U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB



(Mark One)



[ x ]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended:

September 30, 2004



[    ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES

EXCHANGE ACT OF 1934



For the transition period from

to





Commission file number 0-17232



NETMEASURE TECHNOLOGY INC.

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



|NEVADA                                                         | 86-0914695                       
|-------------------------------------------------------------- | ---------------------------------
|(State or other jurisdiction of
incorporation or organization) | (IRS Employer
Identification No.)



1715 Government Street

Victoria, B.C.  V8W 1Z4

(Address of principal executive offices)



(250) 386-5501

(Issuers telephone number)



N/A

(Former name, former address and former fiscal year, if changed since last report)



Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



Yes  X

No





State the number of shares outstanding of each of the issuers classes of common equity, as of the last practicable date:



5,349,921 shares of common stock, $0.001 par value, as of October 29, 2004



Transitional Small Business Disclosure Format (check one):

Yes

No  X









PART I FINANCIAL INFORMATION



ITEM 1.  FINANCIAL STATEMENTS



The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-QSB and Rule 10-01 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments considered necessary for a fair presentation have been included.  All such adjustments are of a normal recurring nature.  Operating results for the nine month period ended September 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.  For further information refer to the consolidated financial statements and footnotes thereto included in the Companys Annual Report on Form 10-KSB for the year ended December 31, 2003.



|                                                     | Page   
|---------------------------------------------------- | -------
|                                                     |        
|Unaudited Consolidated Financial Statements          | 2      
|                                                     |        
|Consolidated Balance Sheet                           | 3      
|                                                     |        
|Consolidated Statements of Operations                | 4      
|                                                     |        
|Consolidated Statements of Cash Flows                | 5  6  
|                                                     |        
|Consolidated Statements of Stockholders Deficit     | 7  9  
|                                                     |        
|Notes to Unaudited Consolidated Financial Statements | 10 - 13





1









NETMEASURE TECHNOLOGY INC.

(A Development Stage Company)

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2004

(Stated in US Dollars)

(Unaudited)

SEE ACCOMPANYING NOTES

2



NETMEASURE TECHNOLOGY INC.

(A Development Stage Company)

INTERIM CONSOLIDATED BALANCE SHEETS

September 30, 2004 and December 31, 2003

(Stated in US Dollars)

(Unaudited)





|                                                 | September 30, | December 31,
|------------------------------------------------ | ------------- | ------------
|ASSETS                                           | 2004          | 2003        
|Current                                          |               |             
|Cash                                             | $
817         | $
2,163     
|                                                 |               |             
|LIABILITIES                                     
|Current                                          |               |             
|Accounts payable and accrued liabilities         | $
198,827     | $
313,143   
|Due to related party                             | 30,077        | 12,077      
|Promissory notes payable  Note 4                | -             | 117,023     
|Convertible promissory notes payable  Note 5    | 23,700        | 127,964     
|                                                 |               |             
|                                                 | 252,604       | 570,207     
|                                                 |               |             
|STOCKHOLDERS' DEFICIENCY                        
|Capital stock  Note 6                           |               |             
|Authorized:                                      |               |             
|100,000,000 common shares at $0.001 par value    |               |             
|Issued:                                          |               |             
|5,334,051 shares (2003:  407,696)                | 5,334         | 408         
|Additional paid-in capital                       | 2,782,042     | 1,760,378   
|Share subscriptions                              | -             | 614,250     
|Deficit accumulated during the development stage | (3,039,163)   | (2,943,080) 
|                                                 |               |             
|                                                 | (251,787)     | (568,044)   
|                                                 |               |             
|                                                 | $
817         | $
2,163     
|                                                 |               |             

SEE ACCOMPANYING NOTES

3



NETMEASURE TECHNOLOGY INC.

(A Development Stage Company)

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

for the three and nine month periods ended September 30, 2004 and 2003

and for the period from May 4, 1998 (Date of Inception) to September 30, 2004

(Stated in US Dollars)

