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

                                    FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the quarterly period ended June 30, 2002

                                       OR

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

     For the transition period from _______________ to __________________

                        Commission file number: 000-30480



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


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

   4312 Woodman Avenue, 3rd Floor,
   Sherman Oaks, California 91505                         98105
-----------------------------------        -------------------------------------
       (Address of principal                            (Zip Code)
         executive offices)


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

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

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

3,920,531 shares of Common Stock, $0.001 par value,  outstanding as of August 7,
2002.


<PAGE>


                            The Neptune Society, Inc.
                                    Form 10-Q
                                      Index

                                                                            Page

PART 1  --  FINANCIAL INFORMATION..............................................1

Item 1: Financial Statements...................................................1

Item 2: Management's Discussion and Analysis of Financial
        Condition and Results of Operations...................................14

Item 3:  Quantitative and Qualitative Disclosures About Market Risk...........24

PART II  --  OTHER INFORMATION................................................25

Item 1.  Legal Proceedings....................................................25

Item 2.  Changes in Securities................................................25

Item 3.  Defaults Upon Senior Securities......................................26

Item 4.  Submission of Matters to a Vote of  Security Holders.................26

Item 5.  Other Information....................................................27

Item 6.  Exhibits and Reports on Form 8-K.....................................28

                                       ii


<PAGE>


                         PART 1 -- FINANCIAL INFORMATION


Item 1: Financial Statements

                            The Neptune Society, Inc.
                      Condensed Consolidated Balance Sheets
                       June 30, 2002 and December 31, 2001


                                              -------------    -----------------
                                                June 30,         December 31,
                                                  2002               2001
                                               (unaudited)         (audited)
                                              -------------    -----------------
                  Assets
                  ------
Current assets:
   Cash                                      $    886,831              213,219
   Accounts receivable                          2,218,185            1,751,276
   Prepaid expenses and other
     current assets                               215,596              113,644
                                                  -------              -------
             Total current assets               3,320,612            2,078,139

Property and equipment, net                       539,270              548,469
Names and reputations, net                     24,374,713           24,364,472
Non compete agreements, net                        24,166               48,333
Deferred financing costs                        1,275,177            1,539,132
Deferred charges and other assets               5,642,955            4,343,159
                                                ---------            ---------
                                               35,176,893           32,921,704
                                               ==========           ==========

    Liabilities and Shareholders' Equity
    ------------------------------------
Current liabilities:
   Current portion of long-term debt              907,410            2,890,215
   Accounts payable                             1,388,698            1,700,487
   Accrued and other current liabilities        1,424,357            1,478,188
                                                ---------            ---------
             Total current liabilities          3,720,465            6,068,890

Long-term debt                                  2,069,005            2,291,575
Convertible debentures                          5,826,654            5,000,000
Other long-term liabilities                       996,158              848,861
Deferred pre-need revenues                     15,642,240           11,688,952
                                               ----------           ----------
                                               28,254,522           25,898,278

                                       1


<PAGE>


Shareholders' equity:
   Common stock                                     3,921                2,153
   Additional paid-in capital                  30,357,912           27,901,241
   Accumulated deficit                        (23,439,462)         (20,879,968)
                                               ----------           ----------
             Total shareholders' equity         6,922,371            7,023,426
                                               ----------            ---------

                                           $   35,176,893           32,921,704
                                               ===========          ==========

See accompanying notes to consolidated financial statements.

                                       2


<PAGE>


<TABLE>
                            The Neptune Society, Inc.
                 Condensed Consolidated Statements of Operations
                Three and Six Months ended June 30, 2002 and 2001
                                   (Unaudited)

                                        ------------    ------------    -------------   ---------------
                                            Three           Three
                                            months          months
                                            ended           ended         Six months       Six months
                                           June 30,        June 30,       ended June       ended June
                                             2002            2001          30, 2002         30, 2001
                                        ------------    ------------    -------------   ---------------
<S>                                   <C>                 <C>              <C>               <C>
Revenues:
   Services and merchandise           $   2,942,033       2,871,393        5,453,368         5,113,081
   Management and finance fees              173,364         312,546          438,884           760,158
                                        ------------    ------------    -------------   ---------------
                    Total revenues        3,115,397       3,183,939        5,892,252         5,873,239

 Costs and expenses                       1,428,494       1,386,622        2,817,534         2,771,772
                                        ------------    ------------    -------------   ---------------
                    Gross profit          1,686,903       1,797,317        3,074,718         3,101,467

 General and administrative expenses      2,188,258       2,154,197        4,013,751         3,912,887
 Amortization and depreciation expense       55,695         516,467          131,790         1,057,772
 Professional fees                          197,964         369,743          373,081           546,163
                                        ------------    ------------    -------------   ---------------

 Total general and admin expenses         2,441,917       3,040,407        4,518,622         5,516,822
                                        ------------    ------------    -------------   ---------------

  Loss from operations                     (755,014)     (1,243,090)      (1,443,904)       (2,415,355)
 Interest expense                           616,425         426,405        1,115,589         1,044,918
                                        ------------    ------------    -------------   ---------------
   Loss before income taxes              (1,371,439)     (1,669,495)      (2,559,493)       (3,460,273)
 Income tax expense                               -               -                -                 -
                                        ------------    ------------    -------------   ---------------

                    Net loss           $ (1,371,439)     (1,669,495)      (2,559,493)       (3,460,273)
                                        ============    ============    =============   ===============

 Loss per share - Basic and
Diluted                                $      (0.35)          (0.87)           (0.84)            (1.81)
 Weighted average number of shares-
   Basic and Diluted                      3,865,153       1,915,822        3,038,271         1,915,583
</TABLE>

See accompanying notes to consolidated financial statements.

                                       3


<PAGE>


<TABLE>
                            The Neptune Society, Inc.
                 Condensed Consolidated Statements of Cash Flows
                Three and Six Months ended June 30, 2002 and 2001
                                   (Unaudited)


                                                    ---------------    --------------    ---------------    ---------------
                                                     Three Months      Three Months        Six Months         Six Months
                                                      Ended June        Ended June         Ended June         Ended June
                                                       30, 2002          30, 2001           30, 2002           30, 2001
                                                    ---------------    --------------    ---------------    ---------------

<S>                                                  <C>                <C>                <C>                <C>
Net loss                                             $(1,371,439)       (1,669,495)        (2,559,493)        (3,460,273)
  Adjustments to reconcile net loss to net
   cash provided by (used in) operating activities:
       Depreciation and amortization                      55,695           516,467            131,790          1,057,772
       Accretion of discount on notes payable             42,689            28,749             50,201             57,499
       Non-cash interest & amortization
        of deferred finance costs                        356,444           256,640            637,148            565,584
       Stock compensation                                 81,058           379,167            156,058            380,532
Change in operating assets and liabilities:
       Accounts receivable                               191,796          (979,729)          (466,909)        (1,078,548)
       Prepaid expenses and other current assets        (273,132)          126,791           (101,952)           (39,895)
       Deferred charges and other assets                (641,611)         (483,035)        (1,002,761)        (1,048,381)
       Accounts payable                                  157,705           (21,653)          (311,789)          (320,707)
       Accrued and other liabilities                       6,128           121,043            109,915            341,747
       Deferred pre-need revenues                      1,799,748         1,841,139          3,953,287          3,390,624
                                                      ----------        ----------         ----------         ----------
Net cash provided by (used in) operating activities:     405,082           116,085            595,494           (154,046)
                                                      ----------        ----------         ----------         ----------

Cash flows from investing activities:
  Purchases of property and equipment                    (87,206)           (4,321)           (98,424)            (7,529)
  Acquisitions, net of cash acquired                     (10,240)                -            (10,240)                 -
                                                      ----------        ----------         ----------         ----------
Net cash used in investing activities                    (97,446)           (4,321)          (108,664)            (7,529)
                                                      ----------        ----------         ----------         ----------

Cash flows from financing activities:
  Payments on notes payable                             (505,281)           (6,054)        (1,513,217)           (11,976)
  Proceeds from issuance of debt, net                          -                 -            200,000                  -
  Net proceeds of common stock issued                    316,475                 -          1,500,000                  -
                                                      ----------        ----------         ----------         ----------
Net cash provided by (used in) financing activities     (188,806)           (6,054)           186,783            (11,976)
                                                      ----------        ----------         ----------         ----------

Net increase (decrease) in cash                          118,829           105,710            673,612           (173,551)

Cash, beginning of period                                768,002           786,078            213,219          1,065,339
                                                      ----------        ----------         ----------         ----------
Cash, end of period                                  $   886,831           891,788            886,831            891,788
                                                      ==========        ==========         ==========         ==========
Supplemental disclosure of cash flow information -
  Cash paid during the period for Interest           $   217,293           227,290            428,241            421,835
                                                      ==========        ==========         ==========         ==========
</TABLE>

 See accompanying notes to consolidated financial statements.

                                       4


<PAGE>


                            THE NEPTUNE SOCIETY, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 and 2001

                                   (Unaudited)

(1)  The Business

     Neptune  Society,  Inc.,  (the  "Company")  a Florida  Corporation,  is the
     holding company for Neptune  America,  Inc., a California  Corporation.  On
     March 31, 1999, the Company acquired a group of private  companies  engaged
     in marketing and administering  pre-need and at-need cremation  services in
     California,  Florida and New York. The business  combination  was accounted
     for using the purchase method of accounting, and the excess of the purchase
     price over the fair value of identifiable net assets acquired, $26,809,237,
     was recorded as names and  reputations.  Neptune  Society,  Inc.  currently
     operates crematories in Los Angeles, California,  Ankeny, Iowa and Spokane,
     Washington.

     As of  June  30,  2002,  the  Company  had a  working  capital  deficit  of
     approximately   $400,000.   The  Company  is  currently  exploring  various
     financing alternatives to address such working capital deficiency.

