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


                                   FORM 10-QSB


[X]   QUARTERLY REPORT UNDER SECTION 13 or 15 (D) OF THE SECURITES
                              EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005


[_]   TRANSISTION REPORT UNDER SECTION 13 OR 15 (D) OF THE EXCHANGE ACT


                         COMMISSION FILE NUMBER: 0-21419


                            NETFABRIC HOLDINGS, INC.
                            ------------------------
         (Exact name of small business issuer as specified its charter)


            Delaware                                      76-0307819
--------------------------------------------------------------------------------
(State or other jurisdiction of                (IRS Employer Identification No.)
 incorporation or organization)


                               Three Stewart Court
                           Denville, New Jersey, 07834
                    (Address of principal executive offices)

                                 (973)-887-2785
                           (Issuer's telephone number)

                     67 Federal Road, Building A, Suite 300
                              Brookfield, CT 06804
                      ------------------------------------
                 (Former address, if changed since last report)

Check whether the issuer (1) filed all reports required 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 latest practicable date: As of August 12, 2005, 62,885,500
shares of common stock, $.001 par value per share, of the issuer were
outstanding.


Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
<PAGE>

                            NETFABRIC HOLDINGS, INC.

                                      INDEX



                                                                            Page

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited)

         Condensed Consolidated Balance Sheets                                1

         Condensed Consolidated Statements of Operations                      2

         Condensed Consolidated Statement of Stockholders'
         Equity (Deficit)                                                     3

         Condensed Consolidated Statements of Cash Flows                      4

         Notes to Condensed Consolidated Financial Statements                 5

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                           16

Item 3.  Controls and Procedures                                             24

PART II. OTHER INFORMATION                                                   24

         Signatures                                                          25

<PAGE>

                         PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                   NetFabric Holdings, Inc. and Subsidiaries
                     Condensed Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                     June 30, 2005            December 31,
                                                                                      (Unaudited)                 2004
                                                                                    ---------------          --------------
<S>                                                                                 <C>                       <C>
                                          ASSETS

Current Assets:
        Cash                                                                              $ 18,087                  $ 67,719
        Trade accounts receivable, net                                                   2,460,590                        --
        Inventory                                                                          209,261                    72,025
        Prepaid expenses and other current assets                                          196,037                    88,910
                                                                                    ---------------          ---------------
        Total current assets                                                              2,883,975                  228,654

Property and equipment, net                                                                 308,010                  171,931

Deferred offering costs                                                                          --                  368,683

Goodwill and other intangibles                                                           34,166,977                       --

Other assets                                                                                  7,324                   43,053
                                                                                    ---------------          ---------------
        Total                                                                       $    37,366,286          $       812,321
                                                                                    ===============          ===============

        LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities:
        Bridge loans, net of unamortized discount                                   $       211,686          $       749,659
        Loans and advances payable to stockholders and officers                             502,639                   32,639
        Accounts payable and accrued liabilities                                          3,512,907                  273,707
        Accrued compensation                                                                459,679                       --
        Deferred revenues and customer advances                                             786,260                   25,966
                                                                                    ---------------          ---------------
        Total current liabilities                                                         5,473,171                1,081,971
                                                                                    ---------------          ---------------

Commitments and contingencies

Stockholders' Equity (Deficit):
        Common Stock, $.001 par value, 100,000,000 shares authorized,
        61,748,358 and 34,652,204 shares issued and outstanding,
        respectively                                                                         61,748                   34,652
        Additional paid-in capital                                                       35,551,209                1,216,523
        Deferred employee compensation                                                      (44,985)                      --
        Accumulated deficit                                                              (3,674,857)              (1,520,825)
                                                                                    ---------------          ---------------
        Total stockholders' equity (deficit)                                             31,893,115                 (269,650)
                                                                                    ---------------          ---------------
        Total                                                                       $    37,366,286          $       812,321
                                                                                    ===============          ===============
</TABLE>

       See Notes to Unaudited Condensed Consolidated Financial Statements

                                       1
<PAGE>

                   NetFabric Holdings, Inc. and Subsidiaries
                Condensed Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                           Three months ended,                Six months ended,
                                                      ------------------------------    ------------------------------
                                                      June 30, 2005    June 30, 2004    June 30, 2005    June 30, 2004
                                                       (Unaudited)      (Unaudited)      (Unaudited)      (Unaudited)
                                                      -------------    -------------    -------------    -------------
<S>                                                   <C>              <C>              <C>              <C>
Revenues                                              $   2,273,330    $          --    $   2,273,330    $          --
                                                      -------------    -------------    -------------    -------------

Expenses:
       Direct employee compensation and
          consultant expenses                             1,778,075           27,044        1,780,808           34,719
       Selling, general and administrative expenses       1,276,243          187,249        1,898,851          261,853
       Research and development                             187,477               --          321,952               --
       Interest and bank charges                            155,019              249          387,843              249
       Depreciation and amortization                         22,618               --           37,908               --
                                                      -------------    -------------    -------------    -------------
          Total expenses                                  3,419,432          214,542        4,427,362          296,821

                                                      -------------    -------------    -------------    -------------
Loss before provision for income taxes                   (1,146,102)        (214,542)      (2,154,032)        (296,821)

Provision for income taxes                                       --               --               --               --
                                                      -------------    -------------    -------------    -------------

Net Loss                                              $  (1,146,102)   $    (214,542)   $  (2,154,032)   $    (296,821)
                                                      =============    =============    =============    =============


Net loss per common share, basic and diluted          $       (0.02)   $       (0.01)   $       (0.05)   $       (0.01)
                                                      =============    =============    =============    =============

Weighted average number of shares
       outstanding, basic and diluted                    48,773,506       31,140,956       42,635,842       30,485,357
                                                      =============    =============    =============    =============
</TABLE>

       See Notes to Unaudited Condensed Consolidated Financial Statements


                                       2
<PAGE>

                   NetFabric Holdings, Inc. and Subsidiaries
       Condensed Consolidated Statements of Stockholders' Equity (Deficit)

<TABLE>
<CAPTION>
                                                                        Common Stock
                                                            -------------------------------
                                                                                                Additional        Deferred
                                                                 Shares         Par Value     Paid-in Capital   Compensation
                                                            --------------   --------------   --------------   --------------
<S>                                                             <C>          <C>              <C>              <C>
Balances at December 31, 2004                                   34,652,204   $       34,652   $    1,216,523   $           --

  Sale of common stock to investors, net of offering             2,000,000            2,000          629,317               --
    costs of $368,683
  Settlement of bridge loan with common stock                    1,000,000            1,000          499,000               --
  Issuance of shares in connection with acquisition             24,096,154           24,096       32,746,673               --
  Allocation of value to warrants in connection with debt               --               --          392,196               --

  Deferred employee stock option compensation                           --               --           67,500          (67,500)
  Amortization of deferred employee stock option
    compensation                                                        --               --               --           22,515

  Net loss                                                              --               --               --               --
                                                            --------------   --------------   --------------   --------------

Balances at June 30, 2005 (unaudited)                           61,748,358   $       61,748   $   35,551,209   $      (44,985)
                                                            ==============   ==============   ==============   ==============

<CAPTION>

                                                                                   Total
                                                             Accumulated   Stockholders' Equity
                                                               Deficit           (Deficit)
                                                            --------------    --------------
<S>                                                         <C>               <C>
Balances at December 31, 2004                               $   (1,520,825)   $     (269,650)

  Sale of common stock to investors, net of offering                    --           631,317
    costs of $368,683
  Settlement of bridge loan with common stock                           --           500,000
  Issuance of shares in connection with acquisition                     --        32,770,769
  Allocation of value to warrants in connection with debt               --           392,196

  Deferred employee stock option compensation                           --
  Amortization of deferred employee stock option
    compensation                                                        --            22,515

  Net loss                                                      (2,154,032)       (2,154,032)
                                                            --------------    --------------

Balances at June 30, 2005 (unaudited)                       $   (3,674,857)   $   31,893,115
                                                            ==============    ==============
</TABLE>