(Unaudited)



|                                                      |                    |                   |               |           | For the period
|----------------------------------------------------- | ------------------ | ----------------- | ------------- | --------- | --------------
|                                                      |                    |                   |               |           | from May 4,   
|                                                      |                    |                   |               |           | 1998 (Date of 
|                                                      | Three months ended | Nine months ended | Inception) to
|                                                      | September 30,      | September 30,     | September 30,
|                                                      | 2004               | 2003              | 2004          | 2003      | 2004          
|General and administrative                            |                    |                   |               |           |               
|Advertising                                           | $
-                | $
-               | $
71          | $
323     | $
472         
|Computer and office supplies                          | -                  | -                 | 145           | 249       | 31,576        
|Consulting fees                                       | 18,000             | 29,000            | 58,500        | 71,210    | 367,843       
|Interest and bank charges
(recovery)                  | (6,629)            | 6,120             | 7,471         | 17,964    | 48,985        
|Professional fees                                     | 2,959              | 3,612             | 11,059        | 16,536    | 100,031       
|Rent                                                  | 1,845              | -                 | 5,720         | -         | 9,742         
|Transfer agent fees                                   | 1,019              | 1,139             | 4,509         | 4,314     | 12,476        
|Travel                                                | 982                | -                 | 6,292         | 1,054     | 10,172        
|                                                      |                    |                   |               |           |               
|Loss before other items                               | (18,176)           | (39,871)          | (93,767)      | (111,650) | (581,297)     
|Other items:                                          |                    |                   |               |           |               
|Foreign exchange gain                                 | (2,316)            | (11)              | (2,316)       | (14,451)  | (10,483)      
|Forgiveness of debt                                   | -                  | -                 | -             | 3,200     | 69,700        
|Interest income                                       | -                  | -                 | -             | -         | 49            
|Write-off of deferred acquisition
costs               | -                  | -                 | -             | -         | (66,500)      
|                                                      |                    |                   |               |           |               
|Loss from continuing operations                       | (20,492)           | (39,882)          | (96,083)      | (122,901) | (588,531)     
|Gain (loss) from discontinued
operations  Note 3     | -                  | -                 | -             | 219,846   | (2,450,632)   
|                                                      |                    |                   |               |           |               
|Net (loss) income for the period                      | $
(20,492)         | $
(39,882)        | $
(96,083)    | $
96,945  | $
(3,039,163) 
|                                                      |                    |                   |               |           |               
|Basic and diluted loss per share                      |                    |                   |               |           |               
|Income (loss) from continuing
operations              | $
(0.02)           | $
(0.10)          | $
(0.14)      | $
(0.30)  |               
|                                                      |                    |                   |               |           |               
|Income (loss) from discontinued
continuing operations | $
-                | $
-               | $
-           | $
0.54    |               
|                                                      |                    |                   |               |           |               
|Income (loss) for the period                          | $
(0.02)           | $
(0.10)          | $
(0.14)      | $
0.24    |               
|                                                      |                    |                   |               |           |               
|Weighted average number of shares
outstanding         | 1,325,988          | 407,696           | 701,690       | 407,696   |               



SEE ACCOMPANYING NOTES

4



NETMEASURE TECHNOLOGY INC.

(A Development Stage Company)

INTERIM CONSOLIDATED STATEMENTS CASH FLOWS

for the nine month period ended September 30, 2004 and 2003

and for the period from May 4, 1998 (Date of Inception) to September 30, 2004

(Stated in US Dollars)

(Unaudited)



|                                                               |                                 |               | For the period
|-------------------------------------------------------------- | ------------------------------- | ------------- | --------------
|                                                               |                                 |               | from May 4,   
|                                                               |                                 |               | 1998 (Date of 
|                                                               |                                 |               | Inception) to 
|                                                               | Nine months ended September 30, | September 30,
|                                                               | 2004                            | 2003          | 2004          
|Operating activities                                           |                                 |               |               
|Net Income (loss) for the period from continuing operations    | $
(96,083)                      | $
(122,901)   | $
(588,531)   
|Foreign exchange                                               | -                               | -             | 8,281         
|Write off of deferred acquisition costs                        | -                               | -             | 66,500        
|Forgiveness of debt                                            | -                               | (3,200)       | (66,500)      
|Interest on promissory note, payable in shares                 | -                               | -             | 1,250         
|Changes in non-cash operating working capital                  |                                 |               |               
|Accounts payable and accrued liabilities                       | 76,737                          | 100,867       | (178,841)     
|                                                               |                                 |               |               
|Cash used in operating activities                              | (19,346)                        | (25,234)      | (757,841)     
|                                                               |                                 |               |               
|Investing Activities                                           |                                 |               |               
|Deferred acquisition costs                                     | -                               | -             | (66,500)      
|Advances to company controlled by a shareholder of the Company | -                               | -             | (17,208)      
|Advances to discontinued operations of disposed subsidiaries   | -                               | -             | (1,235,235)   
|                                                               |                                 |               |               
|Cash used in investing activities                              | -                               | -             | (1,318,943)   
|                                                               |                                 |               |               
|Financing Activities                                           |                                 |               |               
|Due to related party                                           | 18,000                          | 5,000         | 30,077        
|Promissory notes                                               | -                               | 20,200        | 303,206       
|Shares issued for cash                                         | -                               | -             | 1,258,691     
|Share subscriptions                                            | -                               | -             | 613,000       
|Payment of promissory notes payable by subsidiary company      | -                               | -             | (127,373)     
|                                                               |                                 |               |               
|Cash provided by financing activities                          | 18,000                          | 25,200        | 2,077,601     
|                                                               |                                 |               |               