(2)  Interim Financial Statements (Unaudited)

Basis of Presentation

     The accompanying  condensed consolidated financial statements for the three
     and six months  ended June 30, 2002 and 2001  include  the  accounts of the
     Company and all  majority-owned  subsidiaries and are unaudited but include
     all  adjustments,  consisting  of normal  recurring  accruals and any other
     adjustments which management considers necessary for a fair presentation of
     the results  for these  periods.  These  condensed  consolidated  financial
     statements  have been prepared in a manner  consistent  with the accounting
     policies  described  in the  annual  report  on Form  10-K  filed  with the
     Securities and Exchange  Commission (the  "Commission")  for the year ended
     December 31, 2001, and should be read in conjunction  therewith.  Operating
     results for interim periods are not  necessarily  indicative of the results
     that may by expected for the full year period.

     Summary of Significant Accounting Policies

     At-need  cremation  services--The  Company  recognizes  revenue  on at-need
     cremation  services  and  merchandise  sales at the time the  services  are
     provided and the merchandise is delivered.

     Pre-need  cremation  arrangements--The  Company  sells  pre-need  cremation
     services and  merchandise  under contracts that provide for delivery of the
     services at the time of need.

                                       5


<PAGE>


     Revenues related to pre-need  cremation services are recorded as revenue in
     the period the services are performed.

     Prior  to  2000,  revenue  related  to  merchandise  sold  with a  pre-need
     cremation  service  arrangement  was recognized  upon meeting certain state
     regulatory  criteria,  which,  in California and Washington may be prior to
     the performance of cremation services. The Company considered such criteria
     met when the Company was  permitted  to receive one hundred  percent of the
     unrestricted  funds  associated with the merchandise  sale, the merchandise
     was in a condition  for its intended use and the Company did not retain any
     specific  performance  obligations  essential to the  functionality  of the
     merchandise,  the  customer  accepted  the  merchandise  as  evidenced by a
     written  transfer of title to the customer and  certificate  of  ownership,
     and, if the customer so requested, the Company stored the merchandise in an
     insured  location on the customer's  behalf until  customer  pick-up or the
     time of  need,  but no later  than the  customer's  death.  Customers  that
     purchase pre-need  cremation  arrangements do not have cancellation  rights
     with respect to the purchase of merchandise.

     In  response to SAB No. 101,  the Company  changed its revenue  recognition
     accounting   policy  with  respect  to  merchandise   sold  in  a  pre-need
     arrangement  to  include  certain   conditions   beyond  state   regulatory
     requirements.  As of January  1,  2000,  the  Company  added the  following
     criteria  related  to its  revenue  recognition  policy  for  the  sale  of
     merchandise:  (i) a definitive  delivery date,  (ii) stored  merchandise is
     required to be segregated  and  specifically  identified  by customer,  and
     (iii) a customer's  merchandise  is labeled or marked for such customer and
     may not be used  to fill  another  customer's  order,  and  exchange  for a
     different  piece of merchandise in the future is remote.  In addition,  the
     merchandise must not be subject to claims of the Company's  creditors,  the
     risks and rewards of  merchandise  ownership  must have  transferred to the
     customer,  and the Company's custodial risks are insurable and insured. The
     Company  shall  defer  pre-need  merchandise  sales  until such time as the
     merchandise  has been  physically  delivered  or upon  satisfaction  of the
     additional  criteria noted. The Company  recognizes  revenue on the sale of
     future  pre-need  merchandise  sales  upon  the  physical  delivery  of the
     merchandise  or upon the  satisfaction  of the  Company's  current  revenue
     recognition policy criteria outlined above.

     Florida  and  New  York do not  allow  the  Company  to  deliver  cremation
     merchandise  prior to the  provision  of cremation  services,  and as such,
     revenue related to merchandise sold with a pre-need  cremation  arrangement
     in these states is not recognized until the merchandise is delivered, which
     is generally concurrent with the period services are performed.

     The Company is allowed under state regulations in Colorado, Illinois, Iowa,
     Washington,  Oregon and Florida to retain  certain cash  receipts  received
     related to services to be performed in the future.  These cash receipts are
     recorded as deferred revenue and recognized when services are provided.

     During  the three  months  ended  June 30,  2002,  the  Company  recognized
     previously   deferred   pre-need   merchandise   revenues   and   costs  of
     approximately $9,000 and $4,000,  respectively,  related to the fiscal year
     2000 cumulative effect of change in accounting principle adjustment. During
     the six months  ended June 30,  2002,  the  Company  recognized  previously
     deferred pre-need merchandise  revenues and costs of approximately  $23,000
     and $9,000,  respectively related to the above-mentioned  cumulative effect
     of change in accounting principle adjustment.

                                       6


<PAGE>


     Pre-need  installment  sales--The  Company  also sells  pre-need  cremation
     arrangements  under installment plans. Under such plans, the customer makes
     an initial  down-payment and pays the balance in monthly  installments plus
     interest.  To the extent  that cash  received is not  trusted,  the Company
     accounts for this cash as deferred revenue until the transaction  qualifies
     for revenue recognition under its accounting policies.  Prior to January 1,
     2001, due to the uncertainty of collections of these accounts,  the Company
     recorded  these  transactions  in accordance  with its revenue  recognition
     accounting policies as cash was received.

     Worldwide travel sales--The Company sells a worldwide travel assurance plan
     (the "plan") which guarantees the provision of cremation  services anywhere
     in the world to the extent the plan  holder is more than 75 miles away from
     their legal  residence at the time of death.  The plan is underwritten by a
     third party  carrier who  receives a premium  payment,  and is obligated to
     perform  services  if the above  criteria is met.  The  Company  recognizes
     revenue  related to these plans at the time of sale. The Company also sells
     worldwide  travel  plans under  installment  plans.  Under such plans,  the
     customer  makes an  initial  down-payment  and pays the  balance in monthly
     installments plus interest.

     Commission  income--  Under  pre-need  cremation  services and  merchandise
     arrangements  funded  through  insurance  purchased by customers from third
     party  insurance  companies,  the Company earns a commission on the sale of
     the policies.  Commission income, net of related expenses, is recognized at
     the point at which the commission is no longer subject to refund, generally
     3 to 5 days after the  contract is sold.  Policy  proceeds  are paid to the
     Company as cremation services and merchandise are delivered.

     Direct and indirect  costs--The  Company expenses direct and indirect costs
     in the  period  incurred,  with  the  exception  of  expenses  specifically
     identifiable  to  individual  pre-need  cremation  arrangements,   such  as
     commissions.  Such  expenses  are  recognized  when  the  related  pre-need
     merchandise and/or service revenues, respectively, are recognized.

(3)  Computation of Earnings (Loss) Per Common Share

     Basic and diluted  loss per share is  computed by dividing  net loss by the
     weighted average number of common shares outstanding during the period. For
     the three and six months ended June 30, 2002,  options to purchase  607,296
     of common  stock at prices  ranging  from  $10.00 to $56.04 per share,  13%
     convertible  debentures  (which are  convertible  into 1,666,667  shares of
     common  stock at $3.00 per  share  with  detachable  warrants  to  purchase
     200,000  shares of common stock at $3.00 per share) and 13.75%  convertible
     debentures  (which are  convertible  into 893,045 shares of common stock at
     $1.20 per share),  were not included in the computation of diluted loss per
     share because the effect would be antidilutive.

                                       7


<PAGE>


     For the three and six months  ended  June 30,  2001,  options  to  purchase
     89,750 and 218,625 shares, respectively,  of common stock at prices ranging
     from $48.48 to $57.00 per share and 13% convertible  debentures  (which are
     convertible  into  125,000  shares of common stock at $40.00 per share with
     detachable  warrants to purchase  50,000  shares of common  stock at prices
     ranging  from  $41.68 to $50.00 per share)  and 8%  convertible  debentures
     (which are  convertible  into 20,833  shares of common  stock at $48.00 per
     share),  were not  included in the  computation  of diluted  loss per share
     because the effect would be antidilutive.

(4)  Shareholders' Equity

     Effective as of March 22, 2002, the Company's Board of Directors authorized
     and affected a 1 for 4 reverse split of its common stock. Per share amounts
     in the  accompanying  consolidated  financial  statements give  retroactive
     effect to the reverse stock split.

     In April 2002,  the  Company  completed a private  placement  of  1,388,889
     shares of common stock at $1.08 per share to raise $1,500,000.  The Company
     received $1.2 million of the proceeds in March 2002.  The Company  received
     the remaining  $300,000 in April 2002, and issued  1,388,889  shares of the
     Company's  common stock pursuant to the private  placement  agreement.  The
     Company granted resale  registration rights to the investors in the private
     placement.

     In  May  2002,  the  Company   completed  a  private  placement  of  13.75%
     convertible  debentures  in  the  principal  amount  of  $1,000,000  to CCD
     Consulting  Commerce  Distribution AG in  consideration of $200,000 in cash
     and the  satisfaction  of a  promissory  note in the  principal  amount  of
     $800,000.  The  convertible  debenture is exercisable  for shares of common
     stock of The Neptune  Society,  Inc. at $1.20 per share. The Company became
     obligated to issue 83,333  shares of the  Company's  common stock as a loan
     conversion fee. These debentures  automatically  convert into common shares
     at  $1.20  per  share  on  March  31,  2004.  The  Company  granted  resale
     registration rights to this investor.

     In May 2002,  the Company  issued  64,448  shares of common stock to CapEx,
     L.P. and 42,992  shares of common stock to D.H.  Blair  Investment  Banking
     Corp.  at $1.08 per share in connection  with their  exercise of preemptive
     rights  granted  under  the  terms of a  Debenture  and  Warrant  Amendment
     Agreement  dated  effective  December 31, 2001. The Company  granted resale
     registration right to the investors.

     In May 2002,  the  Company  issued  13.75%  convertible  debentures  in the
     principal  amount of  $42,992 to CapEx,  L.P.  and  $28,661  to D.H.  Blair
     Investment  Banking Corp. in connection  with their  exercise of preemptive
     rights  granted  under  the  terms of a  Debenture  and  Warrant  Amendment
     Agreement dated effective December 31, 2001. The convertible debentures are
     convertible  into  common  stock at $1.20 per share.  The  Company  granted
     resale registration right to the investors.

     In  May  2002,   the  Company  issued  6,250  shares  of  common  stock  as
     compensation in connection with the employment of certain senior staff.

                                       8


<PAGE>


     On May 31,  2002,  the Company  amended its  Articles of  Incorporation  to
     increase the authorized capital to consist of 85,000,000 shares,  including
     75,000,000  shares of common stock,  $0.001 par value, and 10,000,000 share
     of preferred stock, $0.001 par value.