       See Notes to Unaudited Condensed Consolidated Financial Statements


                                       3
<PAGE>

                   NetFabric Holdings, Inc. and Subsidiaries
                Condensed Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                  Six Months Ended,
                                                         -----------------------------------
                                                          June 30, 2005       June 30, 2004
                                                           (Unaudited)         (Unaudited)
                                                         --------------       --------------
<S>                                                      <C>                  <C>
OPERATING ACTIVITIES
  Net loss                                               $   (2,154,032)      $     (296,821)
  Adjustments to reconcile net loss to net cash
  used in operating activities:
  Non-cash charge for common stock issued for rent               25,000               25,000
  Non-cash charge for options issued
     to non-employees                                            10,313               30,026
  Non-cash charge for amortization
     of employee deferred compensation                           22,515                   --
  Provision for bad debts                                        18,284                   --
  Amortization of debt discount                                 354,226                   --
  Depreciation and amortization                                  37,908                   --
  Changes in operating assets and liabilities, net
       of acquisition:
       Inventory                                               (137,236)             (10,267)
       Trade accounts receivable                               (306,622)             (16,602)
       Prepaid expenses and other current assets                (42,719)                  --
       Other assets                                              32,740                   --
       Accounts payable and accrued liabilities               1,058,426                4,980
       Accrued compensation                                     239,314                   --
       Deferred revenues and advances                          (312,407)              18,283
                                                         --------------       --------------
  Net cash used in operating activities                      (1,154,290)            (245,401)
                                                         --------------       --------------

INVESTING ACTIVITIES
  Direct acquisition costs of UCA Services                     (187,000)                  --
  Purchases of property and equipment                           (78,342)              (4,500)
                                                         --------------       --------------
  Net cash used in investing activities                        (265,342)              (4,500)
                                                         --------------       --------------

FINANCING ACTIVITIES
  Proceeds from issuance of common stock                      1,000,000              250,000
  Loans and advances from stockholders and officers             370,000                   --
                                                         --------------       --------------
  Net cash provided by financing activities                   1,370,000              250,000
                                                         --------------       --------------
Net increase (decrease) in cash                                 (49,632)                  99
Cash at beginning of period                                      67,719               18,053
                                                         --------------       --------------

Cash at end of period                                    $       18,087       $       18,152
                                                         ==============       ==============

Supplemental cash flow information:
  Cash paid for interest expense                         $       12,500       $           --
                                                         ==============       ==============

  Cash paid for income taxes                             $           --       $           --
                                                         ==============       ==============
</TABLE>

       See Notes to Unaudited Condensed Consolidated Financial Statements


                                       4
<PAGE>

                    NetFabric Holdings, Inc. and Subsidiaries
         Notes to Unaudited Condensed Consolidated Financial Statements

1.       Nature of Business

         NetFabric Holdings, Inc. ("Holdings" or the "Company") (formerly known
         as Houston Operating Company, Inc.) was incorporated under the laws of
         the State of Delaware on August 31, 1989. On December 9, 2004, Holdings
         entered into an Exchange Agreement (the "Acquisition Agreement" or
         "Share Exchange") with all of the stockholders of NetFabric Corporation
         ("NetFabric") whereby Holdings acquired all of the issued and
         outstanding capital stock of NetFabric and NetFabric became a
         wholly-owned subsidiary of Holdings. Upon completion of the merger, the
         NetFabric stockholders controlled approximately 95% of the then issued
         and outstanding common stock. NetFabric's business activities were the
         activities of the merged Company and Holdings was a shell corporation
         without any operations. As a result of these factors, this transaction
         was treated as a reverse merger, and a capital transaction, equivalent
         to the issuance of stock by NetFabric for Holdings' net assets, and
         accordingly, the historical financial statements prior to December 9,
         2004 are those of NetFabric. (Holdings and its subsidiaries are
         collectively referred to as "Holdings").

         NetFabric, a Delaware corporation incorporated on December 17, 2002,
         began operations in July 2003. NetFabric develops and markets a family
         of Internet Protocol ("IP") appliances that simplifies the integration
         of standard telephone systems with an IP infrastructure.

         On May 20, 2005, Holdings entered into and closed on a share exchange
         agreement ("Exchange Agreement"), whereby Holdings acquired all of the
         issued and outstanding shares of UCA Services, Inc. ("UCA Services"), a
         New Jersey company, from its shareholders in exchange for the issuance
         of 24,096,154 shares of common stock of Holdings (See Note 3). Holdings
         emerged from the development stage upon the acquisition of UCA
         Services.

2.       Basis of Presentation and Summary of Significant Accounting Policies
         and Practices

         Basis of Presentation / Interim Financial Statements

         The accompanying unaudited condensed consolidated financial statements
         have been prepared pursuant to the rules and regulations of the
         Securities and Exchange Commission ("SEC"). Certain information and
         footnote disclosures normally included in financial statements prepared
         in accordance with accounting principles generally accepted in the
         United States of America have been omitted pursuant to such rules and
         regulations. However the Company believes that the disclosures are
         adequate to make the information presented not misleading. The
         financial statements reflect all adjustments (consisting only of normal
         recurring adjustments) that are, in the opinion of management,
         necessary for a fair presentation of the Company's financial position
         and results of operations. The operating results for the three and six
         months ended June 30, 2005 and 2004 are not necessarily indicative of
         the results to be expected for any other interim period of any future
         year. The accompanying unaudited condensed consolidated financial
         statements should be read in conjunction with the Company's December
         31, 2004 consolidated financial statements, including the notes
         thereto, which are included in the Company's Annual Report on Form
         10-KSB for the fiscal year ended December 31, 2004 and the audited
         financial statements of UCA Services for the year ended December 31,
         2004 included in the Company Form 8-K filed on August 3, 2005.

         As shown in the accompanying condensed consolidated financial
         statements, the Company has an accumulated deficit of $3,674,857 and
         has a working capital deficit of $2,589,196 at June 30, 2005.
         Management recognizes that the Company's continuation as a going
         concern is dependent upon its ability to generate sufficient cash flow
         to allow the Company to continue the development of its business plans
         and satisfy its obligations on a timely basis. Management believes that
         such cash flows will be funded by additional equity and/or debt
         financings (See Note 10) through the time in which the Company
         consistently generates sufficient positive cash flows from its
         operations, if ever. However there can be no assurance that
         management's plans will be achieved.

                                       5
<PAGE>

         Consolidation

         The condensed consolidated financial statements include the accounts of
         Holdings and its wholly-owned subsidiaries. All significant
         intercompany transactions and balances have been eliminated.

         Reclassifications

         Certain reclassifications have been made in the prior period
         consolidated financial statements to conform to the current period
         presentation.

         Estimates

         The preparation of the consolidated financial statements in conformity
         with accounting principles generally accepted in the United States of
         America requires management to make estimates and assumptions that
         affect the reported amounts of assets and liabilities and disclosure of
         contingent assets and liabilities at the date of the consolidated
         financial statements and the reported amounts of revenues and expenses
         during the reporting period. The accounting estimates that require
         management's most difficult and subjective judgments include provisions
         for bad debts, depreciable/amortizable lives, impairment of long-lived
         assets, accounting for goodwill and intangible assets, the fair value
         of the Company's common stock, the fair value of options issued for
         services, the allocation of proceeds from the bridge loans to equity
         instruments and other reserves. Because of the uncertainty inherent in
         such estimates, actual results may differ from these estimates.

         Revenue Recognition

         The Company derives revenue from the sale of its communication
         equipment products and as a provider of information technology
         consulting and infrastructure development services.

         In accordance with SEC Staff Accounting Bulletin No. 104, "Revenue
         Recognition," revenue is recognized when persuasive evidence of an
         arrangement exists, delivery of the product or services has occurred,
         the fee is fixed and determinable, collectibility is reasonably
         assured, contractual obligations have been satisfied, and title and
         risk of loss have been transferred to the customer.

         UCA Services derives revenue primarily from professional services,
         managed IT services, application development services and from business
         process management services. Arrangements with customers for services
         are generally on a time and material basis or fixed-price,
         fixed-timeframe. Revenue on time-and-material contracts is recognized
         as the related services are performed. Revenue from fixed-price,
         fixed-timeframe service contracts are recognized ratably over the term
         of the contract, as per the proportional performance method. When the
         Company receives cash advances from customers in advance of the service
         period, amounts are reported as advances from customers until the
         commencement of the service period. Billings and collections in excess
         of revenue recognized are classified as deferred revenue.

         To date NetFabric's communication equipment products have been marketed
         only through a network of distributors and value-added resellers
         ("VAR"). In the VAR channel, NetFabric recognizes revenue at the time
         of shipment if all other contractual obligations to the VAR have been
         satisfied. In the distributor channel, NetFabric recognizes revenue
         when the distributor sells and ships NetFabric products to its own
         VARs, resellers or end-user customers, provided the Company has
         satisfied all other terms and conditions with the distributor.
         Accordingly, NetFabric receives distribution sales and inventory
         information regarding its products from its distributors for the
         purpose of determining the appropriate timing of revenue recognition.