/Contd

SEE ACCOMPANYING NOTES

5



Continued

NETMEASURE TECHNOLOGY INC.

(A Development Stage Company)

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

for the nine month period ended September 30, 2004 and 2003

and for the period from May 4, 1998 (Date of Inception) to September 30, 2004

(Stated in US Dollars)

(Unaudited)



|                                                                  |                                 |               | For the period
|----------------------------------------------------------------- | ------------------------------- | ------------- | --------------
|                                                                  |                                 |               | from May 4,   
|                                                                  |                                 |               | 1998 (Date of 
|                                                                  |                                 |               | Inception) to 
|                                                                  | Nine months ended September 30, | September 30,
|                                                                  | 2004                            | 2003          | 2004          
|                                                                  |                                 |               |               
|Increase (decrease) in cash from continuing operations            | (1,346)                         | (34)          | 817           
|                                                                  |                                 |               |               
|Increase (decrease) in cash from discontinued
Operations  Note 3 | -                               | -             | -             
|                                                                  |                                 |               |               
|Increase (decrease) in cash during the period                     | (1,346)                         | (34)          | 817           
|                                                                  |                                 |               |               
|Cash, beginning of period                                         | 2,163                           | 5,481         | -             
|                                                                  |                                 |               |               
|Cash, end of period                                               | $
817                           | $
5,447       | $
817         
|                                                                  |                                 |               |               
|Supplementary disclosure of cash flow
information:                |                                 |               |               
|Cash paid for:                                                    |                                 |               |               
|Interest                                                          | $
-                             | $
-           | $
-           
|                                                                  |                                 |               |               
|Income taxes                                                      | $
-                             | $
-           | $
-           
|                                                                  |                                 |               |               
|Non-cash transactions  Note 7                                    |                                 |               |               





SEE ACCOMPANYING NOTES

6



NETMEASURE TECHNOLOGY INC.

(A Development Stage Company)

INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)

for the period from the May 4, 1998 (Date of Inception) to September 30, 2004

(Stated in US Dollars)

(Unaudited)



|                                                                                             |               |           |            |               |             | Deficit     |            
|-------------------------------------------------------------------------------------------- | ------------- | --------- | ---------- | ------------- | ----------- | ----------- | -----------
|                                                                                             |               |           |            |               | Accrued     | Accumulated |            
|                                                                                             |               |           | Additional |               | Employee    | During the  |            
|                                                                                             | Common Shares | Paid-in   | Share      | Stock         | Development |            
|                                                                                             | Number        | Par Value | Capital    | Subscriptions | Award       | Stage       | Total      
|Common stock issued to officers for
services rendered                                        | 20,000        | $
20      | $
980      | $
-           | $
-         | $
-         | $
1,000    
|Common stock issued by offering at
$1.56 per share                                           | 99,000        | 9         | 154,589    | -             | -           | -           | 154,688    
|Common stock issued by offering at
$1.56  per share for services rendered                    | 71,000        | 71        | 110,867    | -             | -           | -           | 110,938    
|Net loss for the period from inception to
December 31, 1998                                  | -             | -         | -          | -             | -           | (226,390)   | (226,390)  
|                                                                                             |               |           |            |               |             |             |            
|Balance, December 31, 1998                                                                   | 190,000       | 190       | 266,436    | -             | -           | (226,390)   | 40,236     
|Common stock issued for cash, net of
issue costs of $33,247                                  | 16,196        | 16        | 978,987    | -             | -           | -           | 979,003    
|Common stock issued at $1.56 per
share on acquisition of NetMeasure
Technology (Canada) Inc. | 97,700        | 98        | 152,558    | -             | -           | -           | 152,656    
|Accrued employee stock awards                                                                | -             | -         | -          | -             | 387,665     | -           | 387,665    
|Net loss for the year ended
December 31, 1999                                                | -             | -         | -          | -             | -           | (1,132,851) | (1,132,851)
|                                                                                             |               |           |            |               |             |             |            
|Balance, December 31, 1999                                                                   | 303,896       | 304       | 1,397,981  | -             | 387,665     | 1,359,241)  | 426,709    



SEE ACCOMPANYING NOTES

7



NETMEASURE TECHNOLOGY INC.

