchased. The marketing allowances
received in the current year represent the amount earned on all fully paid pre-need
contracts still trusted by the Company for California members, since inception and through
December 31, 2003, representing the equivalent of approximately 13 years of new pre-need
contract sales at the current sales rate. Accordingly the amount of marketing allowance
income in the current year is not representative of what may be earned, if any, in future
years.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Capital
stock issued during the six months ended June 30, 2004
|--- |  | --------------------------------------------------------------

| | 40,000
shares were issued for deemed consideration of $28,000 as compensation expense to an
officer of the Company,
| | -------------------------------------------------------------------------------------------------------------------

| | 30,000 shares valued at $21,000 were issued in settlement of deferred compensation,
| | -----------------------------------------------------------------------------------

| | 28,388
shares were issued for proceeds of $18,452 on the purchase of shares by a shareholder
holding pre-emptive rights on issuances of stock by the Company,
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 250,000
shares were issued to the Companys debenture holder as consideration for entering
into the debenture agreement, recorded at a fair value of $280,000 which was capitalized
as deferred financing costs in the accompanying balance sheet, to be amortized over the
life of the indebtedness using the interest method, and
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 893,044
shares were issued to the former holders of 13.75% mandatory convertible debentures, on
full settlement of the $1,071,653 face value debentures on March 31, 2004.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | Stock
options during the six months ended June 30, 2004
|--- |  | -------------------------------------------------------

| | Options
were granted to an officer for the purchase of a total of 150,000 shares at the price of
$0.70 per share, expiring January 31, 2007. The options vest at the rate of 50,000 shares
on January 31, 2005, 2006, and 2007,
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Options
were granted to an officer for the purchase of a total of 25,000 shares at the price of
$0.70 per share, expiring September 30, 2005.
| | ---------------------------------------------------------------------------------------------------------------------------------------------

-5-

---

| | Options
previously granted to an officer for the purchase of 392,046 shares at a price of $4.40
per share by December 31, 2005 were cancelled on the renegotiation of his employment
contract. Also cancelled were options to be granted in 2004 and 2005 to acquire a further
261,364 shares on the same terms.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) |  | New
Employment Agreements and Commitments
|--- |  | -----------------------------------------

| | (a)  The
Company and its Chief Executive Officer (CEO) entered into an
                    Amended and Restated Agreement dated March 12, 2004 to replace his
existing                     employment arrangements. The March 12, 2004 Agreement
restructures the amount to                     be paid to the CEO in the event of
termination or change of control of the                     Company, and extends the term
of the employment arrangement. The Agreement is                     for an initial term
expiring December 31, 2007, with renewal in successive                     one-year
increments to December 31, 2010. Annual compensation is unchanged from
                    the previous employment agreement, except that there is a 5% increase
in                     compensation for each renewal year after 2007.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
terms of the Amended Agreement provide that in the event of termination of employment by
the Company, resignation by the CEO for good reason, change of control of the company, or
upon the expiry of the employment agreement, the Company is required to offer the CEO
consideration equal to 13% of the fair value of the Company in consideration for the
return or cancellation of a total of 538,818 shares owned by the CEO and related parties,
together with stock options and warrants to acquire a further 457,692 shares at prices
ranging from $0.65 and $0.79 per share.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Companys offer will be subject to a right of first refusal held by certain
shareholders.
| | ---------------------------------------------------------------------------------------------

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

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

| | The
term of the agreement extends to January 31, 2007. The agreement is cancelable on six,
seven or eight months notice in the first, second or third years respectively.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-6-

---

| | (c)  
On June
1, 2004, we entered into an agreement for the services of the Chief
                    Financial Officer. The agreement provides for annual base
compensation of                     $170,000 per annum. We also agreed to grant options
under our stock option plan                     to purchase 25,000 shares of common stock
at $0.70 per share. The executive will                     also be entitled to a yearly
bonus of 30% of his annual salary, such bonus based                     on the
achievement of specific defined goals, and payable in cash or shares of
                    our common stock as determined by the board of directors.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
term of the agreement extends to May 31, 2005. The agreement is cancelable on four weeks
notice.
| | ----------------------------------------------------------------------------------------------------

|(7) |  | Loss
on disposal of operations
|--- |  | ------------------------------

| | The
Company in the period disposed of its operations in Iowa for a net loss of approximately
$177,000. The decision to stop doing business in Iowa was made in the first quarter as
part of our strategic planning process.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) |  | Pro
forma compensation expense for stock options
|--- |  | ------------------------------------------------