         Both VARs and distributors have limited rights to return products to
         NetFabric but must obtain prior approval from NetFabric before
         returning products, consistent with industry practice. NetFabric has no
         obligation to accept the return of any unsold products. If required,
         the Company accrues a provision for estimated sales returns and other
         allowances and deferrals as a reduction of revenue at the time of
         revenue recognition. To date no sales have been made and as such, no
         provisions for estimated sales returns and other allowances have been
         recognized. The Company has no obligation to provide service, repair,
         counseling or other assistance to any customers of the VARs or
         distributors unless NetFabric has a specific agreement directly with
         such customer.

                                       6
<PAGE>

         Allowance for Doubtful Accounts

         The Company maintains allowances for doubtful accounts for estimated
         losses resulting from the inability of its customers to make required
         payments. These estimated losses are based upon historical bad debts,
         specific customer creditworthiness and current economic trends. If the
         financial condition of a customer deteriorates, resulting in the
         customer's inability to make payments within approved credit terms,
         additional allowances may be required. The Company performs credit
         evaluations of its customers' financial condition on a regular basis.
         The Company recorded allowances for bad debts of $18,284 and $0 during
         the three and six months ended June 30, 2005 and 2004, respectively.

         Inventory

         Inventory consists primarily of finished goods and purchased electronic
         components which are stated at the lower of cost or market. Cost is
         determined by using the first-in, first-out method.

         Fair Value of Financial Instruments

         The fair value of the Company's assets and liabilities that qualify as
         financial instruments under Statement of Financial Accounting Standards
         ("SFAS") No. 107 approximate their carrying amounts presented in the
         consolidated balance sheets at June 30, 2005 and December 31, 2004.

         Business Concentrations and Credit Risk

         Financial instruments that potentially subject the Company to
         concentrations of credit risk consist primarily of cash and accounts
         receivable. The Company reduces credit risk by placing its cash with
         major financial institutions with high credit ratings. At times, such
         amounts may exceed Federally insured limits. The Company reduces credit
         risk related to accounts receivable by routinely assessing the
         financial strength of its customers and maintaining an appropriate
         allowance for doubtful accounts.

         The Company's services have been provided primarily to a limited number
         of clients located worldwide in a variety of industries. The Company
         had revenues from 2 clients representing 46% (34% and 12%,
         respectively) of revenues during the three months ended June 30, 2005.
         The Company had revenues from 2 clients representing 46% (34% and 12%,
         respectively) of revenues for the six months ended June 30, 2004.

         The Company generally does not require its clients to provide
         collateral. Additionally, the Company is subject to a concentration of
         credit risk with respect to its accounts receivable. The Company had 3
         clients accounting for 49% (28%, 11% and 10%) of total gross accounts
         receivable as of June 30, 2005.

         Goodwill and Other Intangibles

         Goodwill and other intangibles represent the Company's preliminary
         allocation of the estimated cost to acquire UCA Services in excess of
         the fair value of net assets acquired. The allocation is preliminary
         and subject to change based on finalization of the Company's valuation.
         The actual purchase price allocation, to reflect the fair values of
         assets acquired and liabilities assumed, will be based upon
         management's ongoing evaluation. Accordingly, the final allocation of
         the purchase price may differ significantly from the preliminary
         allocation.

         Under SFAS No. 142 Goodwill and Other Intangible Assets, goodwill is
         not amortized but is reviewed for impairment annually, as well as when
         a triggering event indicates impairment may have occurred.

                                       7
<PAGE>

         The goodwill test for impairment consists of a two-step process that
         begins with an estimation of the fair value of the reporting unit. The
         first step of the process is a screen for potential impairment and the
         second step measures the amount of impairment, if any. The Company will
         perform a goodwill impairment test annually, as well as when a
         triggering event indicating impairment may have occurred.

         Stock-Based Compensation

         The Company accounts for stock options granted to employees using the
         intrinsic value method in accordance with the provisions of Accounting
         Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
         to Employees" ("APB Opinion No. 25"), and related interpretations.

         As such, compensation expense to be recognized over the related vesting
         period is generally determined on the date of grant only if the current
         market price of the underlying stock exceeds the exercise price. SFAS
         No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"),
         permits entities to recognize as expense over the vesting period the
         fair value of all stock-based awards on the date of grant.
         Alternatively, SFAS No. 123 allows entities to continue to apply the
         provisions of APB Opinion No. 25 and provide pro forma net income
         (loss) disclosures for employee stock option grants as if the
         fair-value-based method defined in SFAS No. 123 had been applied. The
         Company has elected to continue to apply the provisions of APB Opinion
         No. 25 and provide the pro forma disclosures required by SFAS No. 123.

         If compensation expense for stock options awarded to employees had been
         determined in accordance with SFAS No. 123, the Company's pro forma net
         loss would have been as follows:

<TABLE>
<CAPTION>
                                                           Six months ended, June 30,           Three months ended, June 30,
                                                        -------------------------------       -------------------------------
                                                           2005               2004               2005               2004
                                                        ------------       ------------       ------------       ------------
<S>                                                              <C>                <C>                <C>                <C>
        Net loss, as reported                           $ (2,154,032)      $   (296,821)      $ (1,146,102)      $   (214,542)
        Stock based employee compensation recorded            22,515                 --              4,207                 --
                                                        ------------       ------------       ------------       ------------
        Sub-total                                         (2,131,517)          (296,821)        (1,141,895)          (214,542)
                                                        ------------       ------------       ------------       ------------
        Stock-based employee compensation expense
        determined under fair value method                   466,401              5,226            175,364              4,318
                                                        ------------       ------------       ------------       ------------
        Pro forma net loss, as adjusted                 $ (2,597,918)      $   (302,047)      $ (1,317,259)      $   (218,860)
                                                        ============       ============       ============       ============
        Loss per share:
        Basic and diluted-as reported                   $      (0.05)      $      (0.01)      $      (0.02)      $      (0.01)
        Basic and diluted-pro forma                     $      (0.06)      $      (0.01)      $      (0.03)      $      (0.01)
</TABLE>

         The estimated value of the options is amortized over their vesting
         periods of one to four years for pro forma disclosure only.

         Earnings per Share

         The Company calculates earnings per share in accordance with SFAS No.
         128, "Earnings per Share." SFAS No. 128 computes basic earnings (loss)
         per share by dividing the net income (loss) by the weighted average
         number of shares of common stock outstanding during the period. Diluted
         earnings per share are computed by dividing the net income (loss) by
         the weighted average number of shares of common stock outstanding
         during the period plus the effects of any dilutive securities. Diluted
         earnings per share consider the impact of potentially dilutive
         securities except in periods in which there is a loss because the
         inclusion of the potential common shares would have an anti-dilutive
         effect. The Company's potentially dilutive securities include common
         shares which may be issued upon exercise of its stock options, exercise
         of warrants or conversion of convertible debt.

         Diluted earnings per share for the three and six months ended June 30,
         2005 and 2004 exclude potential common shares of 9,287,526 and
         4,569,227 respectively, primarily related to the Company's outstanding
         stock options, warrants and convertible debt, because the assumed
         issuance of such potential common shares is antidilutive.

                                       8
<PAGE>

         Recent Accounting Pronouncements

         During December 2004, the FASB issued SFAS No. 123R, "Share-Based
         Payment," requiring all share-based payments to employees, including
         grants of employee stock options, to be recognized as compensation
         expense in the consolidated financial statements based on their fair
         values. As amended by the SEC on April 14, 2005, this standard is
         effective for annual periods beginning after December 15, 2005, and
         includes two transition methods. Upon adoption, the Company will be
         required to use either the modified prospective or the modified
         retrospective transition method. Under the modified retrospective
         approach, the previously reported amounts are restated for all periods
         presented to reflect the FASB Statement No. 123 amounts in the income
         statement. Under the modified prospective method, awards that are
         granted, modified, or settled after the date of adoption should be
         measured and accounted for in accordance with SFAS 123R. Unvested
         equity-classified awards that were granted prior to the effective date
         should continue to be accounted for in accordance with SFAS 123 except
         that amounts must be recognized in the income statement. The Company is
         currently evaluating the impact of this standard and its transitional
         alternatives.

         In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an
         amendment of ARB No. 43, Chapter 4 ("SFAS No. 151"). SFAS No. 151
         amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to
         clarify the accounting for abnormal amounts of idle facility expense,
         freight, handling costs, and wasted material (spoilage). Paragraph 5 of
         ARB No. 43, Chapter 4, previously stated that "...under some
         circumstances, items such as idle facility expense, excessive spoilage,
         double freight, and re-handling costs may be so abnormal as to require
         treatment as current period charges..." SFAS No. 151 requires that
         those items be recognized as current-period charges regardless of
         whether they meet the criterion of "so abnormal." In addition, this
         statement requires that allocation of fixed production overheads to the
         costs of conversion be based on the normal capacity of the production
         facilities. The provisions of SFAS No. 151 shall be applied
         prospectively and are effective for inventory costs incurred during
         fiscal years beginning after June 15, 2005, with earlier application
         permitted for inventory costs incurred during fiscal years beginning
         after the date this Statement was issued. The adoption of SFAS No. 151
         is not expected to have a material impact on the Company's financial
         position and results of operations.

