SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                   Annual Report Under Section 13 or 15(d) of
                       the Securities Exchange Act of 1934


                   For the Fiscal Year Ended: January 31, 2004
                                              ----------------


                           Commission File No. 0-28759
                                               -------


                          PocketSpec Technologies Inc.
       -----------------------------------------------------------------
       (Exact Name of Small Business Issuer as specified in its charter)


         COLORADO                                         84-1461919
----------------------------                       --------------------------
(State or other jurisdiction                       (IRS Employer File Number)
 of incorporation)


            3225 East 2nd Ave.
            Denver, Colorado                                     80206
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(Address of principal executive offices)                      (zip code)


                                 (303) 393-8060
              ----------------------------------------------------
              (Registrant's telephone number, including area code)


     Securities to be Registered Pursuant to Section 12(b) of the Act: None
                                                                       ----

       Securities to be Registered Pursuant to Section 12(g) of the Act:

                   Common Stock, $0.001 per share par value
                   ----------------------------------------

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

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B is  contained  in this  form and no  disclosure  will be
contained,  to the  best of  Registrant's  knowledge,  in  definitive  proxy  or
information  statements  incorporated  by  reference  in Part  III of this  Form
10-KSB. [ ]

Registrant's  revenues  for its most  recent  fiscal  year  were  $161,813.  The
aggregate   market  value  of  the  voting  stock  of  the  Registrant  held  by
non-affiliates as of January 31, 2004 was approximately  $1,256,132.  The number
of  shares  outstanding  of the  Registrant's  common  stock,  as of the  latest
practicable date, May 17, 2004, was 36,094,360.

<PAGE>

References  in this  document  to "us," "we,"  "our" or "the  Company"  refer to
PocketSpec Technologies Inc.

Forward-Looking Statements

     The following discussion contains forward-looking  statements regarding our
Company,  its business,  prospects and results of operations that are subject to
certain  risks and  uncertainties  posed by many  factors  and events that could
cause our  actual  business,  prospects  and  results  of  operations  to differ
materially   from  those  that  may  be  anticipated  by  such   forward-looking
statements.  Factors that may affect such  forward-looking  statements  include,
without  limitation:  our ability to  successfully  develop new products for new
markets; the impact of competition on our revenues, changes in law or regulatory
requirements  that adversely  affect or preclude clients from using our products
or certain  applications;  delays our  introduction of new products or services;
and our failure to keep pace with emerging technologies.

     When used in this  discussion,  words  such as  "believes",  "anticipates",
"expects",   "intends"  and  similar   expressions   are  intended  to  identify
forward-looking  statements,  but are not the  exclusive  means  of  identifying
forward-looking statements. Readers are cautioned not to place undue reliance on
these  forward-looking  statements,  which  speak  only  as of the  date of this
report.  Our Company  undertakes  no  obligation  to revise any  forward-looking
statements in order to reflect  events or  circumstances  that may  subsequently
arise.   Readers  are  urged  to  carefully  review  and  consider  the  various
disclosures  made  by us in  this  report  and  other  reports  filed  with  the
Securities and Exchange  Commission that attempt to advise interested parties of
the risks and factors that may affect our business.

                                     PART I

RISK FACTORS

     THE OWNERSHIP AND INVESTMENT IN OUR SECURITIES INVOLVES  SUBSTANTIAL RISKS.
OUR COMMON  SHARES  SHOULD BE  PURCHASED  ONLY BY PERSONS WHO CAN AFFORD TO LOSE
THEIR ENTIRE INVESTMENT.  PROSPECTIVE  INVESTORS SHOULD CAREFULLY CONSIDER THESE
RISKS RELATING TO OUR COMPANY.

WE HAVE A LACK OF OPERATING  HISTORY AND AN  ACCUMULATED  DEFICIT.  OUR AUDITORS
HAVE RAISED AN ISSUE CONCERNING OUR ABILITY TO CONTINUE AS A GOING CONCERN.  Our
predecessor  was  incorporated on January 1, 2000 as FJK Millennium Fund V, Inc.
and subsequently  changed its name to FJK Opportunities,  Inc. On April 6, 2000,
we did a reverse  acquisition  with Real Estate  Opportunities,  Inc.  (formerly
Monument Galleries, Inc.), a Colorado corporation, incorporated on May 15, 1998.
We have been in three  different  lines of business since our  formation.  Since
beginning  operations,  we have operated at a loss and we have been  profitable.
However, we have never been profitable in our current line of business.  We have
an  accumulated  deficit of  $4,923,998  at January 31, 2004.  In addition,  our
auditors  have  raised an issue  concerning  our  ability to continue as a going
concern.  We are going into our second year of operation in this current line of
business.  Furthermore, we have not engaged in any substantial business activity
over a sustained  period of time,  and thus cannot be said to have a  successful
operating  history.  Our current product lines do not generate enough revenue to
support us.  Therefore,  we have  limited  financial  results upon which you may
judge our  potential.  We expect to continue to incur losses in the near future.
We may not ever become profitable again. We have experienced in the past and may
experience in the future under-capitalization,  shortages,  setbacks and many of
the problems,  delays and expenses encountered by any early stage business, many
of which are beyond our control. These include:

     -    substantial  delays and expenses related to testing and development of
          our new products,

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     -    production and marketing  problems  encountered in connection with our
          new and existing products and technologies,

     -    competition from larger and more established companies, and

     -    lack of market acceptance of our new products and technologies.

     WE HAVE NO HISTORY OF PROFITABILITY WITH OUR NEW PRODUCTS. Sales of our new
products  may  never  generate   sufficient  revenues  to  fund  our  continuing
operations.  We may never generate positive cash flow or attain profitability in
the future. Historically,  we have incurred losses, particularly with operations
related to our new products. As of January 31, 2004, our accumulated deficit was
$ 4,923,998.  For the fiscal year ended January 31, 2004, we incurred a net loss
of $2,720,192. These losses have resulted primarily from:

     - continued development of our color-measuring  product line, - significant
     costs  associated  with  the  development  of our new  products,  - lack of
     marketing  of  those  products,  - lack  of  sufficient  sales  to  achieve
     profitability,  and a one time  expense  impairment  of  intangible  assets
     totaling $1,88,512.

     BECAUSE OF OUR  LIMITED  HISTORY  AND THE  POTENTIAL  FOR  COMPETITION,  AN
INVESTMENT  IN US IS INHERENTLY  RISKY.  Because we are a company with a limited
history,  our operations  will be extremely  competitive and subject to numerous
risks. We expect the color  comparison  business to be highly  competitive  with
many companies having access to the same market.  Substantially all of them have
greater financial  resources and longer operating histories than we have and can
be  expected  to compete  within the  business  in which we engage and intend to
engage.  There can be no assurance that we will have the necessary  resources to
be  competitive.  We are  subject  to the  risks  which are  common to  start-up
companies.  Therefore,  investors  should  consider an investment in us to be an
extremely risky venture.

     TO FULLY DEVELOP OUR BUSINESS PLAN, WE WILL NEED FOR ADDITIONAL  FINANCING.
For the foreseeable  future,  we expect to rely  principally upon our cash flow,
although we have raised limited  private  placement funds during the past fiscal
year and may be required to do so in the future. We cannot guarantee the success
of this  plan.  We  believe  that  from  time to  time,  we may  have to  obtain
additional  financing  in order to conduct our  business in a manner  consistent
with our proposed  operations.  There can be no guaranty that  additional  funds
will be  available  when,  and if,  needed.  If we are  unable  to  obtain  such
financing,  or if the terms thereof are too costly,  we may be forced to curtail
proposed expansion of operations until such time as alternative financing may be
arranged, which could have a materially adverse impact on our operations and our
shareholders'  investment.  At the present time, we have no definitive plans for
additional financing.

     WE MAY NOT BE ABLE TO CONDUCT  SUCCESSFUL  OPERATIONS  IN THE  FUTURE.  The
results of our operations will depend,  among other things,  upon our ability to
develop and to market our color  comparison  products.  Further,  it is possible
that  our  proposed  operations  will not  generate  income  sufficient  to meet
operating expenses or will generate income and capital appreciation,  if any, at
rates  lower than those  anticipated  or  necessary  to sustain  ourselves.  Our
operations may be affected by many factors,  some known by us, some unknown, and
some which are beyond  our  control.  Any of these  problems,  or a  combination
thereof,  could have a materially  adverse  effect on our viability as an entity
and might cause the investment of our  shareholders  to be impaired or lost. Our
technologies and products are in various stages of development.  Our products in
development may not be completed in time to allow production or marketing due to
the inherent  risks of new product and  technology  development,  limitations on
financing,  competition,  obsolescence, loss of key personnel and other factors.
Although we may license or market our development technology at its current

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stage of  development,  there can be no assurance that we will be able to do so.
Unanticipated  technical  obstacles  can arise at any time and result in lengthy
and  costly  delays  or in a  determination  that  further  development  is  not
feasible.

     The  development  of  some  of  our  technologies  has  taken  longer  than
anticipated  and  could be  additionally  delayed.  Therefore,  there  can be no
assurance  of  timely   completion  and   introduction  of  our  products  on  a
cost-effective basis, or that such products, if introduced,  will achieve market
acceptance such that, in combination with existing  products,  they will sustain
us or allow us to achieve profitable operations.

     IF WE FAIL TO EXPAND OUR CONTROLS AND  INTEGRATE  NEW  PERSONNEL TO SUPPORT
OUR ANTICIPATED  GROWTH, OUR BUSINESS  OPERATIONS WILL SUFFER. We are undergoing
rapid growth in the scope of our operations. Our business prospects,  results of
operations or financial  condition could be harmed if we encounter  difficulties
in effectively  managing the budgeting,  forecasting  and other process  control
issues presented by such a rapid expansion.

     WE HAVE NO EXPERIENCE  MARKETING  OUR PRODUCTS AT ANY LEVEL,  INCLUDING THE
LEVEL  WE PLAN TO SELL IN THE  FUTURE.  We  cannot  assure  you  that we will be
successful  in executing our planned  expansion of our  activities to the levels
which we are seeking. We have not previously sold our products in any volume. We
do not know  whether or when we will be able to develop or  continue  efficient,
marketing  capabilities  and processes that will enable us to meet the standards
or volumes  required to  successfully  market large  quantities of our products.
Even if we are successful in developing our  capabilities  and processes,  we do
not know  whether we will sustain our  production  or to continue to satisfy the
requirements of our customers.

     WE ARE DEPENDENT  UPON  TECHNOLOGY  FOR OUR SUCCESS.  We are operating in a
business which requires extensive and continuing research efforts.  There can be
no  assurance  that new  products  will not  render  our  products  obsolete  or
non-competitive at some time in the future.

     TO BE  SUCCESSFUL,  WE MUST BE ABLE TO PROTECT  OUR  TECHNOLOGY  BUT CANNOT
GUARANTEE  THAT WE CAN DO SO. A  successful  challenge  to our  ownership of our
technology  could  materially  damage  our  business  prospects.  We  rely  on a
combination   of   patents,   trademarks,   copyrights,   trade   secret   laws,
confidentiality   procedures   and   licensing   arrangements   to  protect  our
intellectual  property  rights.  We currently have one (1) U.S.  patent acquired
from  Colorimeter,  LLC. Any issued  patent may be challenged  and  invalidated.
Patents may not issue from any of our future  applications.  Any claims  allowed
from  existing  or future  pending  patents  may not be of  sufficient  scope or
strength to provide significant protection for our products.  Patents may not be
issued  in all  countries  where  our  products  can be  sold  so as to  provide
meaningful  protection or any commercial  advantage to us. Our  competitors  may
also be able to design around our patents or the patents which we license.

     We expect vigorous  protection and pursuit of intellectual  property rights
or positions to characterize our industry, which could result in significant and
often protracted and expensive litigation. Therefore, our competitors may assert
that our  technologies  or  products  infringe on their  patents or  proprietary
rights.  Problems  with patents or other  rights could  increase the cost of our
products or delay or preclude new product development and  commercialization  by
us. If  infringement  claims against us are deemed valid,  we may not be able to
obtain appropriate  licenses on acceptable terms or at all.  Litigation could be
costly and  time-consuming  but may be  necessary  to protect our future  patent
and/or technology license positions or to defend against infringement claims.

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     WE ANTICIPATE THAT WE WILL BE SUBJECT TO INTENSE COMPETITION. Technological
competition  from  larger  and  more  established  companies  is  a  significant
possibility  and can be expected.  Most of the companies with which we expect to
compete have far greater  capital  resources and more  significant  research and
development staffs, marketing and distribution programs and facilities, and many
of them have substantially greater experience in the production and marketing of
products.  Our ability to compete  effectively may be adversely  affected by the
ability  of  these  competitors  to  devote  greater  resources  to the sale and
marketing  of  their  products  than we  can.  In  addition,  one or more of our
competitors may succeed or may already have succeeded in developing technologies
and products that are more effective than any of those we currently offer or are
developing.  In  addition,  there  can be no  guarantee  that we will be able to
protect our technology from being copied or infringed upon. Therefore, there are
no  assurances  that we will ever be able to obtain and to maintain a profitable
position in the marketplace

     OUR  ULTIMATE  SUCCESS WILL BE DEPENDENT  UPON  MANAGEMENT.  Our success is
dependent  upon the decision  making of our directors  and  executive  officers.
These  individuals  intend to commit as much time as necessary to our  business.
The loss of any or all of these  individuals  could  have a  materially  adverse
impact on our operations.  We have four employment  agreements with our officers
and directors,  but have not obtained key man life insurance on the lives of any
of these individuals.

     OUR STOCK  PRICE MAY BE  VOLATILE,  AND YOU MAY NOT BE ABLE TO RESELL  YOUR
SHARES AT OR ABOVE YOUR INITIAL SALE PRICE. There has been, and continues to be,
a limited  public market for our common stock.  Although our common stock trades
on the NASD Bulletin Board, an active trading market for our shares has not, and
may never develop or be sustained.  If you purchase shares of common stock,  you
may not be able to resell those  shares at or above the initial  price you paid.
The market price of our common stock may fluctuate  significantly in response to
numerous factors, some of which are beyond our control, including the following:

     actual or anticipated fluctuations in our operating results;

     changes in financial estimates by  securities analysts or our failure to
     perform in line with such estimates;

     changes  in  market  valuations  of  other  mortgage  brokerage  companies,
     particularly those that sell products similar to as ours;  announcements by
     us or our competitors of significant innovations,  acquisitions,  strategic
     partnerships, joint ventures or capital commitments;

     introduction of technologies or product  enhancements  that reduce the need
     for our products; and

     departures of key personnel.

     Most of our common stock is currently restricted. As restrictions on resale
end,  the market price of our stock could drop  significantly  if the holders of
restricted  shares sell them or are perceived by the market as intending to sell
them.   This  could  cause  the  market  price  of  our  common  stock  to  drop
significantly, even if our business is doing well.

     OUR COMMON  STOCK HAS A LIMITED  PUBLIC  TRADING  MARKET.  While our common
stock currently trades in the Over-the-Counter Bulletin Board market, our market
is limited and sporadic. We cannot assure that such a market will improve in the
future,  even if our securities ever are listed on the Nasdaq SmallCap Market or
the American Stock  Exchange.  We cannot assure that an investor will be able to
liquidate his investment without considerable delay, if at all. If a more active
market does develop, the price may be highly volatile. The factors which we have
discussed in this document may have a significant impact on the market price of

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the common  stock.  It is also  possible  that the  relatively  low price of our
common stock may keep many brokerage  firms from engaging in transactions in our
common stock.

