**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
 
 **Second
        Amended Form 10-K/A**
 
 [X]
              ANNUAL
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934
 
 **For
        the fiscal year ended December 31, 2003**
 
 OR
 
 [
                   ]
              TRANSITION
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934
 
 For
        the
        transition period from _______________ to _______________.
 
 
 **Commission
        file number** **0-49687**
 
 
 **M-GAB
        Development Corporation**
 (Exact
        name of registrant as specified in its charter)
 
 **Florida**
                (State
                  or other jurisdiction of
                incorporation
                  or organization)
              **33-0961490**
                (I.R.S.
                  Employer
                Identification
                  No.)**22342
                  Avenida Empresa, Suite 220**
                **Rancho
                  Santa Margarita, CA**
                (Address
                  of principal executive offices)
              **92688**
                (Zip
                  Code)
 
 **Registrant’s
        telephone number, including area code (949) 635-1240**
 
 
 Securities
        registered pursuant to Section 12(b) of the Act:
 
 Title
                  of each class
              
              Name
                  of each exchange on which registeredNone
              
              None
 
 
 Securities
        registered pursuant to Section 12(g) of the Act:
 
 Common
        Stock, par value $0.001
 (Title
        of
        class)
 
 
 Indicate
        by
        check mark whether the registrant (1) has filed all reports required to be
        filed
        by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
        preceding 12 months (or for such shorter period that the registrant was required
        to file such reports), and (2) has been subject to such filing requirements
        for
        the past 90 days. Yes X No .
  Indicate
        by check mark if disclosure of delinquent filers pursuant to Item 405 of
        Regulation S-K is not contained herein, and will not 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-K or any amendment
        to this
        Form 10-K. [  ]
 
 Indicate
        by check mark whether the registrant is an accelerated filer (as defined
        in Rule
        12b-2 of the Act).
 X
 
 State
        the
        aggregate market value of the voting and non-voting common equity held by
        non-affiliates computed by reference to the price at which the common equity
        was
        last sold, or the average bid and asked price of such common equity, as of
        the
        last business day of the registrant’s most recently completed second fiscal
        quarter. There was no market for our common stock.
 
 **Applicable
        only to issuers involved in bankruptcy proceedings during the preceding five
        years:**
 
 Indicate
        by check mark whether the registrant filed all documents and reports required
        to
        be filed by Sections 12, 13 or 15(d) of the Exchange Act of 1934 subsequent
        to
        the distribution of securities under a plan confirmed by a court. Yes
        __  No  .
 
 **Applicable
        only to corporate issuers**
 
 Indicate
        the number of shares outstanding of each of the issuer’s classes of common
        equity, as of the latest practicable date. As of March 10, 2004, there were 6,383,845 shares
        of common stock issued and outstanding.
 
 **Documents
        Incorporated by Reference**
 
 List
        hereunder the following documents if incorporated by reference and the Part
        of
        the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
        incorporated: (1) Any annual report to security holders; (2) Any proxy or
        information statement; and (3) Any prospectus filed pursuant to rule 424(b)
        or
        (c) of the Securities Act of 1933. The listed documents should be clearly
        described for identification purposes (e.g., annual report to security holders
        for fiscal year ended December 24, 1980). None.







**M-GAB
        Devlopement Corporation**
 
 **TABLE
        OF CONTENTS**
 
 
 **PART
                  I**ITEM
                  1
              BUSINESS
              1ITEM
                  2
              PROPERTY
              5ITEM
                  3
              LEGAL
                  PROCEEDINGS
              5ITEM
                  4
              SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY HOLDERS
              5**PART
                  II**ITEM
                  5
              MARKET
                  FOR REGISTRANT'S COMMON EQUITY, AND RELATED STOCKHOLDER MATTERS
                  AND ISSUER
                  PURCHASES OF EQUITY SECURITIES
              6ITEM
                  6
              SELECTED FINANCIAL DATA
              7ITEM
                  7
              MANAGEMENT’S
                    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                    OPERATION
              7ITEM 7A
              QUANTITATIVE AND
                QUALITATIVE
                DISCLOSURES ABOUT MARKET RISK
              8ITEM
                  8
              FINANCIAL
                    STATEMENTS AND SUPPLEMENTARY DATA
              8ITEM 9
              CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE
              9ITEM 9A
              CONTROLS
                  AND PROCEDURES
              9ITEM 9B
              OTHER INFORMATION
              9**PART
                  III**ITEM
                  10
              DIRECTORS
                  AND EXECUTIVE OFFICERS OF THE REGISTRANT
              10ITEM
                  11
              EXECUTIVE
                  COMPENSATION
              11ITEM
                  12
              SECURITY
                  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                  STOCKHOLDER MATTERS
              13ITEM
                  13
              CERTAIN
                  RELATIONSHIPS AND RELATED TRANSACTIONS
              14ITEM
                  14
              PRINCIPAL
                    ACCOUNTING FEES AND SERVICES
              14**PART
                    IV**
              15ITEM
                  15
              EXHIBITS,
                  FINANCIAL STATEMENTS SCHEDULES
              15


PART
      I


**Explanatory
            Note**
 
 M-GAB
            Development Corporation has restated its Annual Report on Form 10-K.
            This Annual
            Report is for the year ended December 31, 2003, and was originally filed
            with
            the Commission on Form 10-KSB on March 23, 2004 and as a First Amended
            Annual
            Report on Form 10-KSB/A on March 26, 2004. The purpose of this amendment
            is to
            correctly file this Annual Report on Form 10-K rather than on Form 10-KSB,
            since
            a business development company does not qualify as a small business issuer
            under
            Reg. § 228.10 of Regulation S-B, which excludes business development companies
            from the definition of “small business issuers.” References throughout this
            Annual Report are accurate as of the date originally filed. The Company
            has not
            undertaken to update all of the information in this Annual Report, but
            instead
            has updated only those areas related to the restatements. Please read
            all of the
            Company’s filings with the Commission in conjunction with this Annual
            Report.
 
 This
            Annual Report includes forward-looking
            statements within the meaning of the Securities Exchange Act of 1934
            (the
“Exchange Act”). These statements are based on management's beliefs and
            assumptions, and on information currently available to management.
            Forward-looking statements include the information concerning possible
            or
            assumed future results of operations of the Company set forth under the
            heading
“Management's Discussion and Analysis of Financial Condition or Plan of
            Operation.” Forward-looking statements also include statements in which words
            such as “expect,”  “anticipate,”  “intend,”  “plan,” 
“believe,”  “estimate,”  “consider” or similar expressions are
            used.
 
 Forward-looking
            statements are not guarantees of future performance. They involve risks,
            uncertainties and assumptions. The Company's future results and shareholder
            values may differ materially fromthose expressed in these forward-looking
            statements. Readers are cautioned not to put undue reliance on any
            forward-looking statements.
 
 **ITEM
        1 - BUSINESS**
 
 **General**
 
 M-GAB
        Development Corporation, a Florida corporation (the “Company”) was incorporated
        in March 2001. From inception through early 2003, our business was the
        development, marketing, and distribution of an interactive travel brochure.
        On
        May 16, 2003, we filed an election to be treated as a business development
        company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”), which
        became effective on the date of filing.
 
 Subsequent
        to the BDC election our principal business is to make venture capital
        investments in early-stage and/or developing enterprises that are principally
        engaged in the development or exploitation of inventions, technological
        improvements, and new or unique products and services. Our principal objective
        is long-term capital appreciation. We may invest in debt securities of these
        companies, or may acquire an equity interest in the form of common or preferred
        stock, warrants or options to acquire stock or the right to convert the debt
        securities into stock. We may invest alone, or as part of a larger investment
        group. Consistent with our status as a BDC and the purposes of the regulatory
        framework for BDC’s under the 1940 Act, we will provide managerial assistance,
        potentially in the form of a consulting agreement or in the form of a board
        of
        director’s seat, to the developing companies in which we invest.
 
 In
        addition, we may acquire either a minority or controlling interest in mature
        companies in a roll-up strategy. It is anticipated that any acquisitions
        will be
        primarily for our stock, or a combination of cash and stock. The principal
        objective of acquisitions pursuant to a roll-up strategy would be to consolidate
        an industry and either sell the acquired entities as a larger unit, or take
        the
        unit public through an initial public offering, spin-off to our shareholders,
        or
        reverse merger into a publicly traded shell corporation.
 
 1
 We
        operate as an internally managed investment company whereby our officers
        and
        employees conduct our operations under the general supervision of our Board
        of
        Directors. We have not elected to qualify to be taxed as a regulated investment
        company as defined under Subchapter M of the Internal Revenue Code, we do
        not
        have any intellectual property protections nor does our management feel that
        any
        is necessary, and we have not spent any funds on research and development
        or
        compliance with environmental laws during the last two fiscal
        years.
 