     During the three and six months ended June 30, 2002,  no options to acquire
     common  stock were  granted.  Zero and 2,625  options,  respectively,  were
     canceled during the three- and six-month periods ended June 30, 2002.

     At June 30,  2002,  3,920,531  shares of the  Company's  common  stock were
     issued and outstanding.

(5)  Debt

     Long-term debt at June 30, 2002 and December 31, 2001, respectively,  is as
     follows:

<TABLE>
                                                                                       June 30,             December 31,
                                                                                        2002                   2001
<S>                                                                                <C>                      <C>
13% Convertible debentures, due February 24, 2005.                                 $  5,000,000             5,000,000

Note payable, non-amortizing, interest accruing at 13%, due July 31, 2003.            2,123,393             2,391,940

Note payable to a private investor, non-interest bearing, non-amortizing,  due
on September 30, 2001.                                                                        -             1,000,000

13.75%  Convertible  debentures,  non-amortizing,  due March 2004. The balance
is net of unaccreted discount of $245,000. (c)                                          755,000               800,000

Note payable, 13% non-amortizing, due July 2003.                                        350,000               350,000

13% Convertible debentures, non-amortizing due July 31, 2002.                            75,000                75,000

Notes  payable,  due November  2003 and February  2004.  The balance is net of
unaccreted discount of $45,372.                                                         294,589               369,872

Note payable, interest accruing at 10%, due July 2002                                    75,948                94,102

Notes payable, interest accruing at 9%, due May 31, 2002.                                     -                10,876

Line of credit, interest accruing at 9%,  due April 1, 2002 (paid July 2002).            45,000                90,000

13.75% Convertible debentures, non-amortizing,  due April 2004. (b)                      71,653                     -
</TABLE>

                                       9


<TABLE>
                                                                                       June 30,             December 31,
                                                                                        2002                   2001
<S>                                                                                <C>                      <C>
Note  payable,  non-amortizing,   due  April  2005.  The  balance  is  net  of
unaccreted discount of $3,978. (a)                                                       12,486                     -
                                                                                      8,803,069            10,181,790
    Less current installments                                                           907,410             2,890,215
                                                                                      ---------            ----------

                                                                                   $  7,895,659             7,291,575
                                                                                    ===========            ==========
</TABLE>


          (a) In April 2002,  the  Company  issued an  amortizing,  non-interest
          bearing,  note payable in the amount of $17,432 in connection with the
          purchase of a vehicle. The note was collateralized by the vehicle. The
          note was discounted to its approximate fair market value.

          (b) In May 2002, the Company issued 13.75%  convertible  debentures in
          the principal amount of $71,653 to certain convertible debt holders in
          connection with their exercise of preemptive  rights granted under the
          terms of a Debenture and Warrant  Amendment  Agreement dated effective
          December 31, 2001. The  convertible  debentures are  convertible  into
          common stock at $1.20 per share.

          (c) In May 2002, the Company  completed a private  placement of 13.75%
          convertible  debentures in the  principal  amount of $1,000,000 to CCD
          Consulting  Commerce  Distribution AG in  consideration of $200,000 in
          cash and the satisfaction of a promissory note in the principal amount
          of $800,000.  The  convertible  debenture is exercisable for shares of
          common  stock of The Neptune  Society,  Inc.  at $1.20 per share.  The
          Company  became  obligated  to issue  83,333  shares of the  Company's
          common stock as a loan conversion fee. These debentures  automatically
          convert into common  shares at $1.20 per share on March 31, 2004.  The
          Company granted resale registration rights to this investor.

(6)  Income Taxes

     As a result of the Company's  continuing  losses,  during the three and six
     months ended June 30, 2002,  the Company did not  recognize any tax benefit
     related to its tax net operating losses.

(7)  Subsequent Events

     In July 2002, the holder of a 13%, $75,000  convertible  debenture due July
     31, 2002  converted  its  debenture  into 225,000  shares of the  Company's
     common stock.

     In  July  2002,  the  Company  extinguished  the  $45,000  balance  of  its
     line-of-credit.

                                       10


<PAGE>


(8)  Contingent Liabilities

     The  Company   guaranteed  the  obligations  of  Wilhelm   Mortuary,   Inc.
     ("Wilhelm"),  a  wholly-owned  subsidiary,  to Green Leaf  Investors I, LLC
     ("Green  Leaf") in the principal  amount of $1.5 million due July 31, 2002.
     This obligation was assumed by Western Management Services, LLC ("Western")
     in connection  with the sale of the assets of Wilhelm.  The Company remains
     obligated under its guarantee to Green Leaf, which is secured by a security
     interest granted in the Company's  assets.  On August 12, 2002, the Company
     received  notice that  Western and Green Leaf agreed in principle to extend
     the due date of the note to November 1, 2002.

(9)  New Accounting Pronouncements

     In July 2001, the FASB issued Statement No. 141, Business Combinations, and
     Statement  No. 142,  Goodwill and Other  Intangible  Assets.  Statement 141
     requires  that the purchase  method of  accounting be used for all business
     combinations  initiated  after June 30, 2001.  Statement 141 also specifies
     criteria   intangible   assets  acquired  in  a  purchase  method  business
     combination  must meet to be recognized  and reported  apart from goodwill,
     noting that any purchase price allocable to an assembled  workforce may not
     be accounted for  separately.  Statement 142 will require that goodwill and
     intangible assets with indefinite useful lives no longer be amortized,  but
     instead  tested for  impairment at least  annually in  accordance  with the
     provisions  of  Statement  142.   Statement  142  will  also  require  that
     intangible  assets  with  definite  useful  lives be  amortized  over their
     respective  estimated useful lives to their estimated  residual values, and
     reviewed for impairment in accordance with SFAS No. 121, Accounting for the
     Impairment of Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed
     Of.

     The  Company  is  required  to  adopt  the   provisions  of  Statement  141
     immediately and Statement 142 effective January 1, 2002.

     Statement 141 will require upon adoption of Statement 142, that the Company
     evaluate its existing  intangible assets and goodwill that were acquired in
     a  prior  purchase  business   combination,   and  to  make  any  necessary
     reclassifications  in order to conform  with the new  criteria in Statement
     141 for  recognition  apart from goodwill.  Upon adoption of Statement 142,
     the Company  will be required to  reassess  the useful  lives and  residual
     values of all intangible assets acquired in purchase business combinations,
     and make any necessary  amortization  period  adjustments by the end of the
     first  interim  period  after  adoption.  In  addition,  to the  extent  an
     intangible  asset is identified as having an  indefinite  useful life,  the
     Company will be required to test the  intangible  asset for  impairment  in
     accordance  with the  provisions  of Statement 142 within the first interim
     period. Any impairment loss will be measured as of the date of adoption and
     recognized as the cumulative effect of a change in accounting  principle in
     the first interim period.

     In  connection  with  the  transitional  goodwill  impairment   evaluation,
     Statement  142 will require the Company to perform an assessment of whether
     there  is an  indication  that  goodwill  is  impaired  as of the  date  of
     adoption.  To accomplish this the Company must identify its reporting units
     and determine the carrying value of each reporting

                                       11


<PAGE>


     unit by  assigning  the  assets and  liabilities,  including  the  existing
     goodwill and intangible  assets, to those reporting units as of the date of
     adoption.  The  Company  will then have up to six  months  from the date of
     adoption to determine the fair value of each  reporting unit and compare it
     to the reporting unit's carrying  amount.  To the extent a reporting unit's
     carrying  amount  exceeds its fair  value,  an  indication  exists that the
     reporting  unit's goodwill may be impaired and the Company must perform the
     second step of the  transitional  impairment  test. In the second step, the
     Company  must  compare  the  implied  fair  value of the  reporting  unit's
     goodwill,  determined by allocating the reporting  unit's fair value to all
     of it assets  (recognized  and  unrecognized)  and  liabilities in a manner
     similar to a purchase price allocation in accordance with Statement 141, to
     its  carrying  amount,  both of which  would be  measured as of the date of
     adoption. This second step is required to be completed as soon as possible,
     but no  later  than  the end of the  year  of  adoption.  Any  transitional
     impairment loss will be recognized as the cumulative  effect of a change in
     accounting principle in the Company's statement of earnings.

     As of the  date of  adoption,  the  Company  expects  to  have  unamortized
     goodwill  in the  amount of $24.4  million  which  will be  subject  to the
     transition  provisions  of  Statements  141 and 142.  Amortization  expense
     related to goodwill was $1.8 million and $1.7  million,  respectively,  for
     the years ended December 31, 2001 and 2000. The Company has, as of June 30,
     2002,  completed  the  first  step of  determining  the fair  value of each
     reporting unit and comparing it to the reporting  unit's  carrying  amount,
     and does not believe that an impairment exists.

     In August  2001,  the  Financial  Accounting  Standards  Board  issued FASB
     Statement No. 144,  Accounting for the Impairment or Disposal of Long-Lived
     Assets  (Statement  144),  which  supersedes  both FASB  Statement No. 121,
     Accounting  for the  Impairment  of  Long-Lived  Assets and for  Long-Lived
     Assets to Be Disposed Of (Statement  121) and the  accounting and reporting
     provisions   of  APB   Opinion   No.   30,   Reporting   the   Results   of
     Operations--Reporting  the  Effects of Disposal of a Segment of a Business,
     and   Extraordinary,   Unusual  and   Infrequently   Occurring  Events  and
     Transactions  (Opinion 30), for the disposal of a segment of a business (as
     previously defined in that Opinion).  Statement 144 retains the fundamental
     provisions in Statement 121 for recognizing and measuring impairment losses
     on long-lived  assets held for use and long-lived  assets to be disposed of
     by sale, while also resolving significant  implementation issues associated
     with Statement 121.  Statement 144 retains the basic  provisions of Opinion
     30 on how to present  discontinued  operations in the income  statement but
     broadens that presentation to include a component of an entity (rather than
     a segment of a business).  Unlike  Statement 121, an impairment  assessment
     under Statement 144 will never result in a write-down of goodwill.  Rather,
     goodwill is evaluated for impairment under Statement No. 142.