     THE  OVER-THE-COUNTER  MARKET FOR STOCK SUCH AS OURS HAS HAD EXTREME  PRICE
AND VOLUME FLUCTUATIONS.

     The  securities  of companies  such as ours have  historically  experienced
extreme price and volume fluctuations during certain periods. These broad market
fluctuations and other factors,  such as new product  developments and trends in
the our industry and in the investment  markets  generally,  as well as economic
conditions and annual variations in our operational results, may have a negative
effect on the market price of our common stock.

     (a) GENERAL DEVELOPMENT OF BUSINESS

     We are a Colorado corporation.  Our principal business address is 3225 East
2nd Ave.,  Denver,  Colorado 80206. We are a technology  company which is in the
business of developing and marketing color comparison  devices.  Previously,  we
were in the real estate development  business.  Originally we were in the retail
arts and crafts industry.

     Our predecessor was  incorporated on January 1, 2000 as FJK Millennium Fund
V, Inc. and subsequently changed its name to FJK Opportunities, Inc. On April 6,
2000,  we  did a  reverse  acquisition  with  Real  Estate  Opportunities,  Inc.
(formerly Monument Galleries, Inc.), a Colorado corporation, incorporated on May
15, 1998.

     In October,  2001,  our main focus  became the business of  developing  and
marketing color comparison devices, ultra-violet measurement devices and related
software products.

     On December 4, 2001 we amended our Articles of  Incorporation to change our
name from Real Estate  Opportunities,  Inc. to PocketSpec  Technologies Inc. and
increased our authorized common shares from 10,000,000 to 50,000,000 shares.

     In May 2002,  we  acquired  Color-Spec  Technologies,  Inc.  in a tax-free,
stock-for-stock  transaction.  We exchanged a total of  8,316,353  shares of our
common  stock  in  exchange   for  100%  of  the  common  stock  of   Color-Spec
Technologies, Inc., which became a wholly owned subsidiary of us.

     In December,  2002, we refined the focus of our business to the development
and marketing of two products:  our PocketSpec(TM)  ColorQA;  and our PocketSpec
BronzCheck(TM). In addition, we began to concentrate on the creation of a set of
software  products to be used in the indoor tanning salon  industry.  We entered
into  independent  contractor  agreements  and obtained a license  agreement for
software development. We plan to concentrate on developing software for use with
our PocketSpec  BronzCheck(TM)  device,  which is our principal color comparison
product for the tanning  industry.  Our plan is to  integrate  the data which is
received from our PocketSpec  BronzCheck(TM)  device with a new software  system
which we currently have under development.

     We have  not  been  subject  to any  bankruptcy,  receivership  or  similar
proceeding.

     (b) NARRATIVE DESCRIPTION OF THE BUSINESS

     Since  we  incorporated  in  1998,  we  have  conducted  three  businesses.
Originally we were in the retail arts and crafts industry.  We then transitioned
into the real estate development business,  where we acquired and developed real
estate properties for our own account,  primarily in Colorado.  Finally, we have
become a  technology  company.  At the  present  time,  our main focus is in the
business of developing  and marketing  color  comparison  devices,  ultra-violet
measurement devices and related software products.

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     c) OPERATIONS

General

     In 2001, we changed our business plan from real estate  development  to the
color comparing business. Our focus has completely shifted away from real estate
as a business enterprise,  except to note that we may acquire company owned real
estate in the future for our own use,  such as offices,  retail  facilities  and
development facilities.

         We changed our name to PocketSpec  Technologies Inc. to better identify
and describe the directions we intend to pursue. On October 3, 2001, we acquired
an exclusive,  worldwide  license under a technology  license  agreement for the
manufacturing and marketing rights to a hand-held device for comparing the color
of objects and light emission.  In addition,  the agreement assigned rights to a
pending  utility  patent  covering the color  technology  and  applications  for
trademarks and patent protection for the ColorQA and the BronzCheck  devices and
related  technologies.  In January,  2003, we entered into a technology transfer
agreement  to  acquire  an  exclusive   license  to  technologies  used  in  the
measurement of ultra-violet  emissions from tanning beds used in tanning salons.
We may  license  and/or  acquire  rights to other  intellectual  properties  and
trademarks  as it may be found  to  enhance  or  align  to our own  intellectual
property and technology.

     All electronic  components used within our products are readily  available.
All  optical,  mechanical  and  packaging  components  are  unique to us but use
standard  injection mold practices for  manufacturing  of these  components.  We
attempt to incorporate  previously  used  programming  codes and  electronics in
planning for future products.  At the present time, we do not plan to produce or
assemble products outside of our direct control.

Our Current Products

     We have two  current  products  which we are  marketing.  The  first is our
Pocket-Spec(TM)  ColorQA.  The other is our  PocketSpec  BronzCheck(TM).  At the
present time, we are producing both the ColorQA units and BronzCheck units.

     The  PocketSpec(TM)  ColorQA is a color  comparison  device with a built-in
display which has been  developed to compare  millions of colors.  The device is
designed  to measure a specified  target  color in a format of red,  green,  and
blue, each on a scale of 0 to 255. The measurement of the target color is stored
for  comparison  to other  colors  in the same  format.  The user can then  take
multiple comparative readings of other colors and determine if the colors match,
or  alternatively  determine  the closest  match.  The two series of numbers are
compared and the device gives a  percentage  difference  in the same display for
easy color  comparison.  The device has circuit  board  space to add  additional
memory if needed for more  advanced  functions.  During  the  second  quarter of
fiscal year 2003-2004, we developed and fitted the PocketSpec(TM) ColorQA device
with a USB connection.

     The  PocketSpec  BronzCheck(TM)  is a color  comparison  device  that  uses
essentially the same technology as the PocketSpec(TM) ColorQA but has a specific
application  to the indoor  tanning  industry.  This is a device with a built-in
display,  used for the comparison of a person's skin color,  with absolute white
being 0 and absolute  black being 1,000.  The tanning salon  operator can take a
measurement of a person's skin with the device and record the number manually to
verify to its clientele that they are increasing or maintaining their individual
tanning goals. This device only differs from the PocketSpec(TM) ColorQA in the

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programming  and printing of the brand name on the outside of the housing and to
sell related  software which  transmits  through an optional USB port for use in
the BronzCheck product, and possible advances to the ColorQA.

Products in Development:

     We have the following products in various development stages:

     BronzCheck(TM) with USB port, which has enhanced our present PocketSpec

BronzCheck(TM) product. We plan to retail this device for approximately
$899 each. We also incorporated the device for use with associated software, our
TanTone(TM) Salon System.

     TanTone(TM) Salon System,  which is a point-of-sale  software system, which
produced a seamless integration to the TanTone(TM) Salon Management software and
other known computer software products, such as Microsoft Access, as well as the
BronzCheck(TM).

     ColorQA(TM)   with  USB  port,  which  has  enhanced  the  readability  and
repeatability of color-measurement.  Software developed for us with ColorQA uses
the red, green, and blue scales to indicate color comparison  accuracy.  We plan
to retail the device at approximately $589 each.

Our Future Products

     We are in the preliminary stages of development of the Dental Color System,
a device  which  will be  designed  to use both the  reflective  manner of color
measurement, present in the BronzCheck(TM), for measuring brightness of teeth by
dental hygienists.

Suspended Development Plans

     We have  suspended  development  plans  of a  previously  planned  product,
the ColorRT,  principally planned for measuring almost any translucent material,
either  liquid  or  solid.  We  believe  that  there  is only a  limited  market
opportunity  in this  application,  but also  believe  that we hold  potentially
valuable patented color technology, which we may utilize in the future.

     We have also suspended  development plans of a previously  planned product,
principally  planned for  remotely  displaying  readings  of color  measurements
generated  digitally  by the  "PocketSpec  Color  Probe".  We have found that in
marketing  our ColorQA  device we had some interest in remotely  displaying  and
recording  color  measurements,  but  decided  that  a  separate  device  is not
necessary.  We have  incorporated the USB device into the BronzCheck and related
software  to a PC program,  using  Interactive  Design,  Inc.  salon  management
software
that remotely displays and records measurements from the BronzCheck. The ColorQA
also uses the USB application and calibration software has been developed and is
available  now.  These  products  potentially  enable our devices to be operated
portably and also as a bench top  laboratory or factory  device,  by plugging in
the USB connection.

     We no longer produce our  ColorCheck  units because we found that there was
not sufficient demand for this product.

     Finally,  in order to consolidate  operations,  we terminated three limited
liability companies, which we had established during our fiscal year for 2003.
The  indebtedness of the limited  liability  companies was assumed by PocketSpec
Technologies Inc., the sole owner/member of the limited liability companies. The
limited liability companies were known as PocketSpec  Cosmetic,  LLC; PocketSpec
Dental, LLC; and PocketSpec Dermatology, LLC.

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Other

     We believe that there are numerous future  potential  applications  for our
products and those in development and planned for development in the future.  We
believe that we can deliver a more marketable range of color comparison  devices
to our  customers  by  integrating  our present and future  product  line with a
series  of  software  applications.  We  initially  plan to focus on the  indoor
tanning  industry.  However,  if we can  achieve  acceptance  of our  integrated
devices and associated  software products,  we plan to expand their applications
to other industries.

     (d) MARKETS

General

     We sell our products  directly to end user markets through direct mailings,
including email and physical  mailings through the US Postal Service and through
internet  websites.  We were using trade shows and expositions for marketing our
our  products,  but  discontinued  this phase of marketing  due to  cost/benefit
analysis.  We use independent  contractors as sales  personnel.  We have two web
sites for sales.

     We  added   on-line   purchasing   in  May   2002.   The  web   sites   are
www.pocketspec.com  for  the  ColorQA  product  and   www.bronzcheck.com,   with
www.tantone.net  linked for our BronzCheck  product. We accept most major credit
cards.

Current Marketing Plans

     During the last fiscal year,  we  completely  revamped and  redesigned  our
marketing program for our products.  For the present, we have abandoned attempts
to enter  corporate  sales to  larger  companies  and  government  agencies.  We
previously  expended  significant  resources  to pursue  these  markets and were
unsuccessful.

     We believe that the use of direct  mailings can give us the  flexibility to
improve our  effectiveness  as well as conserve our  resources.  We use in-house
printing for our promotional materials. This gives us the ability to print as we
need and in full color using all the modern  software design systems used in the
magazine industry.

     We  use  a  database  of  trade   industry   contacts.   We  have  acquired
approximately 100,000 names of painting contractors,  decorators, tanning salons
and  other  target  markets.  We plan to  utilize  these in our  direct  mailing
programs from time to time.

     We operate two web sites for sales and support.  For  products  such as the
ColorQA and other technical products, we use www.pocketspec.com. On this site we
have limited  company  information,  SEC filings,  press  releases,  distributor
information,  and on-line  ordering.  For the Indoor  Tanning  Industry,  we use
bronzcheck.com and www.tantone.net, both linked to one site at the present time.
On this site we have information on the
BronzCheck product and the software products,  distributors, if any, and on-line
ordering.  We continue to update our current websites and have launched features
that include  on-line  demonstration  of our  products.  We also plan to include
technical  support  functionality  in on  BronzCheck(TM)  and TanTone(TM)  Salon
System product sites. We are also considering.

Other Markets

     We also currently  sell the ColorQA  product to  professional  painters and
interior decorators, plastic injection mold manufacturers, leather dye business
and auto trim  parts and  panels  companies.  The  present  version  of  ColorQA
provides assistance in matching colors of paint,  stucco,  fabrics and virtually
any solid color that professional  painters,  interior  decorators,  and general
contractors  need to match.  The device has the  capability of being  programmed
with a color code  look-up  table of paint  colors,  which  would be an enhanced
product, we may offer in the future.
                                        9
<PAGE>

     We are also  looking  as the  auto  body and  paint  industry  and the silk
screening and printing industry as potential markets in the future,  although we
have had no substantial sales in these markets at the present time.

     We believe  that there are  numerous  markets that may require some form of
color  comparison  which we have not yet explored,  such as color copy machines,
the home hobbyist, model makers, rapid prototyping companies, and biologists. We
will  continue to examine new uses for our  product.  Our primary goal for these
products will be to provide a low cost means to measure and compare color.

     (e) RAW MATERIALS

     The use of raw materials is not material  factor in our  operations  and is
not expected to be a material factor in the future.

     (f) CUSTOMERS AND COMPETITION

     There  are a  number  of  established  companies  in the  color  comparison
business.  Among the  largest,  are Xrite,  Munsell  and  Minolta,  which make a
product similar to ours, but generally more expensive.  We plan to differentiate
our products by focusing on low price, hand-held devices, which use color charts
from  multiple  color  suppliers.  Furthermore,  we  believe  that the market is
fragmented, with no one company dominating this business.

     Our  decision to add a software  sales  component  to our lines of business
puts us in  potential  competition  with  additional  competitors.  However,  we
believe  that if we can begin by  delivering  competitive  software  products to
multiple  industries  and add servicing and support for our  customers,  we will
have a reasonable competitive edge.

     In any  case,  we  believe  that  competition  will be  intense.  We cannot
guarantee that we will be able to successfully compete.

     (g) BACKLOG

     At January 31, 2004, we had no backlogs.

     (h) EMPLOYEES AND CONSULTANTS

     At as of the date hereof, we have four full-time  employees,  which include
four administrative  employees.  We do not have any part-time employees. We also
utilize the services of independent  contractors.  The  contractors are involved
with the engineering,  design, and programming of our products. We plan to hire,
from time to time, additional  independent  contractors for prototype design and
production work and employees as our needs may demand.

     In the past, we have customarily used in-house technical support to develop
our color comparing technology. However, with the exception of Mr. Gregg Wagner,
one of our  directors,  who is a product  designer  and optics  expert,  we have
terminated the original technical development team and have replaced it with one
contract  engineer  and  programmer.  In  addition,  we will  attempt,  wherever
possible, to out-source materials,  supplies and component assignments,  such as
circuit boards and injected housings.

     We have also  terminated  most  arrangements,  which we previously  used to
develop  markets for our products.  At the present time we have some  immaterial
distribution  relationships.  Apart from these  distribution  relationships  and
co-development  ventures we may enter into from time to time,  we plan to do our
sales and marketing  exclusively  through our own  independent  contractors.  We
believe that this will provide better  customer  development and support for our
product line.

                                       10
<PAGE>

     (i) PROPRIETARY RIGHTS

     On  October  3,  2001,  we entered  into an  exclusive  technology  license
agreement with Color-Spec Technologies,  Inc., which granted us exclusive rights
to all of the  Color-Spec  Technologies'  intellectual  property and  technology
rights for a period of ten years, subject to our payment of a royalty of $75 per
unit sold by us based  upon the  rights.  In May 2002,  we  acquired  Color-Spec
Technologies,  Inc.  in  a  tax-free,  stock-for-stock  transaction.  Color-Spec
Technologies, Inc. became a wholly owned subsidiary of us.

     Also in October,  2001, we entered into a trademark  license agreement with
Color-Spec  Technologies,  Inc.  and  received an  exclusive  license to use the
trademarks  "PocketSpec" and "PocketSpec  Technologies,  Inc." for a term of ten
years. We use these trademarks in our business.

     We have also applied for several  trademark and service mark  applications,
which are pending. We have applications relating to Colorspec, Pocket Colorspec,
BronzeCheck, and Tantone.

     We own  two  patents.  One is  Patent  No.  6,157,454,  entitled  Miniature
Colorimeter.  We have applied for an additional patent on this device,  which is
pending.  We have also applied for two patents regarding the dental  application
of the Miniature Colorimeter,  one of which has been granted. We now have Patent
No. 6,525,819, entitled Colorimeter for Dental Applications, which was issued on
February  28,  2003.  Finally,  we have  applied  for a  patent  entitled  Color
Measurement Device.

