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

                                   FORM 10-KSB

                 ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

                         COMMISSION FILE NUMBER: 0-50051

                            NETFRAN DEVELOPMENT CORP.
                 (Name of Small Business Issuer in its charter)

           Florida                                        65-0983277
-------------------------------              --------------------------------
(State or other jurisdiction of              (IRS Employer Identification No.)
incorporation or organization)


2801 N.E. 208th Terrace, 2nd Floor, Miami, FL               33180
----------------------------------------------            ----------
(Address of principal executive offices)                  (Zip Code)

                                 (305) 931-4000
                           --------------------------
                           (Issuers telephone number)

        Securities registered pursuant to Section 12 (b) of the Act: None

    Securities registered pursuant to Section 12 (g) of the Act: Common Stock

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

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

         Issuer's revenues for the fiscal year ended December 31, 2003 was
$$906,051.

         The aggregate market value of the voting common stock held by
non-affiliates of the Company as of March 14, 2003 was approximately $218,300
based on the closing bid price for shares of the Company's common stock as
reported by the OTC Bulletin Board for that date.

         On March 25, 2003, 4,366,844 shares of the Company's common stock were
outstanding.


                      DOCUMENTS INCORPORATED BY REFERENCE:

         No documents are incorporated by reference.

         Transitional Small Business Disclosure Format (check one):
         Yes [ ] No [X]


================================================================================



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ITEM 1. DESCRIPTION OF  BUSINESS

    Netfran Development Corp. is a franchisor of Internet web site design,
hosting, updating, maintenance, administration, e-mail publishing and consulting
services, marketing and advertising services and related services under the
registered servicemark "NETSPACE". Our franchisees seek to assist small and
medium size businesses to implement an effective Internet World Wide Web
strategy.

    We have a total of 84 franchises in the United States and the United Kingdom
as of March 24, 2004 of which 68 are located in the United States and 18 are
located in the United Kingdom.


    Our franchisees sell Internet solutions developed and provided by
Netvertise, including:

    -   web site design and development
    -   web site hosting on NETSPACE(R) name servers and platforms
    -   web site promotion with NGENWARE(R)
    -   web-based advertising
    -   e-mail publishing with NVELOPE(TM)
    -   web-based data back-up, storage, transfer, file sharing and recovery
        with BACKVAULT(R)
    -   advanced solutions such as e-commerce

The ability to undertake commercial transactions (e-commerce) is available. The
NETSPACE(R) name servers are operated by Netvertise.

THE NETSPACE(R)FRANCHISE

TARGET CUSTOMERS OF THE NETSPACE(R)FRANCHISEE

    The target customers of our franchisees are small to medium size business
and professional firms doing business in a local market. We believe that a large
number of such potential customers have not implemented an effective Internet
strategy due to the time, expense and expertise required for the design and
development of a World Wide Web site, hosting and maintenance of the site, and
promotion of the site.

SERVICES OFFERED BY OUR FRANCHISEES:

    Our franchisees assist their clients in developing an Internet marketing
strategy which generally starts with a web site. The services are provided by
our franchises but certain services are performed by Netvertise, such as web
hosting.

WEB SITE PLANNING AND DESIGN

    Our franchisees assist their customers in planning the contents of the web
site, choosing the major topics to be addressed in a web site, writing the text
and choosing the graphics to be included in the web site, identifying key words
that a person might use in doing an Internet search for the types of services
and products of the customer.



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WEB SITE HOSTING

    Once a web site is designed and converted to computer code, it is hosted on
a specialized server computer attached to the Internet. The Netspace server
hosts web sites for a fixed monthly charge based upon the size and functions
provided by the web site and other add on services.

WEB SITE MAINTENANCE

    Our franchisees assist their customers in periodic updating of the contents
of the web site to keep the content fresh and relevant.

WEB SITE PROMOTION

    Customers' web sites are indexed and registered with major search engines so
they are identified by appropriate key words by search engines that index the
contents of web sites.

E-PUBLISHING/MARKETING

    Distribution by e-mail of electronic newsletters, announcements or
advertisements to specialized lists of e-mail addresses to targeted users based
upon key word or geographic criteria or from e-mail data collectors placed on
customers' web sites. Our software, named NVELOPE(TM) is employed in solving
these internet marketing problems.


WEB-BASED DATA BACK-UP, STORAGE, TRANSFER, FILE SHARING AND RECOVERY


    Our franchisees assist customers in protecting data from catastrophic events
by implementing periodic, automated back-up procedures and customers with
special needs such as architects are helped to better manage large data files
which are difficult to transfer through typical e- mail formats. Our product
BACKVAULT(TM) offers a comprehensive and flexible solution to these problems.

ADVANCED WEB SOLUTIONS

    For customers who want to expand their Internet strategy beyond the basic
web site, our franchisees can provide their customers advanced web solutions
including online merchant accounts, shopping carts, data base management, web
statistic reporting and customer loyalty and retention programs.

HOW WE SUPPORT OUR FRANCHISEES

    The Netspace franchise program is designed to provide the franchisee with
both the education and technology to enable the franchisee to assist their
customers in implementing an effective Internet World Wide Web strategy for
their businesses.

    The Netfran franchisee is provided with both training and technology to
enable him to market Internet services to clients and to implement and service
the clients' Internet strategy.

    The technology we provide to our franchisees has been designed as a
user-friendly platform and does not require web mastering or programming
experience. Our franchisees are able to help plan and design web sites and
deploy them to the Netspace web site server for access by any computer connected
to the World Wide Web.

TRAINING

    Netfran provides extensive training to its franchisees. Each new franchisee
attends a one-week training course at our offices. In this course, our
franchisees are trained to market Internet services to potential customers. We
provide our franchisees with specific examples of how various types of customers
such as merchants, service establishments and professional service providers can
utilize the Internet to



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communicate with customers, find new customers, sell products and services and
promote their business. Trainees are also instructed in the use of the Netfran
proprietary programs provided to them to help the franchisees market and
implement World Wide Web sites for their customers.

SUPPORT

We support our franchisees with ongoing quarterly training meetings and provide
telephone and e-mail support. Each Netfran franchisee can consult with the
Netvertise marketing director for solutions to a customer's specific situation,
Netvertise website development design team and a sales coach. These services are
provided for the ongoing support of our franchisees.

TECHNOLOGY WE PROVIDE TO OUR FRANCHISEES

    We install on our franchisees' laptop computer our proprietary content to
assist them in finding and servicing their customers.

POWER POINT PRESENTATIONS

As part of their training and on-going support, franchisees are encouraged to
make group presentations, such as with local Chambers Of Commerce, invitational
"executive briefings". As a marketing tool to aid the franchisee with these type
presentations to potential customers, several pre-populated Power Point
Presentations have been designed by the Company and pre- loaded onto their
laptop computers. These colorful and animated presentations, often with sound,
may run in time from as little as ten minutes to a full one-hour "seminar".

MARKETING TEMPLATES

    We have designed our own unique database management interface for our
franchisees' use. Included in this program are tabs and templates that navigate
the franchisee through the initial consultation when they first meet with a new
client. This will include a type of question and answer survey that allows both
the franchisee the opportunity of learning and profiling the client, while at
the same time introduces the client to the Web solutions available through the
franchise. The data collected is then stored on the franchisee's laptop and can
be exported to the Netspace Site Server as content to be published on the
clients' websites.

THE NETSPACE SITE SERVER PLATFORM

    The Netspace site server platform enables our franchisees to rapidly deploy
a Web site for their customers after the basic site concept, content, text and
graphics have been selected during the initial Web site planning and development
phase. The program has a template structure so that the specific content and
text of the Web site can be constructed without knowledge of the underlying
computer code required for Web site publishing. The program has customized
templates for 53 different categories of products and services, resulting in
hundreds of website styles and colors.

NETSPACE E-PUBLISHER PLATFORM

    The Netspace(R) E-Publisher provides franchisee customers with a direct
marketing system that allows them to manage and execute branded e-mail
newsletter campaigns and announcements directly from the Netspace(R) E-Publisher
platform accessible from their computer. The customer can create and publish
scheduled newsletters and announcements, manage a data base of e-mail addresses
that can be segmented for topicality, and monitor and measure the results of
their campaigns through tracking reports generated by the usage and
click-through habits of each e-mail recipient. Fees are generated by client
usage of this product, or the number of e-mails sent monthly, and franchisees
pay us monthly royalties based on this customer usage.



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NGENWARE(TM)SEARCH ENGINE SUBMISSION SOFTWARE

    Once a Web site has been completed, it must be properly indexed and marketed
through the major search engines, such as Altavista, Excite, Yahoo, Overture,
Lycos, MSN, Looksmart, Google and so forth. NGENWARE(R) is an automated
submission system unique to Netspace(R) representing the latest advancements in
Internet based technologies. Through an integrated hands-free process, the
software automatically submits the client Web site to potentially thousands of
Internet portals and directories with a goal of increasing the number of unique
visitors to client Web sites by prioritizing search engine positioning based on
certain criteria, such as keyword density and link popularity. Client's sign up
for a minimum three-month contract and our franchisees generate recurring
revenue each time the product is renewed. A typical contract has a duration of
three months. The Franchisee receives 60 percent of the gross contract price and
Netfran retains 40 percent. Netfran also will receive its royalty and
advertising fee of 11% on the amount collected by the franchisee.

WEBSITE HOSTING

    All websites designed and published by our franchisees are hosted on
Netspace site servers. The websites are accessed over the Internet utilizing the
Internet address which has been established for each customer's website. The Web
sites are accessible to any computer linked to the Internet and World Wide Web
with software such as Microsoft Internet Explorer.

    The site servers are operated at a secure location with 24-hour maintenance
and an array of security to assure that the servers have a high degree of
reliability. These include physical security, fire suppression, back-up power
and content back-up.

ADDITIONAL SERVICES AVAILABLE TO OUR FRANCHISEES FROM NETVERTISE

    We have arranged for Netvertise to support our franchisees by making
available the following additional services.

    Although the Netspace site server platform provided to each franchisee
enables the franchisee to design and publish websites without any further
assistance, our franchisees also have available the services of Netvertise's web
design team if a more customized or elaborate website is desired by the
franchisees' customers.

    -   Graphic design and programming
    -   Copywriting
    -   Sales/Marketing Training
    -   Advertising and Media Consultation

REVENUES OF OUR FRANCHISES

    Our franchisees charge their customers for Internet services including Web
site design, consulting, Web site hosting, Web site promotion, e-publishing, and
advertising. We suggest retail prices for such services based upon the
complexity of the services provided. For example, a starter Web site has a
suggested retail price of $700 while an e-commerce enabled Web site has a
suggested retail price of $2,500.

    Web site hosting has suggested retail prices ranging from $50 to $500 per
month based on the size, functions and services of the site.

    Web site promotion costs $75 to $700 per month. E-publishing programs are
$100 per mailing and up depending on the number and frequency of mailings.

    We suggest that our franchisees collect at least 50% of the Web site
development and initial hosting fees in advance with the balance due on
activation of the Web site. Other services are generally based on a monthly fee.



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NETVERTISE

    Netvertise is a website development and hosting company that has provided
web development and hosting applications and solutions since 1997. We were a
subsidiary of Netvertise until November 2002 when Netvertise distributed our
stock to the shareholders of Netvertise.

    Netvertise offers a comprehensive, cost effective range of web services
primarily geared towards small and medium size business and professional
customers. In 2001 Netvertise decided to expand the marketing of its business by
franchising and terminate operations not related to such business. Since 2002
Netvertise limits its web site development and hosting business to the customers
of Netfran's franchisees. Any potential customers who contract Netvertise
directly are referred to the nearest Netfran franchisee for servicing. These
services are marketed by the Netfran franchisees utilizing the technology
provided as part of the franchise program and our franchisees pay Netvertise for
such services based on a percentage of the suggested list prices established for
such services. Management of Netfran also manages Netvertise.

    Netvertise as of March 9, 2004 has fourteen employees devoted to supporting
the business of our franchisees, including ten employees in website design,
programming and marketing.


PAYMENTS TO NETVERTISE BY OUR FRANCHISEES

    In addition to the franchise fees, advertising fees and royalties our
franchisees pay to Netfran, our franchisees are also required to pay Netvertise
for the Internet solutions provided to the franchisees customers. These fees are
generally based upon a percentage of the suggested retail prices established for
such products and services. Such compensation arrangements provides the higher
compensation level to Netvertise for activities for which Netvertise is
primarily responsible such as Web site hosting, promotion, publishing and more
sophisticated customer Web site design and the lesser compensation level for
activities for which the franchisee is primarily responsible, such as basic Web
site design and development on the Netspace site server platform without
Netvertise webmaster participation.