     In October  2001,  the FASB  issued  SFAS No.  143,  "Accounting  for Asset
     Retirement  Obligations," which requires companies to record the fair value
     of a liability for asset retirement obligations in the period in which they
     occurred. The statement applies to a company's legal obligations associated
     with the  retirement of a tangible  long-lived  asset that results from the
     acquisition,  construction, and development or through the normal operation
     of a long-lived asset. When a liability is initially recorded,  the company
     would  capitalize the cost,  thereby  increasing the carrying amount of the
     related asset.  The capitalized  asset  retirement cost is depreciated over
     the life of the respective asset while the liability is accreted to its

                                       12


<PAGE>


     present value. Upon settlement of the liability,  the obligation is settled
     at its recorded  amount or the company incurs a gain or loss. The statement
     is effective for fiscal years  beginning  after June 30, 2002.  The Company
     does not expect the  adoption  to have a material  impact to the  Company's
     financial position or results of operations.

     The  Company  is  required  to adopt  Statement  144 no later than the year
     beginning  after  December  15, 2001.  Accordingly,  the Company will adopt
     Statement 144 in the first quarter of 2002.  Management does not expect the
     adoption  of  Statement  144 for  long-lived  assets held for use to have a
     material  impact  on  the  Company's   financial   statements  because  the
     impairment  assessment  under  Statement  144  is  largely  unchanged  from
     Statement  121. The provisions of the Statement for assets held for sale or
     other disposal generally are required to be applied prospectively after the
     adoption date to newly initiated disposal activities. Therefore, management
     cannot determine the potential  effects that adoption of Statement 144 will
     have on the Company's financial statements.

                                       13


<PAGE>


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

     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 our ability
to expand our  operations,  our ability to manage an increasing  number of sales
offices,  our  ability to retain key  management  personnel  and to  continue to
attract and retain skilled funeral home and crematory management personnel,  our
ability to comply with state and federal regulations, our ability to satisfy our
debt  obligations as they become due,  changes in the death rate or deceleration
of the trend towards cremation, the 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.

6)   The Company's ability to successfully raise financing to extinguish certain
     debt coming due in the current year.

     Other  specific  risks and  uncertainties  are set  forth in the  Company's
annual report on Form 10-K 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.

                                       14


<PAGE>


Overview

     We are a provider of cremation  services in North America.  As of August 1,
2002, we operate 19 locations serving Arizona,  California,  Colorado,  Florida,
Illinois, Iowa, Oregon, New York and Washington. Our strategy is to grow by: (i)
initiating start-up operations;  (ii) selectively acquiring small,  family-owned
cremation  service  providers  strategically  located  across the United States;
(iii)  operating all of our locations  under one nationally  branded name,  "The
Neptune Society" (where  permitted);  (iv) avoiding direct  competition with the
larger  competitors  in the  death  care  industry  by  concentrating  solely on
marketing  and  selling  cremation  services  and  cremation  products;  and (v)
improving   revenue  and   profitability   of  newly   acquired   operations  by
consolidating  administrative and management  functions within our organization.
We believe  that  implementing  these  initiatives  are  critical  to  achieving
profitability and are our most important challenges in competing  effectively in
the death care industry.

     We have made no  acquisitions  since August 2000. We opened  offices in the
suburbs of Denver, Colorado and Chicago, Illinois in January 2002 and June 2002,
respectively.

Effective March 22, 2002, we completed a consolidation of our share capital on a
four share (old) for one share (new) basis (the "Reverse Split"). As a result of
the Reverse Split, our authorized  capital was reduced from 25,000,000 shares of
common stock to 6,250,000 shares of common stock, and our issued and outstanding
share  capital  consisting  of  9,697,604  shares of common stock was reduced to
2,424,401  shares.  Information  contained  in this report  gives  effect to the
Reverse Split.

     On May 31, 2002, we amended our Articles of  Incorporation  to increase our
authorized capital to consist of 85,000,000 shares,  including 75,000,000 shares
of common stock,  $0.001 par value,  and  10,000,000  share of preferred  stock,
$0.001 par value.  Information  contained  in this  report  gives  effect to the
amendment.


                         SELECTED FINANCIAL INFORMATION

     The selected financial  information presented below as of and for the three
and six  months  ended June 30,  2002 and 2001 are  derived  from our  unaudited
condensed  consolidated  financial  statements.  The  following  discussion  and
analysis  is  provided  to  increase  understanding  of,  and  should be read in
conjunction with, the unaudited condensed  consolidated financial statements and
accompanying notes.

<TABLE>
                                                    Three        Three
                                                    Months       Months        Six Months    Six Months
                                                  Ended June   Ended June      Ended June    Ended June
                                                   30, 2002     30, 2001        30, 2002      30, 2001
                                                 ------------ ------------    ------------ -------------
(in 000's, except for per share                  (unaudited)  (unaudited)     (unaudited)   (unaudited)
information)
INCOME STATEMENT DATA:

<S>                                             <C>              <C>             <C>           <C>
Total Revenue                                   $    3,115       3,184           5,892         5,873
Gross Profit                                         1,687       1,797           3,075         3,101
General and Administrative Expenses                  2,188       2,154           4,014         3,913
Professional Fees                                      198         370             373           546
Amortization and Depreciation Expense                   56         516             132         1,058
Operating Loss                                        (755)     (1,243)         (1,444)       (2,415)
Interest Expense                                       616         426           1,116         1,045
</TABLE>

                                       15


<PAGE>


<TABLE>
                                                    Three        Three
                                                    Months       Months        Six Months    Six Months
                                                  Ended June   Ended June      Ended June    Ended June
                                                   30, 2002     30, 2001        30, 2002      30, 2001
                                                 ------------ ------------    ------------ -------------
(in 000's, except for per share                  (unaudited)  (unaudited)     (unaudited)   (unaudited)
information)
<S>                                                 <C>         <C>             <C>           <C>
Net Loss                                            (1,371)     (1,669)         (2,559)       (3,460)
Loss per share                                  $    (0.35)      (0.87)          (0.84)        (1.81)
</TABLE>

The following table set forth the Company's comparable financial  information as
a percentage of revenues:

<TABLE>
                                                 Three
                                                 Months     Three Months      Six Months    Six Months
                                               Ended June    Ended June       Ended June    Ended June
                                                30, 2002      30, 2001         30, 2002      30, 2001
                                              ------------- --------------    ------------ --------------
<S>                                               <C>           <C>              <C>           <C>
Total Revenue                                     100%          100%             100%          100%
Gross Profit                                       54%           56%              52%           53%
General and Administrative Expenses                70%           68%              68%           67%
Professional Fees                                   6%           12%               6%            9%
Amortization and Depreciation Expense               2%           16%               2%           18%
Operating Loss                                    -24%          -39%             -25%          -41%
Interest Expense                                   20%           13%              19%           18%
Net Loss                                          -44%          -52%             -43%          -59%
</TABLE>


BALANCE SHEET DATA:
(in 000's, except number of offices)            June 30,    December 31,
                                                  2002          2001
                                                  ----          ----
                                               (unaudited)   (audited)
                                               -----------   ---------

Current Assets                                $  3,321         2,078
Current Liabilities                              3,720         6,069
Long-Term Debt                                   2,069         2,292
Convertible Debentures                           5,827         5,000
Shareholders' Equity                          $  6,922         7,023

OTHER FINANCIAL DATA:
Number of Offices                                   19            18

THREE AND SIX MONTHS ended June 30, 2002  compared with THE Three AND SIX months
ended June 30, 2001:

Results of Operations

     The following  discussion  compares our results of operations for the three
and six months  ended June 30, 2002 to our results of  operations  for the three
and six months ended June 30, 2001.

Revenues

     Effective  on  October  1,  2001,  we  adopted  changes  to  our  inventory
management  policy in an effort to reduce  expenses  related to storing  certain
delivered merchandise in connection with the sale of pre-need contracts. We will
continue  to deliver  and store  certain  merchandise  sold in  connection  with
pre-need sales contracts as required by applicable law, but because this certain
merchandise is identical in each pre-need contract,  we will no longer segregate
and  specifically  identify such  merchandise  by customer.  As a result of this
change in our  inventory  management  policy,  we will not continue to recognize
revenue on

                                       16


<PAGE>


the sale of certain future pre-need  merchandise sales.  Merchandise and service
sales of $3,953,000 were deferred during the six months ended June 30, 2002. Our
change in inventory  management is expected to result in an  improvement in cash
flow. We anticipate  recognizing cost savings of  approximately  $300,000 during
the year ending December 31, 2002. See "Liquidity and Capital Resources."

     Cremation  service and  merchandise  revenues were $2,942,000 for the three
months ended June 30, 2002 compared to  $2,871,000  for the same period in 2001,
an increase of $71,000 or 2.5%.  The  increase  was  primarily  due to increased
travel plan sales,  $746,000 during the quarter ended June 30, 2002, compared to
$593,000 during the same quarter in 2001. This increase was partially off-set by
a reduction in cremation  revenues.  The reduction of cremation revenues was the
result of our sale of our crematory business in Portland, Oregon.

     Cremation  service and  merchandise  revenues were  $5,453,000  for the six
months ended June 30, 2002 compared to  $5,113,000  for the same period in 2001,
an increase of $340,000 or 6.7%.  The  increase was  primarily  due to increased
travel plan sales,  $1,478,000 during the quarter ended June 30, 2002,  compared
to $888,000 during the same quarter in 2001. This increase was partially off-set
by a reduction  in cremation  revenues.  The  reduction  of  cremation  revenues
resulted  primarily of our sale of our crematory  business in Portland,  Oregon.
The six months  ended June 30, 2001  included  $389,000 of pre-need  merchandise
revenues as we met our revenue recognition criteria during the period.

     During the three  months  ended  June 30,  2002 and 2001,  merchandise  and
service sales of $1,967,000 and  $1,849,000,  respectively,  were deferred as we
did not meet our revenue recognition criteria. The $118,000 or 6.4% increase was
primarily due to increased pre-need merchandise and service sales activity.  The
quarter ended June 30, 2001 included $389,000 of pre-need  merchandise  revenues
as we met our revenue recognition criteria during the quarter.