| | Pro
forma information regarding the effect on operations as required by SFAS 123 and SFAS 148,
has been determined as if the Company had accounted for its employee stock options under
the fair value method of that statement. Pro forma information using the Black-Scholes
method at the date of grant is based on the following assumptions:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Expected  life -- 3 Years
Risk - free interest rate -- 1.5%
Dividend yield -- -0-
Volatility -- 21%
| | ---------------------------------------------------------------------------------------------------

| | This
option valuation model requires input of highly subjective assumptions. Because the
Companys employee stock options have characteristics significantly different from
those of traded options which affect the fair value estimate, the existing model, in
managements opinion, does not necessarily provide a reliable single measure of fair
value of its employee stock options.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | For
purpose of SFAS 123 pro forma disclosures, the estimated fair value of the options is
amortized to expense over the options vesting period. The companys pro forma
information is as follows:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                               
|-----------------------------------------------
|
|                                               
|Net income (loss) as reported                  
|Compensation recognized under APB 25           
|Approximate compensation expense under SFAS 123
|                                               
|Pro forma net income (loss)                    
|                                               

-7-

---

Item 2:    Managements
Discussion and Analysis of Financial Condition and Results of Operations

# Overview

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

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

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

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

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

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

# Results of Operations

Three Months ended June
30, 2004 compared with the Three Months ended June 30, 2003

The following discussion compares our
results of operations for the three months ended June 30, 2004 (Q2-2004) to our results of
operations for the three months ended June 30, 2003 (Q2-2003).

Revenues

Total revenue was approximately
$5,460,000 in the second quarter of 2004 compared with $4,905,000 for the second quarter
of 2003, an increase of approximately $555,000.

The number and dollar amount of new
pre-need contract sales increased by approximately 16% in the second quarter of 2004
compared with the second quarter of 2003. Sales revenue increased by approximately
$501,000 to $3,624,000 in Q2-2004 compared with $ 3,123,000 in Q2-2003.

Revenue from cremation services was
virtually unchanged between the second quarter of 2004 and the second quarter of 2003,
with revenue of $1,594,000 in Q2-2004 compared with $1,596,000 during the same period in
2003.

-8-

---

Management and finance fee income was
$241,000 in the second quarter of 2004, consisting of approximately $95,000 in management
fees and approximately $150,000 related to a year-to-date accrual of residual marketing
allowances on the group life plan. Management and finance fee income was $186,000 in the
second quarter of 2003, which represented management fees. The reduction in management
fees resulted from the decrease in funds under administration in our California pre-need
trusts due to the purchase of group life insurance coverage in the fourth quarter of
2003. We receive annual renewal marketing allowances based on the face value of insurance
acquired, and these allowances are lower than the trust fund administration fees we
historically earned. The face value of the insurance coverage we negotiated was higher
than the value of the pre-need trust funds used to acquire the coverage so we expect to
receive increased revenue at the time of providing the cremation services. We project this
increased cremation revenue to offset the decrease in trust fund administration fees in
future periods.

Costs and Expenses

The most significant component of
direct costs and expenses relates to the providing of at-need and fulfillment cremation
services. Also included in costs and expenses are the cost of merchandise delivered at the
time pre-need contracts are sold, and the costs of travel plan premiums. Total direct
costs and expenses were approximately $1,112,000 for the three months ended June 30, 2004
compared with $1,040,000 for the second quarter of 2003.

The 7% increase in direct costs and
expenses of cremation services is consistent with an overall increase of 10% in services
and merchandise sales. Overall, costs and expenses were 21% of services and merchandise
sales for the second quarter of 2004 compared with 22% for the second quarter of 2003.

Sales Commissions and
Obtaining Costs

Sales commissions and obtaining costs
represent the cost of acquiring new pre-need contracts, including sales commissions, media
and ad costs and related expenses. Sales commissions and obtaining costs increased by
$509,000 to $1,863,000 for the second quarter of 2004 up from $1,354,000 for the second
quarter of 2003.

Sales commissions increased
approximately $166,000 or 20% to $981,000 in Q2-2004 up from $815,000 in Q2-2003. This
increase was consistent with a 16% increase in pre-need contract sales in Q2-2004,
compared to Q2-2003.

The cost of our direct mailers and
other media increased by approximately $342,000 or 63% to $882,000 in the second quarter
of 2004 compared with $540,000 the second quarter of 2003. In 2004, we initiated a program
to increase the effectiveness of how we generate sales leads, including the use of higher
cost mailers. This program is discretionary and we expect it to result in an increase in
our sales in future fiscal quarters, together with an eventual reduction in the cost per
sale.