OUR AGREEMENT WITH NETVERTISE

     In order to assure the continuation of certain services that Netvertise has
historically provided to Netfran and its franchisees, we have entered into an
agreement with Netvertise. The following is a summary of the material provisions
of the agreement between Netfran and Netvertise.

SERVICES TO BE PROVIDED TO NETFRAN BY NETVERTISE

     Under this agreement, Netvertise will provide certain shared personnel,
including the services of our officers, office facilities, utilities, office
supplies, insurance and support services. Netfran pays its own direct expenses
such as advertising, trade shows, travel and training expenses and non-shared
employees.

COMPENSATION TO NETVERTISE

     We reimburse Netvertise for the costs it incurs in providing services and
facilities to us pursuant to the agreement. For personnel which are shared
between Netfran and Netvertise, a reasonable allocation is made by management of
Netfran and Netvertise, currently Messrs. Krasnow and Steinberg, president and
chief financial officer, respectively of both firms, based upon the relative
time spent by such shared employees working on Netvertise matters or Netfran
matters. We pay Netvertise $2,800 per month for use of office facilities,
including rent, utilities, office furnishings and supplies and the expense of a
shared receptionist and office manager which we believe is a fair allocation of
such expenses. Messrs. Krasnow and Steinberg also allocate other shared expenses
incurred by Netvertise on behalf of Netfran, such as insurance by estimating the
cost of such items used by Netfran. Netfran pays directly and not through
Netvertise its direct non-shared expenses such as advertising, travel, training
and non-shared personnel.



                                       5
<PAGE>

The following table sets forth the amounts payable to Netvertise by Netfran for
the last two fiscal years:

                                    2002        2003
                                   -------     ------
              Personnel(1)         395.916          0
              Facilities(2)         33,600     33,600

--------
(1)   Beginning in 2003 Netvertise provided no personnel as Netfran paid its own
      employees.
(2)   Facilities include rent, utilities, supplies and furnishings and shared
      office manager and receptionist.

There is a procedure for arbitrating any disputes concerning allocation of such
expense items in accordance with the rules of the American Arbitration
Association. Either party may initiate an arbitration proceeding to resolve any
such disputes by making a demand for arbitration. The parties agree on an
arbitrator who is on a list of approved arbitrators of the association. Each
side presents its evidence to the arbitrator and the arbitrator makes a
determination.

TERM

    Netvertise is required to provide such services until the termination of
Netfran's last Franchise Agreement.

SERVICES PROVIDED BY NETVERTISE TO NETFRAN'S FRANCHISEES

     Netvertise is required to continue to provide services relative to those
currently being provided including website development, website hosting, website
maintenance, support and upgrading, graphic design, copywriting, training and
e-publishing. Netvertise has agreed that its charges for such services shall be
no greater than it charges to other customers. Charges for such services are
paid directly to Netvertise by our franchisees and Netfran is not involved in
billing or collection for such services or responsible for such payments.

STANDARD OF CARE

     We have agreed that in providing such services to Netfran and Netfran's
franchisees, Netvertise will not be liable for damages other than for gross
negligence or willful misconduct.

ALTERNATIVE SOURCES

    In the event that Netvertise was unable to provide the facilities and
services to Netfran and its franchisees, Netfran believes it would be able to
make arrangements for alternative suppliers of such facilities and services
through contracting with other providers or directly hiring persons able to
provide such services.

TERMS AND COST OF THE NETSPACE(R)FRANCHISE

    Initial franchise fee is currently $39,500 for a specific geographic area
containing at least 2,000 small to medium sized businesses reporting annual
gross revenues to $50,000,000. Our franchisees may accept client accounts
outside their defined territory but may not establish an office or advertise
outside of their territory. The term of the initial franchise agreement is ten
(10) years. The franchisee may acquire a successor franchise for five (5)
additional years upon certain conditions and payment of a $2,500 successor
franchise fee. Franchisees may become Area Developers by purchasing multi-unit
franchises in an extended territory defined as a collection of postal zip codes.
Each individual franchise acquired under an area development plan is documented
with a separately signed franchise agreement and is subject to its own franchise
fee obligation.

    Our franchisees are required to operate their franchises in accordance with
specified methods, techniques and standards within a designated geographic
territory. Our franchisees may not be involved in a competitive business and
must utilize the Netspace site server and hosting facilities.



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    Each of our franchisees is granted an exclusive area to operate their
business, which means that we will not locate another franchise or company owned
location within such territory. Such exclusive area is subject to Netfran's
right to deem such territory as non-exclusive and therefore to locate another
franchise or company owned location within such territory in the event that the
franchisee fails to provide services to a certain number of the potential
customers in their territory that we identify to our franchisees. Such potential
customers are small and medium size businesses with less than 100 employees
located in the territory. We obtain such potential customer lists from standard
reference sources such as Dun & Bradstreet. The following table sets forth the
percentage of identified customers a franchisee must provide services to at the
end of each year following the execution of the franchise agreement in order to
retain exclusivity in their territory.


                Year of Franchise Agreement                Percentage
                ---------------------------                -----------
                        1                                       1%
                        2                                       3%
                        3                                       5%
                        4                                       8%
                        5                                      12%
                        6                                      16%
                        7 AND LATER                            20%

    Our right to deem a territory as non-exclusive in the event a franchisee
fails to meet the minimum is discretionary. We have not declared the territory
of any of our franchisees as non-exclusive as of the date hereof.

    During the term of the franchise agreement, the franchisee is required to
pay (i) a royalty fee of 10% of gross monthly revenue, and (ii) an advertising
fee of 1% of gross revenue. Thirty (30) days after completing our training
program, franchisees are required to pay minimum monthly royalties to Netfran
that increase each year until the maximum minimum royalty of $500 is payable per
month.

    Franchisees are also required to engage in local advertising of their
services and to budget a specified amount each month towards such advertising.
Each new franchisee is given an initial training for 5 days which the franchisee
is required to complete.

TERMS OF THE NETSPACE(R)MULTI-UNIT DEVELOPMENT AGREEMENT

     The Multi-Unit Development Agreement awards to an area developer multiple
franchise units in a specified geographical area or development territory. Thus,
the multi-unit developer in essence operates multiple franchise units. Each
franchise unit awarded, however, is subject to a separately signed Indivisible
Unit NETSPACE(R) Franchise Agreement that contains the same terms, including
rights, conditions and obligations as does our standard franchise agreement
described above and requires the payment of an individual unit NETSPACE(R)
franchise. The developer purchases the first unit at the full retail unit
franchisee fee price (presently $39,500). Thereafter, the fee is discounted and
the discount increases progressively beginning with the second unit through the
sixth unit and thereafter. In addition, the developer must pay a one-time
development fee based on the number of franchises to be opened under the
development agreement excluding the first franchise unit purchased. The
development fee is then credited against the purchase price of all unit
franchise fees except the first unit franchise fee. There is a development
schedule requiring the developer to open a specified number of units by
scheduled dates. Failure by the developer to comply with the schedule can result
in the termination of his development rights for future units under the
NETSPACE(R) Multi Unit Development Agreement. As previously stated, however, the
Individual Unit NETSPACE(R) Franchise Agreement governs the developer's rights
and obligations regarding franchise units that have already been opened.



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TERMS OF THE NETSPACE(R)REGIONAL DIRECTOR AGREEMENT

    Unlike the multi-unit developer, the regional director generally owns no
individual NETSPACE(R) franchises. Rather, under this agreement he is granted an
exclusive license to market and sell Individual NETSPACE(R) franchises in a
designated geographic area. The agreement has an initial term of twenty years
and may be renewed for an additional ten years. The regional director pays an
initial non-refundable one-time regional director's license fee equal to $1.00
for each business located in the development area covered by the agreement. The
suggested area size will contain between 100,000 and 500,000 businesses as
defined in the Individual Unit NETSPACE(R) Franchise Agreement having up to
$50,000,000 in gross revenue. Thus, the minimum initial regional director
license fee is $100,000. Additionally, the regional director must adhere to a
development schedule to open a specified number of new franchise units per year
and pay minimum royalties of $300 in the first year, $400 in the second year,
and $500 in the third year times the number of units. The regional director's
compensation includes receiving 70 percent of the initial franchise fee and 5
percent of the each franchisee's gross revenues. The Company and the new
individual unit franchisee execute an Individual Unit NETSPACE(R) Franchise
Agreement for each franchise that the regional director sells. The franchisee
operates like any other individual NETSPACE(R) franchise unit and purchases its
products and services from Netvertise. After the initial training, the regional
director and not The Company provide the bulk of the training and support to the
franchisees.


MARKETING OF THE NETFRAN FRANCHISE

    Our marketing strategy for franchise sales is based on the sale of
individual, multi-unit and regional franchise territories to business-minded
individuals. The primary lead sources are referrals from Internet franchise
consultants who are paid a commission. We also receive referrals from web-sites,
print advertising, radio, television, and franchise trade shows. We also seek
publicity for our franchise program by actively engaging in public relations
activities. Dellray Lefevere, our Vice President is primarily responsible for
our overall franchise marketing operations while Jason Mattes our Director of
Franchise Development works on attracting new franchisees to our network.

COMPETITION

    The sale of franchises is highly competitive. We compete directly with other
regional and national franchisors that are also seeking to sell their franchises
to qualified financially capable franchisees. We believe our franchise program
is most suitable for persons with a white-collar business background who may
also be interested in franchises for business services, personal services and
education.

    We have identified three other franchises of Internet-based services: Quick
International, WSI Internet and AIS Media.

    Our franchisees face substantial competition in the sale of their services
to customers. Besides the franchisees of the competing franchisors, numerous
companies offer Web site development and hosting in local markets. Internet
service providers and portals such as America Online and Yahoo offer Web site
development tools and hosting. Several computer programs for Web site design and
e-commerce, such as Microsoft Front Page, are available to those who desire to
"do-it-yourself" without professional assistance.

    We believe that the personalized service provided by our franchisees,
including their willingness to work on-site directly with their customers to
plan, develop and design a Web site for each customer and assist in developing
advanced solutions such as e-commerce, publishing and advertising distinguishes
our franchisees from do-it-yourself and impersonal solutions offered by America
Online and Yahoo and other Internet service providers and portals.

    We believe that our franchise program competes favorably with other
franchises due to the following attributes:

    -   Relatively modest cost to purchase and operate
    -   Customers are businesses and professionals making for an easy



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        transition for franchisees coming from the business world
    -   Large market of potential customers due to recent growth of Internet as
        a commercial media
    -   No specialized certifications are required to become a franchisee

TRADEMARKS AND OTHER PROPRIETARY INFORMATION

    We have received a federal servicemark registration for NETSPACE(R)
NGENWARE(R) and BACKVAULT(R). In addition, we hold copyrights in connection with
our training manuals and marketing materials. We provide our franchisees with a
laptop computer programmed with our proprietary programs which include:

    -   Netspace(R) Siteserver Platform
    -   Netspace(R) E-Publisher Platform
    -   NGENWARE(R)Search Engine Submission Software
    -   Marketing templates
    -   Powerpoint presentations, and
    -   BACKVAULT(R) User manuals

    All intellectual property utilized by Netfran and its franchisees is owned
by Netfran and we are not required to pay royalties or license fees for such
use. We do not have any patents on our technology.

REGULATION

    The offer and sale of franchises is subject to extensive federal and state
laws and substantial regulation under such laws by government agencies,
including the Federal Trade Commission (the "FTC") and various state
authorities. Pursuant to FTC regulations, we are required to furnish to
prospective franchisees a current franchise offering disclosure document
containing information prescribed by the FTC. We use Uniform Franchise Offering
Circulars to satisfy this disclosure obligation. In addition, we are required to
register or file with the states and to provide prescribed disclosure
statements. We are currently authorized to sell franchises in all 50 states.
Such state filings are made annually.

    We are required to update our offering disclosure documents to reflect the
occurrence of material events within a reasonable time after the occurrence.

    We will notify the applicable governmental agencies at the time of the
distribution and will amend our offering documents to reflect the distribution
within a reasonable time after the distribution by such regulation.