 **Regulation
        as a BDC**
 
 Although
        the 1940 Act exempts a BDC from registration under that Act, it contains
        significant limitations on the operations of BDC’s. Among other things, the 1940
        Act contains prohibitions and restrictions relating to transactions between
        a
        BDC and its affiliates, principal underwriters and affiliates of its affiliates
        or underwriters, and it requires that a majority of the BDC’s directors be
        persons other than “interested persons,” as defined under the 1940 Act. The 1940
        Act also prohibits a BDC from changing the nature of its business so as to
        cease
        to be, or to withdraw its election as, a BDC unless so authorized by the
        vote of
        the holders of a majority of its outstanding voting securities. BDC’s are not
        required to maintain fundamental investment policies relating to diversification
        and concentration of investments within a single industry.
  Generally,
        a
        BDC must be primarily engaged in the business of furnishing capital and
        providing managerial expertise to companies that do not have ready access
        to
        capital through conventional financial channels. Such portfolio companies
        are
        termed “eligible portfolio companies.” More specifically, in order to qualify as
        a BDC, a company must (1) be a domestic company; (2) have registered a class
        of
        its equity securities or have filed a registration statement with the Securities
        and Exchange Commission pursuant to Section 12 of the Securities Exchange
        Act of
        1934; (3) operate for the purpose of investing in the securities of certain
        types of portfolio companies, namely immature or emerging companies and
        businesses suffering or just recovering from financial distress; (4) extend
        significant managerial assistance to such portfolio companies; and (5) have
        a
        majority of “disinterested” directors (as defined in the 1940 Act).


An
        eligible portfolio company is, generally, a U.S. company that is not an
        investment company and that (1) does not have a class of securities registered
        on an exchange or included in the Federal Reserve Board’s over-the-counter
        margin list; or (2) is actively controlled by a BDC and has an affiliate
        of a
        BDC on its board of directors; or (3) meets such other criteria as may be
        established by the Securities and Exchange Commission. Control under the
        1940
        Act is generally presumed to exist where a BDC owns 25% of the outstanding
        voting securities of the company.
 
 The
        1940
        Act prohibits or restricts companies subject to the 1940 Act from investing
        in
        certain types of companies, such as brokerage firms, insurance companies,
        investment banking firms and investment companies. Moreover, the 1940 Act
        limits
        the type of assets that BDC’s may acquire to “qualifying assets” and certain
        assets necessary for its operations (such as office furniture, equipment
        and
        facilities) if, at the time of acquisition, less than 70% of the value of
        the
        BDC’s assets consist of qualifying assets. Qualifying assets include: (1)
        securities of companies that were eligible portfolio companies at the time
        the
        BDC acquired their securities; (2) securities of bankrupt or insolvent companies
        that were eligible at the time of the BDC’s initial acquisition of their
        securities but are no longer eligible, provided that the BDC has maintained
        a
        substantial portion of its initial investment in those companies; (3) securities
        received in exchange for or distributed in or with respect to any of the
        foregoing; and (4) cash items, government securities and high-quality short-term
        debt. The 1940 Act also places restrictions on the nature of the transactions
        in
        which, and the persons from whom, securities can be purchased in order for
        the
        securities to be considered qualifying assets. These restrictions include
        limiting purchases to transactions not involving a public offering and acquiring
        securities from either the portfolio company or its officers, directors,
        or
        affiliates.
  2
 A
        BDC is
        permitted to invest in the securities of public companies and other investments
        that are not qualifying assets, but those kinds of investments may not exceed
        30% of the BDC’s total asset value at the time of the investment.
 
 A
        BDC
        must make significant managerial assistance available to the issuers of eligible
        portfolio securities in which it invests. Making available significant
        managerial assistance means, among other things, any arrangement whereby
        the
        BDC, through its directors, officers or employees, offers to provide, and,
        if
        accepted does provide, significant guidance and counsel concerning the
        management, operations or business objectives and policies of a portfolio
        company. The portfolio company does not have to accept the BDC’s offer of
        managerial assistance, and if they do accept may be required to pay prevailing
        market rates for the services.
 
 We
        do not
        currently have any investments in eligible portfolio
        companies.




**Employees**
 
 Other
        than our current sole officer, we do not have any employees, and do not
        anticipate having a ny
        other
        employees other than administrative personnel in the future.
 
 **Statement
        of Risk Factors and Other Considerations**
 
 On
        at
        least an annual basis, we are required to provide our shareholders with a
        statement of risk factors and other considerations for their review. These
        risk
        factors and other considerations include:
 
 ***We
        have not made any investments into other companies.*** We have
        not yet made any investments into other companies, and thus we have virtually
        no
        assets. We need to raise capital before we can make investments into, and
        offer
        managerial assistance to, other companies. We may not be successful in raising
        capital. If we are successful in raising capital, we may make investments
        that
        turn out to be worthless.
 
 ***We
        have never generated any revenue, and we are not
        profitable*** *.* We
        were
        incorporated in March 2001 and have generated no revenue to date. Our primary
        activity to date has been development of our business plan, which has changed
        since our inception. Our success is dependent upon the successful development
        of
        our business model as a business development company, as to which there is
        no
        assurance. Unanticipated problems, expenses and delays are frequently
        encountered in establishing a new business. These include, but are not limited
        to, inadequate funding, competition, and investment development. Our failure
        to
        meet any of these conditions would have a materially adverse effect upon
        us and
        may force us to reduce or curtail operations. We may not ever be
        profitable.
 
 ***We
        need to raise capital in order to fulfill our business
        plan*** .
        To date
        we have relied on private funding from our founders and directors and short-term
        borrowing to fund operations. We have generated no revenues and have extremely
        limited cash liquidity and capital resources. Any equity financings could
        result
        in dilution to our stockholders. Debt financing may result in high interest
        expense. Any financing, if available, may be on unfavorable terms. If adequate
        funds are not obtained, we may be required to reduce or curtail operations.
 
 ***Investing
        in our stock is highly speculative and you could lose some or all of your
        investment*** **.** The
        value
        of our common stock may decline and may be affected by numerous market
        conditions, which could result in the loss of some or the entire amount invested
        in our stock. The securities markets frequently experience extreme price
        and
        volume fluctuations that affect market prices for securities of companies
        generally, and very small capitalization companies in particular.
 
 3
 ***Investing
        in our stock may be in appropriate for your risk
        tolerance*** **.** Our
        planned investments into other companies, in accordance with our investment
        objective and principal strategies, result in a far above average amount
        of risk
        and volatility and may well result in loss of principal.
 
 ***We
        will face a lot of competition, most of which is better capitalized and more
        experienced than us*** **.** We
        will
        face competition in our investing activities from private venture capital
        funds,
        investment affiliates of large industrial, technology, service and financial
        companies, small business investment companies, wealthy individuals and foreign
        investors. As a regulated business development company (“BDC”), we are required
        to disclose quarterly the name and business description of portfolio companies
        and value of any portfolio securities. Most of our competitors are not subject
        to this disclosure requirement. Our obligation to disclose this information
        could hinder our ability to invest in certain portfolio companies. Additionally,
        other regulations, current and future, may make us less attractive as a
        potential investor to a given portfolio company than a private venture capital
        fund.




***We
      are
      subject to regulatory risks as a business development
      company*** **.** We
      are
      subject to regulation as a BDC. The loans and other investments that we expect
      to make in small business concerns are extremely speculative. Many of these
      concerns will be privately held. Even if a public market for their securities
      later develops, the securities we purchase are likely to be restricted from
      sale
      or other transfer for significant periods of time. These securities will be
      very
      illiquid.


***The
        services of our directors and officer are key to our future
        success*** **.** We are
        dependent for the selection, structuring, closing and monitoring of its
        investments on the diligence and skill of our officer, Carl M. Berg, and
        each of
        our directors. Our future success depends to a significant extent on the
        continued service and coordination of its senior management team.
 