     During the six months ended June 30, 2002 and 2001, merchandise and service
sales of $3,953,000 and  $3,407,000,  respectively,  were deferred as we did not
meet our  revenue  recognition  criteria.  The  $456,000 or 13.0%  increase  was
primarily due to increased pre-need merchandise and service sales activity.

     We opened new  offices in the suburbs of Denver,  Colorado in January  2002
and  Chicago,  Illinois  in June  2002.  We did  not  acquire  or  open  any new
properties or offices  during the same six month- period in 2001. We operated 19
offices at June 30, 2002. We intend to open two  additional  offices  during the
last half of 2002.

     Cremation  service and merchandise  revenues related to new office openings
after  December  31, 2000 were  $102,000 and $58,000 for the three and six month
periods ended June 30, 2002.

     Revenues  earned for the three  months  ended  June 30,  2002 and 2001 from
trust fund management and finance fees were $173,000 and $313,000, respectively.
The trust fund  management  and finance fees  declined  $139,000 or 44.5%,  when
compared  to the same  quarter in 2001.  Trust fund  management  fees  decreased
$61,000  or 27.9% as a result  of  declining  investment  yields.  Finance  fees
decreased  $85,000 or 57.0% due to a decrease in pre-need  contracts  sold on an
installment sales basis.

     Revenues  earned for the six months ended June 30, 2002 and 2001 from trust
fund management and finance fees were $439,000 and $760,000,  respectively.  The
trust fund management and finance fees declined $321,000 or 42.3%, when compared
to the first half of 2001.  Trust fund  management  fees  decreased  $105,000 or
22.5% as a  result  of  declining  investment  yields.  Finance  fees  decreased
$207,000 or 61.8% due to decrease in pre-need  contract  sold on an  installment
sales basis.

Costs and Expenses and Gross Profit

     Direct  costs and  expenses  were  $1,428,000  or 45.9% of revenues for the
three months ended June 30, 2002 compared to $1,387,000 or 43.6% of revenues for
the  comparable  period  in 2001.  The  $42,000  or 3%  increase  was  primarily
attributable  to costs to open new offices and increased  variable costs related
to travel  revenues.  These cost  increases  were  partially  off-set by reduced
cremation costs resulting from the

                                       17


<PAGE>


sale of our Portland,  Oregon crematory operations.  The gross profit during the
three  months  ended June 30,  2002 was  $1,687,000  or 54.1% of total  revenues
compared to $1,797,000 or 56.4% for the comparable period in 2001, a $110,000 or
6.1% decrease.

     The gross profit margin for the three months ended June 30, 2002  decreased
4.1% compared to the same period in 2001.  The decrease was due primarily to the
recognition  of  approximately  one  month  of  pre-need   merchandise  revenues
($389,000) in the second quarter of 2001. The decrease was partially  off-set by
reduced  fixed  cremation  costs  resulting  from the sale of our  crematory  in
Portland, Oregon, and increased travel plan sales in the second quarter of 2002.

     Direct costs and expenses were  $2,818,000 or 47.8% of revenues for the six
months ended June 30, 2002  compared to  $2,772,000 or 47.2% of revenues for the
comparable   period  in  2001.  The  $46,000  or  1.7%  increase  was  primarily
attributable  to costs to open new offices and increased  variable costs related
to travel plan revenues.  These cost increases were partially off-set by reduced
cremation  costs  resulting  from the  sale of our  Portland,  Oregon  crematory
operations.  The gross  profit  during  the six months  ended June 30,  2002 was
$3,075,000  or 52.2% of total  revenues  compared to $3,101,000 or 52.8% for the
comparable period in 2001, a $27,000 or 0.9% decrease.

     The gross profit  margin for the six months  ended June 30, 2002  decreased
1.2% over the  comparable  2001 period.  The  decrease was due  primarily to the
recognition  of  approximately  one  month  of  pre-need   merchandise  revenues
($389,000)  in the first half of 2001.  The  decrease was  partially  off-set by
reduced  fixed  cremation  costs  resulting  from the sale of our  crematory  in
Portland, Oregon, and increased travel plan sales in the first half of 2002.

General and Administrative Expenses

     General and  administrative  expenses  for the three  months ended June 30,
2002 were $2,188,000 or 70.2% of revenues.  General and administrative  expenses
for the three months ended June 30, 2001 were  $2,154,000  or 67.7% of revenues.
General  and  administrative  expenses  increased  $34,000 or 1.6% in the second
quarter of 2002 compared to 2001 due primarily to  additional  costs  associated
with  supporting an increased  number of geographic  locations.  These increased
costs were  partially  off-set  by  reduced  general  and  administrative  costs
resulting from the sale of our crematory in Portland, Oregon.

     General and administrative  expenses for the six months ended June 30, 2002
were $4,014,000 or 68.1% of revenues.  General and  administrative  expenses for
the six months ended June 30, 2001 were $3,913,000 or 66.6% of revenues. General
and administrative expenses increased $101,000 or 2.6% in the first half of 2002
compared to 2001 due primarily to additional costs associated with supporting an
increased number of geographic  locations.  These increased costs were partially
off-set by reduced general and  administrative  costs resulting from the sale of
our crematory in Portland, Oregon.

Amortization and Depreciation Expenses

     Amortization   and   depreciation   expenses  were  $56,000  and  $516,000,
respectively,  for the three months  ended June 30, 2002 and 2001.  Amortization
and depreciation  expenses were $132,000 and $1,058,000,  respectively,  for the
six months  ended June 30,  2002 and 2001.  The  decrease  in  amortization  and
depreciation  expenses resulted from the adoption of FASB Statements No. 141 and
142 and the divestiture of the Portland, Oregon properties.  See "New Accounting
Pronouncements."

Professional Fees

     Professional  fees were  $198,000 or 6.4% of revenues  for the three months
ended June 30, 2002  compared  to  $370,000  or 11.6% of revenues  for the three
months ended June 30, 2001.  Professional fees were $373,000 or 6.3% of revenues
for the six months ended June 30, 2002  compared to $546,000 or 9.3% of revenues
for the six months ended June 30, 2001.  Professional  fees primarily related to
general  business  matters and audit and tax  services.  Professional  fees also
include  $167,000  of  consulting  fees  paid  by us  to  the  former  principal
shareholder for marketing and sales  consultation  services in the first half of
2001.  The  consulting  agreement  with the  former  principal  shareholder  was
terminated effective December 31, 2001,

                                       18


<PAGE>


and we incurred no  consulting  fees as a result of that  agreement in the first
half of 2002.

Interest Expense

     Interest  expense was  $616,000 or 19.8% of revenues  for the three  months
ended June 30, 2002  compared  to  $426,000  or 13.4% of revenues  for the three
months ended June 30, 2001. Interest expense was $1,116,000 or 18.9% of revenues
for the six months  ended  June 30,  2002  compared  to  $1,045,000  or 17.8% of
revenues  for the six months  ended June 30, 2001.  Interest  expense  increased
primarily  due to the  amortization  of  deferred  financing  costs  incurred to
acquire or refinance  certain debt during the fourth  quarter of 2001 and/or the
first half of 2002.  This  increase was  partially  off-set by the  reduction of
interest  costs  resulting  from  the  payment  of  certain   acquisition  debt,
disposition  of certain debt related to the sale of our Portland  crematory  and
building and the July 2001 expiration of a "stock purchase guarantee" obligation
related to a July 2000 restructuring of acquisition debt.

Net Loss

     Net loss was $1,371,000  ($0.35 per share) and $1,669,000 ($0.87 per share)
for the three  months ended June 30, 2002 and 2001,  respectively.  Net loss was
$2,559,000 ($0.84 per share) and $3,460,000 ($1.81 per share) for the six months
ended June 30, 2002 and 2001,  respectively.  During the comparative three month
periods, we deferred net earnings of $1,417,000 and $1,398,000, respectively, as
we did  not  meet  our  revenue  recognition  criteria.  During  the  six  month
comparative  periods,  we deferred net earnings of  $2,664,000  and  $2,415,000,
respectively,  as we did not meet our revenue recognition criteria. The net loss
related to each respective  period also differed for the other reasons described
above.

Liquidity and Capital Resources

     At June 30, 2002, we had current assets of  $3,321,000,  which is comprised
of $887,000 in cash,  $2,218,000 in accounts  receivable and $216,000 in prepaid
expenses  and  other  current  assets.  We  had  total  current  liabilities  of
$3,720,000,  comprised mainly of $1,389,000 in accounts  payable,  $1,424,000 in
accrued  liabilities,  and $907,000 in the current portion of long-term debt. We
had long-term debt of $2,069,000,  convertible  debentures with a carrying value
of $5,827,000 and other long-term  liabilities of $996,000. We also had deferred
pre-need revenue of $15,642,000. We had a working capital deficit of $400,000 at
June 30, 2002.

     We have also guaranteed the payment of a $1,500,000 debt, due July 31, 2002
(extended to November 1, 2002) assumed by the purchaser of our Portland,  Oregon
crematory operations.

     In April 2002,  we completed a private  placement  of  1,388,889  shares of
common stock at $1.08 per share to raise $1,500,000 outside the United States to
non-U.S.  persons.  The private placement was completed pursuant to an exemption
from  the  registration   requirements  available  under  Regulation  S  of  the
Securities  Act of  1933,  as  amended.  We used the  proceeds  to  satisfy  our
obligation under a $1,000,000 note we issued to Private Investment Company, Ltd.
We granted resale registration rights to the investors in the private placement.

     In May 2002,  we issued  64,448  shares of common stock to CapEx,  L.P. and
42,992 shares of common stock to D.H.  Blair  Investment  Banking Corp. at $1.08
per share in connection  with their exercise of preemptive  rights granted under
the  terms of a  Debenture  and  Warrant  Amendment  Agreement  dated  effective
December 31, 2001. In addition,  we issued 13.75% convertible  debentures in the
principal amount of $42,992 to CapEx,  L.P. and $28,661 to D.H. Blair Investment
Banking Corp. in connection  with their  exercise of preemptive  rights  granted
under the terms of a Debenture and Warrant  Amendment  Agreement dated effective
December 31, 2001. The convertible  debentures are convertible into common stock
at $1.20 per share.  The  securities  were issued in reliance  upon an exemption
from registration available under Section 4(2) of the Securities Act. We granted
investor  registration  rights to CapEx L.P. and D.H. Blair  Investment  Banking
Corp. in connection with the private placement.