    We are also subject to a number of state laws that regulate certain
substantive aspects of the franchisor-franchisee relationship, such as
termination, cancellation or non-renewal of a franchise (including requirements
that "good cause" exist as a basis for such termination and that a franchisee be
given advance notice of, and a right to cure a default prior to termination) and
may require the franchisor to deal with its franchisees in good faith, prohibit
interference with the right of free association among franchisees, and regulate
discrimination among franchisees in charges, royalties or fees. If we are unable
to comply with the franchise laws, rules and regulations of a particular state
relating to offers and sales of franchises, we will generally be unable to
engage in offering or selling franchises in or from such state. Amendments to
existing statutes and regulations, adopting of new statutes and regulations and
our expansion into new states and foreign jurisdictions could require us to
continually alter methods of operations at costs which could be substantial.

    We believe that we are in substantial compliance with all of the foregoing
federal and state franchising laws and the regulations promulgated there under
and have obtained all licenses and permits necessary for the conduct of our
business. Failure to comply with such laws and regulations in the future could
subject us to civil remedies, including fines or injunctions, as well as
possible criminal sanctions, which would have a material adverse effect on us.
Our franchisees are also subject to various federal, state and local laws
affecting their franchise businesses, including state and local licensing,
zoning, labor and various safety and



                                       9
<PAGE>

other standards. The failure of a franchisee to comply with applicable
regulations could interrupt the operations of the affected franchise or
otherwise adversely affect the franchise.

EMPLOYEES

    As of March 24, 2004, Netfran employed three full time and four part time
staff. Our part time staff is also employed by Netvertise.


ITEM 2. DESCRIPTION OF PROPERTIES

    Our offices are located in a 3,000 sq. ft. office suite in Aventura,
Florida. Our affiliate, Netvertise, Inc. is the tenant on the lease of this
property which expires in January, 2005. We pay Netvertise a $2,800 per month
overhead allocation expense, which we believe to be the fair market value for
the facilities we use. This includes allocation of rent, utilities and cost of
receptionist and office manager. Our lease is unwritten and runs month-to-month.

ITEM 3. LEGAL PROCEEDINGS

None.

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

None.
                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET FOR SECURITIES

Our common stock began trading on the over-the-counter market on February 10,
2003, and is quoted on the NASD Electronic Bulletin Board under the symbol NFDV.

The following is the range of high and low closing bid prices for Netfran common
stock for the periods indicated:



                                     High        Low
                                     ----        ---

                                    December 31, 2003
                                    -----------------

            1st Quarter              .85         .30
            2nd Quarter             1.15         .05
            3rd Quarter             1.50         .05
            4th Quarter              .10         .10


The above represents inter-dealer quotations which do not include retail
mark-ups, markdowns, or commissions, and do not necessarily represent actual
transactions. We had 315 record holders of our common stock on February 27,
2004.





                                       10
<PAGE>

EQUITY AND COMPENSATION PLAN INFORMATION  AS OF DECEMBER 31, 2003.

         The following table sets forth information about any plans or
arrangements that provide for the grant or award of our securities or the grant
of options, warrants or rights to purchase our securities to our employees or to
any other person for services or goods as of December 31, 2003.

<TABLE>
<CAPTION>



                                                                                                      Number of Securities
                                                                                                      Remaining Available
                                Number of Securities to be           Weighted-average              for Future Issuance Under
                                 Issued Upon Exercise of            Exercise Price of               Equity Compensation Plans
                                   Outstanding Options,            Outstanding Options,              (Excluding Securities
                                   Warrants and Rights             Warrants and Rights              Reflected in Column (A))
                                --------------------------         -------------------              ------------------------
                                            a                               b                                   c
<S>                                      <C>                                <C>                               <C>
      Plan Category

      Equity
      Compensation
      Plans Approved
      by Security
      Holders                            90,000                             0.25                              185,000

      Equity
      Compensation
      Plans Not
      Approved by
      Security Holders(1)                   -0-                                                                   -0-
                                         ------                            -----                              -------
      Total                              90,000                            $0.25                              185,000
                                         ======                            =====                              =======

</TABLE>


Individual equity compensation arrangements and arrangements not approved by
shareholders.

Pursuant to a letter agreement dated as of July 22, 2003, we engaged Stategica
Management LLC of Miami, Florida to provide advisory services designed to
generate at least $10 million of value to Netfran over the next three years.
Such value may be in the form of funding, acquisition transactions, or other
business transactions identified by Strategica. In connection with the
agreement, we issued 668,018 shares of common stock to Strategica. Since there
can be no assurance of any level of value we may receive from such engagement,
we have the option to repurchase such shares to the extent that $10 million of
value, as defined in the agreement, has not been provided by Strategica during
the term of the engagement. The shares issued to Strategica are held in escrow
to facilitate our repurchase rights.

In 2003 we issued 33,738 shares of common stock to pay for legal fees to an
independent counsel.

Recent sales of unregistered securities.

On February 11, 2003, pursuant to our 2003 Stock Incentive Plan, we granted to
three executive/directors shares of restricted common stock. Each participant
signed a restricted stock award agreement in connection with such grant. The
awarded shares contain a restrictive legend restricting transfer without
registration under the Securities Act of 1933 or an exemption there from. Each
such participant is an accredited investor under Regulation D. The grantees
were:



                                       11
<PAGE>

         Elliot Krasnow             200,000 shares
         Robert S.Steinberg         100,000 shares
         Dellray Lefevere            25,000 shares


DIVIDEND HISTORY

We have paid no dividends on our common stock and presently intend to retain all
earnings, if any, for use in our operations and to finance the expansion of our
business. We do not anticipate paying a dividend on common stock in the
foreseeable future. The payment of dividends is within the sound discretion of
the Board of Directors. Future decisions with respect to dividend payments will
depend upon future earnings, future capital needs and the company's operating
results and financial condition at the time. These events cannot now be
predicted.



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

    The following discussion of our results of operations and liquidity and
capital resources should be read in conjunction with our Financial Statements
and related Notes thereto appearing elsewhere in this Prospectus. Overview

    The Company was formed in the State of Florida and incorporated in the State
of Florida in January 2000 to market the Netspace Franchise System and began
marketing of franchises in May 2000.

    We derive our revenues from franchise operations, which include an initial
franchise fee, currently $39,500 for each individual franchise unit, in an
identified territory, a minimum of $100,000 for regional developer franchise
license agreements and fluctuating amounts for multi-unit franchise agreements
depending on the number of franchise units to be opened by the multi-unit owner.
In addition we participate in revenue sharing with individual franchisees
receiving a 10% on-going royalty based on the franchisee's gross retail revenues
from customers. We also receive advertising fees of 1% of revenues generated by
our individual franchisees. We wrote off $23,197 when two franchisees defaulted
on their notes. We do not provide financing terms for franchise fees.

     From U.K franchisees opened by our U.K .master franchise we retain 20
percent of the initial franchise fee and receive a flat royalty payment from the
master franchise presently at $200 per month times the number of units he has
open in the U.K. In addition, our affiliate Netvertise provides products and
services to the U.K. individual franchisees that are offered to their customers.
We do not share in this revenue directly other than the indirect benefit of our
franchisee's customer satisfaction.

    From franchises opened by our U.S. regional developers we retain 30 percent
of the initial individual franchisee fee and split with the developer the 10
percent on-going royalty based on each individual franchisee's gross revenues.
As with all of our franchises our affiliate Netvertise provides support,
products and services to the individual franchisees.

    We now have one master franchise in United Kingdom from which we receive
$7,000 in franchise fees for each franchise awarded plus a flat monthly per-unit
royalty ranging from $100 to $500 dependent on how long the master franchisee
has been operating and the number of total units he has opened. On September 29,
2003 we signed our first U.S. Regional Director Agreement covering the states
Colorado, New Mexico, Arizona, Nevada, Idaho, Montana and Wyoming. We have
signed two additional regional director agreements for the New York Metropolitan
Area including Connecticut and for New Jersey and parts of Pennsylvania. The
agreement requires a regional director to develop a minimum number of
Netspace(R) franchises in his or her designated region. The regional director
generally receives compensation equal to seventy percent (70%) of the initial
franchise fee plus fifty percent (50%) of on ongoing royalties from our




                                       12
<PAGE>

franchisees. We will support our franchisees by advertising and training but
cannot predict what level of revenues we will achieve from ongoing royalties
from our franchisees.

    Our revenues come from the initial sale of franchises and ongoing royalties
from the sales of our franchisees. At the current time our revenue from sale of
franchises exceeds our royalty revenues. We anticipate that our revenues from
ongoing royalties will rise as our franchisees establish and build their
businesses. We believe that sale of franchises will continue to generate the
bulk of our revenues for at least the next five years in view of the large part
of the country where we have not sold franchises. However, when sales of
franchises slow or decline we will become more dependent on ongoing royalties
from our franchisees. We will support our franchisees by advertising and
training but cannot predict what level of revenues we will achieve from ongoing
royalties from our franchisees.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

         Our revenues from operations were $904,141 in 2003, an increase of
10.2% from 2002 revenues. Revenues from initial franchise fees increased $75,592
from $688,000 in 2002 to $763,592 in 2003 reflecting sale of nine individual
U.S. franchises in 2003 versus twenty in 2002 and the sale of fifteen U.K.
franchises in 2003 versus none in 2002. We also sold three U.S. regional
director franchises receiving a total of $300,000 from the agreement in 2003 as
opposed to the sale of one Master Franchise in the United Kingdom for $100,000
in 2002. Revenues from marketing and business development materials decreased
$11,311 from $63,464 in 2002 to $52,153 in 2003 with fewer U.S. franchises sold.
Royalty and advertising fees increased from $69,049 in 2002 to $81,665 in 2003
representing fees from new franchisees and existing franchisees as their
business increased. The increase in royalty revenue in 2003 of 18.27% over 2002
reflects increased sales revenues of our franchisees.

         Cost and expenses were 118.0% of total revenues in 2003 compared to
103.6% of revenues in 2002. The increase is mainly due to the rise in salaries
and wages from $222,881 in 2002 to $382,139 in 2003 and to an increase in
commission payments to outside consultants from $173,035 in 2002 to $225,812 in
2003 reflecting increased sales by referral from outside consultants.
Advertising spending was further reduced from $84,556 in 2002 to $62,190 in 2003
as we concentrated our sales and marketing efforts on outside consultants,
Internet and telemarketing programs. Convention and seminar expense increased
from $24,221 in 2002 to $38,475 in 2003, reflecting our need to attend outside
consultant conventions and U.K. shows, while marketing and business development
material expenses decreased from $99,427 in 2002 to $77,230 in 2003. Franchise
materials decreased to $6,869 in 2003 from $39,968 in 2002.. Professional fees
increased $41,337 to $95,503 in 2003 from $54,155 in 2002 reflecting the
increasing costs of operating a publicly owned company due to increased
regulation and filing responsibilities.
         .
         As a result we had a net loss of $162,999 in 2003 compared to a loss of
$29,475 in 2002. As seen note 12, Selected Quarterly Data, to the accompanying
financial statements, we lost $340,985 or $.09 per share during the first three
quarters of 2003 and earned a profit of $177,986 or $.05 per share during the
fourth quarter of 2003. The surge in fourth quarter earnings over the first
three quarters resulted from adjustments to our franchise marketing and sales
program the benefits from which we expect will carry over into 2004.



                                       13
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

      Net cash provided by operating activities was $18,349 in 2003 compared
with $116,654 in 2002 and $121,520 in 2001. The decline in net cash provided
from operations is due primarily to the increase in our operating loss for the
year offset by contribution of services by our officer of $81,250, decrease in
notes and accounts receivable of $31,252, decrease in prepaid expenses of
$24,507 and increase in due to affiliate of $30,150. The cash provided by
operating revenues in 2002 was primarily attributable to a decrease in notes and
accounts receivable of $67,749 and increase in due to affiliate of $61,490.

      There was a net cash decrease of approximately $11,300 from investing
activities in 2003 attributable to employee and Franchisee advances and
equipment purchases as opposed to a net cash increase from investing activities
in 2002 of approximately $2,700 attributable to payments on advances to
employees and Franchisees.

      Net cash provided from financing activities decreased in the amount of
$1,500 in 2003 due to the repayment on affiliate loans and increase in 2002 of
$250,000 due to the proceeds from the borrowings from our affiliate, Netvertise.

    Under our agreement with Netvertise, Inc. we pay only for facilities,
personnel, and services that we request from Netvertise. We can adjust our
expenses rapidly to respond to our available funds from operations by reducing
services requested from Netvertise.