Operating expenses

Salaries and payroll costs, including
stock based compensation, were virtually unchanged with $1,019,000 for the three months
ended June 30, 2004 compared with $1,011,000 for the three months ended June 30, 2003.
Salaries and payroll cash costs increased during Q-2 2004, but were off-set by a decrease
in stock based compensation. We had no stock compensation in the second quarter of 2004,
compared to stock based compensation of $104,000 in the second quarter of 2003. We reduced
our use of stock for the payment of certain annually determined compensation in 2004 and
granted no new employment stock signing bonuses in the second quarter of 2004.

-9-

---

Other operating services and supplies
were reduced by $177,000 or 27% to $468,000 in Q2-2004 compared with $645,000 Q2-2003.
This was as a result of initiatives implemented during 2003 to reduce company wide general
overhead expenses.

Total operating expenses were
$2,152,000 for the second quarter of 2004 compared with $2,277,000 for the second quarter
of 2003. The decrease in operating expenses of $125,000 or 5% relates primarily to the
reasons described above.

Operating profit (loss)

Operating profit was $332,000 for the
second quarter of 2004 compared with an operating profit of $234,000 for the second
quarter of 2003. The increased profit was attributable to increased sales and improved
operating performance overall.

Other revenue and expenses

The gain on assets held for disposal
of $416,000 represents recognition of revenue deferred in prior years for our Iowa
location. We elected to cease business operations in Iowa in the first quarter, as part of
our strategic planning process to concentrate our resources on larger markets.

We received trust placement fees of
$390,000 in the second quarter of 2004 as consideration of our entering into an agreement
to retain Forethought Federal Savings Bank as the new trustee in several states
(Q2-2003:Nil). This was a one-time fee.

Interest and finance expense was
$897,000 for Q2-2004 compared with $482,000 for Q2-2003. The increase of $415,000 is due
in part to the write-off of $659,822 in Deferred Finance Charges, as a result of our
refinancing of certain debt obligation to extend the term of the debt and reduce the
interest rate of such debt during the second quarter of 2004. This write-off was partially
offset by the reduced interest charges.

Net Income (loss)

Net income was $242,000 ($0.04 net
income per share) for the second quarter of 2004 compared with a loss of $(249,000) or
($0.05 loss per share) for the second quarter of 2003. The improvement in net income
relates to the reasons described above.

Six Months ended June 30,
2004 compared with the Six Months ended June 30, 2003

The following discussion compares our
results of operations for the six months ended June 30, 2004 to our results of operations
for the six months ended June 30, 2003.

Revenues

Total revenue was approximately
$10,859,000 in the six months ended June 30, 2004 compared with $9,684,000 for the six
months ended June 30, 2003, an increase of approximately $1,175,000.

The number and dollar amount of new
pre-need contract sales increased by approximately 20% in the first six months of 2004
compared with the same period in 2003. Sales revenue increased by approximately $1,221,000
to $7,211,000 for the six months ended June 30, 2004 up from $5,990,000 for the six months
ended June 30, 2003.

-10-

---

Revenue from cremation services was
virtually unchanged between the six months ended June 30, 2004 and the six months ended
June 30, 2003, standing at $3,241,000 in 2004 compared with $3,285,000 in the same period
of 2003.

Management and finance fee income in
the first six months of 2004 was $406,000 compared with $409,000 in the six months ended
June 30, 2003. We experienced a decrease of $153,000 in management fees earned on our
California pre-need trusts due to the purchase of group life insurance coverage. This was
offset by the recognition of $150,000 in residual marketing allowances associated with
that same group life plan.

Costs and Expenses

The most significant component of
direct costs and expenses relates to the providing of at-need and fulfillment cremation
services. Also included in costs and expenses are the cost of merchandise delivered at the
time pre-need contracts are sold, and the costs of travel plan premiums. Total direct
costs and expenses were approximately $2,140,000 for the six months ended June 30, 2004
compared with $2,160,000 for the six months ended June 30, 2003. Costs and expenses were
20% of services and merchandise sales for the second quarter of 2004 compared with 23% for
the second quarter of 2003. The reduction in percentage is driven primarily by a shift in
revenue mix. Our direct costs and expenses as a percentage of new product sales is less as
a percentage of revenue than our direct costs and expenses on cremation services.