     In May 2002,  we  completed  a  private  placement  of  13.75%  convertible
debentures due March

                                       19


<PAGE>


2004  in  the  principal  amount  of  $1,000,000  to  CCD  Consulting   Commerce
Distribution AG, a non-U.S.  person, outside the United States, in consideration
of $200,000 in cash and the  satisfaction  of a promissory note in the principal
amount of  $800,000.  The  convertible  debenture is  exercisable  for shares of
common stock of The Neptune  Society,  Inc. at $1.20 per share.  The convertible
debentures  were  issued in reliance  upon an  exemption  from the  registration
requirements available under Regulation S of the Securities Act.

     In May 2002, we issued 6,250 shares of our common stock as  compensation in
connection  with the employment of certain senior staff.  The shares were issued
in a  private  transaction  pursuant  to  an  exemption  from  the  registration
requirements available under Section 4(2) of the Securities Act.

     On May 31, 2002, we amended our Articles of  Incorporation  to increase our
authorized capital to consist of 85,000,000 shares,  including 75,000,000 shares
of common stock,  $0.001 par value,  and  10,000,000  share of preferred  stock,
$0.001 par value.

Debt Obligations

As of June 30, 2002, we had the following debt obligations:

<TABLE>
Obligations as of June 30, 2002:                               Principal    Monthly       Interest       Due
                                                                  Due       Payment         Rate         Date


<S>                                                      <C>                <C>             <C>        <C>
Convertible debentures                                   $      5,000,000   Interest        13.00%     Feb-2005
Convertible debentures                                             71,653   Interest        13.75%     Apr-2004
Note payable (original acquisition debt)                        2,123,393   Prin. & Int.    13.00%     Jul-2003
Convertible debentures, net discount of $245,000                  755,000   Interest        13.75%     Mar-2004
Notes payable, net discount of $45,372                            294,589   Principal       11.87%     Nov-2003
Note payable                                                      350,000   Interest        13.00%     Jul-2003
Note payable                                                       75,948   Prin. & Int.    10.00%     Jul-2002
Line of credit*                                                    45,000   Interest         9.00%     Apr-2002
Convertible debentures**                                           75,000   Interest        13.00%     Jul-2002
Notes payable, net discount of $3,978                              12,486   Prin. & Int.    10.00%     Apr-2005

                                                               8,803,069
    Obligations coming due over next 12 months                   907,410
                                                               ---------
    Long-term obligations                                $     7,895,659
                                                               =========
</TABLE>

     *In July 2002, the Company  extinguished the $45,000 balance of its line of
     credit.

     ** In July 2002, the holder converted such debenture into 225,000 shares of
     Company's common stock. See "Subsequent Events."

     We had net cash  provided by operating  activities of $405,000 and $116,000
for the three months ended June 30, 2002 and 2001, respectively. We had net cash
provided by (used in) operating  activities of $595,000 and  $(154,000)  for the
six months  ended June 30, 2002 and 2001,  respectively.  Interest  paid for the
three  months  ended  June  30,  2002  and  2001  was  $217,000  and   $227,000,
respectively.  Interest paid for the six months ended June 30, 2002 and 2001 was
$428,000 and $422,000, respectively.

                                       20


<PAGE>


     In addition,  we guaranteed the obligations of Wilhelm Mortuary,  Inc., our
wholly-owned subsidiary,  to Green Leaf Investors I, LLC in the principal amount
of $1.5  million  due July  31,  2002  (extended  to  November  1,  2002).  This
obligation was assumed by Western  Management  Services,  LLC in connection with
the sale of the assets and  properties  used in our Portland,  Oregon  crematory
operations by Wilhelm.  We remain  obligated  under our guarantee to Green Leaf,
which is secured  by a security  interest  granted  in our  assets.  We have not
included a reserve in our financial statements in connection with our guarantee,
which is  disclosed  as a  contingent  liability  under Note 8 of our  financial
statements.

Subsequent Events

     In July  2002,  a 13%  convertible  debenture  in the  principal  amount of
$75,000  due July 31, 2002 was  converted  by Green Leaf  Investors  I, LLC into
225,000 shares of our common stock.

     We have been informed that Western Management Services,  LLC and Green Leaf
Investors  I, LLC agreed in principle to extend the due date of the $1.5 million
promissory note due July 31, 2002 to November 1, 2002. We remain obligated under
our  guarantee  of the note,  which is  secured by a  security  interest  in the
Wilhelm assets.

Plan of Operation

     Our plan of operation is based,  in part,  on  information  provided in the
reports of our  consultants  and the decisions of  management.  Our  independent
auditors have not examined, compiled or otherwise applied procedures to the plan
of operations presented herein, and,  accordingly,  do not express an opinion or
any  other  form of  assurance  on it.  Information  contained  in this  plan of
operation is presented on a cash basis, which is not in accordance with US GAAP,
and represents  projections  and  assumptions of management.  Actual results can
vary materially from the estimates of management and investors are cautioned not
to place  undue  reliance  on  management's  projections  and  assumptions.  See
"Forward-Looking Statements."

     Management  has  revised its plan of  operation  for the fiscal year ending
December  31,  2002 as a result of weaker  than  anticipated  sales of  pre-need
contracts  during  the  first  six  months  of 2002.  As a  result,  our plan of
operations  differs from  projections made in our annual report on Form 10-K for
the year ended  December 31, 2001 and our quarterly  report on Form 10-Q for the
quarter ended March 31, 2002.  Set out below is a summary of our revised Plan of
Operation for the fiscal year ending December 31, 2002.

Material Commitments--Short-term Funding Requirements

         Operating expenditures (incl. working capital)         $17.5 million
         Interest payments                                        1.1 million
         Current portion of long-term debt                        2.1 million
         Capital expenditures                                     0.2 million
                                                              ---------------
         Estimated total Short-term commitments                  20.9 million
         Estimated total Cash from Operations                    18.7 million
         Cash from Equity Sales                                   1.5 million
         Cash from Debt Proceeds                                  0.2 million
                                                              ---------------
         Estimated net Cash (Deficit)                         $  (0.5) million
                                                              ----------------

Net Cash Flow operations: Management's current year forecast for the year ending
December  31,  2002  projects  it will  achieve  approximately  $1.2  million in
positive net cash flows from operations  before the payment of debt and interest
and capital  expenditures.  We anticipate  generating cash from operations (cash
receipts  from  sales and other  income) of  approximately  $18.7  million,  and
operating expenditures (cash expenditures) of approximately $17.5 million.

Working  capital:  Management had a net working capital deficit of approximately
$400,000 as of June 30, 2002. We had current assets of $3,321,000, offset by the
current portion of long-term debt of $907,000 coming due over

                                       21


<PAGE>


the next twelve  months.  See  "Liquidity & Capital  Resources".  The  remainder
relates to accounts  payable of $1,389,000 and accrued expenses of $1,424,000 in
connection  with  our  on-going  operations.  In  addition,  we  guaranteed  the
obligations of Wilhelm  Mortuary,  Inc., our wholly-owned  subsidiary,  to Green
Leaf Investors I, LLC in the principal  amount of $1.5 million due July 31, 2002
(extended  to  November  1,  2002).  This  obligation  was  assumed  by  Western
Management  Services,  LLC  in  connection  with  the  sale  of the  assets  and
properties  used in our Portland,  Oregon  crematory  operations by Wilhelm.  We
remain  obligated  under our  guarantee  to Green  Leaf,  which is  secured by a
security interest granted in our assets.

Interest  payments:  We carry  outstanding  debt,  including  convertible  debt,
requiring annual cash interest payments of approximately  $1.1 million,  payable
in monthly  installments  for the year ending  December  31,  2002.  There is no
guarantee  that any  convertible  debt will be converted;  therefore the maximum
amount of interest payments have been projected.

Capital   Expenditures:   We  anticipate  capital   expenditures  to  amount  to
approximately $200,000 for the year ending December 31, 2002. These expenditures
include office furniture and office and computer equipment.

     We anticipate  that we will have to raise capital during the next 12 months
to meet our obligations under the portions of long-term debt due. See "Liquidity
and  Capital  Resources".  We intend to raise the  capital  required to fund our
financing  needs by  issuance  of debt and  equity.  There  can be no  assurance
financing will be available or accessible on reasonable terms.

     Our total  operating and capital budgets for the fiscal year ended December
31, 2002 is estimated  to be  approximately  $21 million.  There is no assurance
that our actual  expenditures  for the fiscal year ending December 31, 2002 will
not exceed our estimated operating budgets. Actual expenditures will depend on a
number of factors,  some of which are beyond our control including,  among other
things,  timing of regulatory  approval of its  projects,  the  availability  of
financing on acceptable  terms,  reliability of the assumptions of management in
estimating cost and timing,  the death and cremation  rates in the  geographical
locations that we serve,  consumer acceptance of our pre-need plans,  changes in
governmental  regulation  as they relate to our business,  certain  economic and
political  factors,  the time expended by consultants and professionals and fees
associated with applications  related to obtaining and maintaining  licenses for
our  locations  and  the   professional   fees  associated  with  our  reporting
obligations   under  the  Securities   Exchange  Act  of  1934.  If  the  actual
expenditures  for such costs exceed the estimated  costs or if events occur that
require  additional  expenditures,  we  will be  required  to  raise  additional
financing or to defer  certain  expenditures  to meet other  obligations.  If we
cannot  raise  adequate  financing  to fund  our  plan of  operation,  we may be
required to suspend our growth  strategy;  consolidate  our  operations  through
reductions in staffing,  marketing and sales,  promotion and hours of operation;
terminate our operations in unprofitable or difficult to service  markets;  sell
assets or  operations  in some of the  markets we  service  and/or  suspend  our
operations  in certain  markets.  The failure to meet certain  expenditures  may
cause us to default on material obligations and such default may have a material
adverse effect on our business and results of operations.

     We expect  operating  cash  flows,  before  debt  servicing  and  expansion
expenditures, to be adequate to finance our basic operations. We anticipate that
we will finance long-term debt, additional acquisitions,  if any, and growth, in
part, by issuing equity and/or debt securities.