                                       9
<PAGE>

         In December 2004, the FASB issued SFAS No. 153, "Exchanges of
         Nonmonetary Assets, an amendment of APB Opinion No. 29" ("SFAS No.
         153"). The guidance in APB Opinion No. 29, Accounting for Nonmonetary
         Transactions, is based on the principle that exchanges of nonmonetary
         assets should be measured based on the fair value of assets exchanged.
         The guidance in that Opinion, however, included certain exceptions to
         that principle. This Statement amends Opinion 29 to eliminate the
         exception for nonmonetary exchanges of similar productive assets that
         do not have commercial substance. A nonmonetary exchange has commercial
         substance if the future cash flows of the entity are expected to change
         significantly as a result of the exchange. SFAS No. 153 is effective
         for nonmonetary exchanges occurring in fiscal periods beginning after
         June 15, 2005. The adoption of SFAS No. 153 is not expected to have a
         material impact on the Company's financial position and results of
         operations.

         In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and
         Error Corrections--a replacement of APB Opinion No. 20 and FASB
         Statement No. 3" ("SFAS No. 154"). SFAS 154 changes the requirements
         for the accounting for, and reporting of, a change in accounting
         principle. SFAS 154 requires that a voluntary change in accounting
         principle be applied retrospectively with all prior period financial
         statements presented using the new accounting principle. SFAS No. 154
         is effective for accounting changes and corrections of errors in fiscal
         years beginning after December 15, 2005. The implementation of SFAS 154
         is not expected to have a material impact on the Company's consolidated
         financial statements.

3.       Acquisition

         The Company acquired UCA Services on May 20, 2005. Pursuant to the
         terms of the Exchange Agreement, Holdings acquired all of the issued
         and outstanding shares of UCA Services from the UCA Services'
         shareholders in exchange for the issuance of 24,096,154 shares of
         common stock of Holdings. The acquisition of UCA Services allows the
         Company to enter the IT services industry and is strategic to the
         NetFabric IP equipment development.

         The acquisition was accounted for as a business combination with
         Holdings as the acquirer. Under the purchase method of accounting, the
         assets and liabilities of UCA Services acquired by Holdings are
         recorded as of the acquisition date at their respective fair values,
         and added to those of Holdings, and the results of UCA Services have
         been included with those of the Company since the date of acquisition.

         The preliminary purchase price of $34,166,977 consists of $32,770,769
         of common stock, $187,000 of acquisition costs and the assumption of
         $1,209,208 of net liabilities. The fair value of Holdings' common stock
         issued in exchange for the shares of UCA Services was based on the
         average closing market price of NetFabric Holdings' common stock for a
         period of five days prior and five days subsequent to the share
         exchange.

         The allocation of the preliminary purchase price to the estimated fair
         values of the assets acquired and liabilities assumed as reflected in
         the unaudited condensed consolidated financial statements is
         preliminary and subject to change based on finalization of the
         Company's valuation. The actual purchase price allocation, to reflect
         the fair values of assets acquired and liabilities assumed will be
         based upon management's ongoing evaluation. Accordingly, the final
         allocation of the purchase price may differ significantly from the
         preliminary allocation and such allocation will impact the Company's
         annual goodwill impairment testing and related future impairment
         charge, if any.

         The estimated fair value of the net liabilities assumed in the
         acquisition of UCA Services are as follows:


              Accounts receivable...............................   $  2,153,968
              Property, plant, other assets and equipment.......        190,602
              Accounts payable and accrued expenses.............     (2,481,077)
              Deferred revenue and advances.....................     (1,072,701)
                                                                   -------------

                   Net liabilities assumed......................     (1,209,208)
                                                                   =============

                                       10
<PAGE>


         Summarized below are the pro forma unaudited results of operations for
         the six months and three months ended June 30, 2005 and 2004,
         respectively, as if the results of UCA Services were included for the
         entire periods presented. The pro forma results may not be indicative
         of the results that would have occurred if the acquisition had been
         completed at the beginning of the period presented or which may be
         obtained in the future:

<TABLE>
<CAPTION>
                                                                                       Six Months Ended,
                                                                      -------------------    ---------------------
                                                                          June 30, 2005          June 30, 2004
                                                                      -------------------    ---------------------
<S>                                                                      <C>                     <C>
              Revenues...............................................    $  9,154,682            $    5,966,007
              Net loss...............................................      (3,039,185)                 (142,079)
              Basic and diluted loss per share.......................    $      (0.05)           $           --
              Weighted average common shares outstanding..                 61,140,623                54,581,511
</TABLE>

<TABLE>
<CAPTION>
                                                                                  Three Months Ended
                                                                      -------------------    ---------------------
                                                                          June 30, 2005          June 30, 2004
                                                                      -------------------    ---------------------
<S>                                                                      <C>                     <C>
              Revenues...............................................    $  4,980,848            $    3,210,098
              Net loss...............................................      (2,031,255)                  (59,800)
              Basic and diluted loss per share.......................    $      (0.03)           $           --
              Weighted average common shares outstanding..                 61,748,358                55,237,110
</TABLE>




4.       Bridge Loans

         earnings per share consider the impact of potentially dilutive


         was amended on December 2, 2004 (the "Financing Agreement") with
         Macrocom Investors, LLC, ("Macrocom") whereby Macrocom provided a loan
         to NetFabric in the amount of $500,000 ("Loan I") for a period of 180
         days from the original date of the Financing Agreement ("Due Date") at
         an annual simple interest rate of 5%. On the Due Date, the Company had
         the option to repay the principal in cash or in kind by issuing
         1,000,000 shares of common. In either event, the interest on Loan I is
         payable in cash on the Due Date. In January 2005, in accordance with
         the terms of the Financing Agreement, the Company elected to repay the
         principal of Loan I in kind by issuing 1,000,000 shares of common
         stock. Additionally, in connection with the Financing Agreement the
         Company issued to Macrocom 250,000 shares of common stock as additional
         consideration for Loan I in December 2004.

         On October 14, 2004, NetFabric and Macrocom entered into a loan
         agreement which was amended on December 2, 2004 (the "Loan Agreement"),
         whereby Macrocom agreed to loan an additional $500,000 to NetFabric
         ("Loan II" or the "Second Loan"), due 180 days from the original date
         of the Loan Agreement ("Second Due Date") at an annual simple interest
         rate of 5%. On the Second Due Date, at the option of Macrocom, Macrocom
         can convert the principal of the Second Loan into 1,000,000 shares of
         common stock or demand repayment of the principal in cash. In either
         event, the interest on the Second Loan is payable in cash on the Second
         Due Date. In addition, in December 2004 the Company issued to Macrocom
         250,000 shares of common stock as additional consideration for the
         Second Loan. As noted below, on the Second Due Date in April 2005
         Macrocom did not request repayment or conversion to common stock of
         Loan II.

         As a result of these transactions, total debt discounts on Loan I and
         Loan II (the "Bridge Loans"), including the value of the beneficial
         conversion feature, of $411,403 were recorded in 2004.

         During the three and six months ended June 30, 2005, $132,353 and
         $354,226, respectively, of the discounts were amortized into interest
         expense on the accompanying statements of operations. There was no
         amortization of debt discount during the three and six months ended
         June 30, 2004.

         On May 24, 2005, NetFabric and Macrocom entered into an agreement to
         amend the Financing Agreement between the parties. Under the terms of
         the amendment, the due date for Loan II has been extended from April
         10, 2005 until October 10, 2005. At the same time and in connection
         with the extension of the due date for Loan II, Marcrocom and Holdings
         also amended the terms of the Financing Agreement with respect to a
         warrant Macrocom originally received on December 9, 2004 (Note 5). The
         warrant was set to expire on June 7, 2005; however, the parties agreed
         to extend the term of the warrant until December 9, 2006. As a result
         of these changes in terms, a debt discount of $392,196 was recorded on
         April 11, 2005.