Sales commissions and
obtaining costs

Sales commissions and obtaining costs
represent the cost of acquiring new pre-need contracts. These costs as a total increased
by $1,069,000 to $3,639,000 for the first half of 2004 from $2,570,000 for the same period
of 2003.

Sales commissions increased
approximately $338,000 or 22% to $1,894,000 for the six months ended June 30, 2004
compared with $1,556,000 for the six months ended June 30, 2003. This increase in sales
commission was attributable to a 20% increase in pre-need contract sales for the period.

The cost of our direct mailers and
other media increased by approximately $732,000 or 72% to $1,746,0000 in the first half of
2004 up from $1,014,000 during the first half of 2003. In 2004, we initiated a program to
increase the effectiveness of how we generate sales leads, including the use of higher
cost mailers. This program is discretionary and we expect it to result in an increase in
our sales in future fiscal quarters, together with an eventual reduction in the cost per
sale.

Operating Expenses

Salaries and payroll costs, including
stock based compensation, for the six months ended June 30, 2004 were $2,250,000 compared
with $2,212,000 for the six months ended June 30, 2003. Salaries and payroll cash costs
increased during the first half of 2004, but were off-set by a decrease in stock based
compensation. Stock based compensation decreased to $28,000 in the first six months of
2004 from $323,000 in the first six months of 2003, a decrease of $295,000. This is
attributable to our reduced use in 2004 of stock for the payment of certain annually
determined compensation.

Other operating services and supplies
expenses were reduced by $292,000 or 25% to $856,000 in the six months ended June 30, 2004
compared with $1,148,000 during the six months ended June 30, 2003. We implemented cost
cutting initiatives in late 2003 to reduce company wide general overhead expenses, which
improved our efficiency.

-11-

---

Employee settlements expense was
$296,000 in the first half of 2003, and we had no similar expense in the first half of
2004.

Total operating expenses were $
4,329,000 for the first six months of 2004 compared with $4,907,000 for the first six
months of 2003, a decrease of $ 578,000 or 12%.

Operating profit (loss)

Operating profit was $750,000 for the
six months ended June 30, 2004 compared with an operating profit of $47,000 for the six
months ended June 30, 2003, an increase of $703,000. This increase resulted from increased
sales and improved operating efficiencies, which reduced our overall operating expenses.

Other revenue and expenses

We had a loss on assets held for
disposal which represents an adjustment of $177,000 in the carrying value of assets of our
Iowa location. We elected to cease business operations in Iowa in the first quarter, as
part of our strategic planning process to concentrate our resources on larger markets.

We received insurance marketing
allowances of $1,901,000 during the first half of 2004, which represents the gross amount
received, net of provision for estimated allowance refunds, in connection with the
purchase of group life insurance coverage for fully paid members of our California
pre-need trusts. The purchase of group life coverage involves the insurer issuing a fully
paid life insurance certificate in consideration of the receipt of a premium equal to the
trusted amount of the pre-need contract. The face amount of the insurance purchased, which
is always greater than the premium paid, is paid to us at the time the cremation services
are performed. We received a marketing allowance at the time of issuance of the
certificate based upon the face value of the insurance purchased. The marketing allowances
received in the first half of 2004 represented the marketing allowances earned on the
conversion of all fully paid pre-need contracts trust amounts for California members, from
inception through December 31, 2003 (approximately 13 years of new pre-need contract sales
at the current sales rate), into a group life insurance policy. Accordingly the amount of
marketing allowance income earned in the six months ended June 30, 2004 is not
representative of what may be earned, if any, in future periods.

As long as interest rates continue at
historically low rates and there are benefits identified for both us and our pre-need
contract holders, we anticipate that we will purchase group life insurance coverage as a
component of our business model. We entered into an exclusive four year arrangement with
National Guardian Life Insurance Company for the purchase of group life insurance, should
we choose this funding method, at comparable pricing to the transactions completed in the
first half of 2004.

We also received trust placement fees
of $530,000 were received in the first half of 2004 as consideration of our entering into
an agreement to retain Forethought Federal Savings Bank as the new trustee in states other
than California. This is not anticipated to be an on going source of income.

Interest and finance expense was
$1,199,000 for the first half of 2004 compared with $1,019,000 for the same period in
2003, an increase of $180,000. We wrote-off $659,822 in Deferred Finance Charges as a
result of our refinancing of certain debt obligations to extend the term of the debt and
reduce the interest rate of such debt during the second quarter of 2004. This write-off
was partially offset by the reduced interest charges during the first half of 2004.