(A Development Stage Company)

INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)

for the period from the May 4, 1998 (Date of Inception) to September 30, 2004

(Stated in US Dollars)

(Unaudited)



|                                                            |               |           |            |               |             | Deficit     |            
|----------------------------------------------------------- | ------------- | --------- | ---------- | ------------- | ----------- | ----------- | -----------
|                                                            |               |           |            |               | Accrued     | Accumulated |            
|                                                            |               |           | Additional |               | Employee    | During the  |            
|                                                            | Common Shares | Paid-in   | Share      | Stock         | Development |            
|                                                            | Number        | Par Value | Capital    | Subscriptions | Award       | Stage       | Total      
|                                                            |               |           |            |               |             |             |            
|Share subscriptions received                                | -             | -         | -          | 600,000       | -           | -           | 600,000    
|Bonus shares to be issued under
convertible promissory note | -             | -         | -          | 1,250         | -           | -           | 1,250      
|Accrued employee stock awards                               | -             | -         | -          | -             | 411,962     | -           | 411,962    
|Shares issued under employee stock
award plan               | 3,800         | 4         | 237,497    | -             | (237,501)   | -           | -          
|Net loss for the year ended
December 31, 2000               | -             | -         | -          | -             | -           | (1,503,517) | (1,503,517)
|                                                            |               |           |            |               |             |             |            
|Balance, December 31, 2000                                  | 307,696       | 308       | 1,635,478  | 601,250       | 562,126     | (2,862,758) | (63,596)   
|Common stock issued for cash at $1.25
per share             | 100,000       | 100       | 124,900    | -             | -           | -           | 125,000    
|Accrued employee stock awards                               | -             | -         | -          | -             | (562,126)   | -           | (562,126)  
|Net loss for the year ended
December 31, 2001               | -             | -         | -          | -             | -           | (19,060)    | (19,060)   
|                                                            |               |           |            |               |             |             |            
|Balance, December 31, 2001                                  | 407,696       | 408       | 1,760,378  | 601,250       | -           | (2,881,818) | (519,782)  
|Share subscriptions received                                | -             | -         | -          | 13,000        | -           | -           | 13,000     
|Net loss for the year ended
December 31, 2002               | -             | -         | -          | -             | -           | (92,316)    | (92,316)   
|                                                            |               |           |            |               |             |             |            
|Balance, December 31, 2002                                  | 407,696       | 408       | 1,760,378  | 614,250       | -           | (2,974,134) | (599,098)  



SEE ACCOMPANYING NOTES

8



NETMEASURE TECHNOLOGY INC.

(A Development Stage Company)

INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)

for the period from the May 4, 1998 (Date of Inception) to September 30, 2004

(Stated in US Dollars)

(Unaudited)





|                                                                                 |               |           |             |               |             | Deficit       |            
|-------------------------------------------------------------------------------- | ------------- | --------- | ----------- | ------------- | ----------- | ------------- | -----------
|                                                                                 |               |           |             |               | Accrued     | Accumulated   |            
|                                                                                 |               |           | Additional  |               | Employee    | During the    |            
|                                                                                 | Common Shares | Paid-in   | Share       | Stock         | Development |              
|                                                                                 | Number        | Par Value | Capital     | Subscriptions | Award       | Stage         | Total      
|                                                                                 |               |           |             |               |             |               |            
|Net income for the year ended
December 31, 2003                                  | -             | -         | -           | -             | -           | 31,054        | 31,054     
|                                                                                 |               |           |             |               |             |               |            
|Balance, December 31, 2003                                                       | 407,696       | 408       | 1,760,378   | 614,250       | -           | (2,943,080)   | (568,044)  
|Common stock issued                                                              | 137,500       | 138       | 614,112     | (614,250)     | -           | -             | -          
|Conversion of convertible promissory
notes including accrued interest of
$36,657 | 202,132       | 202       | 140,719     | -             | -           | -             | 140,921    
|Pursuant to debt settlement agreements                                           | 4,586,723     | 4,586     | 266,833     | -             | -           | -             | 271,419    
|Net loss for the nine months ended
September 30, 2004                            | -             | -         | -           | -             | -           | (96,083)      | (96,083)   
|                                                                                 |               |           |             |               |             |               |            
|Balance, September 30, 2004                                                      | 5,334,051     | $
5,334   | $
2,782,042 | $
-           | $
-         | $
(3,039,163) | $
(251,787)



SEE ACCOMPANYING NOTES

9



NETMEASURE TECHNOLOGY INC.