                                       11
<PAGE>

5.       Stockholders' Equity

         In addition to the Bridge Loan transactions (Note 4), during 2004
         Macrocom entered into a commitment with NetFabric to purchase common
         stock of Holdings subsequent to the Closing Date, under certain terms.
         Pursuant to this financing commitment, in two separate closings in
         January and March 2005 the Company sold an aggregate of 2,000,000
         shares of common stock to Macrocom resulting in aggregate proceeds of
         $1,000,000 or $0.50 per share. Additionally, under this arrangement,
         Macrocom received 250,000 shares of common stock and a six-month
         warrant to purchase 2,000,000 shares of common stock at a purchase
         price of $1,500,000 (the "Macrocom Warrant"), provided that the closing
         price of the merged entity's common stock on the day immediately
         preceding the exercise of the warrant is less than $2.00 per share. The
         value of this additional consideration paid to Macrocom as part of this
         financing commitment, totaling $368,683, has been recorded as offering
         costs and offset against the proceeds of the additional purchases of
         common stock in 2005. The term of the Macrocom Warrant was extended in
         April 2005 (Note 4).

6.       Stock-Based Compensation

         During the three months ended June 30, 2005 and 2004 the Company
         recognized nonemployee compensation expenses of $5,157 and $15,013,
         respectively, as a result of the vesting of options, which is included
         in general and administrative expenses on the accompanying consolidated
         statements of operations. During the six months ended June 30, 2005 and
         2004 the Company recognized nonemployee compensation expenses of
         $10,313 and $30,026, respectively, as a result of the vesting of
         options, which is included in general and administrative expenses on
         the accompanying consolidated statements of operations.

7.       Related Party Transactions

         Loans and advances payable to stockholders and officers on the
         accompanying consolidated balance sheet at June 30, 2005 represent
         amounts owed to stockholders of the Company for advances of cash
         provided to the Company. During June 2005, approximately $370,000 was
         advanced from stockholders.

         After the acquisition of UCA Services in May 2005, certain shareholders
         of the Company are also the owners of UCA Computer Systems, Inc.
         ("Systems"), a computer hardware company with which UCA Services has
         historically had transactions with.

         The Company subleases certain office space and incurs occupancy related
         costs under an agreement with Systems, whereby the Company pays rent
         and other occupancy costs based on the proportion of square footage
         occupied by the Company in the Systems office facility. Rent and
         occupancy expenses incurred by the Company under this agreement, which
         commenced on May 20, 2005, was $6,114 and is included in selling,
         general and administrative expenses during the three months ended June
         30, 2005.

         In connection with delivering hardware and software to certain of its
         customers, Systems has engaged the Company to assist with certain
         elements of its customer contracts, including, but not limited to,
         hardware and software configuration and implementation. Such services
         are provided to Systems pursuant to an arrangement between the
         companies. From May 20, 2005, the date of acquisition of UCA Services,
         through June 30, 2005 the Company has not provided any services to
         Systems.

         From time to time, prior to the acquisition of UCA Services by the
         Company, UCA Services provided short-term borrowings to Systems and
         received short-term borrowings from Systems to meet working capital
         needs. At June 30, 2005 the net amount due from Systems of $779,870,
         consisting of $255,746 in trade accounts receivable related to services
         provided by UCA Services and $524,124 of amounts due to Systems for
         advances of cash and accounts payable. On May 17, 2005 UCA Services and
         Systems entered into an unsecured Non-Negotiable Promissory Note (the
         "Systems Note") whereby the net amount due to UCA Services from Systems
         of $779,870 was aggregated into the Systems Note. The Systems Note
         provides for interest at a rate equal to the minimum applicable federal
         rate of interest per annum and for equal monthly payments from Systems
         to UCA Services over a period of thirty-six months commencing on June
         1, 2005. Due to uncertainties related to the realizability of the
         amounts due from Systems, the entire balance due from affiliate, which
         was acquired by Holdings as part of the acquisition of UCA Services,
         had been fully reserved for by UCA Services prior to the acquisition by
         the Company and continues to be fully reserved for as of June 30, 2005.

         Other Relationship
         Included in accounts receivable at June 30, 2005, is $37,720 due from
         Flagship HealthCare Management, Inc. ("Flagship"), a company related to
         the Company through common ownership. No services have been provided to
         Flagship during 2005.

8.       Segments

         SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
         Information" established standards for reporting information about
         operating segments in financial statements. Operating segments are
         defined as components of an enterprise engaging in business activities
         about which separate financial information is available that is
         evaluated by the chief operating decision maker or group in deciding
         how to allocate resources and in assessing performance. The Company
         operates in two business segments: Internet Protocol and Information
         Technology Services. These reportable segments are strategic business
         units that are in different phases of development that the Company
         manages and finances separately based on the fundamental differences in
         their operations. The Company defines segment earnings as earnings
         before interest, taxes, depreciation and amortization and other charges
         determined to be non-recurring in nature, such as restructuring and
         impairment charges.

                                       12
<PAGE>

         Information about the Company operating segments, the presentation of
         which reflects changes in information that is now being made available
         to the Company's chief operating decision maker, is as follows:

<TABLE>
<CAPTION>
                                         IT
                                      Services            IP            Corporate          Total
                                    ------------     ------------     -------------     ------------
<S>                                 <C>              <C>              <C>               <C>
Three Months Ended June 30, 2005
Revenues                            $  2,273,330     $         --     $          --     $  2,273,330
Earnings before interest, taxes,
depreciation and amortization            (84,497)        (716,290)         (167,678)        (968,465)
Net loss                                 (90,567)        (887,857)         (167,678)      (1,146,102)
Total assets                          36,851,080          515,206                --       37,366,286

Six months Ended June 30, 2005
Revenues                            $  2,273,330     $         --     $          --     $  2,273,330
Earnings before interest, taxes,
depreciation and amortization            (84,497)      (1,398,953)         (244,831)      (1,728,281)
Net loss                                 (90,567)      (1,818,634)         (244,831)      (2,154,032)
Total assets                          36,851,080          515,206                --       37,366,286
</TABLE>


         Prior to the acquisition of UCA Services on May 20, 2005, the Company
         did not have operating segments.

9.       Supplemental Disclosure of Non-cash Investing and Financing Activities

<TABLE>
<CAPTION>
                                                                Six Months Ended    Six Months Ended
                                                                  June 30, 2005      June 30, 2004
                                                                   (Unaudited)        (Unaudited)
                                                                ----------------    ----------------
<S>                                                             <C>                 <C>
Settlement of bridge loan with common stock                     $       500,000     $           --

Non-cash offering costs, netted against proceeds from
sales of common stock                                           $       368,683     $           --

Common stock issued in the acquisition of UCA Services          $    32,770,769     $           --

Imputed discount on bridge loans relating to warrants           $       392,196     $           --

Deferred employee stock option compensation                     $        67,500     $           --
</TABLE>

10.      Subsequent Events

         Standby Equity Distribution Agreement

         On July 5, 2005, the Company entered into a Standby Equity Distribution
         Agreement (the "SEDA") with Cornell Capital Partners, LP ("Cornell").
         Pursuant to the SEDA, the Company may, at its discretion, periodically
         sell to Cornell shares of common stock, for a total purchase price of
         up to Ten Million Dollars ($10,000,000). For each share of common stock
         purchased under the SEDA, Cornell will pay the Company ninety-eight
         percent (98%) of the lowest volume weighted average price of the
         Company's common stock as quoted by Bloomberg, LP on the
         Over-the-Counter Bulletin Board or other principal market on which the
         Company's common stock is traded for the five (5) days immediately
         following the notice date. Cornell will also retain five percent (5%)
         of each advance under the SEDA. Cornell's obligation to purchase shares
         of the Company's common stock under the SEDA is subject to certain
         conditions, including the Company obtaining an effective registration
         statement for shares of common stock sold under the SEDA and is limited
         to Seven Hundred Fifty Thousand Dollars ($750,000) per weekly advance.

                                       13
<PAGE>

         The Company has also issued to Cornell a warrant (the "Cornell
         Warrant") to purchase, at Cornell's discretion, up to 560,000 shares of
         common stock at the Warrant Exercise Price as defined in the Cornell
         Warrant.

         On July 5, 2005, in connection with the SEDA, Cornell received a
         commitment fee of 680,000 shares of common stock. On July 5, 2005, the
         Company issued to Newbridge Securities Corporation 7,142 shares of
         common stock under the Placement Agent Agreement in connection with the
         SEDA. Both the value of the commitment fee and the placement fee will
         be accounted for as costs of the SEDA resulting in a charge directly to
         stockholders equity, which will be offset by an equivalent increase in
         equity for the issuance of the shares.