 ***We
        plan to invest primarily in small, private companies*** **.** There
        are significant risks inherent in our planned venture capital business. We
        intend to invest a substantial portion of our assets in early stage or start-up
        companies. These private businesses tend to be thinly capitalized, unproven
        small companies with risky technologies that lack management depth and have
        not
        attained profitability or have no history of operations. Because of the
        speculative nature and the lack of a public market for these investments,
        there
        is significantly greater risk of loss than is the case with traditional
        investment securities. We expect that some of our investments will be a complete
        loss or will be unprofitable and that some will appear to be likely to become
        successful but never realize their potential. We intend to be risk seeking
        rather than risk averse in our approach to venture capital and other
        investments. Neither our investments nor an investment in our stock is intended
        to constitute a balanced investment program. We intend to rely to a large
        extent
        upon proceeds from sales of investments rather than investment income to
        defray
        a significant portion of our operating expenses. Such sales are unpredictable
        and may not occur. The terrorist acts in the United States of September 11,
        2001
        are the type of events that could severely impact a small company that does
        not
        have as many resources to ride out market downturns and would need immediate
        investment capital that might be temporarily unavailable.
 
 ***There
        will be no liquid market for our portfolio investments*** **.** Most
        of
        our intended investments will be either equity securities acquired directly
        from
        small companies or below investment grade subordinated debt securities. Our
        portfolio of equity securities will usually be subject to restrictions on
        resale
        or otherwise have no established trading market. The illiquidity of most
        of our
        portfolio may adversely affect our ability to dispose of such securities
        at
        times when it may be advantageous for us.
 
 Even
        if
        our portfolio companies are able to develop commercially viable products,
        the
        market for new products and services is highly competitive and rapidly changing.
        Commercial success is difficult to predict and the marketing efforts of our
        expected portfolio companies may not be successful.
 
 4
 ***Our
        board of directors will value our portfolio
        investments*** **.** There
        is
        typically no public market of equity securities of the small privately held
        companies in which we intend to invest. As a result, the valuation of the
        equity
        securities in our portfolio are likely to be stated at fair value as determined
        by the good faith estimate of our Board of Directors. In the absence of a
        readily ascertainable market value, the estimated value of our portfolio
        of
        securities may differ significantly, favorably or unfavorably, from the values
        that would be placed on the portfolio if a ready market for the equity
        securities existed.
  ***Our
        quarterly results will fluctuate*** **.** Our
        quarterly operating results could fluctuate as a result of a number of factors.
        These factors include, among other things, variations in and the timing of
        the
        recognition of realized and unrealized gains or losses, the degree to which
        portfolio companies encounter competition in their markets and general economic
        conditions. As a result of these factors, results for any one quarter should
        not
        be relied upon as being indicative of performance in future
        quarters.
 
 **ITEM
        2 - PROPERTY**
 
 We
        utilize the office of our legal counsel, The Lebrecht Group, APLC, under
        a
        verbal agreement where we do not pay rent or reimburse him for the minimal
        expenses incurred.




**ITEM
      3 - LEGAL PROCEEDINGS**


We
        are
        not a party to or otherwise involved in any legal proceedings.
 
 **ITEM
        4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**
 
 No
        matters were submitted to a vote of the security holders during the fiscal
        year.
  5




**PART
        II**
 
 **ITEM
        5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
        AND
        ISSUER PURCHASES OF EQUITIES**
 
 Our
        securities are not listed for trading on any exchange or quotation service.
        We
        are not required to comply with the timely disclosure policies of any exchange
        or quotation service. The requirements to which we would be subject if our
        securities were so listed typically included the timely disclosure of a material
        change or fact with respect to our affairs and the making of required filings.
        Although we are not required to deliver an annual report to security holders,
        we
        intend to provide an annual report to our security holders, which will include
        audited financial statements.
 
 There
        are
        currently warrants outstanding to acquire 333,334 shares of our common stock
        at
        $0.15 per share. Other than these warrants, there are no outstanding options
        or
        warrants to purchase, or securities convertible into, shares of our common
        stock. If we are successful in getting our common stock traded, of the 6,383,845
        shares of common stock outstanding, (i) 10,000 shares held by 20 shareholders
        of
        record were sold pursuant to an effective registration statement and may
        be sold
        without restriction, (ii) 13,000 shares held by 12 shareholders of record
        were
        sold in a private placement over two years ago and the resale of those shares
        was subsequently registered, and thus the shares may be sold either pursuant
        to
        the effective registration statement or pursuant to Rule 144(k), (iii) 450,000
        shares are held by one shareholder who may sell all of them pursuant to Rule
        144(k), and (iv) 360,845 shares held by 42 shareholders were acquired pursuant
        to an exemption from registration under Regulation E, promulgated under the
        Securities Act, and may be sold without restriction. In addition to the above,
        Mr. Carl Berg, our sole officer and director, is the holder of 5,550,000
        shares
        and may sell up to 63,838 shares every 90 days pursuant to Rule
        144.
 
 The
        number of holders of record of shares of our common stock is seventy seven
        (77).
 
 There
        have been no cash dividends declared on our common stock. Dividends are declared
        at the sole discretion of our Board of Directors.
 
 The
        Securities Enforcement and Penny Stock Reform Act of 1990 requires additional
        disclosure relating to the market for penny stocks in connection with trades
        in
        any stock defined as a penny stock. The Commission has adopted regulations
        that
        generally define a penny stock to be any equity security that has a market
        price
        of less than $5.00 per share, subject to a few exceptions which we do not
        meet.
        Unless an exception is available, the regulations require the delivery, prior
        to
        any transaction involving a penny stock, of a disclosure schedule explaining
        the
        penny stock market and the risks associated therewith.




6




**ITEM
        6 - SELECTED FINANCIAL DATA**
 **M-GAB
                  Development Corporation**
                
                For
                    the year ended December 31st2003
                
                
                2002
                
                
                2001(1)Statement
                    of Operations Data:Total
                    revenues
                
                $
                -
                
                
                -
                
                
                -Income
                    (loss) from continuing operations
                
                
                (63,253
                )
                
                (37,376
                )
                
                (19,575
                )Net
                    income (loss)
                
                
                (63,253
                )
                
                (37,376
                )
                
                (19,575
                )Net
                    income (loss) per common share from continuing operations
                
                
                (0.01
                )
                
                (0.01
                )
                
                (0.00
                )Balance
                    Sheet Data:Current
                    assets
                
                $
                -
                
                
                6,437
                
                
                -Total
                    assets
                
                
                -
                
                
                6,437
                
                
                -Current
                    liabilities
                
                
                93,105
                
                
                46,289
                
                
                3,476Total
                    liabilities
                
                
                103,105
                
                
                46,289
                
                
                3,476Total
                    stockholders’ equity (deficit)
                
                
                (103,105
                )
                
                (39,852
                )
                
                (3,476
                )Total
                    dividends per common share
                
                
                -
                
                
                -
                
                
                -
  (1)  Statement
          of Operations Data is from inception (March 2001) through December 31,
          2001.
  **ITEM
          7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
          OPERATION**
  **Plan
        of Operation**
 
 We
        were
        incorporated in March 2001. On May 16, 2003, we filed an election to be treated
        as a BDC under the 1940 Act, which became effective on the date of
        filing.
 
 Subsequent
        to the BDC election our principal business is to make venture capital
        investments in early-stage and/or developing enterprises that are principally
        engaged in the development or exploitation of inventions, technological
        improvements, and new or unique products and services. Our principal objective
        is long-term capital appreciation. We may invest in debt securities of these
        companies, or may acquire an equity interest in the form of common or preferred
        stock, warrants or options to acquire stock or the right to convert the debt
        securities into stock. We may invest alone, or as part of a larger investment
        group. Consistent with our status as a BDC and the purposes of the regulatory
        framework for BDC’s under the 1940 Act, we will provide managerial assistance,
        potentially in the form of a consulting agreement or in the form of a board
        of
        director’s seat, to the developing companies in which we invest.
 
 In
        addition, we may acquire either a minority or controlling interest in mature
        companies in a roll-up strategy. It is anticipated that any acquisitions
        will be
        primarily in exchange for our common stock, or a combination of cash and
        stock.
        The principal objective of acquisitions pursuant to a roll-up strategy would
        be
        to consolidate an industry and either sell the acquired entities as a larger
        unit, or take the unit public through an initial public offering, spin-off
        to
        our shareholders, or reverse merger into a publicly traded shell
        corporation.
 
 7
   We
        do not
        currently have any eligible portfolio companies.
 
 Currently,
        our cash requirements are minimal, related only to the cost of maintaining
        the
        Company in good standing. We recently raised a small amount of capital through
        an offering under Regulation E, which we anticipate will cover our expenses
        for
        at least the next twelve (12) months. Our two primary shareholders, Mr. Berg
        and
        Mr. Lebrecht, have verbally agreed to advance funds to us to fund our minimal
        cash requirements that cannot otherwise be covered by the proceeds from the
        offering.
 
 During
        the next quarter, our management intends to seek to have a market maker file
        an
        application to list our securities on the OTC Bulletin Board.
 