(A Development Stage Company)

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2004

(Stated in US Dollars)

(Unaudited)





Note 1

Interim Reporting



While the information presented in the accompanying interim nine month financial statement is unaudited, it includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim period presented.  All adjustments are of a normal recurring nature.  It is suggested that these financial statements be read in conjunction with the Companys December 31, 2003 annual financial statements.



Note 2

Continuance of Operations



The financial statements have been prepared using generally accepted accounting principles in the United States of America applicable for a going concern which assumes that the Company will realize its assets and discharge its liabilities in the ordinary course of business.  As at September 30, 2004, the Company has a working capital deficiency of $251,787, which is not sufficient to meet its planned business objective or ongoing operations for the next fiscal year.  The Company has accumulated losses of $3,039,163 since its commencement.  Its ability to continue as a going concern is dependent upon the ability of the Company to obtain the necessary financing to meet its obligations and pay its liabilities arising from normal business operations when they come due.



Note 3

Discontinued Operations



On May 23, 2003, the Company disposed of its wholly-owned subsidiary NetMeasure Technology (Canada) Inc. for cash consideration of $1.  Income for the six months ended June 30, 2004 related to NetMeasure Technology (Canada) Inc. has been included to the date of disposition.



The net gain on disposal is determined as follows:



|Proceeds on disposal of subsidiary  |  | $
1      
|----------------------------------- |  | ---------
|                                    |  |          
|Net asset deficiency of subsidiary: |  |          
|Accounts payable                    |  | (107,834)
|Accrued liabilities                 |  | (112,013)
|                                    |  |          
|                                    |  | (219,847)
|                                    |  |          
|Net gain on disposal of subsidiary  |  | $
219,846



10





Note 3

Discontinued Operations  (contd)



Cash flows from discontinued operations are as follows:

|                                                                | Nine months ended September 30,
|--------------------------------------------------------------- | -------------------------------
|                                                                | 2004                           
|Operating Activities                                            |                                
|Net income (loss) for the period                                | $
219,846                      
|Items not involving cash:                                       |                                
|Gain on disposal of subsidiaries                                | (
219,846)                     
|Changes in non-cash working capital balances consist of:        |                                
|Accounts payable and accrued liabilities                        | (1)                            
|                                                                |                                
|                                                                | (1)                            
|                                                                |                                
|Financing activity                                              |                                
|Proceed from disposal of subsidiary                             | 1                              
|                                                                |                                
|Decrease in cash from discontinued operations during
the period | $
-                            
|                                                                |                                





Note 4

Promissory Notes Payable



|                                                                                                                                                                                                                                                                                              | 2004 | 2003    
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | --------
|Due on December 1, 2000. This note bears interest at 10% per annum plus a bonus of 1,000 shares of capital stock. This loan entitled the lender to receive options to acquire 40,960 additional common shares. These options expired on December 14, 2002.                                    | $
-  | $
75,000
|                                                                                                                                                                                                                                                                                              |      |         
|Due on demand to the Companys former president; principal CDN$20,000; interest at 15% per annum; secured by a fixed and floating charge over the Company assets.  During the year ended December 31, 2003, the Companys former president assigned this debt to various non-related parties. | -    | 15,426  
|                                                                                                                                                                                                                                                                                              |      |         