         Securities Purchase Agreement

         On July 5, 2005, the Company entered into an agreement (the "Securities
         Purchase Agreement") pursuant to which the Company shall sell to
         Cornell, and Cornell shall purchase from the Company, secured
         convertible debentures (the "Cornell Debentures") in the aggregate
         principal amount of One Million Dollars ($1,000,000), which are
         convertible, at Cornell's discretion, into common stock. A Four Hundred
         Thousand Dollar ($400,000) Debenture was funded in July 2005, and a Six
         Hundred Thousand Dollar ($600,000) Debenture shall be funded two (2)
         business days prior to the filing date of the registration statement.
         The Debentures are convertible, in whole or in part, at any time and
         from time to time until maturity at a fixed price of $0.50 per share,
         subject to certain limitations as provided therein. Each Debenture has
         a term of (1) year, piggy-back registration rights, a redemption
         premium equal to fifteen percent (15%) per year and accrues interest at
         a rate equal to five percent (5%) per year. As collateral for the
         Cornell Debentures, both the Company and certain officers and
         shareholders have pledged certain assets and common shares of the
         Company to secure the Company's obligations under the Securities
         Purchase Agreement. As noted above in connection with the Cornell
         Debentures, the Company issued Cornell warrants to acquire 560,000
         shares of its common stock at an exercise price $0.50 per share as
         additional consideration. The Company will allocate the proceeds of the
         Cornell Debenture based on the computed relative fair values of the
         debt and equity components noted above. The Cornell Debentures will be
         accounted for as debt with any debt issuance costs or debt discounts
         charged to interest expense over the term of the Cornell Debentures.

         Convertible Debenture

         On July 19, 2005, the Company sold, a Convertible Debenture (the
         "Marcrocom Debenture") in the face amount of $500,000 to Marcrocom. The
         Marcrocom Debenture bears interest at 5% and is due on April 15, 2006.
         At the option of Marcrocom, the Marcrocom Debenture can be converted
         into shares of the Company's common stock at a conversion price of $.50
         per share. In connection with the sale, the Company issued Marcrocom
         warrants to acquire 1,000,000 shares of its common stock at an exercise
         price $1.50 per share. The warrants expire in three years from the date
         of issuance. The Company also issued to Marcrocom 375,000 shares of its
         common stock as additional consideration. As collateral for the
         Debenture, the Company has placed with an escrow agent 5,000,000 shares
         of its common stock. The Company will allocate the proceeds of the
         Macrocom Debenture based on the computed relative values of the debt
         and equity components noted above. The amounts allocated to the equity
         components will be recorded as a debt discount at the date of issuance
         of the Macrocom Debenture and will be amortized to interest expense
         using the effective interest method over the stated term of the
         Macrocom Debenture. The Company anticipates that the amount of
         aggregate debt discounts will approximate the face amount of the
         Macrocom Debenture.

                                       14
<PAGE>

         On July 19, 2005, the Company sold to a stockholder and an entity
         affiliated with an officer of the Company, convertible debentures in
         the face amount of $50,000 each. These debentures were sold on
         substantially similar terms as the Marcrocom Debenture. However, the
         Company did not provide any collateral.


                                       15

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

REVIEW OF OPERATIONS

         The following discussion and analysis of the Company's financial
condition and results of operations should be read in conjunction with the
condensed consolidated financial statements and accompanying notes and the other
financial information appearing elsewhere in this report and reports included
herein by reference. The following discussion contains forward-looking
statements that reflect the Company's plans, estimates and beliefs. Our actual
results could differ materially from those discussed in the forward-looking
statements.

         The Company's independent registered public accounting firm has
indicated in their report dated March 30, 2005 on the Company's December 31,
2004 financial statements that the Company is in the development stage, has had
net losses from inception and has working capital and net capital deficiencies.
The report indicates that these matters raise substantial doubt about the
Company's ability to continue as a going concern. The Company's plan with regard
to this matter is discussed elsewhere in this document. The condensed
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

CORPORATE HISTORY

         NetFabric Holdings, Inc., formerly Houston Operating Company,
("NetFabric Holdings" or the "Company") was incorporated in Delaware in August
of 1989, and has not had operations since before 2002. NetFabric Corporation
("NetFabric") was incorporated in the State of Delaware on December 17, 2002, as
a new corporation and not as a result of a material re-classification, merger,
consolidation, purchase or divestiture. On December 9, 2004, the Company entered
into an acquisition agreement ("Acquisition Agreement") with all of the
stockholders of NetFabric in a transaction that was accounted for as a reverse
merger whereby NetFabric was treated as the accounting acquirer ("Acquisition").
At the closing, which occurred at the same time as the execution of the
Acquisition Agreement, the Company acquired all of the issued and outstanding
capital stock of NetFabric from the stockholders in exchange for an aggregate of
32,137,032 newly-issued shares of the Company's common stock. On April 19, 2005,
the Company's name was changed from Houston Operating Company to NetFabric
Holdings, Inc. and its stock symbol was changed from OTC.BB: HOOC to OTC.BB:
NFBH.

UCA SERVICES, INC. ACQUISITION

         On May 20, 2005, the Company entered into and closed on a share
exchange agreement, whereby the Company purchased all of the issued and
outstanding shares of UCA Services, Inc. ("UCA") from its shareholders in
exchange for the issuance of 24,096,154 shares of the common stock of the
Company, valued at $32.7 million, based on the average quoted market price of
the Company's common stock at the time of the acquisition. Including the net
assumed liabilities of $1.2 million, the preliminary purchase price is
approximately $34.1 million. UCA is an information technology ("IT") solutions
company that serves the information and communications needs of a wide range of
Fortune 500 and small to mid-size business clients in the financial markets
industry as well as the pharmaceutical, health care and hospitality sectors. UCA
delivers a broad range of IT consulting and infrastructure development services,
including multi-year managed services contracts, via an integrated network of
branch offices and alliance partners in the United States, Canada, Europe and
India. UCA's services include solutions in the practice areas of infrastructure
builds and maintenance, application development and maintenance, business
process managed services and professional IT services.

         The acquisition was accounted using the purchase method of accounting
with the results of the acquisition included in the consolidated financial
statements from the date of acquisition.

                                      -16-
<PAGE>

         UCA derives revenues primarily from professional services, managed IT
services, application development services and from business process management
services. Arrangements with customers for services are generally on a time and
material basis or fixed-price, fixed-timeframe revenue.

OVERVIEW

          Prior to acquiring UCA, the Company was a provider of hardware and
services to the burgeoning sector of the telecom industry that utilizes the
Internet for telephone and data communications. Specifically, the Company offers
distributed Voice over Internet Protocol ("VoIP") platforms, as well as Services
over IP ("SoIP") solutions, that provide small to mid-sized Businesses ("SMB"s)
and Enterprise Branch Offices ("EBO"s) with a flexible migration path to an
all-IP infrastructure. The large and very lucrative market of more than 4.9
million SMBs and EBOs that the Company targets is sometimes referred to
collectively in this document as "Small offices." The Company develops and
markets small office Customer Premises Equipment ("CPE") in the form of
integrated telephony services platforms that provide businesses with a flexible
VoIP migration path from a legacy PBX to IP soft switch. The Company will build
and deploy the server side of the advanced Services over IP that enable its
distributed edge devices to deliver to Small Offices the improved business
efficiencies, competitive advantages and significant cost savings of IP that
previously were only available to larger enterprises.


         The Company markets and sells its products to SMBs through Value Added
Resellers ("VAR"s), Service Providers and OEM relationships, and will sell to
Fortune 500 EBO customers, through a direct consultative sales organization. To
date, the Company's VoIP operations have generated very minimal revenues.
Further, there can be no assurance that the Company will generate meaningful
revenues from its VoIP operations in the future.

          Although VoIP deployment within large enterprise and residential
markets is moving forward rapidly, the adoption of VoIP for use in Small Offices
has, until now, been lagging. Given that this market could benefit significantly
from the inherent cost-savings, flexibility and productivity gains of VoIP,
offering a product that allows Small Offices to migrate to VoIP without the
risks of undertaking a large equipment upgrade is extremely attractive to the
Company's partners. The VAR channel that serves this market requires a solution
that is easy to sell, install and support. By definition, the Company designed
its products to be simple to explain, install, configure and support so as to
attract the largest number of partners selling to the Small Office market.

          As previously noted, the December 9, 2004 acquisition was accounted
for as a reverse merger whereby NetFabric was treated as the accounting
acquirer. Accordingly, the historical financial statements of NetFabric have
been presented for all periods required. NetFabric began operations in January
2003 and was a development stage company until the UCA acquisition in May 2005.
The Company's operating activities until the UCA acquisition consisted primarily
of developing its VoIP telephony products for the marketplace, including the
acceleration of research and development activities, hiring of additional
Company personnel (primarily for research and development, but also sales and
marketing personnel), development of sales, marketing programs and filing of
product patents.