 Management
        does not anticipate that we will engage in any material product research
        and
        development, nor do we anticipate that we will purchase a plant or significant
        equipment.
  Our
        financial statements have been prepared assuming we will continue as a going
        concern. Because we have not generated any revenues to date and have minimal
        capital resources, our Certified Public Accountants included an explanatory
        paragraph in their report raising substantial doubt about our ability to
        continue as a going concern. We have not identified any critical accounting
        issues.
 
 **Off-balance
        Sheet Arrangements**
 
 We
        have
        no off-balance sheet arrangements that are reasonably likely to have a current
        or future effect on our financial condition, changes in financial condition,
        revenues or expenses, results of operations, liquidity, capital expenditures
        or
        capital resources that is deemed by our management to be material to
        investors.






**ITEM
          7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
          RISK**
 
 Since
          we have
          very few assets and do not have any investments in eligible portfolio companies
          there is no quantitative information, as of the end of December 31, 2003,
          about
          market risk that has any impact on our present business. Once we begin
          making
          investments in eligible portfolio companies we there will be market risk
          sensitive instruments and we will disclose the applicable market risk
          information at that time.
  Our
          primary financial instruments are cash in banks and money market instruments.
          We
          do not believe that these instruments are subject to material potential
          near-term losses in future earnings from reasonably possible near-term
          changes
          in market rates or prices. We do not have derivative financial instruments
          for
          speculative or trading purposes. We are not currently exposed to any material
          currency exchange risk.
  8
 ITEM 8
        -  FINANCIAL STATEMENTSAND
        SUPPLEMENTARY DATA




Index
                  to Financial StatementsReport
                  of Independent Certified Public Accountants
              F-1Balance
                  Sheet
              F-2Statement
                  of Operations
              F-3Statement
                  of Stockholders Equity
              F-4Statement
                  of Cash Flows
              F-5Notes
                  to Financial Statements
              F-6







**ITEM 9
      - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE**





There
      have been no events required to be reported by this Item 9.





**ITEM
      9A - CONTROLS AND PROCEDURES**


The
        Company's Chief
        Executive Officer and Chief Financial Officer (or those persons performing
        similar functions), after evaluating the effectiveness of the Company's
        disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
        under the Securities Exchange Act of 1934, as amended) as of a date within
        90
        days of the filing of this annual report (the “Evaluation Date”), have concluded
        that, as of the Evaluation Date, the Company's disclosure controls and
        procedures were effective to ensure the timely collection, evaluation and
        disclosure of information relating to the Company that would potentially
        be
        subject to disclosure under the Securities Exchange Act of 1934, as amended,
        and
        the rules and regulations promulgated thereunder. There were no significant
        changes in the Company's internal controls or in other factors that could
        significantly affect the internal controls subsequent to the Evaluation
        Date.
  **ITEM
          9B - OTHER INFORMATION**
 
 All
          information required to be filed on a Form 8-K during the three months
          ended
          December 31, 2003 was filed with the Commission on a Form 8-K. For a description
          of our Form 8-Ks filed during this three month period see Item 15(b),
          below.




9




**PART
        III**
 
 **ITEM 10
        - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT**
  The
        following table sets forth the names and ages of the current directors and
        executive officers of the Company, the principal offices and positions with
        the
        Company held by each person and the date such person became a director or
        executive officer of the Company. The executive officers of the Company are
        elected annually by the Board of Directors. The directors serve one-year
        terms
        until their successors are elected. The executive officers serve terms of
        one
        year or until their death, resignation or removal by the Board of Directors.
        Unless described below, there are no family relationships among any of the
        directors and officers.




**Name**
              
              Age
              
              Position(s)Carl
                  M. Berg
              
              35
              
              Chairman
                  of the Board, President, Secretary, and Treasurer
                  (2001)Kevin
                  J. Gadawski
              
              36
              
              Director
                  (2003)Mark
                  Stewart
              
              37
              
              Director
                  (2003)
  **Carl
          M.
          Berg** has
          served as our director and officer since our inception. He also currently
          serves
          as a company executive with STSN, Inc., a provider of wired and wireless
          broadband communications for business travelers, where he has served since
          2003.
          Prior to STSN, from 1999 to 2003, he was a company executive with Sandlot
          Corporation, a startup subscription management software company. Sandlot
          is
          involved in managing subscription-based e-commerce. Mr. Berg directed business
          initiatives as the Business Development Manager, which resulted in growth
          of the
          company from 10 to 75 employees worldwide with offices in the U.S. and
          Windsor,
          United Kingdom. Prior to Sandlot Corporation, from 1992 to 1999, Mr. Berg
          served
          in various management positions in the technology division of Ameritech
          Corporation. His roles varied from the overall management of library automation
          implementation projects to directing the implementation division of roughly
          75
          technical staff. Job titles included Project Coordinator, Project Manager
          and
          Director of Implementation.
 
 **Kevin
          J. Gadawski** joined
          our Board of Directors in May 2003. He also serves as the President of
          Worldwide
          Medical in Lake Forest, California, where he previously served as the Chief
          Operating Officer and Chief Financial Officer for Worldwide Medical Corporation
          from May of 2002. From May of 2001 to May of 2002, Mr. Gadawski served
          as the
          Chief Financial Officer of California Software Corporation in Irvine,
          California. From June of 2000 through May of 2001, Mr. Gadawski was the
          Chief
          Financial Officer for e-net Financial.com in Costa Mesa, California. His
          primary
          duties included financial reporting and financial management. For the five
          years
          prior to that, Mr. Gadawski served in various capacities including Director
          of
          Internal Audit and Divisional Controller with Huffy Corporation in Miamisburg,
          Ohio. Mr. Gadawski began his career in the audit department of KMPG Peat
          Marwick, LLP.
 
 **Mark
          Stewart** joined
          our Board of Directors in November 2003. Mr. Stewart has been a principal
          with
          Mark Stewart Securities, Inc., a NASD broker-dealer, since 1996. Mr. Stewart
          started his career with American Express Financial Advisors (IDS) in 1991,
          and
          served as head trader at numerous firms from 1991 to 1996.
  10




Audit
        Committee
 
 On
        May
        16, 2003, an Audit Committee of the Board of Directors, established in
        accordance with section 3(a)(58)(A) of the Exchange Act, was formed. The
        directors who are members of the Audit Committee are Kevin J. Gadawski and
        Mark
        Stewart, with Mr. Gadawski considered an audit committee financial expert
        and an
        independent director.
 
 Compliance
        with Section 16(a) of the Securities Exchange Act of 1934
 
 Section
        16(a) of the Securities Exchange Act of 1934 requires the Company's directors
        and executive officers and persons who own more than ten percent of a registered
        class of the Company's equity securities to file with the SEC initial reports
        of
        ownership and reports of changes in ownership of Common Stock and other equity
        securities of the Company. Officers, directors and greater than ten percent
        shareholders are required by SEC regulations to furnish the Company with
        copies
        of all Section 16(a) forms they file.
 
 To
        the
        Company’s knowledge, none of the required parties are delinquent in their 16(a)
        filings.
 
 Code
        of Ethics
 
 We
        have
        not adopted a written code of ethics, primarily because we believe and
        understand that our officers and directors adhere to and follow ethical
        standards without the necessity of a written policy.
 
 **ITEM
        11 - EXECUTIVE COMPENSATION**
 
 None
        of
        our employees are subject to a written employment agreement. Our president
        elected to forego a salary during the early developmental stages, and also
        provided office space. We estimate the value of these services to be $6,000
        and
        $5,125 for the years ended December 31, 2003 and 2002, respectively. As of
        December 31, 2003 and 2002, we had amounts due to our president of $9,400
        and
        $3,400, respectively, which are recorded in accounts payable and accrued
        liabilities in the our financial statements.
 
 On
        May
        15, 2001, our directors and shareholders approved the M-GAB, Inc. 2001 Stock
        Option Plan, effective June 1, 2001. The plan offers selected employees,
        directors, and consultants an opportunity to acquire our common stock, and
        serves to encourage such persons to remain employed by us and to attract
        new
        employees. The plan allows for the award of stock and options, up to 600,000
        shares of our common stock. In November 2003, we agreed to issue options
        to
        acquire 600,000 shares under the Plan to our two independent directors; however,
        these options will not be issued until such time as approved by the Commission
        in accordance with rules and regulations applicable to BDC’s.
 