11







Note 4

Promissory Notes Payable  (contd)



|Due on demand; Interest at 15% per annum; principal CDN$20,000; secured by a first charge on the Companys assets.  In addition to the interest on this note, at the noteholder's option, the Company has committed to pay a bonus of 200 shares of the Company or CDN$5,000 upon presentation of this note for payment. | -   | 15,426   
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --- | ---------
|                                                                                                                                                                                                                                                                                                                         |     |          
|Due on demand to the Companys former president; principal CDN$8,000;  interest at 15% per annum; secured by a first charge on the Company's assets.  During the year ended December 31, 2003, the Companys former president assigned this debt to various non-related parties.                                         | -   | 6,171    
|                                                                                                                                                                                                                                                                                                                         |     |          
|Due on demand; interest at 15% per annum; secured by a fixed and floating charge over the Companys assets. In addition to the interest on this note, at the noteholder's option, the Company has committed to pay a bonus of 200 shares of the Company or $1,000 upon presentation of this note for payment.            | -   | 5,000    
|                                                                                                                                                                                                                                                                                                                         |     |          
|                                                                                                                                                                                                                                                                                                                         | $
- | $
117,023



Note 5

Convertible Promissory Notes Payable



|                                                                                                                                                                                                  | 2004 | 2003    
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | --------
|Promissory note payable September 7, 2002 bearing interest at 10% per annum, unsecured, convertible into shares at $100 per share solely at the company's discretion at any time before maturity. | $
-  | $
49,255
|                                                                                                                                                                                                  |      |         
|Promissory notes payable October 4, 2002 bearing interest at 10% per annum, unsecured, convertible into shares at $75 per share solely at the company's discretion at any time before maturity.   | -    | 24,461  
|                                                                                                                                                                                                  |      |         
|Promissory notes payable May 31, 2003 bearing interest at 10% per annum, unsecured, convertible into shares at $0.25 per share solely at the company's discretion at any time before maturity.    | -    | 28,654  
|                                                                                                                                                                                                  |      |         

12







Note 5

Convertible Promissory Notes Payable  (contd)



|Promissory note payable March 18, 2004 bearing interest at 10% per annum, unsecured and convertible into shares at $0.10 per share solely at the Companys discretion at any time before maturity.  This note is in default. | 10,000   | 10,000   
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- | ---------
|                                                                                                                                                                                                                             |          |          
|Promissory note payable March 31, 2004 bearing interest at 10% per annum, unsecured and convertible into shares at $0.10 per share solely at the Companys discretion at any time before maturity.  This note is in default. | 7,500    | 7,500    
|                                                                                                                                                                                                                             |          |          
|Promissory note payable June 18, 2004 bearing interest at 10% per annum, unsecured and convertible into shares at $0.10 per share solely at the Company's discretion at any time before maturity.  This note is in default.  | 3,200    | 3,200    
|                                                                                                                                                                                                                             |          |          
|Promissory note payable November 21, 2004 bearing interest at 10% per annum, unsecured and convertible into shares at $0.10 per share solely at the company's discretion at any time before maturity.                        | 3,000    | 3,000    
|                                                                                                                                                                                                                             |          |          
|                                                                                                                                                                                                                             | $
23,700 | $
127,964



Note 6

Capital Stock  Notes 4 and 5



Authorized Capital Stock:

On January 22, 2004, the Company approved an increase in the authorized capital stock to 100,000,000 common shares effective February 24, 2004.



Note 7

Non-cash Transactions



Investing and financing activities that do not have a direct impact on current cash flows are excluded from the cash flow statement.  During the period ended September 30, 2004, the following transactions were excluded from the statement of cash flow:

–

The Company issued 137,500 common shares for $614,250, the proceeds of which were received in prior years and were included in share subscription at December 31, 2003.

–

The Company issued 202,132 common shares pursuant to the conversion of convertible promissory notes of $104,264 including accrued interest payable of $36,657.

–

The Company issued 3,386,723 common shares pursuant to debt settlement agreements in respect to $117,023 in promissory notes including accrued interest payable of $52,396.

–

The Company issued 1,200,000 common shares pursuant to the settlement of accounts payable of $102,000.







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ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS



CHANGES IN FINANCIAL CONDITION



As of September 30, 2004, the Company had not undergone a significant change in its financial condition since December 31, 2003.  As of December 31, 2003, the Company had total assets, which consisted of cash only, in the amount of $2,163 and as of September 30, 2004, it had total assets, which consisted of cashonly, in the amount of  $817.





The Company will need to raise approximately $100,000 USD to finance its operations for the next twelve month period.  The Company currently does not have any particular prospects or plans to raise such capital.  There are no guarantees that such financing can be achieved at this time.  The Company has not entered into discussions with any particular funding source regarding such fundraising.