     In January  2003,  we entered into a  technology  transfer  agreement  with
Solartech,  Inc., to acquire an exclusive  license to  technologies  used in the
measurement of ultra-violet  emissions from tanning beds used in tanning salons.
This  technology  is needed to  accurately  incorporate  bulbs into our  tanning
industry software products. We paid Solartech, Inc. 200,000 shares of our common
stock. We plan to use this technology in a device to be called the Solarmeter(R)
Tower.  We will pay a royalty of $10 per  device  sold.  We have also  agreed to
purchase a special sensor at $46 each from Solartech,  Inc. We also acquired the
right to use the name, Solarmeter(R),  which is a name associated with a line of
portable UV meters sold worldwide.  Our license is for 10 years,  with a 10 year
renewal period.

     (j) GOVERNMENT REGULATION

     We are not subject to any material governmental regulation or approvals.

     (k) RESEARCH AND DEVELOPMENT

     We believe that strong product  development  capabilities  are essential to
our  strategy  of  enhancing   our  core   technology,   developing   additional
capabilities  incorporating that technology and maintaining a strategic position
with our products.  We use the services of two  independent  contractors  in the
development  of our  products.  On  January  14,  2002  we  acquired  rights  to
intellectual  property for a total cost of $596,385.  The  transaction  included
cash in the  amount of  $15,000,  1,100,000  shares of  common  stock  valued at
$385,000 or $.35 per share, and partial assignment of a $644,403 note receivable
from an affiliate, or $196,385 of principal amount.

     In December 2002, we entered into a software development agreement with an
independent,  third party contractor to develop the USB port capabilities of our
products. We pay for these services on an hourly basis.

     In January  2003,  we entered into a software  development  agreement  with
Tyger  POS, of  Longmont,  Colorado, a  restaurant  software developer, to write

                                       11
<PAGE>


software  code and create a set of  software  products  to be used in the indoor
tanning salon industry.  We terminated the agreement with Tyger POS during May,
2003 and aligned the development with Interactive Designs, Inc. of Alpharetta,
Georgia.  The project was completed in August 2003.

     We plan to continue to invest significant time and resources in our product
development.  In  addition,  we have  recruited  and plan to continue to recruit
electronic and software  engineers,  as needed,  with experience in illumination
and detection systems.

     (l) ENVIRONMENTAL COMPLIANCE

     We are not subject to any costs for compliance with any environmental laws.

     (m) LEASES

     On March 4, 2003 we signed an operating lease for office copying equipment.
The agreement is effective  through  November 4, 2007.  Monthly  lease  payments
total $1,318.

     (n) SUBSEQUENT EVENT AND CERTAIN TRANSACTIONS

     Subsequent to March 31, 2004 our Chief  Financial  Officer,  Cynthia Kettl,
loaned $20,000 to the Company and a director,  Gregg Wagner,  loaned the $15,000
to the Company. The Company issued notes for the cash.

     On March 7, 2003 certain affiliates and individuals entered into agreements
with us to extinguish debt in exchange for stock. One affiliate provided us with
$10,000 in the form of a payment to another affiliate along with extinguishments
of $275,000  debt  principal  and  interest in the amount of $17,517 for a total
amount of $302,517 for 4,321,673 shares of common stock. The stock was valued at
$.07 per share.

     Ms. Janet  Brophy,  an officer and  director,  as custodian of James Andrew
Krupka, provided $8,400 cash to acquire 120,000 shares of common stock valued at
$.07 per share.

     An unaffiliated  individual  provided us with $7,000 cash and  extinguished
debt principal in the amount of $15,000 and interest in the amount of $399 for a
total amount of $22,399 in exchange for 319,992 shares of common stock valued at
$.07 per share.

     An unaffiliated  individual  provided us with $10,500 cash and extinguished
debt  principal  in the amount of $316,164  and interest in the amount of $1,988
for a total amount of $328,652 in exchange for 4,695,022  shares of common stock
valued at $.07 per share.

     An  unaffiliated  individual  provided  extinguished  debt principal in the
amount of $50,509  and  interest  in the amount of $1,085 for a total  amount of
$51,594 in exchange for 737,064 shares of common stock valued at $.07 per share.

     Our chief financial officer,  Cynthia Kettl, provided us with cash totaling
$1,998 and  extinguished  an account payable in the amount of $3,000 for a total
amount of $4,998 in exchange  for 71,400  shares of common  stock valued at $.07
per share.

     ITEM 2. DESCRIPTION OF PROPERTIES.

     Our  business  office is  located at 3225 East 2nd Ave.,  Denver,  Colorado
80206.  On March 5,  2002,  we signed a lease,  effective  from April 1, 2002 to
April 1, 2007,  with an  organization  affiliated with  one of our employees, F.

                                       12
<PAGE>

Jeffrey Krupka. We pay this organization $4,000 per month on a triple net lease,
Along with real estate  taxes,  property  insurance,  maintenance  and  repairs,
Telephone expenses,  and other normal expenses of the property.  We have granted
Mr. Krupka the  non-exclusive  use of the leased  property for himself and as an
Office location for his other business interests.

     We  own  an  exclusive   technology   license   agreement  with  Color-Spec
Technologies,  Inc.,  which granted us exclusive rights to all of the Color-Spec
Technologies'  intellectual  property and technology  rights for a period of ten
years, subject to our payment of a royalty of $75 per unit sold by us based upon
the  rights.   We  also  own  a  trademark  license  agreement  with  Color-Spec
Technologies,  Inc.  and  received an  exclusive  license to use the  trademarks
"PocketSpec",  "BronzCheck",  "TanTone" and "PocketSpec Technologies Inc." for a
term  of ten  years.  We  use  these  trademarks  in  our  business.  Color-Spec
Technologies, Inc. is now our wholly owned subsidiary.

     We own  two  patents.  One is  Patent  No.  6,157,454,  entitled  Miniature
Colorimeter.  We have applied for an additional patent on this device,  which is
pending.  We have also applied for two patents regarding the dental  application
of the Miniature Colorimeter,  one of which has been granted. We now have Patent
No. 6,525,819, entitled Colorimeter for Dental Applications, which was issued on
February  28,  2003.  Finally,  we have  applied  for a  patent  entitled  Color
Measurement Device.

ITEM 3. LEGAL PROCEEDINGS.

     No material legal  proceedings of a material nature to which we are a party
were pending during the reporting  period.  We know of no legal proceedings of a
material  nature pending or threatened or judgments  entered  against any of our
directors or officers in their capacity as such.

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

     We held no shareholders meeting in the fourth quarter of our fiscal year.


                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

(a) PRINCIPAL MARKET OR MARKETS

     Since  May 2001,  our  securities  have  been  listed  for  trading  in the
Over-the-Counter  market on the NASD's "Electronic Bulletin Board." We currently
trade under the symbol PKSP. The following table sets forth the high and low bid
quotation for our common stock for each fiscal  quarterly period of 2004 and the
three trading quarters of 2003.

                              Bid Price
                  -----------------------------------

                                   High              Low
                                   ----              ----

                  2004
                  ----
         First Quarter             $0.29             $0.05
         Second Quarter            $0.29             $0.04
         Third Quarter             $0.30             $0.05
         Fourth Quarter            $0.08             $0.03


                                       13
<PAGE>

                                   High              Low
                                   ----              ----
                  2003
                  ----
         First Quarter                   $0.41                    $0.27
            Second Quarter            $0.39            $0.26
         Third Quarter             $0.37            $0.09
         Fourth Quarter            $0.38            $0.08

     (b) APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK

     As of January 31, 2004, we had a total of  36,094,360  shares of our common
shares outstanding.  The number of holders of record of our common stock at that
date was approximately 158.

     (c) DIVIDENDS

     Holders of common stock are  entitled to receive  such  dividends as may be
declared by our Board of  Directors.  We paid no  dividends  on the common stock
during the periods reported herein nor do we anticipate  paying dividends in the
foreseeable future.

     (d) THE SECURITIES ENFORCEMENT AND PENNY STOCK REFORM ACT OF 1990

     The  Securities  Enforcement  and Penny Stock  Reform Act of 1990  requires
additional  disclosure and  documentation  related to the market for penny stock
and for trades in any stock  defined  as a penny  stock.  Unless we can  acquire
substantial  assets  and trade at over  $5.00  per share on the bid,  it is more
likely than not that our securities,  for some period of time,  would be defined
under  that  Act as a  "penny  stock."  As a  result,  those  who  trade  in our
securities may be required to provide  additional  information  related to their
fitness to trade our shares. Also, there is the requirement of a broker- dealer,
prior  to a  transaction  in a penny  stock,  to  deliver  a  standardized  risk
disclosure  document that provides  information about penny stocks and the risks
in the penny stock market.  Further,  a broker-dealer  must provide the customer
with current bid and offer  quotations for the penny stock,  the compensation of
the  broker-dealer  and its salesperson in the transaction,  and monthly account
statements  showing the market value of each penny stock held in the  customer's
account.  These  requirements  present a  substantial  burden  on any  person or
brokerage  firm who plans to trade our  securities  and  would  thereby  make it
unlikely  that any liquid  trading  market  would ever result in our  securities
while the provisions of this Act might be applicable to those securities.

     (e) BLUE SKY COMPLIANCE

     The trading of penny stock  companies may be  restricted by the  securities
laws ("Blue Sky" laws) of several  states.  Management is aware that a number of
states  currently  prohibit the  unrestricted  trading of penny stock  companies
absent  the  availability  of  exemptions,  which are in the  discretion  of the
states' securities administrators.  The effect of these states' laws would be to
limit the trading  market,  if any,  for our shares and to make resale of shares
acquired by investors more difficult.

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

Forward-Looking Statements

     The following discussion contains forward-looking  statements regarding our
Company,  its business,  prospects and results of operations that are subject to
certain  risks and  uncertainties  posed by many  factors  and events that could
cause our actual business, prospects and results of operations to differ

                                       14
<PAGE>

materially   from  those  that  may  be  anticipated  by  such   forward-looking
statements.  Factors that may affect such  forward-looking  statements  include,
without  limitation:  our ability to  successfully  develop new products for new
markets; the impact of competition on our revenues, changes in law or regulatory
requirements  that adversely  affect or preclude clients from using our products
or certain  applications;  delays our  introduction of new products or services;
and our failure to keep pace with emerging technologies.

     When used in this  discussion,  words  such as  "believes",  "anticipates",
"expects",   "intends"  and  similar   expressions   are  intended  to  identify
forward-looking  statements,  but are not the  exclusive  means  of  identifying
forward-looking statements. Readers are cautioned not to place undue reliance on
these  forward-looking  statements,  which  speak  only  as of the  date of this
report.  Our Company  undertakes  no  obligation  to revise any  forward-looking
statements in order to reflect  events or  circumstances  that may  subsequently
arise.   Readers  are  urged  to  carefully  review  and  consider  the  various
disclosures  made  by us in  this  report  and  other  reports  filed  with  the
Securities and Exchange  Commission that attempt to advise interested parties of
the risks and factors that may affect our business.

Overview

     We concluded our real estate business during January 2002, when we sold our
remaining  parcel of real estate located in Elbert County,  Colorado.  We do not
anticipate  any further real estate  investments.  We have sold all of our notes
receivable  for  cash or  exchange  of debt  principal  that  we  maintained  in
conjunction  with the real estate  transactions.  We believe that the end of our
real estate  business will enable us to focus on our direction of technology and
the development of our new color-measuring technology.

     On December 4, 2001 we changed our name to PocketSpec  Technologies Inc. to
identify and better describe us. We acquired from Color-Spec Technologies, Inc.,
which  is  an  affiliate  of  ours,  an  exclusive  worldwide  license  for  the
manufacturing  and  marketing  rights for a hand-held  device for  measuring and
comparing color of objects and light emission. We acquired these rights pursuant
to a technology license agreement on October 3, 2001. In addition, the agreement
assigned rights to a pending  utility patent  covering the color  technology and
application,  as well as  three  additional  provisional  patents  that  use the
technology in other  applications  including geology. A major thrust for us will
be to develop color-comparing technology. We have the right to use the trademark
"PocketSpec"  we believe  that this will allow us to market a family of products
under the same "PocketSpec" name.

     Our acquisition of intellectual property from Color-Spec Technologies, Inc.
will be a long-term development. We have what we believe to be an excellent team
to develop the technology. The combination of personnel, capital, and technology
should accelerate our development and the opportunities for our shareholders. We
believe that we are set to expand.

Our Operations

     We are  currently  marketing  two  products.  The  first is our  PocketSpec
ColorQA(TM). The other is our PocketSpec BronzCheck(TM). At the present time, we
are producing both the ColorQA units and BronzCheck units.

     We sell our products  directly to end user markets through direct mailings,
including email and physical  mailings through the US Postal Service and through
trade shows and expositions.  We use independent contractors as sales personnel.
We have two web sites for sales.  We added on-line  purchasing in May 2002.  The
web sites are www.pocketspec.com for the ColorQA product and www.bronzcheck.com,
with www.tantone.net linked for our BronzCheck product. We accept credit cards.

                                       15
<PAGE>

     During the last fiscal year,  we  completely  revamped and  redesigned  our
marketing program for our products.  For the present, we have abandoned attempts
to enter  corporate  sales to  larger  companies  and  government  agencies.  We
previously  expended  significant  resources  to pursue  these  markets and were
unsuccessful.  We  believe  that  the use of  direct  mailings  can  give us the
flexibility to improve our  effectiveness as well as conserve our resources.  We
use in-house printing for our promotional materials.

Results of Operations

     We generated  operating  revenues in our color  comparison  business during
this  fiscal  year.  We  incurred a loss for the year  ended  January  31,  2004
totaling $ 2,720,192 compared to a loss of $1,183,372 for the year ended January
31,  2003.  Our loss for the year ended  January  31,  2004 was due to the costs
involved with developing our color comparison  business and a one time write off
of intangible assets totaling $1,552,363. Our loss for the year ended January
31,  2003 was due to a an expense in the amount of  $601,811  for  research  and
development costs and $608,579 for general and administrative expenses. Our loss
per share,  on a fully  diluted  basis,  was $0.082 per share for the year ended
January  31,  2004,  compared  to a loss of $.066 per  share for the year  ended
January 31, 2003.

     We had total  revenues of  $161,813  for the year ended  January 31,  2004.
Total cost of sales,  which in the fiscal year ended January 31, 2004  consisted
of costs of manufacturing,  was $127,859.  We had total revenues of $128,248 for
the year ended January 31, 2003.  Total cost of sales,  which in the fiscal year
ended January 31, 2003 consisted of costs of manufacturing, was $79,199.

     Total operating  expenses,  which  consisted of general and  administrative
expenses,  were  $2,758,763  for the year ended  January 31,  2004,  compared to
$1,438,771 for the year ended January 31, 2003. The major  components of general
and  administrative  expenses are research and development,  legal,  accounting,
commissions,  wages,  rent,  and  stock  based  compensation,  and  a  one  time
impairment expense totaling $1,388,512 for intangibles.

     We recorded  stock-based  compensation in the amount of $212,822 during the
year ended January 31, 2004 which represented common stock that was issued for
services provided to us for product and software  development.  The common stock
was valued at the closing price of the stock on the date of issue.