                                      -17-
<PAGE>

RESULTS OF OPERATIONS

Comparison of three and six months ended June 30, 2005 and 2004:

         As previously noted, the December 9, 2004 acquisition has been
accounted for as a reverse merger whereby NetFabric was treated as the
accounting acquirer. Accordingly, the historical financial statements of
NetFabric have been presented for all periods required. NetFabric began
operations in January 2003 and was a development stage company until the UCA
acquisition. The UCA acquisition of UCA was accounted using the purchase method
of accounting with the results of the operations included in the Company's
consolidated financial statements from the date of acquisition.

Revenues. Revenues for the three and six months ended June 30, 2005, increased
by $2,273,330 compared to the same periods of the prior year. The increase was
due to the UCA acquisition. Prior the UCA acquisition, the Company did not have
any revenues during the periods reported. The Company anticipates that its
revenues will increase for the remainder of 2005 due to the UCA acquisition. On
a pro forma basis, UCA had revenues of $9,154,682 for the six months ended June
30, 2005 compared to $5,966,007 in comparable period in 2004 due to increased
levels of activity.

Direct employee compensation and consultant expenses. For the three months ended
June 30, 2005, direct employee compensation and consultant expenses increased by
$1,751,031 to $1,778,075. For the six months ended June 30, 2005, direct
employee compensation and consultant expenses increased by $1,746,089 to
$1,780,808 compared to the same period of the prior year. The increases were due
to increased revenues resulting from the UCA acquisition. The Company
anticipates direct employee compensation and consultant expenses to increase for
the remainder of 2005 in line with the anticipated increase in its revenues.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased for the three and six months ended June 30,
2005 by $1,088,994 and $1,636,998, respectively, compared to the same periods of
the prior year. Increases were, in part, due to the UCA acquisition and, in
part, due to an increased level of marketing activities in 2005. In addition, in
2005 the Company incurred additional expenses for professional fees and others
costs due to being a public company.

Research and development. Research and development expenses for the three and
six months ended June 30, 2005, were $187,477 and $321,952, respectively. These
expenses mainly represented the product development costs for the Company's VoIP
products including associated engineering wages.

Interest and bank charges. Interest and bank charges for the three months ended
June 30, 2005 was $155,019 compared to $249 during the comparable period in
2004. Interest and bank charges for the six months ended June 30, 2005 was
$387,843 compared to $249 during the comparable period in 2004. Increases were
due to interest expense on bridge loans and the amortization of debt discount
resulting from the allocation of value to certain equity instruments issued in
connection with debt in 2004.

Depreciation and amortization. For the three months and six ended June 30, 2005,
depreciation and amortization was $22,618 and $37,908, respectively, due to
additional assets arising from the UCA acquisition and due to depreciation on
equipment and purchased software acquired by the Company in late 2004 and 2005.

                                      -18-
<PAGE>

Net loss. As a result of the foregoing, for the three months ended June 30,
2005, net loss increased by $931,560 to a loss of $1,146,102 compared to a net
loss of $214,542 for the corresponding period in 2004. For the six months ended
June 30, 2005, net loss increased by $1,857,211 to a loss of $2,154,032 compared
to a net loss of $296,821 for the corresponding period in 2004.

LIQUIDITY AND CAPITAL RESOURCES

         At June 30, 2005 our working capital deficiency was $2,589,196 compared
to a working capital deficiency of $853,317 at December 31, 2004. The increase
in the working capital deficiency was due to a negative working deficiency the
Company assumed in the UCA acquisition and due to operating losses. During the
six months ended June 30, 2005, the Company utilized cash from its operating
activities of approximately $1,154,000.

         On July 22, 2004, the Company entered into a Financing Agreement which
was amended on December 2, 2004 (the "Financing Agreement") with Macrocom
Investors, LLC, ("Macrocom") whereby Macrocom provided a loan to the Company in
the amount of $500,000 ("Loan I") for a period of 180 days from the original
date of the Financing Agreement ("Due Date") at an annual simple interest rate
of 5%. In January 2005, in accordance with the terms of the Financing Agreement,
the Company elected to repay the principal of Loan I in kind by issuing
1,000,000 shares of common stock.

         During the first quarter of 2005, Macrocom completed its financing
commitment to the Company, as required under the terms of the Financing
Agreement, generating $1,000,000 of gross proceeds to the Company in exchange
for the shares of the Company's common stock.

         On May 24, 2005, the Company and Macrocom entered into an agreement to
amend the Financing Agreement between the parties. Under the terms of the
amendment, the due date for Loan II has been extended from April 10, 2005 until
October 10, 2005. At the same time and in connection with the extension of the
due date for Loan II, Macrocom and the Company also amended the terms of the
Financing Agreement with respect to warrant Macrocom originally received on
December 9, 2004. The warrant was set to expire on June 7, 2005; however, the
parties have agreed to extend the term of the warrant so that it expires on
December 9, 2006.

         During the six months ended June 30, 2005, stockholders of the Company
and an entity affiliated with an officer of the Company loaned the Company
aggregate of $370,000 to enable the Company to meet its working capital
requirements.

          On July 5, 2005, the Company entered into an agreement (the
"Securities Purchase Agreement") pursuant to which the Company shall sell to
Cornell, and Cornell shall purchase from the Company, secured convertible
debentures (the "Cornell Debentures") in the aggregate principal amount of One
Million Dollars ($1,000,000), plus accrued interest, which are convertible, at
Cornell's discretion, into Common Stock. A Four Hundred Thousand Dollar
($400,000) debenture was funded on the fifth (5th) business day following the
date of the Securities Purchase Agreement, and a Six Hundred Thousand Dollar
($600,000) debenture shall be funded two (2) business days prior to the filing
date of the registration statement. The Debentures are convertible, in whole or
in part, at any time and from time to time until maturity at a fixed price of
$.50 per share , subject to certain limitations as provided therein. Each
Debenture has a term of (1) year, piggy-back registration rights and accrue
interest at a rate equal to five percent (5%) per year.

                                      -19-
<PAGE>

            On July 5, 2005, the Company entered into a Standby Equity
Distribution Agreement (the "SEDA") with Cornell Capital Partners, LP
("Cornell"). Pursuant to the SEDA, the Company may, at its discretion,
periodically sell to Cornell shares of common stock, for a total purchase price
of up to Ten Million Dollars ($10,000,000). For each share of common stock
purchased under the SEDA, Cornell will pay the Company ninety-eight percent
(98%) of the lowest volume weighted average price of the Company's common stock
as quoted by Bloomberg, LP on the Over-the-Counter Bulletin Board or other
principal market on which the Company's common stock is traded for the five (5)
days immediately following the notice date.

            Cornell will also retain five percent (5%) of each advance under the
SEDA. Cornell's obligation to purchase shares of the Company's common stock
under the SEDA is subject to certain conditions, including the Company obtaining
an effective registration statement for shares of common stock sold under the
SEDA, and is limited to Seven Hundred Fifty Thousand Dollars ($750,000) per
weekly advance. The transaction is subject to satisfaction of several conditions
and there can be no assurance that the Company will in fact complete the
transaction.

         The Company sold on July 19, 2005, a Convertible Debenture (the
"Marcrocom Debenture") in the face amount of $500,000 to Marcrocom. The
Marcrocom Debenture bears interest at 5% and is due on April 15, 2006. At the
option of Marcrocom, the Marcrocom Debenture can be converted into shares of the
Company's common stock at a conversion price of $.50 per share. In connection
with the sale, the Company issued Marcrocom warrants to acquire 1,000,000 shares
of its common at an exercise price of $1.50 per share. The warrants expire in
three years from the date of issuance. The Company also issued to Marcrocom
375,000 shares of its common stock as additional consideration. As collateral
for the Debenture, the Company has placed with an escrow agent 5,000,000 shares
of its common stock. On July 19, 2005, the Company sold to a stockholder and an
entity affiliated with an officer of the Company convertible debentures in the
face amount of $50,000 each. These debentures were sold on substantially similar
terms as the Debenture sold to Marcrocom. However, the Company did not provide
any collateral to the debenture holders.

         The Company's business strategy calls for growth internally as well as
through acquisitions. To this end, the Company intends to invest substantial
funds to increase its sales and marketing resources in order to grow revenues.
In order to implement this strategy, the Company will require additional funding
for personnel, capital expenditures and other expenses, as well as for working
capital purposes. If adequate funds are not available on acceptable terms, then
the Company may not be able to meet our business objectives for expansion.
Although the Company has entered into the SEDA with Cornell, the transaction is
subject to satisfaction of several conditions and there can be no assurance that
the Company will in fact complete the transaction. Accordingly, there can be no
assurance that any additional funds will be available to the Company to allow it
to cover its expenses as they may be incurred.