-12-

---

Income tax expense-current

The net amount of approximately
$60,000 recorded as income tax provision in the first half of 2004 represents estimated
tax payable on our net income, after recognizing the benefit of previously unclaimed net
operating losses of prior years.

Net Income (loss)

Net income was $1,745,000 ($0.28 net
income per share) for the six months ended June 30, 2004 compared with a loss of
$(972,000) or ($0.20 loss per share) for the six months ended June 30, 2003. This increase
resulted from increased sales, improved operating efficiencies, which reduced our overall
operating expenses, and the receipt of insurance marketing allowances of $1,901,000 during
the first half of 2004.

# Liquidity and Capital
Resources

This section should be read in
conjunction with our consolidated financial statements included under Item 1. Financial
Statements, and in particular the Consolidated Statements of Cash Flows. The section
titled Cash Flows Provided By (Used In) Operating Activities for the six months ended June
30, 2004 reconciles the net income of approximately $1,745,000 for the six month period
ended June 30, 2004 to the net cash provided by operating activities for the same period
of $3,060,000.

Acquisition Expenditures

We used $82,000 to acquire property
and equipment and another $10,000 to complete the acquisition of our Spokane operations
during the first six months of 2004. This compares to $8,000 in acquisition expenditures
for the first six months of 2003.

13% Debenture
Restructuring

In the first quarter of 2004, we
entered into an agreement dated February 18, 2004 with holders of our 13% Debentures to
prepay $1,160,000 in principal and to restructure certain of our payment obligations.
Under the terms of this restructuring, we were not be required to make any further
scheduled lump sum payments or payments based on excess cash flow until July 2005. This
transaction limited the required payments under the Debentures to $125,000 per month until
July 2005.

$6,000,000 Convertible
Debenture Financing

In the second quarter ended June 30,
2004, we completed a convertible debenture financing for the purposes of restructuring
certain of our long-term debt obligations. Under the terms of an agreement with Brooklyn
Holdings LLC, dated effective as of June 18, 2004, we issued to Brooklyn
Holdings LLC a $6,000,000 11% convertible debenture, due June 18, 2014, for $6,000,000 and a
commitment fee of two hundred and fifty thousand (250,000) shares of common stock. We also
agreed to grant Brooklyn Holdings a security interest in our assets to secure our
obligations under the 11% convertible debenture and the debenture purchase agreement and
to file a registration statement to register the resale of the shares issued as the
commitment fee and the shares issuable upon conversion of the debenture. We also agreed to
pay reasonable legal fees and expenses incurred by Brooklyn Holdings in connection with
the financing. .

The material terms of the 11%
convertible debenture are as follows:

-13-

---

| |  |  | We
are required to pay interest on the principal amount in monthly installments until
June 18, 2014;
| | - |  | ----------------------------------------------------------------------------------------------------

| |  |  | The
principal amount is due on June 18, 2014;
| | - |  | ---------------------------------------------

| |  |  | We
have the right to convert all or a portion of the principal amount due under the
convertible debenture into shares of common stock at anytime during the term at the
conversion price of $1.65 per share;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | The
holder has the right to convert all or a portion of the principal amount due under the
convertible debenture into shares of common stock at the conversion price of $1.65 per
share at any time after June 18, 2009, subject to our right to repay, in full or in part,
the convertible debenture within 30 days of receiving written notice of a conversion;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | The
principal balance is payable upon an event of default, which includes a non-payment
under the Debenture which is not cured within 30 days after written notice of default and
is delivered to the Corporation; default by the Corporation in the performance of or
compliance with any term or any provision of the Debenture Purchase Agreement, which is
not cured within 30 days after written notice of default; default by the Corporation in
the performance of or compliance with any term or provision of the Security Agreements,
which is not cured within 30 days after written notice of default; or if we apply or
consent to the appointment of a receiver, custodian, trustee or liquidator, are unable to
pay our debts as they become due or file for bankruptcy;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | We
agreed to file a registration statement to register the resale of the shares issuable
upon conversion of the debenture; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------

| |  |  | We
agreed to grant a security interest in our assets to secure our obligations under the
debenture.
| | - |  | ---------------------------------------------------------------------------------------------------

We used approximately $5,600,000 of
the proceeds to pay off the outstanding principal and interest of under our 13%
debentures. The remainder of the proceeds was used to increase working capital.

California State Tax
Refund

In February, 2004, we received a
refund of $733,000 from the State of California representing sales tax paid on pre-need
contracts sold in the years 1999 to 2002. The sales tax on pre-need contracts still
outstanding from those years is required to be paid at the time the cremation is
performed, rather than at the time of sale of the pre-need contract. As a result, we were
able to obtain the return of sales tax paid prematurely. Effective in 2003, we began
delivering merchandise at the time of sale of the pre-need contract in most states,
including California, and accordingly, pay state sales tax at the time of sale.