     We recorded  stock-based  compensation  in the amount of $61,852 during the
year ended January 31, 2003, which represented  common stock that was issued for
services  provided to us along with common  stock issued for  promotion  through
public relations  organizations  and web-site  development and maintenance.  The
common stock was valued at the closing price of the stock on the date of issue.

     On  January  12,  2002 we sold  the  remaining  parcel  of  property  to an
individual,  ending our real estate  business.  The  agreement  consisted  of an
$800,000  sale price to be paid by cash of $45,000,  a note  receivable  bearing
interest  at  12.69%  accruing  from  April 1, 2002 and due in full on or before
August 29,2002. In addition,  the buyer assumed a note payable for the amount of
$670,000.  We had a cost basis in the property in the amount of $965,478. A loss
on the sale of the property was recorded in the amount of $165,428.

     On January 14, 2002 we acquired rights to intellectual property for a total
cost of  $596,385.  The  transaction  included  cash in the  amount of  $15,000,
1,100,000  shares of common  stock  valued at  $385,000  or $.35 per share,  and
partial assignment of a $644,403 note receivable from an affiliate,  or $196,385
of principal  amount.  The  transaction was expensed to research and development
costs in the accompanying financial statements.

     Between January 12, 2002 and January 31, 2002, we sold part of the above

                                       16
<PAGE>

$85,000 note to  non-affiliates.  Net cash received on the partial assignment of
the note totaled  $55,845.  We  discounted  the partial  assignment  and charged
$6,205 to operating  expenses.  The current  carrying  balance on the promissory
note totaled $22,950 at January 31, 2002.

     We have not been profitable since we entered the color comparison business.
We believe that we have begun to generate  enough sales to  potentially  reach a
break-even during the second fiscal quarter. For the coming fiscal year, we plan
to  vigorously  market our  technology  and  develop our  operations.  If we are
unsuccessful in achieving  positive results from operations,  we may be required
to curtail  operations,  liquidate  assets,  or enter into  capital or financing
arrangements on terms, which may have an adverse effect on future operations.

Liquidity and Capital Resources

     Our net cash and cash  equivalents  were  $9,780 as of  January  31,  2004,
compared  to $6,451  as of  January  31,  2003.  Net cash  used  from  investing
activities  totaled  $26,841 as of January 31, 2004 and net cash  received  from
investing  activities  was $304,688 for January 31,  2003.  Cash from  investing
activities  was used for property  additions and cash  received  from  investing
activities  for the year ended  January 31, 2003 came from receipts and sales of
notes receivable.

     Our net cash received from  financing  activities was $573,549 for the year
ended January 31, 2004, compared to having received $701,966 for the year ended
January 31, 2003.  Cash from  financing  activities  totaled  $601,350 came from
loans from  affiliates  and third  parties,  and $27,898  cash came from sale of
stock for the year  ended  January  31,  2004.  Cash from  financing  activities
totaled  $867,642,  which came as loans from  affiliates and third parties,  and
sale of stock for the year  ended  January  31 2003.  Cash  used from  financing
activities  was $55,700 to repay debt for the fiscal year ended January 31, 2004
and a total  amount of $79,470  was used to repay debt for the fiscal year ended
January 31, 2003.

     We have  prepaid  expenses  of $9,374 at  January  31,  2004.  The  prepaid
expenses consist of points paid for financing and other.

     During the year ended January 31, 2004 we had no outstanding stock options.

     While we have been profitable in the past, we have not been profitable over
the short term,  while we attempt to develop  operations in our color  comparing
technology business.

     During the next twelve  months,  we plan to use our internal  cash flow and
perhaps  private  placement  funds  as  the  principal  method  to  finance  the
commercialization of our technologies.  We do not intend to pay dividends in the
foreseeable future.

     New Accounting Pronouncements

     In  December  2002,  the FASB issued  Statements  of  Financial  Accounting
Standards  No.148,  "Accounting  for  Stock-Based  compensation - Transition and
Disclosure - an amendment of FASB  Statement  123" (SFAS 123). For entities that
change their accounting for stock-based  compensation  from the intrinsic method
to the fair value  method under SFAS 123, the fair value method is to be applied
prospectively  to those  awards  granted  after the  beginning  of the period of
adoption  (the  prospective   method).  The  amendment  permits  two  additional
transition  methods for  adoption of the fair value  method.  In addition to the
prospective  method,  the entity can choose to either (i)  restate  all  periods
presented  (retroactive  restatement method) or (ii) recognize compensation cost
from the  beginning  of the fiscal year of adoption as if the fair value  method
had been used to account for awards (modified  prospective  method).  For fiscal
years  beginning  December 15, 2003,  the  prospective  method will no longer be
allowed. The Company currently  accounts for its  stock-based compensation using

                                       17
<PAGE>

the intrinsic value method as proscribed by Accounting  Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" and plans on continuing using
this method to account for stock options, therefore, it does not intend to adopt
the  transition  requirements  as specified in SFAS 148. As of January 31, 2004,
the Company  does not have a stock  option plan in  existence,  however;  if the
Company chooses to in the future they will be subject to these guidelines.

Significant Accounting Policies and Estimates

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

Our  consolidated  financial  statements  have been prepared in accordance  with
generally accepted accounting principles, which require us to make estimates and
judgments that affect the reported amounts of assets, liabilities,  revenues and
expenses and the related disclosures.  A summary of these significant accounting
policies  can be  found  in  PocketSpec  Technologies  Inc.'s  (PST's)  Notes to
Consolidated  Financial  Statements  include in this Form 10-KSB.  The estimates
used by management  are based upon PST's  historical  experiences  combined with
managements'  understanding of current facts and  circumstances.  Certain of our
accounting  policies are  considered  critical as they are both important to the
portrayal  of our  financial  condition  and the results of our  operations  and
require  significant  or complex  judgments  on our part.  We  believe  that the
following  represent  the  critical  accounting  policies of PST as described in
Financial Reporting Release No. 60, Cautionary Advice Regarding Disclosure About
Critical  Accounting  Policies,  which was issued by the Securities and Exchange
Commission, inventories, deferred income taxes, allowance for doubtful accounts,
and allowance for sales returns.

The valuation of  inventories  involves  complex  judgments on our part.  Excess
finished  goods  inventories  are a natural  component  of market  demand of our
products. We continually evaluate and balance the levels of inventories based on
sales  projections and historical  product demand.  While certain finished goods
items will sell out quantities of other finished goods items will remain.  These
finished  goods are reserved as excess  inventory.  We believe we have  adequate
control  with  respect  to the amount of  finished  goods  inventories  that are
anticipated  to become  excess,  while we believe this  process  produces a fair
valuation of inventories, changes in general economic conditions of our products
could materially effect valuation of our inventories.

We do not record an  allowance  that  directly  relates to the  warranty  of our
products,  which would otherwise reduce our gross sales. We believe an allowance
is not required at this time,  since  historical data has indicated that returns
of our products for repair or replacement have been insignificant.

Our policy  regarding  long-lived  assets is to evaluate the  recoverability  or
usefulness of these assets when the facts and  circumstances  suggest that these
assets may be impaired.  This analysis relies on a number of factors,  including
changes  in  strategic  direction,   business  plans,  regulatory  developments,
economic  and budget  projections,  technological  improvements,  and  operating
results.  The test of  recoverability or usefulness is a comparison of the asset
value to the  undiscounted  cash flow of its expected  cumulative  net operating
cash flow over the asset's  remaining  useful  life.  Any  write-downs  would be
treated  as  permanent  reductions  in the  carrying  amount of the asset and an
operating  loss would be  recognized.  To date, we have had recurring  operating
losses  and the  recoverability  of our  long-lived  assets is  contingent  upon
executing our business plan that includes monitoring our manufacturing costs and
significantly  increasing  sales. If we are unable to execute our business plan,
we may be  required to write down the value of our  long-lived  assets in future
periods.
                                       18
<PAGE>


ITEM 7. Financial Statements.

                                      INDEX


                                                                            Page
                                                                           ----

Independent Auditor's Report                                                F-2

Consolidated Balance Sheet, January 31, 2004                                F-3

Consolidated Statements of Operations for the years ended
   January 31, 2004 and 2003                                                F-4

Consolidated Statement of Shareholders' Equity (Deficit),
   February 1, 2002 through January 31, 2004                                F-5

Consolidated Statements of Cash Flows, for the years ended
   January 31, 2004 and 2003                                                F-7

Notes to Consolidated Financial Statements                                  F-8


<PAGE>


INDEPENDENT AUDITOR'S REPORT





Board of Directors
PocketSpec Technologies, Inc.
Denver, Colorado


We have  audited  the  accompanying  consolidated  balance  sheet of  PocketSpec
Technologies,  Inc. and  Subsidiaries  as of January 31,  2004,  and the related
consolidated statements of operations,  shareholders' equity (deficit), and cash
flows  for the  years  ended  January  31,  2004 and  2003.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  consolidated  financial  position  of  PocketSpec
Technologies,  Inc. and  Subsidiaries  as of January 31, 2004 and the results of
operations  and cash flows for the years ended  January  31,  2004 and 2003,  in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying  financial  statements have been prepared  assuming the Company
will  continue  as a going  concern.  As  discussed  in Note 2 to the  financial
statements,  the Company has a working capital deficit as well as an accumulated
deficit as of January 31, 2004. The Company has also suffered  recurring  losses
from  operations.  These  factors  raise  substantial  doubt about the Company's
ability to continue as a going concern. Management's plans with respect to these
matters are also described in Note 2. These financial  statements do not include
any adjustments  relating to the  recoverability  and classification of reported
asset  amounts or the  amounts and  classifications  of  liabilities  that might
result from the outcome of this uncertainty.



By:  /s/ HEIN & ASSOCIATES LLP
     --------------------------
     HEIN & ASSOCIATES LLP

April 23, 2004
Denver, Colorado





                                       F-2
<PAGE>

                          POCKETSPEC TECHNOLOGIES INC.
                           Consolidated Balance Sheets
                                                                    January 31,
                                                                       2004
                                                                    -----------


                                     Assets
Current assets:
      Cash and cash equivalents                                     $     9,780
      Trade receivables                                                   4,352
      Inventory at cost, net of reserve of $22,500                      284,179
      Prepaid, and other, net                                             9,374
                                                                    -----------
          Total current assets                                          307,685

Fixed assets:
      Furniture and fixtures, net of accumulated
        depreciation of $14,324                                          35,578
      Office equipment, net of accumulated
        depreciation of $14,289                                          23,315
      Molds, net of accumulated
        depreciation of $71,796                                          63,553
                                                                    -----------
          Total fixed assets                                            122,446

                                                                    -----------
          Total assets                                              $   430,131
                                                                    ===========

                 Liabilities and Shareholders' Equity (Deficit)
Liabilities:
      Accounts payable                                              $   149,706
      Accounts payable, related party (Note 6)                          132,727
      Accrued liabilities                                                 2,017
      Accrued interest                                                    1,015
      Accrued interest, related parties (Note 6)                         44,028
      Accrued wages                                                     186,694
      Indebtedness, related parties (Note 6)                            121,800
      Notes payable                                                      14,500
      Notes payable, related parties (Note 6)                           498,885
                                                                    -----------
          Total current liabilities                                   1,151,372

Commitment and Contingencies (Notes 7,8,and 11)                            --

Shareholders' equity (deficit):
      Common stock, $0.001 par value, 50,000,000
          shares authorized, 36,124,260 shares
          issued, 36,094,260 shares outstanding                          36,095
      Additional paid-in capital                                      4,177,268
      Treasury stock, excess of $.001 par value,
          30,000 shares acquired, at cost                               (10,606)
      Accumulated deficit                                            (4,923,998)
                                                                    -----------
          Total shareholders' equity (deficit)                         (721,241)
                                                                    -----------
                                                                    $   430,131
                                                                    ===========
                 See accompanying notes to financial statements

                                       F-3
<PAGE>

<TABLE>
                          POCKETSPEC TECHNOLOGIES INC.
                      Consolidated Statements of Operations
<CAPTION>
                                                                  For the Years
                                                                    January 31,
                                                           ----------------------------
                                                               2004             2003
                                                           ------------    ------------
<S>                                                        <C>             <C>
Revenues
      Product sales                                        $    161,813    $    128,248

Cost of sales:
      Cost of sales                                             127,859          79,199
                                                           ------------    ------------
          Gross margin                                           33,954          49,049

Operating expenses:
      General and administrative expenses:
        Impairment of intangibles                             1,388,512            --
        General and administrative                              834,935       1,083,695
        Stock based compensation (Note 9)                       212,822          61,852
        Rent expense to related parties (Note 6)                 48,000          25,500
        Research and development costs                           52,460         115,160
      Depreciation                                               58,183          40,906
      Amortization                                              163,851         111,658
                                                           ------------    ------------
          Total general and administrative expenses           2,758,763       1,438,771

          Operating (loss)                                   (2,724,809)     (1,389,722)

Other income (expense):
      Other income                                                4,616            --
      Interest income (expense)                                       1           4,783
      Gain on sale of assets acquired from related party           --             9,231
                                                           ------------    ------------
          Total other income (expense)                            4,617          14,014

          (Loss) before provision
            for income taxes                                 (2,720,192)     (1,375,708)

Provision for income taxes - benefit                       $       --      $       --
                                                           ============    ============
          (Loss) from continuing operations                $ (2,720,192)   $ (1,375,708)
                                                           ============    ============
Discontinued operations:
      Income of Real Estate Opportunities, Inc.
        including gain on disposal of $0,$192,336                  --           192,336
      Income tax expense (benefit)                                 --              --
                                                           ------------    ------------
      Income on discoutinued operations                            --           192,336

          Net (loss)                                       $ (2,720,192)   $ (1,183,372)
                                                           ============    ============

Net income per share:
      Continuing operations                                $     (0.082)   $     (0.077)
                                                           ============    ============
      Discontinued operations                              $       --      $      0.011
                                                           ============    ============
      Net (loss)                                           $     (0.082)   $     (0.066)
                                                           ============    ============
      Basic and dilluted shares used for computation         33,240,563      17,932,064
                                                           ============    ============
</TABLE>
                 See accompanying notes to financial statements

                                       F-4
<PAGE>

<TABLE>
                          POCKETSPEC TECHNOLOGIES INC.
            Consolidated Statement of Shareholders' Equity (Deficit)
                    February 1, 2002 Through January 31, 2004
<CAPTION>


                                              Common     Treasury                 Additional  Common
                                               Stock      Stock                    Paid In     Stock  Accumulated
                                              Shares      Shares      Amount      Capital     Options   Deficit         Total
                                            ----------   --------    --------    ----------    ----   -----------    -----------

<S>                                         <C>          <C>         <C>         <C>           <C>    <C>            <C>
Beginning Balance February 1, 2002          11,088,718   (111,850)   $ 10,978    $1,410,521     --    $(1,020,434)   $   401,065