 The
        Summary Compensation Table shows certain compensation information for services
        rendered in all capacities for the fiscal years ended December 31, 2003 and
        2002. Other than as set forth herein, no executive officer's salary and bonus
        exceeded $100,000 in any of the applicable years. The following information
        includes the dollar value of base salaries, bonus awards, the number of stock
        options granted and certain other compensation, if any, whether paid or
        deferred.
  11




**Annual
                  Compensation**
              
              **Long
                  Term Compensation****Awards**
              
              **Payouts****Name
                  and**
                **Principal
                  Position**
              **Year**
              **Salary**
                **($)**
              **Bonus**
                **($)**
              **Other
                  Annual**
                **Compensation**
                **($)***
              
              **Restricted
                  Stock**
                **Awards**
                **($)**
              **Securities
                  Underlying Options SARs**
                **(#)**
              
              **LTIP
                  Payouts**
                **($)**
              **All
                  Other**
                **Compensation**
                **($)**Carl
                  M. Berg
              2003
              -0-
              -0-
              $6,000
              
              -0-
              -0-
              
              -0-
              -0-Chairman,
                  President, Secretary, Treasurer
              2002
              -0-
              -0-
              $3,400
              
              -0-
              -0-
              
              -0-
              -0-Kevin
                  J. Gadawski
              2003
              -0-
              -0-
              $5,000
              
              -0-
              -0-
              
              -0-
              -0-DirectorMark
                  Stewart
              2003
              -0-
              -0-
              $-0-
              
              -0-
              -0-
              
              -0-
              -0-Director




*
        For all
        years presented, compensation amounts have been accrued. No compensation
        payments have been made.
  **OPTION/SAR
                    GRANTS IN LAST FISCAL YEAR**
                  **(Individual
                    Grants)****Name**
                **Number
                    of Securities**
                  **Underlying**
                  **Options/SARs
                    Granted**
                  **(#)**
                **Percent
                    of Total**
                  **Options/SARs
                    Granted**
                  **to
                    Employees In Fiscal**
                  **Year**
                **Exercise
                    or Base Price**
                  **($/Sh)**
                **Expiration
                    Date**Carl
                    M. Berg
                -0-
                N/A
                N/A
                N/AKevin
                    J. Gadawski
                -0-
                N/A
                N/A
                N/AMark
                    Stewart
                -0-
                N/A
                N/A
                N/A






**AGGREGATED
                  OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR**
                **AND
                  FY-END OPTION/SAR VALUES****Name**
              **Shares
                  Acquired On**
                **Exercise**
                **(#)**
              **Value
                  Realized**
                **($)**
              **Number
                  of Unexercised**
                **Securities
                  Underlying**
                **Options/SARs
                  at FY-End**
                **(#)**
                **Exercisable/Unexercisable**
              **Value
                  of Unexercised**
                **In-The-Money**
                **Option/SARs**
                **at
                  FY-End**
                **($)**
                **Exercisable/Unexercisable**Carl
                  M. Berg
              N/A
              N/A
              N/A
              N/AKevin
                  J. Gadawski
              N/A
              N/A
              N/A
              N/AMark
                  Stewart
              N/A
              N/A
              N/A
              N/A




**Compensation
        of Directors**
 
 In
        November 2003, we agreed to issue to each of Mr. Gadawski and Mr. Stewart
        options to acquire 300,000 shares of our common stock for serving as directors
        of the Corporation. The issuance of the options is subject to approval of
        the
        SEC pursuant to provisions of the Investment Company Act of 1940. The options
        are to be exercisable for a period of ten years from their grant date, at
        an
        exercise price equal to the fair market value on the grant date, and will
        expire
        upon their resignation from the Board. In addition, we have agreed to pay
        Mr.
        Gadawski $1,250 per quarter for additional consulting services.
 
 Mr.
        Berg
        has not received any compensation for serving as a director. Other than as
        set
        forth herein, no compensation has been given to any of the directors, although
        they may be reimbursed for any pre-approved out-of-pocket
        expenses.




12




**ITEM
        12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
        STOCKHOLDER MATTERS**
 
 The
        following table sets forth, as of March 10, 2004, certain information with
        respect to the Company’s equity securities owned of record or beneficially by
        (i) each Officer and Director of the Company; (ii) each person who owns
        beneficially more than 5% of each class of the Company’s outstanding equity
        securities; and (iii) all Directors and Executive Officers as a
        group.




Name
                  and Address (1)
              
              Nature
                  of Affiliation
              
              Common
                  Stock Ownership
              
              Percentage
                  of Common Stock Ownership (2)Carl
                  M. Berg
              
              Chairman
                  of the Board, President, Secretary and Treasurer
              
              5,550,000
                  (3)
              
              86.9%Brian
                  A. Lebrecht (4)
              
              5%
                  Shareholder
              
              450,000
              
              7.0%Kevin
                  J. Gadawski
              
              Independent
                Director
              
              300,500
                  (5)(6)
              
              4.4%
                  (5)Mark
                  Stewart
              
              Independent
                Director
              
              300,000
                  (5)
              
              4.4%
                  (5)All
                  Officers and Directors
                as
                  a Group(3
                  Persons)
              
              
              
              6,150,500
                  (3)(5)(6)
              
              88%
                  (5)




(1)
              Unless
                  stated otherwise, the address of each affiliate is c/o M-GAB Development
                  Corporation, 22342 Avenida Empresa, Suite 220, Rancho Santa Margarita,
                  CA
                  92688.
 
 (2)
              Unless
                  otherwise indicated, based on 6,383,845 shares of common stock
                  issued and
                  outstanding. Shares of common stock subject to options or warrants
                  currently exercisable, or exercisable within 60 days, are deemed
                  outstanding for purposes of computing the percentage of the person
                  holding
                  such options or warrants, but are not deemed outstanding for purposes
                  of
                  computing the percentage of any other person.
 
 (3)
              Includes
                  3,000,000 shares held of record by Sadie, LLC, an entity wholly-owned
                  and
                  controlled by Mr. Berg. Mr. Berg is our sole
                  officer.
 
 (4)
              Mr.
                  Lebrecht is President of The Lebrecht Group, APLC, which serves
                  as our
                  securities counsel.
 
 (5)
              Includes
                  options to acquire 300,000 shares of common stock which will be
                  granted to
                  each of Mr. Gadawski and Mr. Stewart upon approval by the Commission
                  in
                  compliance with the Investment Company Act of
                  1940.
 
 (6)
              Includes
                  500 shares held by Mr. Gadawski’s
                  spouse.


The
        issuer is
        not aware of any person who owns of record, or is known to own beneficially,
        five percent or more of the outstanding securities of any class of the issuer,
        other than as set forth above. The issuer is not aware of any person who
        controls the issuer as specified in section 2(a)(1) of the Investment Company
        Act of 1940. There are no classes of stock other than common stock issued
        or
        outstanding.




13




There
        are
        currently warrants outstanding to acquire 333,334 shares of our common stock
        at
        $0.15 per share, and other than as set forth herein, there are no options,
        warrants, or other rights to acquire common stock outstanding. The Company
        does
        not have an investment advisor.
 
 There
        are
        no current arrangements which will result in a change in
        control.




**ITEM
        13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**
 
 On
        April
        20, 2001, our founder, Carl M. Berg, purchased 2,550,000 shares of common
        stock
        for $255.00. On April 20, 2001, Sadie, LLC, an entity wholly-owned and
        controlled by Mr. Berg, purchased 3,000,000 shares of common stock for $300.00.
        Also on April 20, 2001, Brian A. Lebrecht, our legal counsel, purchased 450,000
        shares of common stock for $45.00. The total purchase price from these
        transactions was $600.00.
  We
        have
        engaged one of our shareholders, Mr. Lebrecht, as our corporate counsel.
        For the
        twelve months ended December 31, 2003, we incurred total legal services and
        out
        of pocket costs to Mr. Lebrecht’s firm of $37,730, compared to $18,161 for the
        twelve months ended December 31, 2002. As of December 31, 2003 and 2002,
        we had
        amounts due to Mr. Lebrecht of $78,705 and $32,889, respectively, which are
        recorded in accounts payable and accrued liabilities in the accompanying
        financial statements.
 
 Our
        President, Mr. Berg, has elected to forego a salary during our early development
        stages. He also provided office space for us. We estimate the value of these
        services to be $6,000 and $5,125 for the twelve months ended December 31,
        2003
        and 2002, respectively. As of December 31, 2003 and 2002, we had amounts
        due to
        Mr. Berg of $9,400 and $3,400 respectively, which are recorded in accounts
        payable and accrued liabilities in the accompanying financial statements.
        In
        addition, one of our directors, Mr. Gadawski, provides consulting services
        to
        us. As of December 31, 2003, we had $5,000 due to Mr. Gadawski for services
        rendered during the twelve months the ended. There were no amounts due to
        Mr.
        Gadawski for services in 2002.
 