The amount of approximately $689,000
reported in the Consolidated Statements of Cash Flows under Operating
Activities represents the refund of $733,000 discussed above, net of $44,000 in
sales tax on 1999-2002 member cremations performed in 2004. We estimate that the sales tax
relating to the 1999 to 2002 contracts will be required to be repaid over a 13 year
period.

Working Capital Position

At June 30, 2004 we had current
assets of approximately $5,221,000, offset by current liabilities of $2,938,000, for net
working capital of approximately $2,283,000.

-14-

---

Long-term Obligations

At June 30, 2004 our material
long-term debt consisted of the following:

| |  |  | 11%
Convertible Debentures with a single scheduled principal repayment of $6,000,000 on June
18, 2014.
| | - |  | ------------------------------------------------------------------------------------------------------

| |  |  | Employee
settlement note with scheduled payments of $330,000 in the period July 1, 2005 to March
31, 2008.
| | - |  | ----------------------------------------------------------------------------------------------------------

Payments required under our long-term
debt obligations are approximately $120,000 during the next twelve months. We believe that
we will have sufficient cash flow from operations to satisfy our cash requirements for the
next twelve months and for the foreseeable future.

We intend to finance any acquisitions
or start-ups in 2004 from operational cash flow, or a combination of operational cash
flow, cash on hand and vendor financing. We have completed test marketing in and are
presently expanding our Trident brand into Riverside and Mission Viejo, in Southern
California. We believe that these two markets present attractive business opportunities.

We have no material commitments for
capital expenditures at this time.

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

# Item 3:    Controls and
Procedures

Evaluation of Disclosure Controls
and Procedures.  Our Chief Executive Officer and Chief Financial Officer have
evaluated the effectiveness of our disclosure controls and procedures (as such term is
defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended)
as of the end of the period covered by this quarterly report (the Evaluation
Date). Based on such evaluation, such officers have concluded that, as of the
Evaluation Date, our disclosure controls and procedures are effective in alerting them on
a timely basis to material information relating to the Company required to be included in
its reports filed or submitted under the Securities Exchange Act of 1934, as amended.

Changes in Internal Controls over
Financial Reporting.  During the most recent fiscal quarter, there have not been
any significant changes in our internal controls over financial reporting or in other
factors that have materially affected, or are reasonably likely to materially affect, our
internal controls over financial reporting.

# PART II:    OTHER
INFORMATION

# Item 1.    Legal Proceedings

Not applicable.

-15-

---

# Item 2.    Changes In Securities

Recent
Sales of Unregistered Securities

Set
forth below is a description of unregistered securities issued by the Company during the
three months ended June 30, 2004.

| | We
issued 30,000 to an executive officer for consideration of $21,000 as a result of an
officers exercising their stock options. The shares of common stock were issued in
a private transaction pursuant to Section 4(2) of the Securities Act of 1933, as amended.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | We
issued a $6,000,000 11% convertible debenture, due June 18, 2014, to Brooklyn
Holdings LLC, under the terms of a debenture purchase agreement dated June 18, 2004. In
connection with the financing, we issued Brooklyn Holdings a commitment fee of 250,000
shares of our common stock. These securities were issued in a private transaction
pursuant to Section 4(2) of the Securities Act of 1933, as amended.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | We
granted options to acquire 25,000 shares at the price of $0.70 per share, expiring
September 30, 2005, in connection with an employment agreement with our Chief Financial
Officer. The options were granted in a private transaction pursuant to Section 4(2) of
the Securities Act of 1933, as amended.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Additional
information regarding the Companys issuance of unregistered securities during the
past three fiscal years is contained in the Companys annual reports on Form 10-KSB
for the year ended December 31, 2003 under Item 5. Market for Common Equity and
Related Shareholder Matters  Recent Sale of Unregistered Securities and during
the three month period ended March 31, 2004 under Item 2. Changes in
Securities filed with the United States Securities and Exchange Commission. The
information contained under Item 5. Market for Common Equity and Related Shareholder
Matters  Recent Sale of Unregistered Securities of the Companys annual
report on Form 10-KSB for the year ended December 31, 2003 and under Item 2. Changes
in Securities in the Companys quarterly report for the three month period
ended March 31, 2004, is hereby incorporated by reference to this report.