    As of December 31, 2003 we owed Netvertise $333,985 evidenced by an amended
and extended note, dated June 30, 2003, that is due in full with accrued
interest at 7 percent on March 26, 2006. Before the note amendment and extension
we had owed Netvertise $250,000 on the note plus interest at 7 percent that was
payable quarterly. We had also owed Netvertise $83,985 on an open account
payable. The open account debt was consolidated into the new amended and
extended note.

    During 2002, Netvertise contributed to the capital of Netfran an open
account receivable in the amount of $488,041. Netvertise has no further
obligation to support our capital requirements. We believe that we will have
sufficient liquidity to meet our needs for the next twelve months based upon our
expected expenses and funds on hand and expected from anticipated revenues from
operations, including minimum royalties payable by our franchisees.

    At December 31, 2003 the Company had shareholder equity of $264,405 compared
with shareholder equity of $346,154 at the end of 2002. At December 31, 2003 the
Company had net working capital (current assets minus current liabilities) of
approximately $595,500 compared with approximately $592,000 at the end of 2002.

Critical Accounting Policies and Estimates

Financial Reporting Release No. 60, "Cautionary Advice Regarding Disclosure
About Critical Accounting Policies" ("FRR 60"), suggests companies provide
additional disclosure and commentary on those accounting policies considered
most critical. A critical accounting policy is one that is both very important
to the portrayal of our financial condition and results, and requires
management's most difficult, subjective or complex judgments. Typically, the
circumstances that make these judgments difficult, subjective and/or complex
have to do with the need to make estimates about the effect of matters that are
inherently uncertain. We believe the accounting policies below represent our
critical accounting policies as contemplated by FRR 60.

In December 2002, the FASB Issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure,")"SFAS 148"). SFAS 148 amends SFAS No.
123, "Accounting for Stock-Based Compensation," to provide alternative methods
of transition to SFAS 123's fair value method of accounting for stock-based
employee-compensation. During 2003 we issued to certain key employees shares of
restricted common stock. We expensed the fair market value price of such shares
as a charge against current operations. We also granted stock options to certain
key officers for which no current charge to operations was made (see Equity and
Compensation Plan information above).



                                       14
<PAGE>

REVENUE RECOGNITION

Revenues from the sale of regional franchise agreements and individual
franchises in the United States are generally recognized when substantially all
significant services to be provided by the Company have been performed. Interest
on trade notes receivable is accrued and recorded as income when due. In
situations where revenue from such sales is collectible over an extended period
of time, down payments are not sufficient and/or collection is not reasonably
certain, revenue is recognized on the cash method as amounts are collected.
Interest on trade notes receivable, resulting from sales recorded on the cash
method, is recorded when received.

INCOME TAXES

Deferred income tax assets and liabilities are computed annually for differences
between the financial statements and tax basis assets and liabilities that will
result in taxable or deductible amounts in the future, based on enacted tax laws
and rates applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized. Income tax
expense is the tax payable or refundable for the period, minus the changes
during the period in deferred tax assets and liabilities.


RISK FACTORS

We have identified the following as the some of the factors that could affect
our future results.

We have had a history of operating losses.

    We incurred net losses of $162,999 in 2003, $29,475 in 2002 and $192,189 in
2001. Our expenses are currently greater than our revenues. Our ability to
operate profitably depends on increasing our sales and achieving sufficient
gross profit margins. We cannot assure you that we will operate profitably.

We have no arrangements or sources of additional capital and may have to curtail
our operations if additional capital is not available if we need it.

    We are currently spending more to operate our business than we receive in
revenues. There can be no assurance that we can obtain additional capital if
this pattern continues. Netvertise has no obligation to provide us with
facilities and personnel if we cannot pay for them. We may have to curtail our
operations if we do not have sufficient funds to pay for the expenses of
operating our business.

We have a limited operating history which makes your evaluation of our business
difficult.

    We commenced operations in March 2000. Our prospects must be considered in
light of the risks, expenses and difficulties frequently encountered by
companies in relatively new and rapidly evolving markets. These risks include:

    o   uncertain commercial acceptance of our franchises; and
    o   competition in the sale of franchises.

    We cannot assure you that we will succeed in addressing these risks. If we
fail to do so, our revenue and operating results could be materially harmed.

Our operations will be subject to conflicts of interest with Netvertise,
including the following:



                                       15
<PAGE>

         All of our officers and directors are also affiliates of Netvertise.

         Our president, our chief financial officer and our vice president are
currently employees of Netvertise and they will remain part-time employees of
Netvertise.

         Although we believe all transactions between Netfran and Netvertise
have been and will be fair, these conflicts may cause our business to be
adversely affected.

         For example:

         - Future business dealings between Netfran and Netvertise may be on
terms less favorable to us than we could achieve on an arm's length basis and
cost us more than could be obtained elsewhere.

         - We may have to compete with Netvertise for the time and attention of
our officers and directors for our business or hire additional personnel.

         - The terms of our agreement with Netvertise may be less favorable to
us than we could have achieved on an arm's length basis.


ITEM 7.   FINANCIAL STATEMENTS

The financial statements follow the signatures on this report.


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

None.

ITEM 8A.  CONTROLS AND PROCEDURES.

The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's Exchange Act
reports is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to the Company's management, including its Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure based closely on the definition of "disclosure
controls and procedures" in Rule 13a-14(c). In designing and evaluating the
disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.

Within 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and the Company's
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on the foregoing, the
Company's Chief Executive Officer



                                       16
<PAGE>

and Chief Financial Officer concluded that the Company's disclosure controls and
procedures were effective.

There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect the internal controls subsequent
to the date the Company completed its evaluation.


                                    PART III


ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

DIRECTORS AND EXECUTIVE OFFICERS

    The following table sets forth the directors and officers of Netfran and
their respective ages and positions:

<TABLE>
<CAPTION>

                   Name                Age       Position
           -------------------         ---    --------------------------------
           <S>                         <C>   <C>
           Elliot Krasnow               56    President, CEO and director
           Dellray Lefevere             57    Vice president of franchise development and director
           Robert Steinberg             60    Chief financial officer and director

</TABLE>

    Elliot Krasnow has been the president, CEO and director since March 2000.
From 1992 to 1994 he was president of Sandler Sales Institute of South Florida,
a national sales training organization. From 1994 to 1995, Mr. Krasnow was
co-producer for Mako Films International, Inc., an independent film production
company. From 1995 to 1997, he was founder and president of Netspace, Inc. the
predecessor company of Netvertise, Inc. d/b/a/ Netspace. Since 1997 he has been
president and director of Netvertise, Inc., an Internet solutions company that
provides services to Netfran's franchisees.

    Dellray Lefevere has been our vice president of franchise development since
January 2000 and a director since September 2001. He also serves as Vice
President of Netvertise since January 2002. He was director of sales for
Uniglobe Travel, a franchise travel company, from 1997-1999. He was
vice-president, franchising, with Leadership Management, Inc. from 1988 to 1992.
From 1992 to 1997, he was executive vice president for General Business
Services, a business tax/accounting franchise company, a division of Don Dwyer
Group of Companies, a franchise development enterprise.

    Robert S. Steinberg, CPA, has been our chief financial officer since October
2000 and a director since September 2001. He has also served as chief financial
officer of Netvertise since October 2000. He has been a certified public
accountant in private practice in South Miami, Florida since June 1977. Mr.
Steinberg has been chief financial officer of Netfran since October, 2000. His
professional experience extends over 34 years of diverse public practice. He is
a CPA in NY and Florida. He is also an attorney



                                       17
<PAGE>

admitted to the Bars of NY, Florida, The US Tax Court, the US Supreme Court and
various US District and Circuit Courts of Appeal. Mr. Steinberg is also a
credential business valuation expert who has testified in many court cases. He
has lectured and published extensively including recently, "Identifying Valuing
and Dividing Employee Stock Options," American Bar Association, Family Division
Spring Session, Providence, Rhode Island (April, 2002). He is a member of
numerous professional organizations and serves on two charity boards of
directors.

    Directors are elected annually and hold office until the next annual meeting
of our stockholders and until their successors are elected and qualified. The
Board has not established any committees. All executive officers are chosen by
the board of directors and serve at the board's discretion.

    We plan to reimburse directors for any expenses incurred in attending board
of directors meetings.

Section 16(a) Beneficial Ownership Reporting Compliance

         Based solely upon a review of the copies of Forms 3 and 4 and 5 thereto
furnished to the Company, or written representations that no annual Form 5
reports were required, the Company believes that all filing requirements under
Section 16(a) of the Securities Act of 1934, as amended (the "Exchange Act")
applicable to its directors, officers and any persons holding ten percent (10%)
or more of the Company's Common Stock were made with respect to the Company's
fiscal year ended December 31, 2003, except Strategica Management, LLC failed to
file a Form 3 concerning the acquisition of over 10% of our common stock.

    Audit Committee Financial Expert

    The Board has determined that Director Robert Steinberg is an audit
committee financial expert as defined by Item 401(e)(2) of Regulation S-B of the
Securities exchange Act of 1934. Mr. Steinberg is not independent within the
meaning of Item 7(d)(iv) of Schedule 14A under the Exchange Act.

    Code of Ethics

    The Company has adopted a code of business conduct and ethics for its
directors, officers and management employees. Such code is filed as Exhibit 14
to this Form 10-KSB and is available to shareholders at no charge from: Elliot
Krasnow, Netfran Development Corp., 2801 N.E. 208th Terrace, 2nd Floor, Miami,
FL 33180.

    Change of Control Arrangements

    The Company's 2003 Stock Incentive Plan provides that in the event of a
change in control as defined in the plan, all outstanding options under the plan
will immediately become exercisable 100% for each participant and the
restrictions on any restricted stock issued under the Plan will cease.


                                       18
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION.


                           SUMMARY COMPENSATION TABLE

The following table sets forth the compensation paid or accrued to our chief
executive officer (the "named executive officer") in 2003 and well his
compensation in 2002 and 2001. No officer earned over $100,000 in such fiscal
year. We have no written employment contract with Mr. Krasnow.


<TABLE>
<CAPTION>

                                                                          Long Term Compensation
                                                                 ---------------------------------------
                                     Annual Compensation                    Awards              Payouts
                               -------------------------------   ----------------------------   --------
                                                                 Restricted
    Name and                                                        Stock       Securities       LTIP
    Principle                  Salary   Bonus   Other Annual       Award(s)      Underlying     Payouts       All Other
    Position            Year    ($)      ($)   Compensation ($)      ($)     Options/SARs (#)     ($)    Compensation ($)
    --------            ----   ------   -----  ----------------  ----------  ----------------   -------  ----------------
<S>                     <C>   <C>         <C>         <C>         <C>           <C>                <C>       <C>
 Elliot Krasnow, CEO    2003  75,000      0           0           50,000         40,000            0             0
                        2002  75,000      0           0              0                0            0             0
                        2001  75,000      0           0              0                0            0             0

</TABLE>

OPTIONS GRANTS IN LAST FISCAL YEAR

The following information sets forth the individual grants of stock options to
the Company's named executive officer in the fiscal year ended December 31,
2003. No stock appreciation rights were granted during 2003.


<TABLE>
<CAPTION>



                                                 OPTION/SAR GRANTS IN LAST FISCAL YEAR
                           -----------------------------------------------------------------------------------
                                                           Individual Grants
                           -----------------------------------------------------------------------------------
                             Number of Securities       % of Total Options/SARs     Exercise or
                            Underlying Options/SARs     Granted to Employees in      Base Price    Expiration
          Name                    Granted (#)                 Fiscal Year              ($/Sh)         Date
          ----              -----------------------     ------------------------    -----------    ----------
<S>                                <C>                            <C>                   <C>         <C>  <C>
   Elliot Krasnow, CEO             40,000                         44%                   .25         2/11/13

</TABLE>





                                       19
<PAGE>

AGGREGATED OPTIONS EXERCISES IN LAST FISCAL YEAR and FY-END OPTIONS VALUES

The following table sets forth the number of stock options exercised by the
named executive officer during the last completed fiscal year. No options were
exercised in such year. There were no stock appreciation rights held or
exercised by the named executive officer.

AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES

<TABLE>
<CAPTION>

                              Shares                    Number of Securities        Value of Unexercised In-the
                             Acquired                  Underlying Unexercised      Money Options/SARs at FY-End
                                on        Value      Options/SARs at FY-End (#)                 ($)
                             Exercise   Realized     -------------------------      --------------------------
           Name                 (#)        ($)       Exercisable/Unexercisable       Exercisable/Unexercisable
           ----              --------   --------     -------------------------       -------------------------

<S>                              <C>        <C>         <C>                              <C>
      Elliot Krasnow            -0-        -0-          13,333 / 26,667                     -0- / -0-

</TABLE>


Director Compensation

Each of our directors is also an employee of the Company and received salary for
such services. No compensation is paid for service as a director.

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

The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of March 25, 2004 by (i) each stockholder who is
known by the Company to own beneficially more than five percent of the Company's
outstanding Common Stock, (ii) each director of the Company, (iii) the Company's
executive officer named in the Summary Compensation Table, and (iv) by all
executive officers and directors of the Company as a group. The information as
to each person or entity has been furnished by such person or group.

                                                 Shares Beneficially Owned (1)
                                                ------------------------------
                                                Common Stock(4)     Percentage
                                                ---------------     ----------

       Elliot Krasnow(2)                           1,283,673           29. %
       Roy Farrington(3)                             246,000            6.0%
       Robert Steinberg                              123,333            3.0%
       Dellray Lefevere                               75,000            2.0%
       Strategica Management LLC(3)                  668,018           15.0%
       All directors and officers
         as a group (3 persons)                    1,482,006           34.0%



                                       20
<PAGE>

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

(1)     Applicable percentage of ownership at March 25, 2004, is based upon
        4,393,510 shares of Common Stock outstanding including vested option
        shares. Beneficial ownership is determined in accordance with the rules
        of the Securities and Exchange Commission and includes voting and
        investment power with respect to shares shown as beneficially owned.
        Shares of Common Stock subject to options or warrants currently
        exercisable or exercisable within 60 days of March 25, 2004, are deemed
        outstanding for computing the shares and percentage ownership of the
        person holding such options or warrants, but are not deemed outstanding
        for computing the percentage ownership of any other person or entity.


(2)     Address for this shareholder is 2801 N.E. 208th Terrace, 2nd Floor,
        Miami, FL 33180.

(3)     Mr. Farrington holds such shares as trustee for himself, his spouse and
        descendants. Address for this shareholder is 7902 40th Street, Gig
        Harbor, WA 98335. Address for Strategica Management LLC is 701 Brickell
        Avenue, Miami, FL 33131.

(4)     Includes options to purchase common stock as follows: Mr. Krasnow:
        13,333 shares, Mr. Steinberg: 13,333 shares, all directors and officers:
        26,666 shares.

ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.

    Netfran was founded in March 2000 to engage in the franchise business. At
that time Elliot Krasnow funded its operations by purchasing stock for $75,000.
These shares were contributed by Mr. Krasnow to Netvertise in 2001. Mr. Krasnow
and Netvertise, Inc. are considered promoters of Netfran.

    Our directors and executive officers, Elliot Krasnow, Dellray Lefevere and
Robert Steinberg, are also directors and executive officers of Netvertise. We
also share office space with Netvertise. We attempt to make a reasonable good
faith allocation of shared personnel, facilities and other shared expenses. In
fiscal year 2002 we incurred shared overhead costs in the amount of $33,800.

    Netvertise has paid costs on behalf of Netfran from time-to-time. As of
December 31, 2002 we owed Netvertise $61,490 for such matters which are shown as
liabilities "due to affiliate" on our balance sheet. In November 2002 Netvertise
contributed $488,041 of the receivable we owed Netvertise to Netfran's capital
thereby converting a liability to



                                       21
<PAGE>

shareholders equity. See Liquidity and Capital Resources section for details on
amended and extended note payable to Netvertise.

    Netfran has an agreement with Netvertise concerning services rendered to
Netfran and its franchisees. See, "Item 1. Description of Business -- Our
agreement with Netvertise."

    In March 2002 Netfran borrowed $250,000 from Netvertise. Such loan is due on
March 6, 2004 with interest at 7% per annum payable quarterly. In 2003 the note
was amended and extended to March 26, 2006.


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


Number      Description
------      -----------

  3.1       Articles of Incorporation (1)

  3.2       By-laws (2)

  3.2       2003 Stock Incentive Plan *

  10.2      Agreement between Registrant and Netvertise, Inc. (3)

  10.3      Commission agreement with Dellray Lefevere (4) *

  10.4      Revised Standard Franchise Agreement [portions omitted pursuant to a
            request for confidentiality] (5)

  10.5      Promissory Note made by Registrant to Netvertise, Inc. (6)

  10.7      Agreement dated as of July 22, 2003 between Registrant and
            Strategica Management LLC.(7)

  14.       Code of Ethics

  31.1      Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

  31.2      Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

  32.1      Section 1350 Certification of Chief Executive Officer

  32.2      Section 1350 Certification of Chief Financial Officer

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

(1)     Incorporated by reference to Exhibit 3.1 to the Company's registration
        statement on Form SB-2 (file no. 333-102894).

(2)     Incorporated by reference to Exhibit 3.2 to the Company's registration
        statement on Form SB-2 (file no. 333-102894).



                                       22
<PAGE>

(3)     Incorporated by reference to Exhibit 10.2 to the Company's registration
        statement on Form SB-2 (file no. 333-102894).

(4)     Incorporated by reference to Exhibit 10.3 to the Company's registration
        statement on Form SB-2 (file no. 333-102894).

(5)     Incorporated by reference to Exhibit 10.4 to the Company's registration
        statement on Form SB-2 (file no. 333-102894).

(6)     Incorporated by reference to Exhibit 10.5 to the Company's registration
        statement on Form SB-2 (file no. 333-102894).

(7)     Incorporated by reference to Exhibit 10 to the Company's report on Form
        8-K filed August 14, 2003.

*       Indicates a management contract or compensatory plan or arrangement.

We will furnish a copy of any of these exhibits to a shareholder upon written
request to Netfran Development Corp., 2801 N.E. 208th Terrace, 2nd Floor, Miami,
FL 33180, Att: President.

Reports on Form 8-K

There were no reports filed on Form 8-K during the quarter ended December 31,
2003.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

      McClain & Company has audited the Company's financial statements annually
since the Company's inception in 2002.

Fees related to services performed by McClain & Company in 2003 and 2002 were as
follows:




                                    2003                                2002
                                   -------                             -------

Audit Fees (1)                     $33,915                             $16,780
Audit-Related Fees
Tax Fees (2)
All Other Fees
                                   -------                             -------
Total                              $33,915                             $16,780
                                   =======                             =======

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

(1)     Audit fees represent fees for professional services provided in
        connection with the audit of our financial statements and review of our
        quarterly financial statements.

The Board of Directors has reviewed and discussed with the Company's management
and McClain & Company the audited financial statements of the Company contained
in the Company's Annual Report on Form 10-KSB for the Company's 2003 fiscal
year. The Board has also discussed with McClain & Company the matters required
to be discussed pursuant to SAS No. 61 (Codification of Statements on Auditing
Standards, AU Section 380), which includes, among other items, matters related
to the conduct of the audit of the Company's financial statements.



                                       23
<PAGE>

The Board has received and reviewed the written disclosures and the letter from
McClain and Company required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and has discussed with McClain
and Company its independence from the Company.

The Board has considered whether the provision of services other than audit
services is compatible with maintaining auditor independence.

Based on the review and discussions referred to above, the Board approved the
inclusion of the audited financial statements be included in the Company's
Annual Report on Form 10-KSB for its 2003 fiscal year for filing with the SEC.

 Audit Committee's Pre-Approval Policies

The Board's policy is now to pre-approve all audit services and all permitted
non-audit services (including the fees and terms thereof) to be provided by the
Company's independent auditor; provided, however, pre-approval requirements for
non-audit services are not required if all such services (1) do not aggregate to
more than five percent of total revenues paid by the Company to its accountant
in the fiscal year when services are provided; (2) were not recognized as
non-audit services at the time of the engagement; and (3) are promptly brought
to the attention of the Board and approved prior to the completion of the audit.

The Board pre-approved all of McClain and Company's fees described above.




                                       24
<PAGE>


                                   SIGNATURES

     In accordance with the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Miami, Florida, on March 30, 2004.

                                       NETFRAN DEVELOPMENT CORP.
                                       (Registrant)

                                       /s/ Elliot Krasnow
                                       -----------------------------------------
                                       Elliot Krasnow
                                       President



     In accordance with the requirements of the Exchange Act, this report has
been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>


       Signature                                         Title                        Date
       ---------                                         -----                        ----
<S>                                                             <C>                   <C>
/s/ Elliot Krasnow                       President and Director                       March 30, 2004
-------------------------------          (Principal Executive Officer)
Elliot Krasnow


/s/ Dellray Lefevere                      Director                                    March 30, 2004
-------------------------------
Dellray Lefevere


/s/ Robert Steinberg                     Treasurer and Director                       March 30, 2004
-------------------------------          (Principal Accounting Officer)
Robert Steinberg

</TABLE>



                                       25
<PAGE>
                              FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

                         NETFRAN DEVELOPMENT CORPORATION

                                 MIAMI, FLORIDA


<PAGE>



                          INDEPENDENT AUDITORS' REPORT


The Officers and Directors
Netfran Development Corporation
Miami, Florida


We have audited the accompanying balance sheets of Netfran Development
Corporation (the "Company"), as of December 31, 2003 and 2002, and the related
statements of income, stockholders' equity (deficit), and cash flows for the
years ended December 31, 2003, 2002, and 2001. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Netfran Development Corporation
as of December 31, 2003 and 2002, and the results of its operations and cash
flows for the years ended December 31, 2003, 2002, and 2001 in conformity with
accounting principles generally accepted in the United States of America.





McClain & Company, LC
Miami, Florida
March 4, 2004

                                  Page 1 of 19

<PAGE>
                        NETFRAN DEVELOPMENT CORPORATION
                                 BALANCE SHEET
                           DECEMBER 31, 2003 AND 2002




<TABLE>
<CAPTION>

                                                                                         2003            2002
                                                                                      ---------       ---------
<S>                                                                                      <C>             <C>
                                        ASSETS


CURRENT ASSETS
     Cash                                                                             $ 680,883       $ 675,408
     Notes and accounts receivable, net                                                   7,460          40,076
     Prepaid expenses and other                                                          10,939          25,677
                                                                                      ---------       ---------

         Total current assets                                                           699,282         741,161

PROPERTY AND EQUIPMENT - NET                                                              2,877           3,515
                                                                                      ---------       ---------

         Total assets                                                                 $ 702,159       $ 744,676
                                                                                      =========       =========

                    LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Due to affiliate                                                                 $   6,155       $  61,490
     Accounts payable and accrued expenses                                               97,614          87,032
                                                                                      ---------       ---------

         Total current liabilities                                                      103,769         148,522

LONG-TERM LIABILITIES
     Note payable to affiliate                                                          333,985         250,000
                                                                                      ---------       ---------

         Total liabilities                                                              437,754         398,522
                                                                                      ---------       ---------

STOCKHOLDERS' EQUITY
     Common stock, $0.001 par value, 50,000,000 shares authorized, 3,698,826 and
       3,373,826 shares issued or issuable and outstanding at December 31,
       2003 and December 31, 2002                                                         3,699           3,374
     Paid-in capital                                                                    711,772         630,847
     Accumulated deficit                                                               (451,066)       (288,067)
                                                                                      ---------       ---------

         Total stockholders' equity                                                     264,405         346,154
                                                                                      ---------       ---------

         Total liabilities and stockholders' equity                                   $ 702,159       $ 744,676
                                                                                      =========       =========

</TABLE>

The accompanying notes to the financial statements are an integral part of this
statement.