 From
        time
        to time, Mr. Berg and Mr. Lebrecht have loaned or advanced money to us to
        pay
        for administrative expenses. These advances do not pay interest, have no
        maturity date, and are expected to be repaid as soon as reasonably practicable.
        As of December 31, 2003 and 2002, we had $10,000 due to Mr. Lebrecht related
        to
        an advance for our organizational costs.
 
 In
        November 2003, we agreed to issue to each of Mr. Gadawski and Mr. Stewart
        options to acquire 300,000 shares of our common stock for serving as directors
        of the Corporation. The issuance of the options is subject to approval of
        the
        SEC pursuant to provisions of the Investment Company Act of 1940. The options
        are to be exercisable for a period of ten years from their grant date, at
        an
        exercise price of $0.15 per share, and will expire upon their resignation
        from
        the Board. In addition, we have agreed to pay Mr. Gadawski $1,250 per quarter
        for consulting services.
  ITEM 14 - PRINCIPAL ACCOUNTING FEES AND SERVICES
 **Audit
            Fees**
 
 During
            the fiscal years ended December 31, 2003 and 2002, Ramirez International
            billed
            us $13,420 and $10,719, respectively, in fees for professional services
            for the
            audit of our annual financial statements and review of financial statements
            included in our Form 10-QSB.
 
 **Audit
            - Related Fees**
 
 During
            the fiscal years ended December 31, 2003 and 2002, Ramirez International
            billed
            us $13,420 and $10,719, respectively, in fees for assurance and related services related to the performance of the audit
            or review
            of the Company’s financial statements.
  14
 **Tax
            Fees**
 
 During
            the fiscal years ended December 31, 2003 and 2002, Ramirez International
            billed
            us $200 and $200, respectively, in fees for professional services for tax planning and preparation.
  **All
            Other Fees**
 
 During
            the fiscal years ended December 31, 2003 and 2002, Ramirez International
            did not
            bill the Company for any other fees.
 
 Of
            the
            fees described above for the fiscal year ended December 31, 2002, 100%
            were
            approved by the Board of Directors of the Company as there was not an
            Audit
            Committee in place at the time of the approvals. Of the fees described
            above for
            the fiscal year ended December 31, 2003, 100% were either approved in
            advance by
            the Audit Committee if it was in existence at the time of approval, or
            subsequently ratified by the Audit Committee.
 PART IV
 **ITEM
        15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES**
  **(a)**  **Exhibits**
 3.1
                    (1)
                
                Articles
                    of Incorporation of M-GAB Development Corporation3.2
                    (1)
                
                Bylaws
                    of M-GAB Development Corporation10.1
                    (1)
                
                M-GAB,
                    Inc. 2001 Stock Option Plan31.1
                
                Rule
                    13a-14(a)/15d-14(a) Certification of Chief Executive
                    Officer31.2
                
                Rule
                    13a-14(a)/15d-14(a) Certification of Chief Financial
                    Officer32.1
                
                Chief
                    Executive Officer Certification Pursuant to 18 USC, Section 1350,
                    as
                    Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
                    2002.32.2
                
                Chief
                    Financial Officer Certification Pursuant to 18 USC, Section 1350,
                    as
                    Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
                    2002.


(1)
              Incorporated
                  by reference from our Registration Statement on Form SB-2 filed
                  with the
                  Commission on August 31, 2001.
  **(b)**  **Reports
        on Form 8-K**
 
 On
        November 18, 2003, we filed a Current Report on Form 8-K dated November 13,
        2003
        disclosing the resignation of one of our directors, and the appointment of
        a
        replacement director, as well as the rescission of previous stock issuances
        to
        our independent directors.
  15
 **SIGNATURES**


In
        accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
        this report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
    Dated: July
                  22,
                  2005
              
              /s/
                  Carl M. BergBy:
              Carl
                  M. BergIts:
              President,
                  Chief Executive Officer,Chief
                  Financial Officer






In
        accordance with the Exchange Act, this report has been signed below by the
        following persons on behalf of the registrant and in the capacities and on
        the
        dates indicated.
 
  Dated: July
                  22,
                  2005
              
              /s/
                  Carl M. BergBy:
              Carl
                  M. Berg, DirectorDated:  July
                  22,
                  2005
              By:
              /s/
                  Kevin J. GadawskiKevin
                  J. Gadawski, DirectorDated:  July
                  22,
                  2005
              
              /s/
                  Mark StewartBy:
              Mark
                  Stewart, Director






16




Financial
        Statements and Report of
 
 Independent
        Certified Public Accountants
 
 M-GAB
        DEVELOPMENT CORPORATION
 (A
        Development Stage Enterprise)
 
 December
        31, 2003 and 2002
  
    **Report
        of Independent Certified Public Accountants**
 
 
 
 
 To:  The
        Board
        of Directors  of
 M-GAB
        DEVELOPMENT CORPORATION
 
 We
        have
        audited the accompanying balance sheets of M-GAB DEVELOPMENT CORPORATION
        (the
“Company”) (a Development Stage Corporation) as of December 31, 2003 and 2002
        and the related statements of operations, stockholders’ equity and cash flows
        for each of the years then ended and the period from inception (March 27,
        2001)
        through December 31, 2003. These financial statements are the responsibility
        of
        the Company’s management. Our responsibility is to express an opinion on these
        statements based on our audits.
 
 We
        conducted our audits in accordance with generally accepted auditing standards.
        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 M-GAB DEVELOPMENT CORPORATION
        as of
        December 31, 2003 and 2002 and the results of its operations and cash flows
        for
        the years then ended and the period from inception (March 27, 2001) through
        December 31, 2003, in conformity with generally accepted accounting
        principles.
 
 The
        accompanying financial statements have been prepared assuming the Company
        will
        continue as a going concern. As discussed in Note 2 to the financial statements,
        the Company has no established source of revenue and is dependent on its
        ability
        to raise substantial amounts of capital. Management’s plans in regard to these
        matters are also described in Note 2. These matters raise substantial doubt
        about the Company’s ability to continue as a going concern. The financial
        statements do not include any adjustments that might result from the outcome
        of
        this uncertainty.
 
 
 **RAMIREZ
        INTERNATIONAL**
 **Financial
        & Accounting Services, Inc.**
 
 
 
 
 March
        15,
        2004
 Irvine,
        CA




F
          -
          1




**M-GAB
        Development Corporation**
 **(A
        Development Stage Company)**
 
 **Balance
        Sheet**
 
 **December
        31,**


2003
              
              
              2002ASSETSCurrent
                  assetsCash
              
              $
              -
              
              $
              6,437Total
                  assets
              
              $
              -
              
              $
              6,437LIABILITIES
                  AND STOCKHOLDERS' EQUITYCurrent
                  liabilitiesAccounts
                  payable and accrued liabilities
              
              $
              93,105
              
              $
              36,289Payable
                  to stockholder
              
              
              10,000
              
              
              10,000Total
                  current liabilities
              
              
              103,105
              
              
              46,289Commitments
                  and contingencies
              
              
              -
              
              
              -Stockholders'
                  equity:Preferred
                  stock, $0.001 par value;5,000,000
                  shares authorized; No sharesissued
                  or outstanding
              
              
              -
              
              
              -Common
                  stock, $0.001 par value; 100,000,000shares
                  authorized; 6,023,000 shares issuedand
                  outstanding in 2003 and 2002
              
              
              6,023
              
              
              6,023Additional
                  paid in capital
              
              
              11,076
              
              
              11,076Deficit
                  accumulated during the development stage
              
              
              (120,204
              )
              
              (56,951
              )Total
                  stockholders' equity
              
              
              (103,105
              )
              
              (39,852
              )Total
                  liabilities and stockholders' equity
              
              $
              -
              
              $
              6,437




The
        accompanying notes are an integral part of these financial
        statements.