Purchases of Equity
Securities by the Small Business Issuer and Affiliates

During
the quarter ended June 30, 2004, there were no purchases of equity securities by the small
business issuer or any affiliated purchaser.

# Item 3.   Defaults Upon
Senior Securities

Not
applicable.

# Item 4.    Submission of
Matters to a Vote of Security Holders

We held our annual general meeting of
shareholders on June 22, 2004 in Vancouver, British Columbia, Canada pursuant to the
notice of annual meeting and proxy statement dated June 8, 2004. A total of 2,962,560
common shares of the Company were represented in person or by proxy at the annual meeting,
consisting of 43.9% of the total number of common shares of the company outstanding on
June 22, 2004, the record date for the annual general meeting.

Matters voted upon at the annual
general meeting:

-16-

---

Election of Directors

The
following persons were elected to serve as Directors until the next annual general meeting
or until their retirement, resignation or removal. The following table sets forth the
voting results (1) in the election:

|Nominee        | Votes
|-------------- | -----
|              
|Marco Markin   |      
|              
|Brent Lokash   |      
|              
|Cameron Strang |      
|              
|Bruno Darre    |      
|              

|(1) |  | Our
shareholders are entitled to cumulative voting rights. A shareholder voting
                    for the election of directors may cast a number of votes equal to the
number of                     directors being elected times the number of shares held on
the record date for a                     single nominee or divide them among nominees in
any manner. The table reflects                     cumulative votes cast by the Companys
shareholders for each nominee.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Appointment of Auditors

At
the annual general meeting, the shareholders ratified the appointment of Stonefield
Josephson, Inc. as our auditors for the fiscal year ending December 31, 2004. The
following table sets for the information regarding the voting on the appointment of
auditors:

|Votes Cast
For | Votes Cast
Against | Votes
Abstained
|-------------- | ------------------ | ---------------
|              
|2,962,560      |                    |                
|              

We
filed with the Securities and Exchange Commission our proxy statement for the annual
general meeting pursuant to Regulation 14A of the Securities and Exchange Act of 1934, as
amended, on June 8, 2004.

# Item 5.     Other Information

Employment
Agreement with Chief Financial Officer

On June 1, 2004, we entered into an
agreement for the services of Daniel M. Solberg as our Chief Financial Officer. The
agreement providers for an annual base compensation of $170,000 per annum. We also agreed
to grant options under our stock option plan to purchase 25,000 shares of common stock at
$0.70 per share. The executive will also be entitled to a yearly bonus of 30% of his
annual salary, such bonus based on the achievement of specific defined goals, and payable
in cash or shares of our common stock as determined by the board of directors. The term of
the agreement extends to May 31, 2005. The agreement is cancelable on 30 days notice.

Relationship between
Brooklyn Holdings LLC and BG Capital Group Ltd.

According to information provided to
us by Robert Genovese, Robert Genovese controls BG Capital Group Ltd. and Brooklyn
Holdings, LLC.

-17-

---

According to information contained in
a Schedule 13D filed with the SEC on May 19, 2004, BG Capital is the direct and beneficial
owner of 2,525,954 shares of our Common Stock, and is indirectly the beneficial owner of
256,936 shares of our common stock.

We issued Brooklyn Holdings, LLC a
$6,000,000 11% convertible debenture, due June 18, 2014, and 250,000 shares of our common
stock under the terms of a Convertible Debenture Purchase Agreement. We have the right to
convert the 11% convertible debenture into share of our common stock at the conversion
price of $1.65 per share at any time. Brooklyn Holdings, LLC has the right to convert the
11% convertible debenture into share of our common stock at the conversion price of $1.65
per share beginning June 18, 2009, subject to our right to repay, in full or in part, the
convertible debenture within 30 days of receiving written notice of a conversion.

We estimate that BG Capital Group,
Ltd and Brooklyn Holdings, LLC, in aggregate, beneficially own 3,032,890 shares of our
common stock (as of June 18, 2004), which would represent approximately 43.2% of our
issued and outstanding common stock as of August 10, 2004 (based on 7,014,637 issued and
outstanding shares).