February 2002 shares repurchased                  --      (74,858)        (75)      (25,690)    --           --          (25,765)
February 2002, shares cancelled                (79,000)      --          --            --       --           --                0
March, 2002 shares repurchased                    --      (36,992)        (37)      (12,913)    --           --          (12,950)
March 2002, shares cancelled                   (33,358)      --            (1)         (177)    --           --             (178)
March 2002, shares issued for stock
   based compensation                           30,000       --            30        10,670     --           --           10,700
April 2002, shares repurchased                    --      (75,500)        (76)      (27,066)    --           --          (27,142)
May 2002, shares repurchased                      --      (27,000)        (27)       (8,874)    --           --           (8,901)
May 2002, stock acquired from
   Color-Spec Technologies, Inc.                  --     (700,000)       (700)          700     --           --                0
May 2002, shares issued for
   Color-Spec Technologies, Inc.             8,316,353       --         8,316     1,378,734     --           --        1,387,050
June 2002, shares repurchased                     --       (7,500)         (7)       (2,962)    --           --           (2,969)
July 2002 shares repurchased -
   Gill & Assoc                                   --      (23,000)        (23)       (8,279)    --           --           (8,302)
July 2002, shares cancelled                   (901,850)   901,850        --            --       --           --                0
September 2002, shares issued for
   stock based compensation                     78,000       --            78        21,522     --           --           21,600
October 2002, sale of common stock,
   related parties                           1,165,000       --         1,165       115,335     --           --          116,500
October 2002, common stock exchanged
   for debt                                  2,430,000       --         2,430       240,570     --           --          243,000
October 2002, sale of stock to
   individuals                                 436,996       --           437        61,309     --           --           61,746
October 2002, shares issued for stock
   based compensation                            5,000       --             5           795     --           --              800
October 2002, shares issued for stock
   based compensation                           10,000       --            10         1,590     --           --            1,600
October 2002, shares cancelled                 (13,000)    13,000        --            --       --           --                0
December 2002,  common stock issued
   for payable                                 130,000       --           130        34,303     --           --           34,433
December 2002, shares issued for stock
   based compensation                           70,625       --            71        15,252     --           --           15,323
January 2003, shares issued for stock
   based compensation                           95,146       --            95        11,734     --           --           11,829
January 2003, shares issued for
   intellectual property                       200,000       --           200        23,800     --           --           24,000
Net loss for the year - PocketSpec
   Technologies Inc.                              --         --          --            --       --     (1,183,372)    (1,183,372)
                                            ----------   --------    --------    ----------    ----   -----------    -----------

Balance January 31, 2003                    23,028,630    (30,000)   $ 22,999    $3,240,874    $--    $(2,203,806)   $ 1,060,067
                                            ==========   ========    ========    ==========    ====   ===========    ===========
</TABLE>

                         (TABLE CONTINUED ON NEXT PAGE)

                 See accompanying notes to financial statements

                                       F-5
<PAGE>

<TABLE>
                          POCKETSPEC TECHNOLOGIES INC.
            Consolidated Statement of Shareholders' Equity (Deficit)
                    February 1, 2002 Through January 31, 2004

                         (CONTINUED FROM PREVIOUS PAGE)
<CAPTION>


                                              Common     Treasury                 Additional  Common
                                               Stock      Stock                    Paid In     Stock  Accumulated
                                              Shares      Shares      Amount      Capital     Options   Deficit         Total
                                            ----------   --------    --------    ----------    ----   -----------    -----------
<S>                                         <C>          <C>         <C>         <C>           <C>    <C>            <C>
February 2003, shares issued for stock
   based comp, related party                     9,155                      9           906                                  915
February 2003, shares issued for stock
   based comp                                   28,875                     29         2,859                                2,888
March 2003, shares exchange stock for
   debt - B7 Brand Note                      4,321,673                  4,322       298,195                              302,517
March 2003, shares exchanged stock for
   debt - Roben Note                           319,992                    320        22,079                               22,399
March 2003, shares exhanged stock for
   debt - Miller Note                        4,695,022                  4,695       323,957                              328,652
March 2003, shares exchanged for debt
   - Ford PS Plan Note                         737,064                    737        50,857                               51,594
March 2003, shares exchanged for payable,
   related party                                71,400                     71         4,927                                4,998
March 2003, sale of stock, related party       120,000                    120         8,280                                8,400
March 2003 - shares issued for design and
   consulting                                   50,000                     50         8,950                                9,000
March 2003, shares issued for stock based
   comp                                        109,063                    109        19,522                               19,631
March 2003, shares issued for stock based
   comp, related party                          18,310                     18         3,278                                3,296
March 2003, shares issued for stock based
   comp                                        137,500                    138        25,137                               25,275
July 2003, shares issued for stock based
   comp                                      1,130,750                  1,131        78,221                               79,352
July 2003, shares issued for stock based
   comp, related party                          50,000                     50         3,450                                3,500
July 2003, shares issued for stock based
   comp                                        215,181                    216        14,849                               15,065
July 2003, shares issued for stock based
   comp, related party                         500,000                    500        24,500                               25,000
July 2003, shares exchanged for payable        125,000                    125         7,375                                7,500
August 2003, shares issued for stock based
   comp                                         70,000                     70         3,430                                3,500
August 2003, shares issued for stock based
   comp, related party                         183,100                    183        10,803                               10,986
August 2003, shares issued for stock based
   comp                                        118,406                    118         6,986                                7,104
August 2003, shares returned and canceled      (61,000)                   (61)           61                                    0
October 2003, shares issued for stock
   based comp                                  146,239                    146         7,166                                7,312
Net loss for the year - PocketSpec
   Technologies Inc.                                                                                   (2,720,192)    (2,720,192)
                                            ----------   --------    --------    ----------    ----   -----------    -----------
Balance January 31, 2004                    36,124,360    (30,000)     36,095     4,166,662       0    (4,923,998)      (721,241)
                                            ==========   ========    ========    ==========    ====   ===========    ===========
</TABLE>

                 See accompanying notes to financial statements

                                       F-6
<PAGE>

<TABLE>
                          POCKETSPEC TECHNOLOGIES INC.
                      Consolidated Statements of Cash Flows
<CAPTION>


                                                                     Twelve Months Ended
                                                                          January 31,
                                                                  --------------------------
                                                                     2004           2003
                                                                  -----------    -----------
<S>                                                               <C>            <C>
Cash flows from operating activities:
    Net loss                                                      $(2,720,192)   $(1,183,372)
    Adjustments to reconcile net loss to net cash used
      by operating activities:
       Depreciation and amortization                                  222,034        148,565
       Impairment of intangibles                                    1,388,512           --
       Stock-based compensation (Note 9)                              212,824         61,852
       Non-cash interest expense, related parties                        --           53,433
       Non-cash interest expense, other                                15,791          5,625
       Non-cash other                                                  23,727
       Discount on sale of note receivable                               --           45,198
       Gain on sale of asset, related party                              --         (192,336)
       (Increase) decrease in:
          Accounts receivable, trade                                      193         (2,545)
          Inventory                                                   (33,823)      (250,357)
          Prepaids and accruals                                         7,583         (1,723)
       Increase (decrease) in:
          Payables, accruals, and other, net                          339,973        271,889
                                                                  -----------    -----------
             Net cash used by operating activities                   (543,378)    (1,043,771)
                                                                  -----------    -----------

Cash flows from investing activities:
    Cash paid for property additions, related party                      --          (69,065)
    Cash paid for property additions, other (Notes 3 & 7)             (25,482)      (121,385)
    Cash paid for intangibles (Notes 3 & 7)                            (1,359)       (34,040)
    Loans made, related party                                            --           (2,497)
    Proceeds from repayment of short term loan,                          --
      related party                                                      --            7,700
    Proceeds from repayment of notes receivable,
      related party                                                      --           30,054
    Proceeds from sale of note receivable, other                         --          493,921
                                                                  -----------    -----------
             Net cash received (used) by investing activities         (26,841)       304,688
                                                                  -----------    -----------

Cash flows from financing activities:
    Principal payments paid on notes                                     --           (3,500)
    Principal payments paid on notes, related party (Note 6)          (55,700)          (200)
    Repayment of short term loans, related parties                       --          (75,770)
    Proceeds from short term loans, related parties (Note 6)          121,800         75,770
    Proceeds from borrowing, other                                       --          100,000
    Proceeds from borrowing, related parties (Note 6)                 479,550         99,689
    Proceeds from revenue funding, related parties                       --          374,562
    Proceeds from revenue funding, other                                 --           39,375
    Cash paid to acquire stock                                           --          (86,206)
    Proceeds from issuance of common stock (Notes 7 & 9)               17,500         61,746
    Proceeds from issuance of common stock, related party
      (Notes 6 & 9)                                                    10,398        116,500
                                                                  -----------    -----------
             Net cash provided by financing activities                573,548        701,966
                                                                  -----------    -----------

    Net change in cash                                                  3,329        (37,117)
    Cash and cash equibalents at beginning of period                    6,451         43,568
                                                                  -----------    -----------
             Cash and cash equivalents at end of period           $     9,780    $     6,451
                                                                  ===========    ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Cash paid during the year for:
       Interest                                                   $     4,601    $     6,732
                                                                  ===========    ===========
       Income taxes                                               $      --      $      --
                                                                  ===========    ===========
    Non-cash investing and financing activities:
       Common stock issued for acquisition of Color-Spec
         Technologies, Inc                                        $      --      $ 1,387,050
                                                                  ===========    ===========
       Common stock issued for debt, related party                $   302,517    $      --
                                                                  ===========    ===========
       Common stock issued for debt, other                        $   402,645    $      --
                                                                  ===========    ===========
       Common stock issued to acquire intangibles                 $      --      $    24,000
                                                                  ===========    ===========
       Common stock issued for services                           $   212,824    $    61,852
                                                                  ===========    ===========
       Common stock issued to repay revenue entitlement
          funding                                                 $      --      $   284,485
                                                                  ===========    ===========
       Common stock issued to repay payables                      $    12,498    $    34,433
                                                                  ===========    ===========
</TABLE>

                 See accompanying notes to financial statements

                                       F-7
<PAGE>


                          POCKETSPEC TECHNOLOGIES INC.
                   Notes to Consolidated Financial Statements

Note 1:  Basis of presentation

(a)  Organization and Basis of Presentation

Our  predecessor  was  incorporated on January 1, 2000 as FJK Millennium Fund V,
Inc. and subsequently  changed its name to FJK  Opportunities,  Inc. On April 6,
2000,  we  did a  reverse  acquisition  with  Real  Estate  Opportunities,  Inc.
(formerly Monument Galleries, Inc.), a Colorado corporation, incorporated on May
15, 1998.  We acquired  tracts of raw land and developed  them into  residential
lots for sale to homebuilders.  In addition, we acquired,  for redevelopment,  a
commercial  rental property in Denver,  Colorado.  During the year ended January
31, 2002, we sold all of our real estate  holdings.  Beginning  during out third
fiscal  quarter of 2001,  we changed our business plan and became a developer of
color comparing instruments.

On December 4, 2001,  our  shareholders  voted in favor of two amendments to our
Articles of Incorporation. The first amendment approved was our name change from
Real Estate  Opportunities,  Inc. to  PocketSpec  Technologies  Inc.  The second
amendment  approved  our  changing  our  authorized  shares of common stock from
10,000,000 to 50,000,000  shares. Our shareholders also elected four nominees to
our board of directors  and  ratified  our  selection of auditors for our fiscal
year ending January 31, 2003.

In  May  2002,  we  acquired  Color-Spec  Technologies,   Inc.  in  a  tax-free,
stock-for-stock  transaction.  We exchanged a total of  8,316,353  shares of our
common  stock  in  exchange   for  100%  of  the  common  stock  of   Color-Spec
Technologies, Inc., which became a wholly owned subsidiary of us.

Our consolidated  financial  statements  include the accounts of the Company and
our wholly owned subsidiary. All inter-company transactions have been eliminated
in consolidation.

We  are a  technology  company,  which  is in the  business  of  developing  and
marketing color comparison devices.  Previously, we were engaged in certain real
estate  activity  since  inception  through  January 31,  2002.  Inherent in our
business are various risks and  uncertainties,  including our limited  operating
history,  historical  operating  losses,  and the  success  of recent  change in
business  plans.  Our plans include  continuing  to develop our  color-measuring
technology and marketing our products. Our future success will be dependent upon
our ability to market an effective and competitive color-comparing instrument on
a timely and cost-effective bases.

(b) Use of Estimates

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

(c) Cash and Cash Equivalents

The Company considers all highly liquid  securities with original  maturities of
three months or less when acquired to be cash equivalents. Our net cash and cash
equivalents were $9,780 as of January 31, 2004, compared to $6,451 as of January
31, 2003
                                       F-8
<PAGE>

                          POCKETSPEC TECHNOLOGIES INC.
                   Notes to Consolidated Financial Statements

(d) Revenue and Cost Recognition

Costs that clearly relate to sales of the Company's  color  comparison  products
are charged to  earnings  when  incurred.  Revenues  from sales of products  are
recognized  at the time of  shipment  of  product.  Customers  have the right to
return products for 90 days after purchase.  Defective  products are repaired or
replaced  at our  discretion.  Refunds  are issued  either by check or credit as
necessary.  The Company has minimal  returns and therefore  does not maintain an
allowance for those returns.

(e) Inventory

Inventories are stated at the lower of cost or market.  Cost includes materials,
labor, direct costs, and allocated overhead. Generally,  inventories are written
down to market value during the period in which  impairment of such  inventories
is  identified.  Inventory at January 31, 2004 consisted of finished  goods.  We
have recorded an allowance of $22,500 that directly  relates to  non-saleable or
discontinued products, which reduces our gross profit.

(f) Intangible Assets

The Company acquired an exclusive,  worldwide license under a technology license
agreement for the  manufacturing  and marketing rights to a hand-held device for
comparing the color of objects and light  emission.  In addition,  the agreement
assigned rights to a pending  utility patent  covering the color  technology and
applications  for  trademarks  and patent  protection  for the  ColorQA  and the
BronzCheck  devices  and  related  technologies.  In January  2003,  the Company
entered into a technology  transfer agreement to acquire an exclusive license to
technologies used in the measurement of ultra-violet emissions from tanning beds
used in tanning salons.

All electronic  components used within our products are readily  available.  All
optical,  mechanical and packaging  components are unique to us but use standard
injection  mold practices for  manufacturing  of these  components.  The Company
attempt to incorporate  previously  used  programming  codes and  electronics in
planning for future products.  At the present time, we do not plan to produce or
assemble products outside of our direct control.

Costs of acquiring the  exclusive  rights are  reflected as  intangibles  in the
accompanying  consolidated  financial  statements.  The costs of such rights are
recovered  at the time the rights are sold or  otherwise  disposed  of.  Related
income is recognized when earned. The license rights are amortized over ten (10)
years.

(g) Impairment of Intangible Assets

The Company  evaluates  the carrying  value of its  long-lived  assets under the
provisions of Statement of Financial  Accounting  standards No. 144,  Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of  (Statement  No. 144).  Statement  No. 144 requires  impairment  losses to be
recorded on long-lived assets used in operations,  when indicators of impairment
are present and the undiscounted  future cash flows estimated to be generated by
those  assets are less than the  assets'  carrying  amount.  If such  assets are
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying value or fair value,  less
costs to sell. The Company expensed the carrying value of its intangible  assets
as a one time charge totaling $1,388,512 for the year ending January 31, 2004.

                                       F-9
<PAGE>

                          POCKETSPEC TECHNOLOGIES INC.
                   Notes to Consolidated Financial Statements


(h) Income Taxes

The Company  accounts  for income  taxes under the  provisions  of  Statement of
Financial  Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109).
SFAS 109 requires  recognition  of deferred tax  liabilities  and assets for the
expected  future  tax  consequences  of events  that have been  included  in the
consolidated  financial statements or tax returns.  Under this method,  deferred
tax  liabilities and assets are determined  based on the difference  between the
financial  statement and tax bases of assets and  liabilities  using enacted tax
rates in effect for the year in which the differences are expected to reverse.

(i) Stock Based Compensation

The Company  accounts for  stock-based  compensation  arrangements in accordance
with Statement of Financial  Accounting  Standards ("SFAS") No. 123, "Accounting
for Stock-Based  Compensation,"  which 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 Accounting  Principle Board ("APB") Opinion No. 25 and provide pro
forma net earnings (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,  where
applicable, and provide the pro forma disclosure provisions of SFAS No. 123. The
Company has not granted options during the past fiscal year.