                                  Page 2 of 19

<PAGE>


                         NETFRAN DEVELOPMENT CORPORATION
                               STATEMENT OF INCOME
                        DECEMBER 31, 2003, 2002, AND 2001


<TABLE>
<CAPTION>

                                                         2003              2002              2001
                                                     -----------       -----------       -----------
<S>                                                      <C>               <C>               <C>
REVENUES
   Initial franchise fees                            $   763,592       $   688,000       $   653,000
   Marketing and business development materials           52,153            63,464             5,704
   Royalty and advertising fees                           81,665            69,049            27,338
   Interest income                                         1,910             5,218             6,584
   Other income                                            6,731                --                --
                                                     -----------       -----------       -----------

       Total revenues                                    906,051           825,731           692,626
                                                     -----------       -----------       -----------

COST AND EXPENSES
   Advertising                                            62,190            84,556           303,260
   Bad debt expense                                        1,364             4,690            23,197
   Commissions                                           225,812           173,035           145,733
   Conventions and seminars                               38,475            24,221            17,195
   Depreciation                                            1,618             2,343               308
   Franchise materials                                     6,869            39,968            38,210
   General and administrative                             59,359            35,654            29,608
   Interest expense                                       20,837            15,689               913
   Licenses, permits, and taxes                           32,977            27,578            22,099
   Marketing and business development material            77,230            99,427            37,935
   Overhead costs                                         33,600            33,600            33,600
   Professional fees                                      95,503            54,166            51,412
   Salaries and wages                                    382,139           222,881           148,386
   Travel                                                 31,077            37,398            32,959
                                                     -----------       -----------       -----------

       Total costs and expenses                        1,069,050           855,206           884,815
                                                     -----------       -----------       -----------

       Loss before income taxes                         (162,999)          (29,475)         (192,189)

PROVISION FOR INCOME TAXES                                    --                --                --
                                                     -----------       -----------       -----------

       Net loss                                      $  (162,999)      $   (29,475)      $  (192,189)
                                                     ===========       ===========       ===========

EARNINGS (LOSS) PER COMMON SHARE:

   BASIC LOSS PER COMMON SHARE                       $     (0.04)      $    (0.009)      $     (0.06)
                                                     ===========       ===========       ===========

   WEIGHTED AVERAGE COMMON SHARES                      3,662,319         3,340,180         3,340,088
                                                     ===========       ===========       ===========

   DILUTED LOSS PER COMMON SHARE                     $     (0.04)      $    (0.009)      $     (0.06)
                                                     ===========       ===========       ===========

   WEIGHTED AVERAGE DILUTED COMMON SHARES              3,662,319         3,340,180         3,340,088
                                                     ===========       ===========       ===========

</TABLE>

The accompanying notes to the financial statements are an integral part of this
statement.

                                  Page 3 of 19

<PAGE>


                         NETFRAN DEVELOPMENT CORPORATION
                   STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                           DECEMBER 31, 2003 AND 2002


<TABLE>
<CAPTION>

                                              COMMON        COMMON                                      TOTAL
                                               STOCK         STOCK       PAID-IN      ACCUMULATED     STOCKHOLDERS'
                                              SHARES        AMOUNTS      CAPITAL       DEFICIT       EQUITY (DEFICIT)
                                             ---------      -------      --------     ------------  ------------------


<S>                                          <C>            <C>          <C>           <C>             <C>
BALANCE, December 31, 2001                   3,340,088      $ 3,340      $142,030      $(258,592)      $(113,222)

Contributed capital from Netvertise,
   Inc. (See Note 1)                                --           --       488,041             --         488,041

Issuable common stock for services              33,738           34           776             --             810

Net loss                                            --           --            --        (29,475)        (29,475)
                                             ---------      -------      --------      ---------       ---------

BALANCE, December 31, 2002                   3,373,826      $ 3,374      $630,847      $(288,067)      $ 346,154

Issuable common stock for services             325,000          325        80,925             --          81,250

Net loss                                            --           --            --       (162,999)       (162,999)
                                             ---------      -------      --------      ---------       ---------

BALANCE, December 31, 2003                   3,698,826      $ 3,699      $711,772      $(451,066)      $ 264,405
                                             =========      =======      ========      =========       =========

</TABLE>

The accompanying notes to the financial statements are an integral part of this
statement.

                                  Page 4 of 19



<PAGE>


                         NETFRAN DEVELOPMENT CORPORATION
                             STATEMENT OF CASH FLOWS
                      INCREASE IN CASH AND CASH EQUIVALENTS
                        DECEMBER 31, 2003, 2002, AND 2001


<TABLE>
<CAPTION>

                                                                       2003            2002            2001
                                                                    ---------       ---------       ---------
<S>                                                                 <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Cash received from customers                                   $ 928,662       $ 882,862       $ 575,933
     Cash paid to suppliers and employees                            (894,326)       (771,218)       (451,090)
     Interest received                                                  1,910           5,218           6,315
     Interest paid                                                    (17,897)           (208)             --
     Taxes paid                                                            --              --          (9,638)
                                                                    ---------       ---------       ---------

         Net cash provided by operating activities                     18,349         116,654         121,520
                                                                    ---------       ---------       ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
     (Advances to) payments from employees and franchises, net         (9,769)          2,740          (6,966)
     Purchases of property and equipment                               (1,605)             --          (6,166)
                                                                    ---------       ---------       ---------

         Net cash (used in) provided by investing activities          (11,374)          2,740         (13,132)
                                                                    ---------       ---------       ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Issuance of common stock                                              --              --              --
     (Repayment to) borrowings from affiliate                          (1,500)        250,000              --
                                                                    ---------       ---------       ---------

         Net cash provided by financing activities                     (1,500)        250,000              --
                                                                    ---------       ---------       ---------

         Net increase in cash                                           5,475         369,394         108,388

CASH, beginning of period                                             675,408         306,014         197,626
                                                                    ---------       ---------       ---------

CASH, end of period                                                 $ 680,883       $ 675,408       $ 306,014
                                                                    =========       =========       =========

</TABLE>

The accompanying notes to the financial statements are an integral part of this
statement.

                                  Page 5 of 19

<PAGE>


                         NETFRAN DEVELOPMENT CORPORATION
                       STATEMENT OF CASH FLOWS (CONTINUED)
                      INCREASE IN CASH AND CASH EQUIVALENTS
                        DECEMBER 31, 2003, 2002, AND 2001


<TABLE>
<CAPTION>

                                                                       2003            2002            2001
                                                                   ---------       ---------       ---------
<S>                                                                    <C>             <C>             <C>
RECONCILIATION OF NET LOSS TO NET CASH PROVIDED BY OPERATING
   ACTIVITIES:
     Net loss                                                      $(162,999)      $ (29,475)      $(192,189)
     Bad debt expense                                                  1,364           4,690          23,197
     Depreciation                                                      1,618           2,343             308
     Contribution of services by officer of the Company               81,250              --              --
     Stock issued for payment of legal services                           --             810              --
     Loss on disposal of asset                                           625              --              --
     Decrease (increase) in notes and accounts receivable             31,252          67,349        (115,109)
     Decrease (increase) in prepaid expenses                          24,507          (2,631)         19,446
     Increase in income tax receivable                                    --              --          (8,207)
     Increase in accrued interest receivable                              --              --            (269)
     Increase in due to affiliate                                     30,150          61,490         352,299
     Increase in accounts payable and accrued expenses                10,582          17,078          38,475
     (Decrease) increase in refundable franchise fee deposits             --          (5,000)          5,000
     Decrease in income tax payable                                       --              --          (1,431)
                                                                   ---------       ---------       ---------

         Net cash provided by operating activities                 $  18,349       $ 116,654       $ 121,520
                                                                   =========       =========       =========

</TABLE>

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
During October 2002, in lieu of payment of debt owed to Netvertise, $488,041 of
outstanding debt was transferred to paid-in capital (see Note 1).

During 2002, in lieu of cash payment for legal services, the Company issued
33,738 shares of stock with a fair value of $810.

During 2003, in lieu of cash payment for officer compensation, the Company
issued 325,000 shares of stock with a fair value of $81,250.

On June 30, 2003, the Company amended and extended its note payable to
Netvertise. As part of the amendment, the note payable was increased by $83,985,
which represented the balance of the due to affiliate.




The accompanying notes to the financial statements are an integral part of this
statement.

                                  Page 6 of 19

<PAGE>


                         NETFRAN DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002, AND 2001


NOTE 1  - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          NATURE OF OPERATIONS

          The Company was formed in the State of Florida in January 2000,
          commenced operations on March 7, 2000, and was organized to market
          Netspace franchises, which provides Internet web design, hosting,
          updating, maintenance, and related services to businesses and
          individuals. The Netspace system was developed by Netvertise, Inc.,
          ("Netvertise"), a related company and the Company's former sole
          shareholder.

          COMPANY OWNERSHIP

          For the period from January 1, 2002 to October 31, 2002, the Company
          was a wholly-owned subsidiary of Netvertise. On October 31, 2002, the
          Company's issued and outstanding shares were distributed to the
          shareholders of Netvertise on a pro-rata basis. Prior to the
          distribution, Netvertise made a capital contribution in the amount of
          $488,041, equivalent to amounts due to Netvertise by the Company.

          REVENUE RECOGNITION

          Revenues from the sale of regional franchise agreements and individual
          franchises in the United States and Great Britain are generally
          recognized when substantially all significant services to be provided
          by the Company have been performed. Interest on trade notes receivable
          is accrued and recorded as income when due. In situations where
          revenue from such sales is collectible over an extended period of
          time, down payments are not sufficient and/or collection is not
          reasonably certain, revenue is recognized on the cash method as
          amounts are collected. Interest on trade notes receivable, resulting
          from sales recorded on the cash method, is recorded when received.

          Revenues from franchise royalties and advertising fees are recognized
          when earned. Expenses are recognized when incurred.

          CASH AND CASH EQUIVALENTS

          For purposes of the statement of cash flows, the Company considers all
          highly liquid debt instruments purchased with a maturity of three
          months or less to be cash equivalents.

          PROPERTY AND EQUIPMENT

          Property and equipment are stated at cost and depreciated using
          straight-line and accelerated methods over the following estimated
          useful lives of the assets:

                Computer equipment                    3 - 5 years

          LONG-LIVED ASSETS

          The Company reviews its long-lived assets for impairment whenever
          events or changes in circumstances indicate that the carrying amount
          of an asset may not be recoverable.


                                  Page 7 of 19
<PAGE>


                         NETFRAN DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002, AND 2001


NOTE 1  - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          INCOME TAXES

          Deferred income tax assets and liabilities are computed annually for
          differences between the financial statements and tax basis of assets
          and liabilities that will result in taxable or deductible amounts in
          the future, based on enacted tax laws and rates applicable to the
          periods in which the differences are expected to affect taxable
          income. Valuation allowances are established when necessary to reduce
          deferred tax assets to the amount expected to be realized. Income tax
          expense is the tax payable or refundable for the period, minus the
          changes during the period in deferred tax assets and liabilities.

          Income taxes are provided for on all taxable income included in the
          financial statements in the period in which the income is reported for
          financial statement purposes. Accordingly, deferred income taxes
          (benefits) are provided for timing differences between financial and
          tax reporting. The principal items comprising these differences at
          December 31, 2003 and 2002 are the deferred recognition of operating
          losses for tax purposes and the allowance for doubtful accounts.

          USE OF ESTIMATES

          The preparation of financial statements in conformity with accounting
          principles generally accepted in the United States of America requires
          management to make estimates and assumptions that affect the reported
          amounts of assets and liabilities and disclosure of contingent assets
          and liabilities at the date of the financial statements, and the
          reported amounts of revenues and expenses during the reporting period.
          Actual results could differ from those estimates.

          RECLASSIFICATION

          For comparative purposes, certain items in the prior years' financial
          statements have been reclassified to conform to current year's
          presentation.

          BUSINESS SEGMENT REPORTING

          Financial Accounting Standards Board ("FASB") Statement of Financial
          Accounting Standards ("SFAS") No. 131, "DISCLOSURES ABOUT SEGMENTS OF
          AN ENTERPRISE AND RELATED INFORMATION," requires companies to report
          information about operating segments in financial statements.
          Operating segments are defined as components of an enterprise about
          which separate financial information is available that is evaluated
          regularly by the chief operating decision maker, or decision making
          group, in deciding how to allocate resources and/or assess
          performance. The operating segments are managed separately because
          each operating segment represents a strategic business unit that
          offers different product services. At December 31, 2003 and 2002, the
          Company had one reportable segment: franchise sales.


                                  Page 8 of 19


<PAGE>


                         NETFRAN DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002, AND 2001


NOTE 1  - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          COMPREHENSIVE INCOME

          SFAS 130, "REPORTING COMPREHENSIVE INCOME," requires disclosure of
          non-owner changes in stockholders' equity, and is defined as net
          income plus direct adjustments to stockholders' equity. The Company
          did not have any items of comprehensive income.

          RECENT PRONOUNCEMENTS

          In May 2003, the FASB issued SFAS No. 150, "ACCOUNTING FOR CERTAIN
          FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND
          EQUITY," to establish standards for how an issuer classifies and
          measures certain financial instruments with characteristics of both
          liabilities and equity. The Company does not have any financial
          instruments with characteristics of both liabilities and equity. The
          adoption of this standard will not have impact on the Company's
          financial condition or results of operations.