New Accounting Pronouncements

     In July 2001, the FASB issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets.  Statement 141 requires
that the purchase  method of  accounting  be used for all business  combinations
initiated after June 30, 2001.  Statement 141 also specifies criteria intangible
assets  acquired  in a  purchase  method  business  combination  must meet to be
recognized  and reported  apart from  goodwill,  noting that any purchase  price
allocable  to an  assembled  workforce  may  not be  accounted  for  separately.
Statement 142 will require that goodwill and intangible  assets with  indefinite
useful lives no longer be amortized,  but instead tested for impairment at least
annually in accordance with the provisions of Statement 142.  Statement 142 will
also require

                                       22


<PAGE>


that  intangible  assets with  definite  useful  lives be  amortized  over their
respective  estimated  useful  lives to their  estimated  residual  values,  and
reviewed for  impairment in  accordance  with SFAS No. 121,  Accounting  for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.

     The  Company  is  required  to  adopt  the   provisions  of  Statement  141
immediately and Statement 142 effective January 1, 2002.

     Statement 141 will require upon adoption of Statement 142, that the Company
evaluate its existing  intangible  assets and goodwill  that were  acquired in a
prior purchase business combination, and to make any necessary reclassifications
in order to conform with the new criteria in Statement 141 for recognition apart
from  goodwill.  Upon adoption of Statement 142, the Company will be required to
reassess the useful lives and residual values of all intangible  assets acquired
in purchase business  combinations,  and make any necessary  amortization period
adjustments by the end of the first interim period after adoption.  In addition,
to the extent an intangible  asset is identified as having an indefinite  useful
life, the Company will be required to test the  intangible  asset for impairment
in  accordance  with the  provisions  of Statement  142 within the first interim
period.  Any  impairment  loss will be measured  as of the date of adoption  and
recognized as the cumulative  effect of a change in accounting  principle in the
first interim period.

     In  connection  with  the  transitional  goodwill  impairment   evaluation,
Statement 142 will require the Company to perform an assessment of whether there
is an  indication  that  goodwill  is impaired  as of the date of  adoption.  To
accomplish  this the Company must identify its reporting units and determine the
carrying value of each  reporting unit by assigning the assets and  liabilities,
including the existing goodwill and intangible  assets, to those reporting units
as of the date of adoption. The Company will then have up to six months from the
date of adoption to determine the fair value of each  reporting unit and compare
it to the reporting  unit's carrying  amount.  To the extent a reporting  unit's
carrying amount exceeds its fair value, an indication  exists that the reporting
unit's  goodwill may be impaired and the Company must perform the second step of
the  transitional  impairment test. In the second step, the Company must compare
the  implied  fair  value  of  the  reporting  unit's  goodwill,  determined  by
allocating the reporting  unit's fair value to all of it assets  (recognized and
unrecognized) and liabilities in a manner similar to a purchase price allocation
in accordance with Statement 141, to its carrying amount, both of which would be
measured  as of the  date  of  adoption.  This  second  step is  required  to be
completed  as  soon as  possible,  but no  later  than  the  end of the  year of
adoption. Any transitional  impairment loss will be recognized as the cumulative
effect  of a change  in  accounting  principle  in the  Company's  statement  of
earnings.

     As of the  date of  adoption,  the  Company  expects  to  have  unamortized
goodwill in the amount of $24.4 million which will be subject to the  transition
provisions of Statements 141 and 142.  Amortization  expense related to goodwill
was $1.8 million and $1.7 million,  respectively,  for the years ended  December
31, 2001 and 2000.  The Company  has, as of June 30, 2002,  completed  the first
step of  determining  the fair value of each  reporting unit and comparing it to
the reporting  unit's carrying  amount,  and does not believe that an impairment
exists.

     In August  2001,  the  Financial  Accounting  Standards  Board  issued FASB
Statement  No. 144,  Accounting  for the  Impairment  or Disposal of  Long-Lived
Assets (Statement 144), which supersedes both FASB Statement No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of (Statement  121) and the accounting  and reporting  provisions of APB Opinion
No. 30, Reporting the Results of  Operations--Reporting  the Effects of Disposal
of  a  Segment  of a  Business,  and  Extraordinary,  Unusual  and  Infrequently
Occurring Events and Transactions (Opinion 30), for the disposal of a segment of
a business (as previously  defined in that  Opinion).  Statement 144 retains the
fundamental provisions in Statement 121 for recognizing and measuring impairment
losses on long-lived assets held for use and long-lived assets to be disposed of
by sale, while also resolving significant  implementation issues associated with
Statement 121.  Statement 144 retains the basic  provisions of Opinion 30 on how
to present  discontinued  operations  in the income  statement but broadens that
presentation  to include a component  of an entity  (rather  than a segment of a
business).  Unlike  Statement 121, an impairment  assessment under Statement 144
will never result in a write-down

                                       23


<PAGE>


of goodwill.  Rather,  goodwill is evaluated for impairment  under Statement No.
142.

     In October  2001,  the FASB  issued  SFAS No.  143,  "Accounting  for Asset
Retirement  Obligations," which requires companies to record the fair value of a
liability for asset retirement obligations in the period in which they occurred.
The  statement  applies to a company's  legal  obligations  associated  with the
retirement  of a tangible  long-lived  asset that results from the  acquisition,
construction,  and  development or through the normal  operation of a long-lived
asset. When a liability is initially recorded,  the Company would capitalize the
cost,  thereby  increasing  the  carrying  amount  of  the  related  asset.  The
capitalized asset retirement cost is depreciated over the life of the respective
asset while the liability is accreted to its present value.  Upon  settlement of
the liability,  the obligation is settled at its recorded  amount or the company
incurs a gain or loss.  The  statement is effective  for fiscal years  beginning
after June 30, 2002. The Company does not expect the adoption to have a material
impact to the Company's financial position or results of operations.

     The  Company  is  required  to adopt  Statement  144 no later than the year
beginning after December 15, 2001. Accordingly, the Company will adopt Statement
144 in the first  quarter of 2002.  Management  does not expect the  adoption of
Statement 144 for  long-lived  assets held for use to have a material  impact on
the Company's  financial  statements  because the  impairment  assessment  under
Statement 144 is largely  unchanged  from  Statement  121. The provisions of the
Statement for assets held for sale or other  disposal  generally are required to
be applied  prospectively  after the adoption date to newly  initiated  disposal
activities.  Therefore,  management  cannot determine the potential effects that
adoption of Statement 144 will have on the Company's financial statements.

Item 3: Quantitative and Qualitative Disclosures About Market Risk

     The market  risk  inherent  in our market risk  sensitive  instruments  and
positions  is the  potential  change  arising  from  increases  or  decreases in
interest  rates as  discussed  below.  Our  exposure to market risk as discussed
below  includes  "forward-looking  statements"  and  represents  an  estimate of
possible  changes in fair value or future  earnings  that would  occur  assuming
hypothetical  future  movements in interest rates.  Our views on market risk are
not necessarily indicative of actual results that may occur and do not represent
the maximum  possible  gains and losses that may occur,  since  actual gains and
losses will  differ from those  estimated,  based upon  actual  fluctuations  in
interest rates and the timing of transactions.

                                       24


<PAGE>


                          PART II -- OTHER INFORMATION

Item 1. Legal Proceedings.

     Our  operations are subject to numerous  laws,  regulations  and guidelines
adopted by various  governmental  authorities in the  jurisdictions  in which we
operate.   Liabilities  are  recorded  when  liabilities  are  either  known  or
considered probable and can be reasonably  estimated.  Our policies are designed
to control risk upon acquisition  through extensive due diligence and corrective
measures  taken prior to  acquisition.  We believe  liabilities to be immaterial
individually and in the aggregate.

     On June 13, 2002, the Iowa State Board of Mortuary  Science  Examiners (No.
01-011,  DIA No. 01DPHMS002 and No. 01-015,  DIA No. 01DPHMS001) issued an order
against our Iowa  operations  and an employee of the Neptune  Society  under the
Iowa Code for  failure  to comply  with  appropriate  procedures  related to its
operations.  Under the order, our license to operate a funeral establishment and
cremation  establishment in Iowa would be suspended for a period of thirty days;
we would be required to make  arrangements  during the period of suspension with
other licensed  funeral and/or  cremation  establishments  to provide funeral or
cremation  services  during  the  suspension;  we were  required  to pay a civil
penalty in the amount of $7,600 and we would be placed on probation for a period
of two years,  subject to certain terms and conditions,  including among others,
complying  with Iowa  requirements  related to licensed  funeral  establishments
applicable  to  our  business  of  providing  cremation  and  funeral  services,
designating  an employee  responsible  for  management and oversight of our Iowa
operations,  only  permitting a licensed  funeral  director to perform  services
required to be performed by a licensed  funeral  director,  maintaining a log of
our cremation and funeral services in the State of Iowa, being subject to random
inspections  and  notifying  other  states  of  the  order.  The  order  is  not
anticipated to affect our ability to market and sell pre-need contracts in Iowa.
On June 26, 2002, we filed a rehearing  application  with the Iowa Board,  which
was  denied by order  dated  July 9,  2002.  The order of the Iowa Board will be
effective  on August 8,  2002,  unless an appeal is filed.  We intend to file an
appeal of the Iowa Board's decision.

     We are  party to other  legal  proceedings  in the  ordinary  course of its
business,   but  do  not  expect  the  outcome  of  any  of  other  proceedings,
individually  or in the  aggregate,  to have a  material  adverse  effect on our
financial position, results of operations or liquidity.

Item 2. Changes in Securities.

     In April 2002,  we completed a private  placement  of  1,388,889  shares of
common  stock at $1.08 per share to raise  $1,500,000.  We used the  proceeds to
satisfy our obligation  under a $1,000,000 note we issued to Private  Investment
Company,  Ltd. and for working capital purposes.  The private placement was made
to non-U.S.  persons outside the United States pursuant to an exemption from the
registration requirements available under Regulation S of the Securities Act.