(j) Transfer Pricing of Transactions Among Related Entities

The Company  accounts for certain related party  transactions in accordance with
SEC  policies.  The SEC staff has stated that  assets  should be valued at their
historical cost in a transfer of assets between companies under common control.

(k) Earnings Per Share

Basic earnings per share are generally  calculated by dividing net income by the
weighted  average  number  of shares  outstanding.  Diluted  earnings  per share
reflect the potential dilution that would occur if all grants,  agreements,  and
contracts to issue shares were exercised or converted.  Diluted income per share
is the same as basic  income per share for the years ended  January 31, 2004 and
2003.

(l) New Accounting Pronouncements

In December 2002, the FASB issued Statements of Financial  Accounting  Standards
No.148,  "Accounting for Stock-Based  compensation - Transition and Disclosure -
an amendment of FASB  Statement  123" (SFAS 123). For entities that change their
accounting for stock-based  compensation  from the intrinsic  method to the fair
value   method  under  SFAS  123,  the  fair  value  method  is  to  be  applied
prospectively  to those  awards  granted  after the  beginning  of the period of
adoption  (the  prospective   method).  The  amendment  permits  two  additional
transition  methods for  adoption of the fair value  method.  In addition to the
prospective  method,  the entity can choose to either (i)  restate  all  periods
presented  (retroactive  restatement method) or (ii) recognize compensation cost
from the  beginning  of the fiscal year of adoption as if the fair value  method
had been used to account for awards (modified  prospective  method).  For fiscal
years  beginning  December 15, 2003,  the  prospective  method will no longer be
allowed.  The Company currently accounts for its stock-based  compensation using
the intrinsic value method as proscribed by Accounting Principles Board Opinion

                                      F-10
<PAGE>

                          POCKETSPEC TECHNOLOGIES INC.
                   Notes to Consolidated Financial Statements


No. 25, "Accounting for Stock Issued to Employees" and plans on continuing using
this method to account for stock options, therefore, it does not intend to adopt
the  transition  requirements  as specified in SFAS 148. As of January 31, 2004,
the Company  does not have a stock  option plan in  existence,  however;  if the
Company chooses to in the future they will be subject to these guidelines.

Note 2: Liquidity and Basis of Presentation

We generated  operating  revenues in our color  comparison  business during this
fiscal year.  We incurred a loss for the year ended  January 31, 2004 totaling $
2,720,192  compared to a loss of $1,183,372 for the year ended January 31, 2003.
We have a working  capital  deficit of $843,687 as of January 31, 2004. Our loss
for the year ended January 31, 2004 was due to continued developing costs of our
color comparison business.

We have not been profitable since we entered the color comparison  business.  We
believe  that we have begun to  generate  enough  sales to  potentially  reach a
break-even during the second fiscal quarter. For the coming fiscal year, we plan
to vigorously market our technology and develop our operations.  We believe that
we have begun to generate enough sales to potentially  reach a break-even during
the second fiscal quarter. Even with our marketing plan we will continue to have
liquidity issues. If the Company cannot ultimately obtain profitable operations,
there is substantial doubt about its ability to continue as a going concern. The
consolidated  financial  statements  do not include any  adjustments  should the
company be unable to continue operations as a going concern.

Note 3:   Acquisition of property

     (a)  In order to obtain specific intellectual property, on May 31, 2002 the
          Company  acquired 100% of the issued and outstanding  common shares of
          Color-Spec  Technologies,   Inc.  (Color-Spec)  in  a  stock-for-stock
          acquisition.  Color-Spec  has  developed  and  holds  the  rights to a
          product line of color  comparing  instruments.  Under the terms of the
          acquisition,  each shareholder of Color-Spec received one common share
          of PocketSpec for each common share of Color-Spec  owned.  The Company
          issued a total of  8,316,353  restricted  shares  of  common  stock in
          connection  with this  transaction.  As 50% of Color-Spec was owned by
          the president and controlling shareholder of Pocket-Spec, that portion
          of the  consideration  has  been  recorded  at  historical  cost.  The
          remaining 50% of the consideration issued for Color-Spec was valued at
          the market  price of the  Company's  common  stock on May 31,  2002 of
          $1,455,362.  The amount of the purchase  price  assigned to each major
          asset and liability of Color-Spec is as follows:

          Current Assets                        $    5,615
          Fixed Assets, net                          4,992
          License rights                         1,455,362
          Current liabilities                          150

                                      F-11
<PAGE>

                          POCKETSPEC TECHNOLOGIES INC.
                   Notes to Consolidated Financial Statements


          The following  unaudited  pro-forma  results of operations are for the
          Company  and  Color-Spec  as if the  acquisition  had  taken  place on
          February 1, 2002:

                                        Year Ended
                                        January 31,
                                           2003
                                        ------------
          Revenue                       $   128,248
          Net (Loss)                     (1,283,712)
          Loss per share                      (0.06)
          Weighted average shares
            Outstanding                  20,704,181

          The  amortization  period for the  license  rights  are 10 years.  The
          results of the Color-Spec  business have been  consolidated with those
          of Pocket-Spec effective May 31, 2002.

     (b)  During the third quarter of our fiscal year ended January 31, 2003 the
          Company  entered into a trademark  license  agreement with  Solartech,
          Inc. located in Michigan.  The purpose of the agreement was to acquire
          use of its hand held solar meters for use with the Company's hand held
          color-measuring  devices,  primarily  the  BronzCheckTM  product line.
          Terms  of the  agreement  include  a  non-exclusive  right  to use the
          Licensed  Mark in the  promotion  of solar  meters for a period of ten
          (10) years.  The property  was  acquired for 200,000  shares of common
          stock valued at $24,000 or $.12 per share.


     (c)  During  the  year  ended  January  31,  2004,  the  Company   acquired
          depreciable  assets for cash for a total  amount of  $25,482  and paid
          $1,359 for patent filing fees.


Note 4: Buildings, property, equipment and depreciation.

Building,  property and equipment are recorded at cost. Expenditures that extend
the useful lives of assets are  capitalized.  Repairs,  maintenance and renewals
that do not extend the useful  lives of the  assets are  expensed  as  incurred.
Depreciation  is  provided  on  the  straight-line  method  over  the  following
estimated useful lives:  building,  39 years; building  improvements,  39 years;
furniture, 7 years;  equipment, 5 years; and molds, 3 years.  Depreciable assets
consisted of the following at January 31, 2004:

               Furniture                            $    49,902
               Equipment                                 37,604
               Molds                                    135,349
                                                    -----------
                                                        222,855
               Less accumulated depreciation           (100,409)
                                                    -----------
                                                    $   122,446

Note 5: Intangible assets and amortization

Intangible assets were expensed as a one time charge in the amount of $1,388,512
at January 31, 2004.

Note 6: Related party transactions

B7 Brand, LLC (B7B), Cherry Creek Cottage, LLC (CCC),  Color-Spec  Technologies,
Inc., (CST), Platinum Financial Fund, LLC, (PFF), F. Jeffrey Krupka (FJK), Janet
Brophy (JB), Krupka-Brophy Profit Sharing Plan (KBP), and Wraith Moon House, LLC
(WMH) are  affiliates  of our Company by either  common  ownership  or by common
management.  Asset Realization, Inc.  (ARI)  and  Cape Aloe  Corp., (CAC) became
unaffiliated  at January  31, 2004 when those  companies  changed  officers  and
directors.

                                      F-12
<PAGE>

                          POCKETSPEC TECHNOLOGIES INC.
                   Notes to Consolidated Financial Statements


     (a)  The  Company  has  accounts  payable  to Janet  Brophy  the  amount of
          $95,022,  to Cynthia  Kettl,  $4,040,  to Frank  Krupka,  an employee,
          $24,801, and to Gregg Wagner,  $8,864, for a total amount of $132,727.
          Janet Brophy is The President, CEO, and board member, Cynthia Kettl is
          the Secretary/Trea-  surer, CFO, and board member, and Gregg Wagner is
          a board  member.  Officers and  employees  have paid  expenses for the
          Company from time to time. For their payments,  the Company intends to
          pay  interest on the expense  amounts  that have been  provided by the
          personnel.  During  the year  ended  January  31,  2004,  the  Company
          transferred  an  outstanding  indebtedness  from FJK in the  amount of
          $2,000 by applying the  indebtedness  to  outstanding  payables due to
          Janet Brophy. The balances owing to Janet Brophy were expenses paid by
          FJK on behalf  of the  Company  through  use of his  personal  line of
          credit.

     (b)  Notes payable and accrued interest

          The  Company  has  accrued  interest  payable to  affiliates  totaling
          $44,028 from notes payable totaling $498,885 to affiliates. During the
          year ended  January  31, 2004 the  Company  borrowed  $1,500 from ARI,
          $285,000  from B7B,  $35,000 from CAC,  $5,700 from CAC,  $36,350 from
          KBP, and $116,000  from B7B,  totaling  $479,550  cash.  Points in the
          amount of $15,000 were included in the  principal  balance of $300,000
          to B7B,  loan  fees in the  amount  of  $3,635  were  included  in the
          principal  balance  of  $39,985  to KBP,  and  points in the amount of
          $11,600 were  included in the $127,600 to B7B.  Amounts  borrowed were
          used for  operating  capital and  development  of new  color-measuring
          product lines.

          Note payable to ARI in the amount of $1,500.  The note bears  interest
          at 6% and is due with a single payment  totaling $1,572 on December 1,
          2003.  The note has been  extended  until paid and continues to accrue
          interest. Accrued interest through January 31, 2004 totals $87.

          Note  payable to B7B in the amount of $300,000.  The Company  borrowed
          $285,000 from B7B during March 2003 for use as operating capital.  The
          terms of the note required payment of $15,000 in interest points which
          was deducted from the $300,000 principal balance,  netting the Company
          $285,000 cash. The note bears interest at 12% with monthly payments in
          the amount of $3,750  beginning  April 1, 2003 and  matures  March 24,
          2004. B7B has temporarily  waived the monthly payment  requirement and
          has extended the note until paid. Accrued interest at January 31, 2004
          totals $30,773.

          Note  payable to B7B in the amount of $127,600.  The Company  borrowed
          $116,000 from B7B during September 2003 for use as operating  capital.
          The terms of the note required  payment of $11,600 in interest  points
          which was deducted from the $127,600  principal  balance,  netting the
          Company  $116,000  cash.  The note bears  interest at 12% with monthly
          payments  in the  amount  of $2,500  beginning  October  19,  2003 and
          matures  September 19, 2004.  B7B has  temporarily  waived the monthly
          payment  requirement.  The total  amount of  points  expensed  through
          January  31,  2004 was  $4,259.  Accrued  interest at January 31, 2004
          totaled $5,621.

          Note payable to CAC in the amount of $50,000.  The Company converted a
          short-term  loan in the  amount of $20,000  from CAC into a note.  The
          note had an interest rate of 6% and matured August 1, 2004.  Principal
          payments in the amount of $50,000  have been paid along with  interest
          in the amount of $389 through the period ended April 30, 2003.

                                      F-13
<PAGE>

                          POCKETSPEC TECHNOLOGIES INC.
                   Notes to Consolidated Financial Statements


          Note payable to CAC in the amount of $5,700.  The note had an interest
          rate of 6%. The note was paid in full along with  accrued  interest in
          the amount of $41.

          Note payable to Janet Brophy in the amount of $24,000.  The note bears
          interest at 15% with monthly payments in the amount of $3,000 starting
          March 1, 2003 and matures November 1, 2003. JB has temporarily  waived
          the monthly payment  requirement and extended the note until it can be
          paid. Accrued interest at January 31, 2004 totals $3,620.

          Note payable to KBP in the amount of $39,985.  The note bears interest
          at 12% and is due with a single payment  totaling  $43,206 and matures
          January 6, 2004.  The  Company  borrowed  $36,350  from KBP during the
          second  quarter  ended  July  31,  2003.  The  money  was used to fund
          continued development of the color measuring product line. The Company
          paid a loan fee and financed the fee into the note.  The amount of the
          fee was $3,635 and is being amortized over the life of the loan. Total
          fees expensed  through January 31, 2004 were $3,635.  Accrued interest
          through January 31, 2004 totaled $3,549.

          Note payable to WMH in the amount of $5,800.  The note bears  interest
          at 6% and is due  with a single  payment  totaling  $5,975  on July 3,
          2003. The note has been extended until it can be paid and continues to
          accrue interest. Accrued interest at January 31, 2004 totals $378.

     (c)  Short term loans

          For the year ended  January 31, 2004 the Company  received  short term
          loans from affiliates  totaling $121,  800. The amounts  received were
          $61,800 from CAC,  $27,000 from B7B,  $7,500 from CCC, $6,000 from JB,
          $16,500 from Cynthia Kettl,  $1,000 from Frank Krupka, and $2,000 from
          Gregg Wagner.

     (d)  Issuance of common stock

          During the three months period ended April 30, 2003 the Company issued
          27,465  shares  valued at $4,211 to an  employee in lieu of salary for
          services provided to the Company. The Company also sold 191,400 shares
          of stock to two  employees/directors  for cash totaling $10,398 and an
          amount payable to the CFO for $3,000. The transaction totaled $13,398.

          For the year ended  January  31,  2004 the  Company  converted  a note
          payable in the amount of $275,000  along with  accrued  interest  into
          stock.  The  Company  received  $10,000  cash and  converted  the note
          payable for  $275,000  with  interest in the amount of $17,517,  for a
          total amount of $302,517 for  4,321,673  shares of common  stock.  The
          Company  also sold  120,000  shares of stock to JB for $8,400 cash and
          issued  71,400  shares of common  stock to the CFO for $1,998 cash and
          $3,000 from an account  payable,  for a total  amount of $4,998.  Cash
          from the transaction totaled $10,398.

          During the year ended  January  31,  2004 the  Company  issued  68,750
          shares  of  common  stock  to  two  employees  valued  at  $4,813  for
          compensation  for services to the  Company.  The Company also issued a
          total of 800,000  shares of common  stock to the two  directors of the
          Company in recognition for services  performed.  300,000 shares of the
          stock were  valued at $.07 per share,  for a total  amount of $21,000,
          while  500,000  shares  of stock  were  valued at $.05 per  share,  or
          $25,000 at market value at date of issue.  A total  expense of $46,000
          was  recorded  in the  accompanying  financial  statements.  The total
          amount recorded as stock based compensation was $50,813.

                                      F-14
<PAGE>

                          POCKETSPEC TECHNOLOGIES INC.
                   Notes to Consolidated Financial Statements


          During the year ended  January  31, 2004 the  Company  issued  183,100
          shares valued at $10,986 to an employee in lieu of salary for services
          provided to the Company.

     (e)  On March 5, 2002 the Company  entered into an office  lease  agreement
          with CCC.  The  agreement  requires  $4,000 per month rental of office
          space commencing  April 1, 2002 and continuing  through April 1, 2007.
          The agreement also requires payment of the yearly property tax. During
          the year ended  January 31, 2004 the Company paid rent to CCC totaling
          $48,000.  The Company  also paid  $20,000 to CCC for accrued rent from
          the year ended  January 31, 2003.  The total amount paid to CCC during
          the year ended January 31, 2004 totaled $68,000.

     (f)  The  Company  has agreed to pay a board  member a bonus of $20,000 for
          his  participation  in  developing  software  for the  ColorQA  device
          whenever  sales  amount to  $200,000  from sale of the units  with the
          software and after all of deferred wages have been paid.