          In April 2003, the FASB issued SFAS No. 149, "AMENDMENT OF STATEMENT
          133 ON DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES," to amend and
          clarify financial accounting and reporting for derivative instruments
          and for hedging activities under SFAS 133. The adoption of this
          standard will not have impact on the Company's financial condition or
          results of operations.

          In December 2002, the FASB issued SFAS No. 148, "ACCOUNTING FOR
          STOCK-BASED COMPENSATION-TRANSITION AND DISCLOSURE," ("SFAS 148").
          SFAS 148 amends SFAS No. 123, "ACCOUNTING FOR STOCK-BASED
          COMPENSATION," to provide alternative methods of transition to SFAS
          123's fair value method of accounting for stock-based employee
          compensation. (See Note 13.)

          In July 2002, the FASB issued SFAS No. 146, "ACCOUNTING FOR COSTS
          ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES," ("SFAS 146"), which
          supercedes Emerging Issues Task Force No. 94-3, "LIABILITY RECOGNITION
          FOR CERTAIN EMPLOYMENT TERMINATION BENEFITS AND OTHER COSTS TO EXIT AN
          ACTIVITY." SFAS 146 requires companies to record liabilities for costs
          associated with exit or disposal activities to be recognized only when
          the liability is incurred instead of at the date of commitment to an
          exit or disposal activity. Adoption of this standard is effective for
          exit or disposal activities that are initiated after December 31,
          2002. The adoption of this standard will not have an impact on the
          Company's financial condition or results of operations.




                                  Page 9 of 19

<PAGE>


                         NETFRAN DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002, AND 2001


NOTE 1  - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          RECENT PRONOUNCEMENTS (CONTINUED)

          In April 2002, the FASB issued SFAS No. 145, "RESCISSION OF FASB
          STATEMENTS NO. 4, 44, AND 64, AMENDMENT OF FASB STATEMENT NO. 13, AND
          TECHNICAL CORRECTION," ("SFAS 145"). SFAS 145 rescinds SFAS No. 4,
          "REPORTING GAINS AND LOSSES FROM EXTINGUISHMENT OF DEBT," which
          required all gains and losses from extinguishment of debt to be
          aggregated and, if material, classified as an extraordinary item, net
          of related income tax effect. SFAS 145 requires that gains or losses
          from extinguishment of debt be classified as extraordinary items only
          if they meet the criteria of ABP Opinion No. 30, "REPORTING THE
          RESULTS OF OPERATIONS - REPORTING THE EFFECTS OF DISPOSAL OF A SEGMENT
          OF BUSINESS, AND EXTRAORDINARY, UNUSUAL, AND INFREQUENTLY OCCURRING
          EVENTS AND TRANSACTIONS," and is effective beginning after May 15,
          2002. The adoption of this standard will not have an impact on the
          Company's financial condition or results of operations.

          Effective January 1, 2002, the Company adopted the SFAS No. 142,
          "GOODWILL AND OTHER INTANGIBLE ASSETS," ("SFAS 142"). SFAS 142 changes
          the accounting for goodwill and other intangible assets. Under this
          standard, goodwill and intangible assets with indefinite lives are no
          longer amortized, but are subject to an annual impairment test. The
          Company does not hold any goodwill or intangible assets. The adoption
          of SFAS 142 did not have any effect on the Company's financial
          condition or results of operations.

NOTE 2  - NOTES AND ACCOUNTS RECEIVABLE

          The Company had received notes from the sale of new franchises. These
          notes are collateralized by the rights to the related franchise
          territory sold, and bear interest at the market rates prevailing at
          the dates of the transactions.

          Following is a summary of notes and accounts receivable:

<TABLE>
<CAPTION>

                                                          DECEMBER 31, 2003           DECEMBER 31, 2002
                                                          -----------------           -----------------
<S>                                                            <C>                          <C>
               Notes receivable                                $    --                      $ 3,186
               Accounts receivable                              11,079                       39,144
                                                               -------                      -------
                                                                11,079                       42,330
               Less allowance for doubtful accounts              3,619                        2,254
               Less current portion                              7,460                       40,076
                                                               -------                      -------
               Less allowance for doubtful accounts                 --                           --
                                                               -------                      -------
                                                               $    --                      $    --
                                                               =======                      =======
</TABLE>


                                  Page 10 of 19


<PAGE>


                         NETFRAN DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002, AND 2001


NOTE 2  - NOTES AND ACCOUNTS RECEIVABLE (CONTINUED)

          Notes receivable are comprised of the following:

          Note receivable issued May 22, 2000 bears interest at 10% per annum,
          principal and interest of $507.26 is payable monthly, and matures
          September 2004. At December 31, 2001, the unpaid principal balance was
          $17,137. This note was written off in 2002.

          Note receivable issued April 1, 2001 bears interest at 10% per annum,
          principal and interest of $368.90 is payable monthly, and matures
          September 2003. At December 31, 2002, the unpaid principal balance was
          $3,186. This note was paid off in 2003.

          Note receivable issued June 1, 2001 bears interest at 10% per annum,
          principal and interest of $79.95 is payable monthly, and matures
          August 2011. At December 31, 2001, the unpaid principal balance was
          $6,061. This note was written off in 2002.

NOTE 3  - PROPERTY AND EQUIPMENT

          At December 31, 2003 and 2002, property and equipment consisted of the
          following:

<TABLE>
<CAPTION>
                                                          2003                2002
                                                        -------             -------
<S>                                                       <C>                 <C>
               Computer equipment                       $ 6,263             $ 6,166
               Less accumulated depreciation             (3,386)             (2,651)
                                                        -------             -------
                                                        $ 2,877             $ 3,515
                                                        =======             =======

</TABLE>

          Depreciation expense charged to operations for the years ended
          December 31, 2003, 2002, and 2001 amounted to $1,618, $2,343, and
          $308, respectively.

NOTE 4  - NOTE PAYABLE TO AFFILIATE

          On March 6, 2002, Netvertise made a loan to the Company in the amount
          of $250,000 to fund operations. The note bears interest at 7% per
          year, payments of interest only on a quarterly basis, ballooning in
          two years.

          During 2002, the Company did not make the required quarterly payments
          on the note and was in technical default. Netvertise advised the
          Company that it will not demand immediate payment on the note and has
          extended the due date on the past due interest to March 6, 2003. Prior
          to March 6, 2003, the past due interest had been paid in full.

          On June 30, 2003, the note payable to Netvertise was amended and
          extended. In addition, all accrued and unpaid interest on this note in
          the amount of $6,731 was waived. This amount is recorded as other
          income in the accompanying condensed statements of income and
          accumulated deficit. The new note is in the amount of $333,985, which
          represents the original principal balance plus $83,985, which
          represented the balance of the due to affiliate. The due to affiliate
          was an open account with Netvertise that did not bear interest. The
          amended note bears interest at 7% per year, ballooning on March 26,
          2006.



                                  Page 11 of 19

<PAGE>

                         NETFRAN DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002, AND 2001


NOTE 5  - FAIR VALUE OF FINANCIAL INSTRUMENTS

          The following assumptions were used to estimate the fair value of each
          class of financial instruments for which it is practicable to estimate
          that value:

                  CASH AND CASH EQUIVALENTS

                  The carrying amounts of cash and cash equivalents approximate
                  their fair value.

                  NOTES RECEIVABLE

                  The carrying amounts of the notes receivable approximates
                  their fair value.

                  DUE TO AFFILIATE

                  The carrying amount of the due to affiliate approximates its
                  fair value.

                  NOTE PAYABLE TO AFFILIATE

                  The fair value of the note payable is estimated based upon
                  current rates offered to the Company for debt of the same
                  remaining maturities. The carrying amount of note payable to
                  affiliate is a reasonable estimate of its fair value.

                  The estimated fair values of the Company's financial
                  instruments at December 31, 2003 and 2002, were as follows:

<TABLE>
<CAPTION>


                                                                2003                         2002
                                                       --------------------------    ----------------------
                                                         CARRYING         FAIR        CARRYING        FAIR
                                                          AMOUNT         VALUE        AMOUNT         VALUE
                                                        ---------     -----------    ---------     --------
<S>                                                      <C>           <C>           <C>           <C>
                          Cash and cash equivalents      $680,883      $680,883      $675,408      $675,408
                          Notes receivable, net          $     --      $     --      $  3,186      $  3,186
                          Due to affiliate               $  6,155      $  6,155      $ 61,490      $ 61,490
                          Note payable to affiliate      $333,985      $333,985      $250,000      $250,000

</TABLE>

NOTE 6  - COMMITMENTS AND CONTINGENCIES WITH OFF-BALANCE SHEET RISK

          The Company has experienced credit risk in connection with its bank
          accounts. At various times during the year, it maintained deposits
          with financial institutions in excess of amounts insured by the FDIC.
          The exposure to the Company is solely dependent on daily bank balances
          and the financial strength of the respective institutions.

          As indicated in Note 1, the Company sells Netspace franchises.
          Netspace provides Internet web design, hosting, updating, and related
          services to businesses and individuals. The Netspace system was
          developed by Netvertise. Netvertise is related to Netfran in that they
          both have the same management and common ownership.


                                  Page 12 of 19

<PAGE>


                         NETFRAN DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002, AND 2001


NOTE 6  - COMMITMENTS AND CONTINGENCIES WITH OFF-BALANCE SHEET RISK (CONTINUED)

          The Company derives its revenue primarily from the sale of the
          Netspace franchises and from royalties paid by the franchise holders.
          Netvertise expects to profit from the sale of services to the ultimate
          users of the Netspace system. The Company did not compensate
          Netvertise for the right to sell the franchise, and prior to October
          20, 2001, there was no written agreement between the two companies.
          Effective October 20, 2001, the Company and Netvertise entered into a
          written agreement whereas Netvertise shall provide services to the
          Company's franchisees. The services shall consist of website
          development, website hosting, maintenance support and upgrading,
          graphic design, copy writing, training, and e-publishing. The
          agreement also stipulates that Netvertise will provide its personnel,
          office space, facilities, and support services as may be requested by
          the Company. The costs of these services are to be reimbursed to
          Netvertise on a monthly basis. This agreement continues until the
          termination of the last Netfran franchise agreement.

NOTE 7  - INCOME TAXES

          Provision (benefit) is made for the tax effects of timing differences
          as described in Note 1. The provision for income taxes for the years
          ended December 31, 2003, 2002, and 2001 is based upon current
          statutory rates and is summarized as follows:



                                 YEAR ENDED DECEMBER 31, 2003
                            ---------------------------------------
                             CURRENT        DEFERRED        TOTAL
                            ---------      ---------      ---------
               Florida      $      --      $      --      $      --
               Federal             --             --             --
                            ---------      ---------      ---------

                            $      --      $      --      $      --
                            =========      =========      =========


                                 YEAR ENDED DECEMBER 31, 2002
                            ---------------------------------------
                             CURRENT        DEFERRED        TOTAL
                            ---------      ---------      ---------
               Florida      $      --      $      --      $      --
               Federal             --             --             --
                            ---------      ---------      ---------

                            $      --      $      --      $      --
                            =========      =========      =========


                                 YEAR ENDED DECEMBER 31, 2001
                            ---------------------------------------
                             CURRENT        DEFERRED        TOTAL
                            ---------      ---------      ---------
               Florida      $      --      $      --      $      --
               Federal             --             --             --
                            ---------      ---------      ---------

                            $      --      $      --      $      --
                            =========      =========      =========


                                  Page 13 of 19


<PAGE>

                         NETFRAN DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002, AND 2001


NOTE 7  - INCOME TAXES (CONTINUED)

          Deferred tax assets have been provided for deductible temporary
          differences related to net operating losses and the allowance for
          doubtful accounts. At December 31, 2003 and 2002, deferred income
          taxes related to the following:

                                                         2003           2002
                                                       --------       --------
           Deferred tax assets (liabilities):
               Net operating loss                      $ 83,917       $ 41,870
               Allowance for doubtful accounts              712            444
                                                       --------       --------
                                                         84,629         42,314
           Less valuation allowance                     (84,629)       (42,314)
                                                       --------       --------

               Net deferred tax asset (liability)      $     --       $     --
                                                       ========       ========

NOTE 8  - LITIGATION

          At December 31, 2003 and 2002, there was no pending litigation against
          the Company.