         The Company's ability to continue as a going concern and future success
are dependent upon its ability to raise capital in the near term to: (1) satisfy
its current obligations, (2) continue its research and development efforts, and
(3) the successful wide scale development, approval, deployment and marketing of
its products and services.

         Management's plans in this regard include, but are not limited to
current discussions and negotiations with a number of additional financing
alternatives, one or more of which it believes will be able to successfully
close to provide necessary working capital, while maintaining sensitivity to
shareholder dilution issues. However, there can be no assurance that the Company
will generate sufficient revenues to provide positive cash flows from operations
or that sufficient capital will be available, when required or at terms
favorable to us, to permit the Company to realize its plans. The accompanying
unaudited condensed consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

                                      -20-
<PAGE>

            To fund the Company's operations for the remainder of fiscal 2005,
the Company needs to raise additional financing and generate cash flows from its
operations. Should additional cash flows not be available, the Company believes
that it would have the ability to restructure its operations and if necessary
initiate significant reductions in expenses. In addition, the Company will have
to negotiate with its lenders to extend the repayment dates of its indebtedness.
There can be no assurance, however, that the Company will be able to
successfully restructure its operations or debt obligations in the event it
fails to obtain additional financing.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         The discussion and analysis of our financial conditions and results of
operations is based upon the Company's financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America ("GAAP"). The preparation of these financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an ongoing basis, we evaluate our
estimates, including those related to revenue recognition, accounts receivable
and long-lived assets. The Company bases its estimates on historical experience
and on various other assumptions that it believes to be reasonable under the
current circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions.

         The Company believes the following critical accounting policies affect
its judgment and estimates used in preparation of our consolidated financial
statements.

Revenue Recognition

         The Company derives revenue from the sale of its communication
equipment products and as a provider of information technology consulting and
infrastructure development services.

         In accordance with SEC Staff Accounting Bulletin No. 104, "Revenue
Recognition," revenue is recognized when persuasive evidence of an arrangement
exists, delivery of the product or services has occurred, the fee is fixed and
determinable, collectibility is reasonably assured, contractual obligations have
been satisfied, and title and risk of loss have been transferred to the
customer.

         UCA derives revenue primarily from professional services, managed IT
services, application development services and from business process management
services. Arrangements with customers for services are generally on a time and
material basis or fixed-price, fixed-time frame. Revenue on time-and-material
contracts is recognized as the related services are performed. Revenue for
fixed-price, fixed-timeframe services is recognized as the service is performed.
Revenue from fixed-price, fixed time-timeframe service contracts are recognized
ratably over the term of the contract, as per the proportional performance
method. When the Company receives cash advances from customers in advance of the
service period, amounts are reported as advances from customers until the
commencement of the service period. Billings and collections in excess of
revenue recognized are classified as deferred revenue.

           To date NetFabric's communication equipment products have been
marketed only through a network of distributors and value-added resellers
("VAR"). In the VAR channel, NetFabric recognizes revenue at the time of
shipment if all other contractual obligations to the VAR have been satisfied.

                                      -21-
<PAGE>

           In the distributor channel, NetFabric recognizes revenue when the
distributor sells and ships NetFabric products to its own VARs, resellers or
end-user customers, provided the Company has satisfied all other the terms and
conditions with the distributor. Accordingly, NetFabric receives distribution
sales and inventory information regarding its products from its distributors for
the purpose of determining the appropriate timing of revenue recognition.

                  Both VARs and distributors have limited rights to return
products to NetFabric but must obtain prior approval from NetFabric before
returning products, consistently with common industry practice. NetFabric has no
obligation to accept the return of any unsold products. If required, the Company
accrues a provision for estimated sales returns and other allowances and
deferrals as a reduction of revenue at the time of revenue recognition. To date
no sales have been made and as such, no provisions for estimated sales returns
and other allowances have been recognized. The Company has no obligation to
provide service, repair, counseling or other assistance to any customers of the
VARs or distributors unless NetFabric has a specific agreement directly with
such customer.

Allowance for Doubtful Accounts

         The Company maintains allowances for doubtful accounts for estimated
losses resulting from the inability of its customers to make required payments.
These estimated losses are based upon historical bad debts, specific customer
creditworthiness and current economic trends. If the financial condition of a
customer deteriorates, resulting in the customer's inability to make payments
within approved credit terms, additional allowances may be required. The Company
performs credit evaluations of its customers' financial condition on a regular
basis.

Inventory

         Inventory consists primarily of finished goods and purchased electronic
components, and are stated at the lower of cost or market. Cost is determined by
using the first-in, first-out method.

Fair Value of Financial Instruments

         The fair values of the Company's assets and liabilities that qualify as
financial instruments under Statement of Financial Accounting Standards ("SFAS")
No. 107 approximate their carrying amounts presented in the consolidated balance
sheets at June 30, 2005 and December 31, 2004.

Goodwill and Other Intangibles

         Goodwill and other intangibles represent the Company's preliminary
allocation of the estimated cost to acquire UCA Services in excess of the fair
value of net assets acquired. Under SFAS No. 142 Goodwill and Other Intangible
Assets, goodwill is not amortized but is reviewed for impairment annually, as
well as when a triggering event indicates impairment may have occurred. The
goodwill test for impairment consists of a two-step process that begins with an
estimation of the fair value of the reporting unit. The first step of the
process is a screen for potential impairment and the second step measures the
amount of impairment, if any. The Company will perform a goodwill impairment
test annually, as well as when a triggering event indicates impairment may have
occurred.

Stock-Based Compensation

         The Company accounts for stock options granted to employees using the
intrinsic value method in accordance with the provisions of Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB Opinion No. 25"), and related interpretations.

                                      -22-
<PAGE>

         As such, compensation expense to be recognized over the related vesting
period is generally determined on the date of grant only if the current market
price of the underlying stock exceeds the exercise price. SFAS No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123"), permits entities to
recognize as expense over the vesting period the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS No. 123 allows entities to
continue to apply the provisions of APB Opinion No. 25 and provide pro forma net
income (loss) disclosures for employee stock option grants as if the
fair-value-based method defined in SFAS No. 123 had been applied. The Company
has elected to continue to apply the provisions of APB Opinion No. 25 and
provide the pro forma disclosures required by SFAS No. 123.



                                      -23-
<PAGE>

ITEM 3.  CONTROLS AND PROCEDURES

A.   Evaluation of Disclosure Controls and Procedures:

         Our disclosure controls and procedures are designed to ensure that
information required to be disclosed in the reports filed or submitted under the
Exchange Act is recorded, processed, summarized and reported, within the time
period specified in the SEC's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in the reports filed under the
Exchange Act is accumulated and communicated to management, including the Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure. As of the end of the period covered by
this report, we carried out an evaluation, under the supervision and with
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. Based upon and as of the date of that
evaluation, the President and Chief Financial Officer concluded that our
disclosure controls and procedures are effective to ensure that information
required to be disclosed in the reports we file and submit under the Exchange
Act are recorded, processed, summarized and reported as and when required.

B.   Changes in Internal Control over Financial Reporting:

         There were no changes in our internal controls over financial
reporting identified in connection with our evaluation of these controls as of
the end of the period covered by this report that could have significantly
affected those controls subsequent to the date of the evaluation referred to in
the previous paragraph, including any correction action with regard to
significant deficiencies and material weakness.


PART II. OTHER INFORMATION

ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

         During the three months ended June 30, 2005, the Company issued
24,096,154 shares of its common stock in connection with the acquisition of UCA
Services, Inc. The foregoing shares were issued pursuant to exemptions from
registration under Sections 3(a)(9) and 4(2) of the Securities Act of 1933.


ITEM 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits:

              31.1   Rule 13a-14(a)/15d-14(a) Certification (CEO)
              31.2   Rule 13a-14(a)/15d-14(a) Certification (CFO)
              32.1   Section 1350 Certification (CEO)
              32.2   Section 1350 Certification (CFO)

         (b)  Reports on Form 8-K:
              During the three months ended June 30, 2005, the Company filed;

              (i)    an 8-K for the event dated May 20, 2005 under Items 2.01,
                     2.03, 3.02 and 5.02 to report the acquisition of UCA
                     Services, Inc.

              (ii)   an 8-K for the event dated June 23, 2005 under Item 5.02
                     to report changes in officers and directors.

                                      -24-
<PAGE>

                                   SIGNATURES



          Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.



Date: August 15, 2005            By:  /s/ Jeff  Robinson
                                    ----------------------------
                                     Jeff Robinson
                                     Chairman and Chief Executive Officer

                                 By:  /s/ Vasan Thatham
                                    ----------------------------
                                    Vasan Thatham
                                    Principal Financial Officer and
                                    Vice President




                                      -25-