Note 7:  Transactions with non-affiliates

     (a)  For  the  year  ended  January  31,  2004  the  Company  had  accounts
          receivable  totaling $4,352. The Company acquired inventory for use in
          the production of its color measuring  product lines. The value of the
          inventory at January 31, 2004 totaled $294,103. Each product line uses
          the same technology and the electronic components are interchangeable.
          The Company had prepaid  expenses  totaling $9,374 and acquired assets
          totaling  $25,482 and acquired  intangibles  totaling $1,359 for cash.
          The  Company  also had  payables  in the amount of  $149,706,  accrued
          liabilities  totaling $2,017.  The Company has accrued payroll for its
          employees totaling $186,694.

     (b)  As of January 31, 2004, the Company had accrued interest payable for a
          note payable to an individual  totaling $1,015. The note payable is in
          the amount of $14,500 and bears  interest at 6%, with a single payment
          that was due in the approximate amount of $14,939 on June 3, 2003. The
          note has been extended until it can be paid.

     (c)  For the year  ended  January  31,  2004 the  Company  converted  notes
          payable to  non-affiliates  totaling  $381,164  plus accrued  interest
          totaling $3,982 into stock, for a total amount of $385,146. Additional
          cash in the  amount  of  $17,500  was  received  from the  individuals
          towards the  purchase  of 250,000  shares of stock  totaling  $17,500,
          which  was  used  for  operating   capital.   Shares  issued  for  the
          transaction totaled 5,752,078 and were valued at $0.07 per share.

     (d)  During the year ended January 31, 2003, the Company  received  $78,750
          from  assignment  for the sale of  specific  units to be produced at a
          later time.  The financial  arrangement  covers the costs of inventory
          and production,  in order to establish an inventory of completed units
          to be shipped upon receipt of orders. These units were produced.

     Note 8: Operating leases

We have an operating  lease for our office space  located at 3225 East 2nd Ave.,
Denver,  Colorado  80206.  On March 5, 2002, we signed a lease,  effective  from
April 1, 2002 to April 1, 2007, with B7B an affiliate of an employee, F. Jeffrey

                                      F-15
<PAGE>

                          POCKETSPEC TECHNOLOGIES INC.
                   Notes to Consolidated Financial Statements


Krupka.  We pay B7B  $4,000  per month on a triple  net  lease,  along with real
estate taxes, property insurance,  maintenance and repairs,  telephone expenses,
and other normal expenses of the property.

We also have an operating lease for office copying equipment.  The agreement was
signed on March 4, 2003 and is effective through November 4, 2007. Monthly lease
payments total $1,318.

In addition, we have a lease for storage space that was effective on May 1, 2002
and is renewable on an annual basis. The monthly rental amount is $500.

Total monthly leases payments are  approximately  $5,818.  Total amount paid for
the year ended January 31, 2004 and 2003 was $69,816 and $58,279 respectively.

Future minimum lease payments  under the office and equipment  leases  described
above are approximately as follows.

                       Year                  Year
                       ----               ----------
                       2005               $   69,816
                       2006                   69,816
                       2007                   69,816
                       2008                   25,180
                                          -----------
                                          $  234,628
                                          ===========


Note 9:   Shareholders' equity

     (a)  Related parties

          During the three months period ended April 30, 2003 the Company issued
          27,465  shares  valued at $4,211 to an  employee in lieu of salary for
          services provided to the Company. The Company also sold 191,400 shares
          of stock to two  employees/directors  for cash totaling $10,398 and an
          amount payable to the CFO for $3,000. The transaction totaled $13,398.
          During the six months  period  ended July 31, 2003 the Company  issued
          27,465  shares  valued at $4,211 to an  employee in lieu of salary for
          services provided to the Company.  During the nine months period ended
          October 31, 2003 the Company  issued  183,100 shares valued at $10,986
          to an employee in lieu of salary for services provided to the Company.
          For the period  ended  April 30,  2003 the  Company  issued  4,321,673
          shares  of  stock  to  B7B  valued  at   $302,517,   in  exchange  for
          extinguishment  of debt  principal in the amount of $275,000,  accrued
          interest  through  March 7,  2003  totaling  $17,517,  and cash in the
          amount of $10,000. The shares were valued at $0.07 per share. The cash
          was used to repay CAC  principal  in the amount of $9,737 and  accrued
          interest in the amount of $263.

     (b)  Non-affiliates

          For the year ended January 31, 2004 the Company  issued 325,438 shares
          of common stock to individuals for services rendered. The value of the
          shares was expensed and  recorded as stock based  compensation  in the
          amount of $56,792. The Company also issued additional shares of common
          stock  totaling  868,750  valued at  $60,813,  or $.07 per share.  The
          Company issued a total of 1,017,181  shares to  individuals  valued at
          $71,204 or $.07 per share for  services  to the  Company.  The Company
          also issued  125,000  shares of its common  stock  valued at an agreed
          amount of $10,000 or

                                      F-17
<PAGE>


                          POCKETSPEC TECHNOLOGIES INC.
                   Notes to Consolidated Financial Statements


          $.08 per share for an account payable in the same amount. Market value
          the stock was $7,500, or $.06 per share. The resulting  difference was
          recorded  against  research  and  development  costs  according to the
          charges  from the vendor.  The Company  also issued a total of 344,645
          shares to  individuals  valued at  $18,816 or  approximately  $.05 per
          share for services to the Company.

          For the three months ended April 30, 2003 the Company  converted notes
          payable to  non-affiliates  totaling  $381,164  plus accrued  interest
          totaling $3,982 into stock, for a total amount of $385,146. Additional
          cash totaling  $17,500 was received from  individuals,  which was used
          for  operating  capital.  Shares  issued for the  transaction  totaled
          5,752,078  and were  valued at $0.07 per share,  or a total  amount of
          $402,645.

     (c)  Shares issued to acquire property, prior year

          On May 31, 2002 we acquired 100% of the issued and outstanding  common
          shares  of  Color-Spec   Technologies,   Inc.  in  a   stock-for-stock
          acquisition.   The  transaction  was  approved  on  May  31,  2002  by
          shareholders of Color-Spec  Technologies,  Inc. Under the terms of the
          acquisition,   each  shareholder  of  Color-Spec  Technologies,   Inc.
          received  one common share of our stock for each common share of stock
          owned by the Color-Spec Technologies,  Inc. shareholder.  As a result,
          we own all of the assets of Color-Spec  Technologies,  Inc., including
          their intellectual property. We issued a total of 8,316,353 restricted
          shares of our common stock in connection with this transaction.

          During the third quarter of our fiscal year ended January 31, 2003 the
          Company  entered into a trademark  license  agreement with  Solartech,
          During the third quarter of our fiscal year ended January 31, 2003 the
          Company  entered into a trademark  license  agreement with  Solartech,
          Inc. located in Michigan.  The purpose of the agreement was to acquire
          use of its hand held solar meters for use with the Company's hand held
          color-measuring  devices,  primarily  the  BronzCheckTM  product line.
          Terms  of the  agreement  include  a  non-exclusive  right  to use the
          Licensed  Mark in the  promotion  of solar  meters for a period of ten
          (10) years.  The property  was  acquired for 200,000  shares of common
          stock valued at $24,000 or $.12 per share.


Note 10:  Income taxes

Under SFAS No. 109 deferred taxes result from temporary  differences between the
financial   statement   carrying  amounts  and  the  tax  bases  of  assets  and
liabilities. The components of deferred taxes are as follows:

                                                          Deferred Tax
                                                        Assets (Liability)
                                                        ------------------
  Current:
       Inventory Reserve                                   $     8,000
  Non-Current:
       Property and equipment                                   41,000
       Net operating losses                                  2,067,000
  Net deferred tax asset before
       Valuation allowance                                   2,016,000
  Valuation allowance                                       (2,116,000)
                                                          -------------
  Total deferred tax asset                                 $     --
                                                          =============


                                      F-18
<PAGE>

                          POCKETSPEC TECHNOLOGIES INC.
                   Notes to Consolidated Financial Statements


The net deferred tax assets have a 100% valuation  allowance  resulting from the
inability to predict sufficient future taxable income to utilize the assets. The
valuation  allowance for 2004  increased  $495,000 and  increased  $1,223,000 in
2003.

At January 31, 2004 we have approximately  $5,500,000 available in net operating
loss  carry-forwards,  which begin to expire  from 2016 to 2018.  Usage of these
carry  forwards  may be  severely  limited  in the  future  due  to  changes  in
ownership or other loss limitations.

Total income tax expense for 2004 and 2003 differed from the amounts computed by
applying the US Federal statutory tax rates to pre-tax income as follows:


                                         Year Ended             Year Ended
                                         January 31,          January 31,
                                            2004                 2003
                                         --------------     ----------------
U.S statutory federal rate                (34.00)%             (34.00)%
State income tax rate, net
     of Federal income tax benefit         (3.30)%              (3.30)%
Increase (reduction) in valuation
     Allowance                             37.30%               37.30%
                                         --------------     ----------------
                                            --                     --
                                         ==============     ================

Note 11: Commitments

The Company has  employment  agreements  with Mr.  Krupka,  Ms.  Kettl,  and Ms.
Brophy.  Mr. Krupka's  agreement runs from November 1, 2002 through December 31,
2007. Under this agreement, Mr. Krupka is paid $5,000 per month with an increase
to $10,000  per month once the  Company  generates  $60,000 per month in product
sales for two consecutive  months.  Mr. Krupka will be additionally  compensated
when  the  Company  generates  $100,000  per  month  in  product  sales  for two
consecutive months.

The  Company's  agreement  with Ms.  Kettl runs from  November  1, 2002  through
December 31, 2007. Under this agreement, Ms. Kettl is paid $5,000 per month with
an increase to $6,500 per month once the Company  generates $60,000 per month in
product  sales  for two  consecutive  months.  Ms.  Kettl  will be  additionally
compensated  when the Company  achieves  $100,000 per month in product sales for
two consecutive months.

Our  agreement  with Ms.  Brophy runs from January 1, 2002 through  December 31,
2005. Under this agreement, Ms. Brophy is paid $8,630 per month.

Mr.  Gregg  Wagner shall  receive a 4%  commission  on sales to key accounts and
distribution channels that he maintains.

Note 12: Concentrations

During the year ended January 31, 2003 we received a total amount of $39,375 for
the  rights  to  receive  future  revenues  from  sales  of  our  products.  The
transaction was converted to sales of units  including 236 BronzCheck  units, 20
ColorQA units,  and 7 ColorCheck  units. The individual also paid the Company an
additional  $9,000.  The total value  of the sale was $48,375,  which represents


                                      F-19
<PAGE>

                          POCKETSPEC TECHNOLOGIES INC.
                   Notes to Consolidated Financial Statements


approximately  37.7% of our sales for the year. The  transaction was cash and an
account receivable was not recorded.

During the year ended  January  31,  2003 we  purchased  significant  amounts of
inventory from several  suppliers.  We have approximately six vendors from which
we purchase  electronic  components and two suppliers for our molded housing and
battery components. We believe that if we were to lose or terminate the services
of our plastic injection molder for our housing  components,  we have sufficient
inventory  and  another  supplier  that we can  contact  in  order  to  continue
production of our necessary component parts.


Note 13: Reclassification

Certain amounts in the prior year financial  statements  have been  reclassified
for  comparative  purposes to conform with the  presentation in the current year
financial statements.


Note 14: Subsequent events.

The  Company's  CFO,  Cynthia  Kettl,  provided the Company  with cash  totaling
$20,000 and a director,  Gregg  Wagner,  provided the Company with cash totaling
$15,000 for the extinguishment an account payable in the amount of $35,000.


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

We did not have any  disagreements on accounting and financial  disclosures with
our present  accounting firm during the reporting  period.  On June 5, 2002, our
Board of Directors voted to change our Certifying Accountants from Cordovano and
Harvey, P.C. to Hein & Associates,  LLP. On June 6, 2002 Hein & Associates,  LLP
finalized their client background check and formally accepted us as a client for
the fiscal 2003 audit.  Cordovano and Harvey,  P.C. has rendered opinions on our
audit for the past two years.  The change in Certifying  Accountants was made so
that we could utilize the specific accounting experience and expertise of Hein &
Associates, LLP.

There were no  disagreements  between us and  Cordovano  and Harvey,  P.C.  with
respect  to  our  accounting   principles  or  practices,   financial  statement
disclosure  or audit scope or  procedure,  which,  if not resolved to the former
Certifying Accountant's  satisfaction,  would have caused them to make reference
to the subject matter of the  disagreement in connection  with their report.  We
have authorized Cordovano and Harvey, P.C. to respond fully to inquiries of Hein
& Associates, LLP concerning our financial statements.

                                    PART III

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

     Our Directors and Executive Officers, their ages and positions held with us
as of January 31, 2004 are as follows:

                                       19
<PAGE>

                                           YEAR BECAME            POSITION
      NAME                 AGE              DIRECTOR              IN COMPANY
-----------------          ---              -----------           -----------

Janet Brophy               48               2001                  President,
                                                                  Director &
                                                                  Chairman of
                                                                  The Board

Cynthia Kettl              56               2000                  Secretary,
                                                                  Treasurer &
                                                                  Director
                           19
Gregg Wagner               45               2002                  Director

Philip Robertson           50               2003                  Director

Our  Directors  will serve in such  capacity  until our next  annual  meeting of
shareholders  and until their  successors  have been elected and qualified.  The
officers  serve  at  the  discretion  of our  Directors.  There  are  no  family
relationships  among our officers and directors,  nor are there any arrangements
or  understandings  between any of our directors or officers or any other person
pursuant to which any officer or director was or is to be selected as an officer
or director.

Janet Brophy.  Ms. Brophy has been our President and CEO since July,  2003.  She
previously served as Secretary and has been one of our Directors since May 2001.
From 1988 to 1998,  she was  involved in the off site  management  of  apartment
buildings in the Denver, Colorado area and other real estate activities. She was
a homemaker  from 1998 until she joined us in May 2001. She has been involved in
real estate oriented  businesses  since 1978. Ms. Brophy attended  Arizona State
University.

Cynthia Kettl.  Ms. Kettl has been our Treasurer and CFO since  September  1999.
She has been involved with Platinum  Financial Fund,  LLC, a private  investment
company,  since 1998 and was employed by Krupka and  Associates,  LLC, a private
investment  company from October 1995 to 1998.  Ms. Kettl  received a Bachelor's
degree in  Business  Management  from  Metropolitan  State  College  in 1981,  a
Bachelor's degree in Accounting from Metropolitan  State College in 1998, and an
Associates Degree in Business from Community College North Denver in 1977.

Gregg Wagner.  Mr. Wagner has been one of our Directors  since  September  2002.
From 1998 to the present,  he has been the owner and design consultant for LOMA,
Incorporated,  a private firm,  which produces  optical  products.  From 1993 to
1998, he was Senior  Mechanical  Design Engineer for IVI Corporation,  a private
mechanism,  illuminator,  and optics  design  firm.  He has been  involved  with
optical  design since 1979. He holds one patent and has five patents  pending in
the optical design area. Mr. Wagner attended the University of Colorado.

Philip  Robertson.  Mr.  Robertson has been one of our Directors since September
2003. Mr. Robertson in the Chief Executive Officer of Premier  Manufacturing and
Supply Chain Service, Inc. located in Longmont,  Colorado.  Mr. Robertson's work
experience  Spans 26  years  and  includes  various  Vice-Presidency  positions,
Managing Director,  and other Director and Manager level positions in materials,
operations,  and business  Development  companies.  His  educational  background
includes an M.B.A. from San Jose State University and an undergraduate degree in
Business Management.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934.