# Item 6.    Exhibits And
Reports On Form 8-K

|ExhibitNumber | Description
|------------- | -----------
|
|3             | .1(1)      
|3             | .2(1)      
|3             | .3(1)      
|3             | .4(1)      
|3             | .5(1)      
|3             | .6(6)      
|3             | .7(1)      
|10            | .1(1)      
|10            | .2(1)      
|10            | .3(1)      
|10            | .4(1)      
|10            | .5(1)      
|10            | .6(1)      
|10            | .7(1)      
|10            | .8(1)      

-18-

---

|ExhibitNumber | Description
|------------- | -----------
|
|              |            
|10            | .9(1)      
|10            | .10(1)     
|10            | .11(1)     
|10            | .12(1)     
|10            | .13(1)     
|10            | .14(1)     
|10            | .15(1)     
|10            | .16(1)     
|10            | .17(1)     
|10            | .18(1)     
|10            | .19(1)     
|10            | .20(1)     
|10            | .21(1)     
|10            | .22(1)     
|10            | .23(1)     
|10            | .24(1)     
|10            | .25(1)     
|10            | .26(1)     
|10            | .27(1)     
|10            | .28(2)     
|10            | .29(2)     
|10            | .30(2)     
|10            | .31(2)     
|10            | .32(2)     
|10            | .33(2)     
|10            | .34(2)     
|10            | .35(3)     
|10            | .36(3)     
|10            | .37(4)     
|10            | .38(4)     

-19-

---

|ExhibitNumber | Description
|------------- | -----------
|
|              |            
|10            | .39(4)     
|10            | .40(4)     
|10            | .41(4)     
|10            | .42(4)     
|10            | .43(4)     
|10            | .44(4)     
|10            | .45(5)     
|10            | .46(8)     
|10            | .47(8)     
|10            | .48(8)     
|10            | .49(8)     
|10            | .50(8)     
|10            | .51(8)     
|10            | .52(8)     
|10            | .53(9)     
|10            | .54(9)     
|10            | .55(9)     
|10            | .56(9)     
|10            | .57(9)     
|10            | .58(9)     
|10            | .59(10)    
|10            | .60(11)    
|10            | .61(11)    
|10            | .62(11)    
|10            | .63        
|10            | .64        
|10            | .65        
|10            | .66        
|10            | .67        
|10            | .68        
|10            | .69        
|10            | .70        
|10            | .71        
|10            | .72        
|10            | .73        
|31            | .1         
|31            | .2         
|32            | .1         
|32            | .2         

_________________

-20-

---

|(1) |  | Previously
filed on February 12, 2001.
|--- |  | --------------------------------------

|(2) |  | Previously
filed as an exhibit to Form 10-Q (for the Period ended June 30, 2001)           on August
14, 2001.
|--- |  | --------------------------------------------------------------------------------------------------------------

|(3) |  | Previously
filed as an exhibit to Form 10-Q/A           (for the Period ended June 30, 2001) on
August 20, 2001.
|--- |  | ----------------------------------------------------------------------------------------------------------------

|(4) |  | Previously
filed as an exhibit to Form 10-K (for the period ended December 31,           2001) on
April 2, 2002.
|--- |  | ----------------------------------------------------------------------------------------------------------------

|(5) |  | Previously
filed on Form 10-Q (for the           period ended March 31, 2002) on May 15, 2002.
|--- |  | ----------------------------------------------------------------------------------------------

|(6) |  | Previously
filed on           Form 8-K on June 3, 2002.
|--- |  | -------------------------------------------------------

|(7) |  | Previously
filed on Form 10-Q (for the period ended September 30, 2002) on           November 14,
2002.
|--- |  | -------------------------------------------------------------------------------------------------------

|(8) |  | Previously
filed on Form 10-K (for the period           ended December 31, 2002) on May 1, 2003.
|--- |  | ------------------------------------------------------------------------------------------------

|(9) |  | Previously
filed on Form           10-QSB (for the period ended June 30, 2003) on August 19, 2003.
|--- |  | --------------------------------------------------------------------------------------------------

|(10) |  | Previously
filed on Form 10-KSB (for the period ended December 31, 2003) on           March 30,
2004.
|---- |  | -----------------------------------------------------------------------------------------------------

|(11) |  | Previously
filed on Form 10-QSB (for the period           ended March 31, 2004) on May 21, 2004.
|---- |  | ------------------------------------------------------------------------------------------------

-21-

---

# 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 hereunto duly authorized.

| | THE NEPTUNE SOCIETY, INC.
(Registrant)
| | --------------------------------------

|Date:   August 13, 2004 | By: /s/ Marco Markin
Marco Markin
Chief Executive Officer
|----------------------- | ---------------------------------------------------------

|Date:   August 13, 2004 | By: /s/ Daniel Solberg
Daniel Solberg
Chief Financial Officer
|----------------------- | -------------------------------------------------------------

-22-

---