     In May 2002,  we  completed  a  private  placement  of  13.75%  convertible
debentures in the principal  amount of  $1,000,000  to CCD  Consulting  Commerce
Distribution AG, a non-U.S.  person outside the United States,  in consideration
of $200,000 in cash and the  satisfaction  of a promissory note in the principal
amount of  $800,000.  The  convertible  debenture is  exercisable  for shares of
common stock of The Neptune Society, Inc. at $1.20 per share. The Company became
obligated  to  issue  83,333  shares  of the  Company's  common  stock as a loan
conversion  fee. These  debentures  automatically  convert into common shares at
$1.20 per share on March 31, 2004. The private placement was completed  pursuant
to an exemption from the registration  requirements available under Regulation S
of the Securities Act.

     In May 2002,  the Company  issued  64,448  shares of common stock to CapEx,
L.P. and 42,992 shares of common stock to D.H. Blair Investment Banking Corp. at
$1.08 per share in connection  with their exercise of preemptive  rights granted
under the terms of a Debenture and Warrant  Amendment  Agreement dated effective
December 31, 2001. In addition,  we issued 13.75% convertible  debentures in the
principal amount of $42,992 to CapEx,  L.P. and $28,661 to D.H. Blair Investment
Banking Corp. in connection  with their  exercise of preemptive  rights  granted
under the terms of a Debenture and Warrant

                                       25


<PAGE>


Amendment   Agreement  dated  effective   December  31,  2001.  The  convertible
debentures  are  convertible  into  common  stock  at  $1.20  per  share.  These
debentures  automatically convert into common shares at $1.20 per share on March
31, 2004. The private placement was completed in reliance upon an exemption from
registration available under Section 4(2) of the Securities Act.

     In May 2002, we issued 6,250 shares of our common stock as  compensation in
connection  with the  employment  of certain  senior  staff.  The shares will be
issued in a private  transaction  pursuant to an exemption from the registration
requirements available under Section 4(2) of the Securities Act.

     On May 31, 2002, we amended our Articles of  Incorporation  to increase our
authorized capital to consist of 85,000,000 shares,  including 75,000,000 shares
of common stock,  $0.001 par value,  and  10,000,000  share of preferred  stock,
$0.001 par value.

Subsequent Events

     In July  2002,  a 13%  convertible  debenture  in the  principal  amount of
$75,000  due July 31, 2002 was  converted  by Green Leaf  Investors  I, LLC into
225,000 shares of our common stock.

     We have been informed that Western Management Services,  LLC and Green Leaf
Investors  I, LLC agreed in principle to extend the due date of the $1.5 million
promissory note due July 31, 2002 to November 1, 2002. We remain obligated under
our  guarantee  of the note,  which is  secured by a  security  interest  in our
assets.

Item 3. Defaults Upon Senior Securities.

None.

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

     The Company's  annual general meeting of  shareholders  was held on May 22,
2002 in Boca Raton,  Florida  pursuant to the notice of annual meeting and proxy
statement  dated  April 19,  2002.  A total of  1,739,610  common  shares of the
Company were represented in person or by proxy at the annual meeting, consisting
of  approximately  45.5% of the total  number of  common  shares of the  Company
outstanding on April 19, 2002,  the record date for the annual general  meeting.
At the annual general meeting,  21 shareholders were represented in person or by
proxy.

     Appointment of Auditors.

     At the  annual  meeting,  the  shareholders  ratified  the  appointment  of
Stonefield Josephson,  Inc. as the Company's auditors for the fiscal year ending
December  31, 2001 and approved the  authorization  of the  directors to fix the
remuneration  of the auditors.  The following  table sets forth the  information
regarding the voting on the proposal:

      Votes Cast      Votes Cast       Votes
         For            Against       Withheld     Abstentions       Not Voted
--------------------------------------------------------------------------------
      1,732,927         6,089            0             594               0

     Election of Directors.

     At the annual  meeting,  the  following  persons  were  elected to serve as
Directors  until  the  next  Annual  General  Meeting  or  until  their  earlier
retirement,  resignation,  or removal. The following table sets forth the voting
in the election held at the annual meeting for Directors:

                                       26


<PAGE>


<TABLE>
                                 Votes Cast      Votes Cast     Votes Withheld
  Nominee                        For Nominee      Against                         Abstentions      Not Voted
-----------------------------  ---------------  --------------  ---------------  --------------  --------------
<S>                               <C>                <C>               <C>         <C>                  <C>
       Gary Loffredo              1,782,913          32                0           10,665               0
      Rodney M. Bagley            1,782,913          32                0           10,665               0
      Marco P. Markin             1,782,913          32                0           10,665               0
      David Schroeder             1,782,913          32                0           10,665               0
  Bryan G. Symington Smith        1,782,913          32                0           10,665               0
       Anthony George             1,782,913          32                0           10,665               0
</TABLE>

     Adoption of the 2002 Stock Plan.

     At the annual meeting, the adoption of the 2002 Stock Plan was approved and
ratified. The following table sets forth the information regarding the voting on
the proposal:

      Votes Cast      Votes Cast       Votes
         For            Against       Withheld     Abstentions       Not Voted
--------------------------------------------------------------------------------
      1,062,819         14,506           0             409            662,646

     Special Resolution to Amend the Company's Articles of Incorporation.

     A special  resolution  was  approved  to amend the  Company's  Articles  of
Incorporation to increase the authorized share capital of the Company to consist
of 75,000,000 shares of common stock, par value $0.001 per share, and 10,000,000
shares of "blank  check"  preferred  stock,  par value  $0.001  per  share.  The
following table sets forth the information regarding the voting on the proposal:

      Votes Cast      Votes Cast       Votes
         For            Against       Withheld     Abstentions       Not Voted
--------------------------------------------------------------------------------
      1,039,819         36,150            0           995             662,646

     We filed with the  Securities and Exchange  Commission our proxy  statement
for the annual meeting pursuant to Regulation 14A of the Securities Exchange Act
of 1934, as amended, on April 29, 2002.

Item 5. Other Information.

     During the  quarter  ended June 30,  2002,  Tom Camp,  Tom Soucy,  and Gary
Harris resigned as directors.

     On May 8, 2002, the Company  announced the appointment of Douglas Irving as
the Company's  Chief  Operating  Officer  ("COO").  Doug Irving  joined  Neptune
Society as it's COO in May 2002.  Prior to joining  Neptune,  Mr. Irving had his
own Management  Consulting Business.  From 1997-1998 he served as Vice President
of Operations  for Service  Corporation  International,  and from  1988-1996 had
several positions including Operations Controller for The Loewen Group, Inc. Mr.
Irving is also a Licensed  Funeral  Director  and holds a Bachelor  of  Commerce
Degree from the University of British Columbia and is a Professional Accountant.
To  accommodate  Mr.  Irving's  appointment  David  Schroder  resigned  as Chief
Operating officer and will continue to serve as the Company's President.

     On May 31, 2002, Gary Loffredo resigned as a director of the Company.

                                       27


<PAGE>


     Effective at 5:00 p.m. (Eastern Standard Time) on May 31, 2002, the amended
its articles of  incorporation  to increase the authorized  share capital of the
Company to consist of 75,000,000  shares of common  stock,  par value $0.001 per
share, and 10,000,000  shares of "blank check" preferred stock, par value $0.001
per share.

Subsequent Events

     On July 1, 2002,  we entered into an agreement for Mr. Irving to act as our
Chief Operating Officer. Mr. Irving's annual base compensation shall be $144,000
per annum, and a bonus of no less than 25% of base  compensation upon successful
performance  as defined by the Company.  The Company is obligated to grant stock
options to purchase  50,000 shares of its common share at $2.00 per share.  Such
stock  options shall vest June 30, 2003.  The term of the  agreement  extends to
June 30, 2005,  unless  terminated prior to that date. The Company may terminate
the agreement  upon written  notice and payment of any and all balances due. Mr.
Irving may terminate the agreement upon four weeks written notice.

Item 6. Exhibits and Reports on Form 8-K.

                                (a) EXHIBIT INDEX

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

                                       28


<PAGE>


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

                                       29


<PAGE>


Exhibit
Number    Description
--------- ---------------------------------------------------------------------
10.38(4)  Service  Agreement  effective  as of March  8,  2002,  by and  between
          Western  Management  Services,  L.L.C.,  an Oregon  limited  liability
          company, and The Neptune Society, Inc., a Florida Corporation.
10.39(4)  Note  Extension And Assumption  Agreement  effective as of January 31,
          2002, and is made by and between Western Management Services,  L.L.C.,
          an Oregon limited liability company, Wilhelm Mortuary, Inc., an Oregon
          corporation, The Neptune Society, Inc., a Florida corporation, Neptune
          Society of America,  Inc.,  a California  corporation,  and Green Leaf
          Investors I, LLC, a California limited liability company.
10.40(4)  Convertible Debenture in the principal amount of $75,000, due July 31,
          2002,  issued to Green Leaf  Investors  I, LLC, a  California  limited
          liability company.
10.41(4)  Debenture and Warrant Amendment Agreement effective as of December 31,
          2001, by and between The Neptune Society, Inc., a Florida corporation,
          CapEx, L.P., a Delaware limited partnership, and D.H. Blair Investment
          Banking Corp., a New York corporation.
10.42(4)  Form of CapEx, L.P. Debenture Amendment
10.43(4)  Form of D.H. Blair Investment Banking Corp. Debenture Amendment
10.44(4)  Form of Warrant Amendment
10.45(5)  Form of Debenture
99.1      Section 906 Certificate of Chief Executive Officer
99.2      Section    906    Certificate    of    Chief     Financial     Officer

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

(b)  Reports on Form 8-K

     Form 8-K filed on June 3, 2002, regarding increase in authorized capital

                                       30


<PAGE>

                                   SIGNATURES


     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused this Form 10-Q,  period  ending June 30, 2002 to be
signed on its behalf by the undersigned duly authorized.

                                    THE NEPTUNE SOCIETY

                                    /s/ Marco Markin
August 14, 2002                     -------------------------------------------
                                    Marco Markin, Chief Executive Officer
                                    (Principal Executive Officer)


                                    /s/ Rodney M. Bagley
August 14, 2002                     -------------------------------------------
                                    Rodney M. Bagley, Chief Financial Officer
                                    (Principal Accounting Officer)