NOTE 9  - EARNING (LOSS) PER SHARE

          Basic earnings (loss) per share ("EPS"), was computed by dividing net
          loss by the weighted average number of shares outstanding during the
          period. For the years ended December 31, 2002 and 2001, the Company
          did not issue stock warrants, stock options, or certain other
          transactions that would have a dilutive effect on EPS. For the year
          ended December 31, 2003, 90,000 stock options were excluded from
          diluted weighted average shares as the net loss for the year ended
          would have a dilutive effect on EPS.

          The following is the calculation of loss per share:


<TABLE>
<CAPTION>

                                                               Year ended       Year ended         Year ended
                                                              December 31,     December 31,       December 31,
                                                                 2003              2002                2001
                                                              -----------       -----------       -------------
<S>                                                           <C>               <C>               <C>
               Basic earnings (loss) per common share:
                  Numerator
                    Net loss before extraordinary items
                       applicable to common stockholders      $  (162,999)      $   (29,475)      $    (192,189)
                    Extraordinary items, net                           --                --                  --
                                                              -----------       -----------       -------------

                    Loss applicable to common
                     stockholders                             $  (162,999)      $   (29,475)      $    (192,189)
                                                              ===========       ===========       =============

                  Denominator
                    Weighted average common shares              3,662,319         3,340,180           3,340,088
                                                              -----------       -----------       -------------
                    Basic EPS                                 $     (0.04)      $    (0.009)      $       (0.06)
                                                              ===========       ===========       =============
</TABLE>


                                  Page 14 of 19

<PAGE>


                         NETFRAN DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002, AND 2001


NOTE 9  - EARNING (LOSS) PER SHARE (CONTINUED)

<TABLE>
<CAPTION>

                                                               Year ended         Year ended         Year ended
                                                                December 31,      December 31,      December 31,
                                                                   2003              2002              2001
                                                                -----------       -----------       -----------
<S>                                                             <C>               <C>               <C>
               Diluted earnings (loss) per common share:
                  Numerator
                    Net loss before extraordinary items
                       applicable to common stockholders        $  (162,999)      $   (29,475)      $  (192,189)
                    Extraordinary items, net                             --                --                --
                                                                -----------       -----------       -----------

                    Loss applicable to common stockholders      $  (162,999)      $   (29,475)      $  (192,189)
                                                                ===========       ===========       ===========

                  Denominator
                    Weighted average common shares                3,662,319         3,340,180         3,340,088
                                                                -----------       -----------       -----------
                    Diluted EPS                                 $     (0.04)      $    (0.009)      $     (0.06)
                                                                ===========       ===========       ===========
</TABLE>


NOTE 10 - INITIAL MATERIALS FRANCHISE FEE REVENUE AND MARKETING AND BUSINESS
          DEVELOPMENT REVENUE

          From inception, March 7, 2000 to November 2002, all franchise fee
          sales were derived from initial franchise fees for individual
          franchise sales. In December 2002, the Company re-sold its first
          franchise. Additionally, it sold a master franchise covering the
          United Kingdom. In 2003, it sold three master franchises covering
          three regions in the United States. When a franchise is sold, the
          Company agrees to provide certain services to the franchisee.
          Generally, these services include initial training and support
          services, and are usually performed within the first six months of
          selling the franchise.

          Any additional services required by the franchisee is provided by
          Netvertise. At December 31, 2003 and 2002, the Company had
          substantially provided all necessary training and support services to
          existing franchisees.

          The Company anticipates substantial growth of franchise sales;
          however, franchise sales do reach a saturation point, and accordingly,
          revenue from franchise sales may decline in the future.

          The Company requires its franchisees to purchase from the Company
          certain marketing and business development materials. For the years
          ended December 31, 2003, 2002, and 2001, the Company derived revenues
          in the amount of $52,153, $63,464, and $5,704, respectively, from the
          sale of such materials to its franchisees.


                                 Page 15 of 19
<PAGE>



                         NETFRAN DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                         DECEMBER 31, 2003, 2002, AND 2001


NOTE 11 - RELATED PARTY TRANSACTIONS

          The Company shares facilities and certain personnel with Netvertise,
          and accordingly, overhead costs are allocated between the two
          companies. For the years ended December 31, 2003, 2002, and 2001, the
          Company incurred shared overhead costs in the amount of $33,600.

          At December 31, 2003 and 2002, included on the balance sheet under the
          caption "due to affiliate" is $6,155 and $61,490, respectively, of
          various expenditures paid by Netvertise on behalf of the Company.

          In January 2003, the Company issued 33,738 shares as payment for legal
          services rendered to the Company during 2002. The value per share at
          the time the legal services were rendered was $.024 per share. These
          shares were deemed issuable as of December 31, 2002.

          In February 2003, the Company issued 325,000 shares as payment for
          officer compensations during 2003. The value per share at the time the
          services were rendered was $0.25 per share.


                                  Page 16 of 19

<PAGE>


                         NETFRAN DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002, AND 2001



NOTE 12 - SELECTED QUARTERLY DATA (UNAUDITED)

          Following is a summary of the Company's quarterly results of
          operations for the years ended December 31, 2003, 2002, and 2001:

<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31, 2003     FIRST QUARTER        SECOND QUARTER      THIRD QUARTER       FOURTH QUARTER           YEAR
----------------------------     -------------        --------------      -------------       --------------        ----------
<S>                                <C>                 <C>                 <C>                 <C>                 <C>
Revenues                           $   113,134         $    88,615         $   142,405         $   561,897         $   906,051
Operating (loss) income            $  (185,496)        $  (120,825)        $   (34,664)        $   177,986         $  (162,999)
Net (loss) income                  $  (185,496)        $  (120,825)        $   (34,664)        $   177,986         $  (162,999)
Earnings (loss) per share:
    Basic                          $     (0.05)        $     (0.03)        $     (0.01)        $      0.05         $     (0.04)
                                   ===========         ===========         ===========         ===========         ===========
    Weighted average shares          3,550,770           3,698,826           3,698,826           3,698,826           3,662,319
                                   ===========         ===========         ===========         ===========         ===========
    Diluted                        $     (0.05)        $     (0.03)        $     (0.01)        $      0.05         $     (0.04)
                                   ===========         ===========         ===========         ===========         ===========
    Weighted average shares          3,550,770           3,698,826           3,698,826           3,698,826           3,662,319
                                   ===========         ===========         ===========         ===========         ===========

YEAR ENDED DECEMBER 31, 2002     FIRST QUARTER        SECOND QUARTER      THIRD QUARTER       FOURTH QUARTER           YEAR
----------------------------     -------------        --------------      -------------       --------------        ----------

Revenues                           $    91,909         $   383,319         $   145,390         $   205,113         $   825,731
Operating (loss) income            $   (96,267)        $   117,950         $   (78,975)        $    27,817         $   (29,475)
Net (loss) income                  $   (96,267)        $   117,950         $   (78,975)        $    27,817         $   (29,475)
Earnings (loss) per share:
    Basic                          $    (0.029)        $     0.035         $    (0.023)        $     0.008         $    (0.009)
                                   ===========         ===========         ===========         ===========         ===========
    Weighted average shares          3,340,088           3,340,088           3,340,088           3,340,180           3,340,180
                                   ===========         ===========         ===========         ===========         ===========
    Diluted                        $    (0.029)        $     0.035         $    (0.023)        $     0.008         $    (0.009)
                                   ===========         ===========         ===========         ===========         ===========
    Weighted average shares          3,340,088           3,340,088           3,340,088           3,340,180           3,340,180
                                   ===========         ===========         ===========         ===========         ===========

YEAR ENDED DECEMBER 31, 2001     FIRST QUARTER        SECOND QUARTER      THIRD QUARTER       FOURTH QUARTER           YEAR
----------------------------     -------------        --------------      -------------       --------------        ----------

Revenues                           $   155,872         $   110,120         $   152,007         $   274,627         $   692,626
Operating (loss) income            $     5,420         $  (160,151)        $   (20,955)        $   (16,503)        $  (192,189)
Net (loss) income                  $     5,420         $  (160,151)        $   (20,955)        $   (16,503)        $  (192,189)
Earnings (loss) per share:
    Basic                          $     0.002         $    (0.051)        $    (0.006)        $    (0.005)        $     (0.06)
                                   ===========         ===========         ===========         ===========         ===========
    Weighted average shares          3,340,088           3,340,088           3,340,088           3,340,088           3,340,088
                                   ===========         ===========         ===========         ===========         ===========
    Diluted                        $     0.002         $    (0.051)        $    (0.006)        $    (0.005)        $     (0.06)
                                   ===========         ===========         ===========         ===========         ===========
    Weighted average shares          3,340,088           3,340,088           3,340,088           3,340,088           3,340,088
                                   ===========         ===========         ===========         ===========         ===========

</TABLE>

                                  Page 17 of 19

<PAGE>


                         NETFRAN DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002, AND 2001


NOTE 13 - STOCK INCENTIVE PLAN

          In 2003, the Company established a Stock Incentive Plan ("Stock
          Plan"), which provides eligible employees, consultants, and
          non-employee directors of the Company and its affiliates, stock-based
          incentives in the Company, thereby creating a means to raise the level
          of stock ownership by such individuals in order to attract, retain,
          and reward such individuals. Under the Stock Plan, a maximum of
          600,000 shares may be awarded. The options awarded are subject to an
          option term determined by a Committee. However, no option shall be
          exercisable more than 10 years after the date of grant. Options shall
          be exercisable at such time and subject to such terms and conditions
          as shall be determined by the Committee at grant.

          On February 11, 2003, the Company granted 325,000 shares of restricted
          stock, in accordance with the Stock Plan, to three of its officers.
          The restricted stock had a fair value of $0.25 per share and was
          recorded as compensation for the three-month period ended March 31,
          2003.

          This restricted stock was fully vested on February 11, 2003. In the
          event the participant engages in detrimental activity as defined in
          the Stock Plan prior to, or during the one-year period after vesting
          of the restricted stock, the Committee may direct (at any time within
          two years thereafter) that the participant shall pay over to Netfran
          an amount equal to the fair market value at the time of vesting of any
          restricted stock, which had vested in the period referred to above.

          Furthermore, in accordance with the Stock Plan, the Company granted
          90,000 stock options as follows:
<TABLE>
<CAPTION>

                                                                      VESTING
                          GRANTEE              NO. OF SHARES          SCHEDULES               TERM                PRICE
                      ---------------          -------------       --------------           ---------             -----
<S>                                                <C>             <C>                       <C>                  <C>
                      Two Officers                 80,000          1/3 each year             10 years             $0.25

                      Non-Officers                 10,000          1/3 each year             10 years             $0.25
</TABLE>


NOTE 14 - STRATEGIC VENTURE

          On July 22, 2003, the Company entered into a three-year agreement with
          Strategica Management, LLC ("SM"). SM is to provide financial advisory
          services that would include endeavoring to arrange or provide up to
          $10 million in value to the Company by arranging financing, merger and
          acquisition transactions, obtaining customers, or other transactions
          that may be identified by SM and proposed to the Company. As part of
          the agreement, SM received $5,000 and was issued in escrow, 668,018
          shares of the Company's stock. The Company has not recorded these
          shares as outstanding in the accompanying condensed balance sheets as
          SM has not completed its performance under this agreement, nor has any
          performance commitment been reached as of December 31, 2003.

                                  Page 18 of 19

<PAGE>


                         NETFRAN DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002, AND 2001


NOTE 14 - STRATEGIC VENTURE (CONTINUED)

          Subject to provisions of the agreement, SM's equity shares are subject
          to repurchase by the Company at a price of $.0001 per share, to the
          extent that the Company has not received $10 million in value during
          the term of the agreement. The Company's repurchase right shall expire
          at 5% of such shares for each $500,000 of value created by SM during
          the term of the agreement. SM or any of its affiliates are not allowed
          to acquire any additional equity shares without the consent of the
          Board of Directors of the Company for a ten-year period. Once the
          Company has received a value of $1,000,000 or more, the Company shall
          enter into an advisory service agreement with SM and shall be paying
          SM $3,000 per month for the balance of the initial term of the
          agreement. As part of the advisory service agreement, the Company
          shall pay to SM at the closing of each transaction (i) 3% of the gross
          amount of any senior debt (ii) 4% of the gross amount of any mezzanine
          debt or subordinate debt (iii) 6% of the gross amount of any equity,
          and (iv) 6% of the value of any merger, acquisition, bulk asset sale,
          control block stock sale, divestiture, or other similar transaction.



                                  Page 19 of 19