F
          -
          2




**M-GAB
        DEVELOPMENT CORPORATION**
 **(A
        Development Stage Company)**
 
 **Statement
        of Operations**


Cumulative
                  frominception (March27,
                  2001) through
              
              
              Year
                  ended
              
              
              Year
                  endedDecember
                  31,
              
              
              December
                  31,
              
              
              December
                  31,2003
              
              
              2003
              
              
              2002Revenue
              
              $
              -
              
              $
              -
              
              $
              -General
                  and administrative expenses
              
              
              120,204
              
              
              63,253
              
              
              37,376Net
                  loss
              
              $
              (120,204
              )
              $
              (63,253
              )
              $
              (37,376
              )Basic
                  and diluted net loss per share
              
              
              
              
              $
              (0.01
              )
              $
              (0.01
              )Weighted
                  average shares outstanding
              
              
              
              
              
              6,023,000
              
              
              6,014,726
  The
          accompanying notes are an integral part of these financial
          statements.
  F
            -
            3




**M-GAB
        DEVELOPMENT CORPORATION**
 **(A
        Development Stage Company)**
 
 **Statement
        of Stockholders’ Equity**


DeficitCommon
                  Stock
              
              Additional
                Paid-in
              
              
              Accumulated
                  During
                the
                  DevelopmentShares
              
              
              Amount
              
              
              Capital
              
              
              Stage
              
              
              TotalIssuance
                  of common stock tofounders
                  on April 20, 2001
              
              
              6,000,000
              
              $
              6,000
              
              $
              (5,400
              )
              $
              -
              
              $
              600Issuance
                  of common stock forcash
                  in August 2001
              
              
              13,000
              
              
              13
              
              
              1,287
              
              
              -
              
              
              1,300Contributed
                  capital-services
              
              
              -
              
              
              -
              
              
              14,199
              
              
              -
              
              
              14,199Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (19,575
              )
              
              (19,575
              )Balance,
                  December 31, 2001
              
              
              6,013,000
              
              
              6,013
              
              
              10,086
              
              
              (19,575
              )
              
              (3,476
              )Issuance
                  of common stock forcash
                  in September 2002
              
              
              10,000
              
              
              10
              
              
              990
              
              
              -
              
              
              1,000Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (37,376
              )
              
              (37,376
              )Balance,
                  December 31, 2002
              
              
              6,023,000
              
              
              6,023
              
              
              11,076
              
              
              (56,951
              )
              
              (39,852
              )Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (63,253
              )
              
              (63,253
              )Balance,
                  December 31, 2003
              
              
              6,023,000
              
              $
              6,023
              
              $
              11,076
              
              $
              (120,204
              )
              $
              (103,105
              )




The
        accompanying notes are an integral part of these financial
        statements.




F
          -
          4




**M-GAB
        DEVELOPMENT CORPORATION**
 **(A
        Development Stage Company)**
 
 **Statement
        of Cash Flows**


Cumulative
                    from inception (March 27, 2001) to December 31,
                    2003
              
              
              Year
                  ended December 31, 2003
              
              
              Year
                  ended December 31, 2002Cash
                  flows from operating activities:Net
                  loss
              
              $
              (120,204
              )
              $
              (63,253
              )
              $
              (37,376
              )Adjustments
                  to reconcile net loss to cash used inoperating
                  activities:Contributed
                  capital for services rendered
              
              
              14,199
              
              
              -
              
              
              -Increase
                  in accounts payable andaccrued
                  liabilities
              
              
              93,105
              
              
              56,816
              
              
              32,813Net
                  cash used by operating activities
              
              
              (12,900
              )
              
              (6,437
              )
              
              (4,563
              )Cash
                  flows from financing activities:Proceeds
                  from issuance of stock
              
              
              2,900
              
              
              -
              
              
              1,000Advance
                  from shareholder
              
              
              10,000
              
              
              -
              
              
              10,000Net
                  cash provided by financing activities
              
              
              12,900
              
              
              -
              
              
              11,000Net
                  increase (decrease) in cash
              
              
              -
              
              
              (6,437
              )
              
              6,437Cash
                  and cash equivalents, beginning of period
              
              
              -
              
              
              6,437
              
              
              -Cash
                  and cash equivalents, end of period
              
              $
              -
              
              $
              -
              
              $
              6,437
  The
          accompanying notes are an integral part of these financial
          statements.
  F
            -
            5




**M-GAB
        DEVELOPMENT CORPORATION**
 **(A
        Development Stage Company)**
 **Notes
        to Financial Statements**
 **December
        31, 2003 and 2002**
 1.
                NATURE
                    OF OPERATIONS AND ACCOUNTING
                    POLICIES
 
 *Nature
          of Operations* .
          The
          Company incorporated in Florida on March 27, 2001. The fiscal year end
          of the
          Company is December 31. Planned principal operations of the Company have
          not yet
          commenced; activities to date have been limited to forming the Company,
          developing its business plan, and obtaining initial capitalization. On
          May 16,
          2003, the Company filed an election to be treated as a business development
          company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”), which
          became effective on the date of filing. Subsequent to the BDC election
          the
          Company’s principal business is to make venture capital investments in
          early-stage and/or developing enterprises that are principally engaged
          in the
          development or exploitation of inventions, technological improvements,
          and new
          or unique products and services.
 
 *Principles
          of Accounting* .
          The
          accompanying financial statements have been prepared in conformity with
          generally accepted accounting principles.
 
 *Accounting
          Estimates* .
          The
          preparation of financial statements in conformity with generally accepted
          accounting principles requires management to make estimates that affect
          the
          reported amounts of assets and liabilities and disclosures 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 may
          differ
          from those estimates.
 *Shares
          Issued in Exchange for Services.* ****** The
          fair
          value of shares issued in exchange for services rendered to the Company
          is
          determined by the Company's officers and directors, as there is currently
          no
          market for the Company's stock.
 
 *Cash
          and Cash Equivalents.* The
          Company includes cash on deposit and short-term investments with original
          maturities less than ninety days as cash and cash equivalents in the
          accompanying financial statements.
 
 *General
          and Administrative Expenses.* The
          Company's general and administrative expenses consisted primarily of legal
          and
          accounting fees for the years ended December 31, 2003 and 2002.
 
 *Research
          and Development.* Research
          and development costs are expensed as incurred as required by Statement
          of
          Financial Accounting Standards No. 2, “Accounting for Research and Development
          Costs.” As of December 31, 2003, no costs had been incurred.
 
 *Advertising.* Advertising
          costs are charged to operations when incurred. The Company has not incurred
          any
          advertising costs.
 
 *Stock-Based
          Compensation* .
          Statement of Financial Accounting Standards No. 123, Accounting for Stock
          Based
          Compensation, encourages, but does not require, companies to record compensation
          cost for stock-based employee compensation plans at fair value. The Company
          has
          chosen to account for stock-based compensation using the intrinsic value
          method
          prescribed in previously issued standards. Accordingly, compensation cost
          for
          stock options issued to employees is measured as the excess, if any, of
          the fair
          market value of the Company's stock at the date of grant over the amount
          an
          employee must pay to acquire the stock. Compensation is charged to expense
          over
          the shorter of the service or vesting period. Stock options issued to
          non-employees are recorded at the fair value of the services received or
          the
          fair value of the options issued, whichever is more reliably measurable,
          and
          charged to expense over the service period.
 
 F
              -
              6
 **M-GAB
            DEVELOPMENT CORPORATION**
 **(A
            Development Stage Company)**
 **Notes
            to Financial Statements**
 **December
            31, 2003 and 2002**
  1.
                NATURE
                    OF OPERATIONS AND ACCOUNTING POLICIES -
                    Continued
 
 *Income
          Taxes.* ****** The
          Company has not made a provision for income taxes because of its financial
          statement and tax losses since its inception on March 27, 2001. A valuation
          allowance has been used to offset the recognition of any deferred tax assets
          related to net operating loss carryforwards due to the uncertainty of future
          realization. The use of any tax loss carry-forward benefits may also be
          limited
          as a result of changes in Company ownership.
 
 *Fair
          Value of*  *Financial
          Instruments.* The
          Company considers all liquid interest-earning investments with a maturity
          of
          three months or less at the date of purchase to be cash equivalents. Short-term
          investments generally mature between three months and six months from the
          purchase date. All cash and short-term investments are classified as available
          for sale and are recorded at market using the specific identification method;
          unrealized gains and losses are reflected in other comprehensive income.
          Cost
          approximates market for all classifications of cash and short-term
          investments.
 
 *Net
          Loss per Common Share* .
          Net
          loss per share is calculated in accordance with Statement of Financial
          Accounting Standards No. 128, Earnings Per Share. Basic net loss per share
          is
          based upon the weighted average number of common shares outstanding. Diluted
          net
          loss per share is based on the assumption that options are included in
          the
          calculation of diluted earnings per share, except when their effect would
          be
          anti-dilutive. Dilution is computed by applying the treasury stock method.
          Under
          this method, options and warrants are assumed to be exercised at the beginning
          of the period (or at the time of issuance, if later), and as if funds obtained
          thereby were used to purchase common stock at the average market price
          during
          the period.
 