Balance Sheet Data:

|                                       |   | September  30, 2004 |  | December 31, 2003
|-------------------------------------- | - | ------------------- |  | -----------------
|Cash                                   | $ | 817                 |  | 2,163            
|Total assets                           | $ | 817                 |  | 2,163            
|Accounts payable & Accrued liabilities | $ | 198,827             |  | 313,143          
|Due to related party                   |   | 30,077              |  | 12,077           
|Promissory notes                       | $ | 0                   |  | 117,023          
|Convertible promissory notes           | $ | 23,700              |  | 127,964          
|Total stockholders equity             | $ | (251,787)           |  | (568,044)        
|                                       |   |                     |  |                  



RESULTS OF OPERATIONS



Revenues



The Company earned no revenues for the three month period ended September 30, 2004, and earned no revenues during the same period from the previous year.  The Company has had no operations since August 2001.



Expenses

Statement of Operations Data:



|                                           | THREE MONTH PERIOD ENDED SEPTEMBER 30, 2004 | THREE MONTH PERIOD ENDED SEPTEMBER 30, 2003
|------------------------------------------ | ------------------------------------------- | -------------------------------------------
|Net Sales                                  | 0                                           | 0                                          
|Loss from operations                       | (20,492)                                    | (39,882)                                   
|Net Income (loss)                          | (20,492)                                    | (39,882)                                   
|Net Income (loss) per common share         | (0.02)                                      | (0.10)                                     
|Weighted average common shares outstanding | 1,325,988                                   | 407,696                                    





During the three months ended September 30, 2004 and 2003, we incurred operating expenses of $18,176 and $39,871, respectively.  The following table provides a breakdown of operating expenses by category.

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General Operating Expenses

|                                     | THREE MONTH PERIOD ENDED SEPTEMBER 30, 2004 | THREE MONTH PERIOD ENDED SEPTEMBER 30, 2003
|------------------------------------ | ------------------------------------------- | -------------------------------------------
|Bank charges and interest (recovery) | (6,629)                                     | 6,120                                      
|Consulting fees                      | 18,000                                      | 29,000                                     
|Travel                               | 982                                         | 0                                          
|Professional fees                    | 2,959                                       | 3,612                                      
|Transfer Agent Fees                  | 1,019                                       | 1,139                                      
|Rent                                 | 1,845                                       | 0                                          
|TOTAL                                | 18,176                                      | 39,871                                     



Administrative expenses have decreased during the first three and nine months of 2004, compared to the same periods in 2003.  This is primarily due to the fact that the Company has not had sustained operations since August 2001 and has been undertaking only those activities that are necessary to keep the Company in good standing while management seeks acquisition opportunities.  We continue seeking acquisition opportunities, and we anticipate our general operating expenses will increase due to additional travel and possible consulting fees and professional fees.



LIQUIDITY AND CAPITAL RESOURCES



As of September 30, 2004 we had cash of $817 and a working capital deficit of $251,787, compared to cash of $2,163and a working capital deficit of $568,044 at December 2003.



Funds used in operations for the nine month period ended September 30, 2004 were $19,346,compared to funds used in operations of $25,234 for the nine month period ended September 30, 2003.



Since inception, we have financed operations primarily through sales of equity securities, promissory notes and shareholder loans and have raised a total of $2,077,601 with$18,000 raised during the nine month period ended September 30, 2004.



Our current operating requirements are expected to be approximately $8,500per month.



We will be required to raise additional funds to finance our current overhead requirements through the next twelve months.  Our principal source of capital has been equity financing from investors and our founders. Meeting our future financing requirements is dependent on access to equity and debt capital markets. We may not be able to raise additional equity when required or on favorable terms that are not diluting to existing shareholders or obtain loans that have terms and conditions that the Company can perform under.



FINANCING ACTIVITIES



In the nine months ended September 30, 2004, we were able to raise $18,000 in a shareholder loan for the on going funding of the Company.



ITEM 3. CONTROLS AND PROCEDURES



We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.



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Within 90 days prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14.  Based upon the foregoing, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective in connection with the filing of this Quarterly Report on Form 10-QSB for the quarter ended September 30, 2004.



There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any significant deficiencies or material weaknesses of internal controls that would require corrective action.



Prior to the filing date of this quarterly report, the Company had not adopted a complete set of written policies, controls and procedures.  The Company is now developing such written document and expects that in the process of such undertaking it will discover internal control policies and practices that the Company should implement and follow that are not part of its current practice.



PART II  OTHER INFORMATION



ITEM 1.

LEGAL PROCEEDINGS



Not Applicable.



ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS



(a) Issuances Pursuant to Exemption found in Regulation S



(1) On September 20, 2004, the Company issued 3,588,855 restricted shares of common stock to twenty-six private investors as the result of such investors election to convert the debt owed to them by the Company. The aggregate amount of debt converted to shares of common stock was $310,340, including accrued interest.



(2) On January 16, 2004, the Company issued 137,500 restricted shares of common stock in exchange for $614,250 in cash and services, as follows:



-

6,000 shares were to three (3) investors in connection with a private placement offered by the Company in 2000;

-

130,500 shares were issued to three (2) individuals as a bonus for financing services provided to the Company in September 2002; and

-

1,000 shares were issued as a bonus to a loan agreement earned in December 2000.



Except as noted below, the foregoing issuances of securities was exempt from registration due to the exemption found in Regulation S promulgated by the Securities and Exchange Commission under the Securities Act of 1933. These sales were offshore transactions since all of the offerees were not in the United States and the purchasers were outside the United States at the time of the purchase. Moreover, there were no directed selling efforts of any kind made in the Untied States neither by us nor by any affiliate or any person acting on our behalf in connection with any of these offerings. All offering materials and documents used in connection with the offers and sales of the securities included statements to the effect that the securities have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States or to U.S. persons unless the securities are registered under the Act or an exemption therefrom is available and that no hedging transactions involving those securities may not be conducted unless in compliance with the Act. Each purchaser under Regulation S certified that it is not a U.S. person and is not acquiring the securities for the account or benefit of any U.S. person and agreed to resell such securities only in accordance with the provisions of Regulation S, pursuant to registration under the Act or pursuant to an available exemption from registration. The shares sold are restricted securities and the certificates representing these shares have been affixed with a standard restrictive legend, which states that the securities cannot be sold without registration under the Securities Act of 1933 or an exemption

16



therefrom and we are required to refuse to register any transfer that does not comply with such requirements.



(b) Issuances made Pursuant to Exemption found in Regulation D



Of the issuances referred to in paragraph (a)(1) above, a total of 410,606 shares were issued to three (3) individuals residing in the Untied States. Of the issuances referred to in paragraph (a)(2) above, 500 shares were issued to one (1) individual residing in the Untied States.



These issuances of shares were exempt from registration pursuant to Rule 506 of Regulation D. Neither we nor any person acting on our behalf offered or sold these securities by any form of general solicitation or general advertising. The shares sold are restricted securities and the certificates representing these shares have been affixed with a standard restrictive legend, which states that the securities cannot be sold without registration under the Securities Act of 1933 or an exemption therefrom. Each purchaser represented to us that he was purchasing the securities for his own account and not for the account of any other persons. Each purchaser was provided with written disclosure that the securities have not been registered under the Securities Act of 1933 and therefore cannot be sold without registration under the Securities Act of 1933 or an exemption therefrom.



ITEM 3.

DEFAULT UPON SENIOR SECURITIES



Not Applicable.



ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



Not Applicable.



ITEM 5.

OTHER INFORMATION



Not Applicable.



ITEM 6.

EXHIBITS



Exhibit Index.  The following exhibits are filed with or incorporated by reference into this quarterly report:



|Exhibit No. | Description                                                                                                            | Filing Status 
|----------- | ---------------------------------------------------------------------------------------------------------------------- | --------------
|2(a)        | Corporate Charter of Powertech, Inc.                                                                                   | *             
|2(a)(1)     | Articles of Amendment of Articles of Incorporation
*                                                                   | *             
|2(b)        | By-Laws of Powertech, Inc.                                                                                             | *             
|6(b)        | Non- Competition Agreement dated February 12, 1999 between Randy

Voldeng and NETSentry Technology Inc.                | *             
|6(e)        | Assignment Agreement dated December 23, 1998 between Dragos Ruiu
and Dragostech.com Inc. and NETSentry Technology Inc. | *             
|6(g)        | Asset Purchase and Sale Agreement made August 1998 between

Dragostech.com Inc. and NETSentry Technology Inc.          | *             
|31.1        | Rule 12aq-14(a)/15D-14(a) Certification of Chief Executive Officer                                                     | Filed Herewith
|32.1        | Certification Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                       | Filed Herewith



*

Incorporated by reference to the same exhibit number in the Registrant's Form 10-SB, as amended, File Number 0-27675.



17



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.



Date: November 10, 2004









By: /s/ Peter Laipnieks

Name:

Peter Laipnieks

Title:

President

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