 *Recently
          Enacted Accounting Standards* .
          Statement of Financial Accounting Standards (“SFAS”) No. 146, “Accounting for
          Costs Associated with Exit or Disposal Activities”, SFAS No. 147, “Acquisitions
          of Certain Financial Institutions - an Amendment of FASB Statements No.
          72 and
          144 and FASB Interpretation No. 9”, SFAS No. 148, “Accounting for Stock-Based
          Compensation - Transition and Disclosure - an Amendment of FASB Statement
          No.
          123”, SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and
          Hedging Activities”, and SFAS No. 150, “Accounting for Certain Financial
          Instruments with Characteristics of both Liabilities and Equity”, were recently
          issued. SFAS No. 146, 147, 148, 149 and 150 have no current applicability
          to the
          Company or their effect on the financial statements would not have been
          significant.
 
 2.
                  GOING
                      CONCERN
 The
          accompanying financial statements have been prepared assuming that the
          Company
          will continue as a going concern. As shown in the financial statements,
          the
          Company has no established source of revenue, and as of December 31, 2003,
          the
          Company had negative working capital of $103,105. In addition, the Company
          has
          been in the development stage since its inception on March 27, 2001 and
          is
          dependent on outside financing to fund its operations. These factors, among
          others, raise substantial doubt about the Company's ability to continue
          as a
          going concern.
 
 Management's
          plans in regard to these matters are to continue to raise additional capital
          from selling the Company's stock. However, there is no assurance that the
          Company will be able to obtain such financing. Management believes actions
          currently being taken provide the opportunity for the Company to continue as
          a
          going concern. The financial statements do not include any adjustments
          that
          might result from the outcome of this uncertainty.
 
 3.
                STOCKHOLDERS'
                    EQUITY
 
 *Founders'
          Stock.* On April
          20, 2001, the Company issued 6,000,000 shares of common stock to its President
          and legal counsel for cash totaling $600.
 
 *Private
          Placement Memorandum* .
          On June
          1, 2001, the Company began an offering to sell up to 100,000 shares of
          common
          stock at $0.10 per share pursuant to a Private Placement Memorandum. In
          August
          2001, the Company sold 13,000 shares of its common stock at $0.10 under
          this
          private placement. All proceeds from this offering were used for
          pre-incorporation expenditures, consulting fees and working
          capital.
 
 *Registered
          Stock Offering.* During
          the quarter ended December 31, 2002, the Company sold 10,000 shares of
          its
          common stock at $0.10 per share for total proceeds of $1,000. The stock
          offering
          was pursuant to the Company's effective Form SB-2/A registration statement
          dated
          November 15, 2001. The Company used the proceeds to repay advances and
          general
          and administrative expenses. The Company's registered offering expired
          on
          October 30, 2002.
 
 *Stock
          Option Plan.* The
          Company's Board and shareholders approved a Stock Option Plan, effective
          June 1,
          2001. The plan limits the aggregate number of shares available to 600,000.
          Each
          award under the plan will be evidenced by a Stock Purchase Agreement; each
          agreement will establish the vesting requirements and the maximum term
          of the
          options granted. No stock options have been issued as of December 31,
          2003 ***.*** In
          November 2003, the Company agreed to issue options to acquire a total of
          600,000
          shares of common stock to two directors. The issuance of the options is
          contingent upon the approval of the Securities and Exchange Commission.
          The
          options are to be exercisable over ten years at an exercise price equal
          to the
          fair market value of the Company’s common stock.
 
 4.
                LOSS
                    PER SHARE


The
        following data show the amounts used in computing loss per share for the
        periods
        presented:
  For
                    the Years EndedDecember
                    31,2003
                
                
                2002Loss
                    from continuing operationsavailable
                    to commonshareholders
                    (numerator)
                
                $
                (63,253
                )
                $
                (37,376
                )Weighted
                    average number ofcommon
                    shares outstandingused
                    in loss per share duringthe
                    period (denominator)
                
                
                6,023,000
                
                
                6,014,726




Dilutive
        loss per share was not presented, as the Company had no common equivalent
        shares
        for all periods presented that would effect the computation of diluted loss
        per
        share.
 
 F
            -
            7
 **M-GAB
            DEVELOPMENT CORPORATION**
 **(A
            Development Stage Company)**
 **Notes
            to Financial Statements**
 **December
            31, 2003 and 2002**
  5.
              INCOME
                  TAXES
  The
        Company accounts for income taxes in accordance with Statement of Financial
        Accounting Standards No. 109 “Accounting for Income Taxes” which requires the
        liability approach for the effect of income taxes.
 The
        Company accounts for income taxes in accordance with Statement of Financial
        Accounting Standards No. 109 “Accounting for Income Taxes” which requires the
        liability approach for the effect of income taxes.
 
 The
        Company has available at December 31, 2003, unused operating loss carryforwards
        of approximately $100,000, which may be applied against future taxable income
        and which expire in various years through 2023. If certain substantial changes
        in the Company's ownership should occur, there could be an annual limitation
        on
        the amount of net operating loss carryforward which can be utilized. The
        amount
        of and ultimate realization of the benefits from the operating loss
        carryforwards for income tax purposes is dependent, in part, upon the tax
        laws
        in effect, the future earnings of the Company and other future events, the
        effects of which cannot be determined. Because of the uncertainty surrounding
        the realization of the loss carryforwards, the Company has established a
        valuation allowance equal to the tax effect of the loss carryforwards,
        therefore, no deferred tax asset has been recognized for the loss carryforwards.
        The net deferred tax assets are approximately $48,000 and $23,000 at December
        31, 2003 and 2002, respectively, with an offsetting valuation allowance of
        the
        same amount resulting in a change in the valuation allowance of approximately
        $25,000 during the year ended December 31, 2003.


6.
              RELATED
                  PARTY TRANSACTIONS
 
 The
        Company has engaged one of its shareholders, Mr. Lebrecht, as its corporate
        counsel. For the years ended December 31, 2003 and 2002, the Company incurred
        total legal services and out of pocket costs to Mr. Lebrecht’s firm of $37,730
        and $18,161, respectively. As of December 31, 2003 and 2002, the Company
        had
        amounts due to Mr. Lebrecht of $78,705 and $32,889, respectively, which are
        recorded in accounts payable and accrued liabilities in the accompanying
        financial statements. In addition, the Company received an advance of $10,000
        from Mr. Lebrecht for organizational costs. The Company has recorded this
        advance as a payable to stockholder as of Decemebr 31, 2003 and
        2002.
 
 The
        Company’s President, Mr. Berg, has elected to forego a salary during its early
        development stages. Mr. Berg has also provided office space to the Company.
        The
        Company estimates the value of these services to be $6,000 and $5,125 for
        the
        years ended December 31, 2003 and 2002, respectively. As of December 31,
        2003
        and 2002, the Company had amounts due to Mr. Berg of $9,400 and $3,400
        respectively, which are recorded in accounts payable and accrued liabilities
        in
        the accompanying financial statements. In addition, one of the Company’s
        directors, Mr. Gadawski, provided consulting services to the Company in 2003.
        As
        of December 31, 2003, the Company had $5,000 due to Mr. Gadawski for services
        rendered during the year ended December 31, 2003.
 
 From
        time
        to time, Mr. Berg and Mr. Lebrecht have loaned or advanced money to the Company
        to pay for administrative expenses. These advances do not pay interest, have
        no
        maturity date, and are expected to be repaid as soon as reasonably practicable.
        As of December 31, 2003 and 2002, the Company had $10,000 due to Mr. Lebrecht
        related to an advance for organizational costs.
  F
            -
            8


**M-GAB
        DEVELOPMENT CORPORATION**
 **(A
        Development Stage Company)**
 **Notes
        to Financial Statements**
 **December
        31, 2003 and 2002**
 In
          November 2003, the Company agreed to issue to each of Mr. Gadawski and
          Mr.
          Stewart options to acquire 300,000 shares of our common stock for serving
          as
          directors of the Corporation. As of December 31, 2003, the Company has
          not
          issued these options, as this issuance of options is subject to approval
          of the
          SEC pursuant to provisions of the Investment Company Act of 1940.
  
 7.
                SUBSEQUENT
                    EVENTS
  On
          March
          8, 2004, the Company completed a private stock offering whereby 333,334
          stock
          units were sold at $0.15 per unit and 27,511 shares of common stock were
          sold at
          $0.15 per share, pursuant an offering exemption provided by Regulation
          E. Each
          stock unit includes one share of the Company’s common stock and a warrant to
          purchase an additional share of common stock at an exercise price of $0.15
          per
          share and a term of three years. All proceeds from this offering will be
          used
          for the Company’s working capital expenses.
   F
              -
              9