Section 16(a) of the Securities Exchange Act of 1934 (the "34 Act") requires Our
officers  and  directors  and  persons  owning  more  than  ten  percent  of the
Outstanding  Common Stock,  to file initial  reports of ownership and changes in
ownership  with the Securities and Exchange  Commission  ("SEC").  Additionally,
Item 405 of Regulation  S-B under the 34 Act requires us to identify in its Form
10-KSB  and  proxy  statement  those  individuals  for  whom  one of  the  above
referenced reports was not filed on a timely basis during the most recent fiscal

                                       20
<PAGE>

year or prior fiscal  years.  Given these  requirements,  we have the  following
report to make under this section. None of our officers or directors made timely
Form 3 or 4  filings.  Mr.  Robertson  did not  make  either  a Form 3 or Form 4
filing. Ms. Kettl did not make a timely Form 5 filing.

AUDIT COMMITTEE AND FINANCIAL EXPERT

Our board of  directors  has  established  an audit  committee  comprised of Ms.
Cynthia  Kettl and Mrs.  Janet Brophy.  Ms. Kettl has the  requisite  education,
background or experience to be considered an "audit committee  financial expert"
as  that  term is  defined  by the  SEC.  Mrs.  Brophy  and  Ms.  Kettl  are not
independent of management.

ITEM 10. EXECUTIVE COMPENSATION.

The  following  table sets forth the  Summary  Compensation  Table for the Chief
Executive  Officer.  Except as indicated in the  footnotes to this  section,  no
other compensation not covered in the following table was paid or distributed by
the  Company to such  persons  during the period  covered.  Our Chief  Executive
Officer received in excess of $100,000 in compensation during the past
fiscal year.  No other  executive  officer  received  compensation  in excess of
$100,000 during the past fiscal year.

<TABLE>
                           SUMMARY COMPENSATION TABLE
<CAPTION>

                               Annual Compensation                                 Long Term Compensation
                           ---------------------------                          ---------------------------
                                 Awards Payouts

Name                                                            Other
Restricted                         All
And                                           Salary            Annual            Stock            LTIP
Other
Principal                                  Compensation         Bonus          Compensation       Award(s)
Options/
Position                       Year            ($)                ($)             ($)
----------                 ----------       ----------        ----------        ----------       ----------
<S>                        <C>              <C>               <C>               <C>              <C>
Janet                           2003        $  112,190              --
Brophy                          2002        $   96,300              --
Chairman (1)                    2001        $   14,017              --
                                2000        $     -0-               --
</TABLE>

-------------------
(1)  Ms. Brophy became an officer and director in 2001.  She became our Chairman
     in 2003.  We paid Ms.  Brophy  $47,465 and  accrued  wages in the amount of
     $64,725  for the  year  ended  January  31,  2004.  We  have an  employment
     agreement  with her,  which runs from January 1, 2002 through  December 31,
     2005. Under this agreement, she is paid $8,630 per month.
-------------------

We have no compensation committee,  retirement,  pension, sharing, stock option,
insurance or other similar  programs but plan to establish  such programs in the
future, although there are no definitive plans to do so at this time.

We do not pay  members  of our Board of  Directors  any fees for  attendance  or
similar remuneration, but reimburse them for any out-of-pocket expenses incurred
by them in connection with our business.

2003 STOCK COMPENSATION PLAN 1

We have a  current  registration  statement  on Form  S-8  for  our  2003  Stock
Compensation  Plan I. A total of 1,000,000 shares have been registered under the
plan. We have issued a total of 674,826 shares and no options under this plan as
of January 31, 2004.

Code of Ethics

The Company  endeavors to adhere to the  requirements as dictated by the SEC and
provide  assurances  to  outside  investors  and  interested  parties  that  the
Company's  officers,  directors  and  principal  financial  officer  adhere to a
reasonably  responsible  code of ethics  and as such,  we have  adopted  code of
ethics that applies to our executive officers,  including Mrs. Brophy, our Chief
Executive Officer and President, and Ms. Kettl, our Chief Financial Officer.

                                       21
<PAGE>


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The  following  sets  forth the number of shares of our  $.0.001  par value
common stock  beneficially owned by (i) each person who, as of January 31, 2004,
was known by us to own  beneficially  more than five  percent (5%) of its common
stock;  (ii) the  individual  Directors of the Registrant and (iii) the Officers
and Directors of the Registrant as a group. As of January 31, 2004, there were a
total of 33,094,360 shares issued and outstanding.

  NAME AND ADDRESS                  AMOUNT AND NATURE OF             PERCENT
 OF BENEFICIAL OWNER             BENEFICIAL OWNERSHIP (1)(2)          CLASS
-----------------------          ---------------------------         -------

Cynthia Kettl                               775,829                    2.34%
3225 East 2nd Ave
Denver, Colorado 80206

Janet Brophy (3)                          5,687,540                   26.35%
6195 South Akron Way
Greenwood Village, Colorado 80111

Gregg Wagner                              1,078,785                    3.26%
1368 Cedar Avenue
Boulder, CO 80304

Philip Robertson (4)                        100,000                    0.30%

All Officers and Directors as a Group     7,642,154                   23.09%
(four persons)

---------------------
     (1)  All ownership is beneficial and on record, unless indicated otherwise.

     (2)  Beneficial  owners listed above have sole voting and investment  power
          with respect to the shares shown, unless otherwise indicated.

     (3)  Includes  1,404,444  shares  owned of record by Ms.  Brophy.  Includes
          shares  owned of record by B7 Brand,  LLC.  Asset  Realization,  Inc.,
          Advanced Gas & Oil Corp,  Cape Aloe Corp, are entities  formerly under
          common control of Ms. Brophy. The Krupka-Brophy Profit Sharing Plan is
          an entity  controlled  by Ms.  Brophy.  Includes  15,536  shares owned
          jointly by Mr.  Krupka and Ms.  Brophy,  but does not  include  shares
          owned by the Krupka-Murr Gift and Education Foundation,  for which Ms.
          Brophy  disclaim  beneficial  ownership.  Does not  include any shares
          owned by Ms. Brophy's children, for which she disclaims any beneficial
          ownership.

     (4)  Includes shares owned jointly by Mr. Robertson and his wife.
---------------------

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Our  business  office is  located at 3225 East 2nd Ave.,  Denver,  Colorado
80206.  On March 5,  2002,  we signed a lease,  effective  from April 1, 2002 to
April 1, 2007,  with an organization  affiliated  with one of our employees,  F.
Jeffrey Krupka. We pay this organization $4,000 per month on a triple net lease,
Along with real estate  taxes,  property  insurance,  maintenance  and  repairs,
telephone expenses,  and other normal expenses of the property.  We have granted
Mr. Krupka the  non-exclusive  use of the leased  property for himself and as an
office  location for his other  business  interests,  as  consideration  for the
November 1, 2002 employment agreement


                                       22
<PAGE>


     We have terminated  previous  agreements with CD ROM, USA, Inc. and CD ROM,
Inc., which are private  companies owned by Mr. Roger Hutchison,  who was one of
our directors at the time.  Under our agreement with CD ROM, Inc., he remains an
approved supplier of products.

     We paid our  Treasurer,  Ms.  Kettl,  a total of $27,500 and accrued  wages
totaling $42,000 for accounting services during the 2004 fiscal year.

     Asset Realization, Inc. (ARI), B7 Brand, LLC (B7B), Cape Aloe Corp., (CAC),
Cherry Creek Cottage, LLC (CCC), Color-Spec Technologies,  Inc., (CST), Krupka &
Associates, LLC (K&A), F. Jeffrey Krupka (FJK), Janet Brophy (JB), Krupka-Brophy
Profit Sharing Plan (KBP), and Platinum  Financial Fund, LLC (PFF),  Wraith Moon
House,  LLC (WMH) are affiliates of our Company by either common ownership or by
common management. Asset Realization, Inc. (ARI) and Cape Aloe Corp., (CAC), are
no longer considered affiliates as of January 31, 2004.

     On September  28, 2001 we entered  into an agreement  with PFF, LLC to sell
our Arapahoe  County,  Colorado  property for the sale price of $2,800,000.  Our
affiliate  agreed  to  assume  all  outstanding  debt  obligations  owing on the
property and a participation  agreement with the original seller of the property
in the amount of $666,000.  Terms of the  participation  agreement state that we
agree to pay the original seller  approximately 24% of the first $2,750,000 sale
after   deducting   selling  costs  plus  20%.   Exceptions   contained  in  the
participation agreement included real estate taxes and assessments,  interest on
the  assumed   encumbrances,   interest,   points  and  costs   associated  with
refinancing,  and points and costs associated with  construction and development
loans.

     The  $2,800,000  sale  price  was  reduced  by the  $666,000  participation
agreement  since there is a potential that future sales of the property will not
be profitable. We accepted a note receivable from our affiliate in the amount of
$644,403. Terms of the agreement include monthly principal and interest payments
of $30,000 beginning December 1, 2001 and maturing on December 1, 2002.

     During the third  quarter  ended  October 31, 2001,  we sold the  Riverside
County,  California  property to Advanced Gas & Oil Corp.  for $15,000  cash. We
sold retail space to an affiliate, Color-Spec Technologies, Inc. for $54,745. We
loaned an affiliate $500 to be repaid without  interest during the first quarter
of the new fiscal  year.  In  addition,  we loaned  $2,700 to an affiliate to be
repaid during the same period. We loaned a director $30,037.

     On October 3, 2001 we signed two agreements with  Color-Spec  Technologies,
Inc. to acquire rights to the POCKETSPEC  trademarks and to license the right to
develop the POCKETSPEC color measuring devices. The second agreement provides us
with the license required in order to continue the development of the POCKETSPEC
color  measuring  devices.  We issued 700,000 of our common shares to Color-Spec
Technologies as part consideration for the license.

     During the fiscal year ended  January  2002,  we received from PFF proceeds
totaling $144,290 from the sale of its  participation  interest in American Tire
Corporation stock (ATC).

     During the third quarter ended October 31, 2001, we borrowed  $166,300 from
PFF and repaid PFF $166,300 of the amount we borrowed.  We also borrowed $25,000
from CAC and $10,000  from a  director.  We repaid the $35,000 and have paid all
indebtedness  to our affiliates.  We also borrowed  $151,000 from CST during the
first two quarters of this fiscal year.  During the third  quarter ended October
31,  2001,  the  balance  owing to CST in the amount of  $106,334  was paid.  We
borrowed  $100,000  from AGO and repaid  the  $100,000  during the same  period.
During the fourth  quarter ended January 31, 2002 we borrowed  $10,500 from PFF,
$1,500 from KBP, and $1,200 from CST for a total amount of $13,100.  All amounts

                                       23
<PAGE>

were repaid during  January,  2002.  Total amount borrowed for the twelve months
period ended January 31, 2002 was $669,400 and total amount repaid was $669,400.

     We borrowed $195,752 from the Krupka-Brophy Profit Sharing Plan for funding
our operations.  We consolidated  two notes payable and accrued interest to date
with the  $195,752  into one note  payable in the amount of  $510,000.  One note
payable in the amount of $89,836 bears  interest at 10% due in full on August 1,
2002.  One note payable in the amount of $218,499  bears  interest at 10% due in
full on August 1, 2002.  The new note  payable in the amount of  $510,000  bears
interest at 12% due in full on September 24, 2002. PFF subsequently  assumed the
note payable when we sold our Arapahoe County, Colorado property.

     During the fourth  quarter  ended  January  31, 2002 we  exchanged  100,000
shares of our common stock with a  non-affiliate  for a $30,000  promissory note
receivable  from PFF.  On  November  29, 2001 we sold one of the parcels of real
estate located in Elbert County,  Colorado to a third party.  The purchase price
of the property was  $393,000 and paid by the buyer with five  promissory  notes
receivable  from  PFF.  All of the  notes  receivable  were sold for net cash of
$96,369. The notes were discounted in the amount of $12,850.

     During the period ended January 31, 2002, we sold our property bond for net
cash of  $13,200.  The face  value  of the bond in the  amount  of  $17,600  was
discounted by $4,400. Part of the bond was sold to Mr. Krupka, while the balance
was sold to The Frederick Master Home Owners Association, an affiliate of ours.

     On May 31,  2002 we  acquired  100% of the  issued and  outstanding  common
shares of Color-Spec Technologies,  Inc. in a stock-for-stock  acquisition.  The
transaction  was  approved  on  May  31,  2002  by  shareholders  of  Color-Spec
Technologies,  Inc.  Under the terms of the  acquisition,  each  shareholder  of
Color-Spec  Technologies,  Inc.  received one common share of our stock for each
common share of stock owned by the Color-Spec Technologies, Inc. shareholder. As
a result, we own all of the assets of Color-Spec  Technologies,  Inc., including
their intellectual property. We issued a total of 8,316,353 restricted shares of
our common stock in connection with this transaction.  As PockeSpec Technologies
Inc.  and  Color-Spec   Technologies,   Inc.  were  under  common  control,  the
acquisition  was  recorded  at  historical  cost and the  historical  results of
operations have been combined for all periods presented.

     During the 1st quarter period ended April 30, 2002 the Company formed three
wholly owned limited liability companies. The Company advanced a total amount of
$7,500,  or $2,500 to each company in order to provide financing by the Company.
The names of the companies were PocketSpec  Cosmetics,  LLC,  PocketSpec Dental,
LLC, and PocketSpec Dermatology,  LLC. The purpose of the formation of the three
limited  liability  companies was to grant certain  rights to each LLC to enable
the Company and the LLC's to combine their  respective  efforts and cooperate in
the joint development of specific  color-measuring devices and ranges of visible
light,  ultra-violet,   and  infra-red  frequencies,   and  for  development  of
biomedical analytical devices.

     During December 2002, the limited liability companies were dissolved due to
issues incurred in developing markets and products  originally  intended for the
LLC's business  plans.  The Company  absorbed the debt from the LLC's since they
were  wholly  owned  subsidiaries.  Debt  totaled  $285,000 in the form of notes
payable to an individual as part of a $316,164 note payable.

     During the third  quarter of our fiscal  year ended  January  31,  2003 the
Company entered into a trademark license agreement with Solartech,  Inc. located
in Michigan.  The purpose of the  agreement  was to acquire use of its hand held
solar  meters  for use with the  Company's  hand held  color-measuring  devices,
primarily  the  BronzCheckTM  product  line.  Terms of the  agreement  include a
non-exclusive right to use  the  Licensed Mark in the  promotion of solar meters

                                       24
<PAGE>

for a period of ten (10) years.  The property was acquired for 200,000 shares of
common stock valued at $24,000 or $.12 per share.

     During  the  year  ended  January  31,  2003,  we  received  $161,937  from
assignment  agreements  for the sale of specific units to be produced at a later
time. The financial  arrangement  covered the costs of inventory and production,
in order to establish an inventory of completed units to be shipped upon receipt
of orders.

     We received cash from ARI in the amount of $43,312 for 330 units,  $113,125
from B7B for 862  units,  and  $5,500  from WMH for 40  units.  The terms of the
agreements  included finance charges on a per unit basis, or  approximately  $19
per unit. Interest expensed on the financial arrangement totaled $23,058.

     During the fiscal year ended January 31, 2003, we entered into an agreement
with  FJK to  convert  $40,317  from  accounts  payable  owed to FJK into a note
payable. JB also loaned the Company $32,438 for operating capital.  B7B received
an  assignment  from FJK and JB in the  amount of  $72,755  for the  loans  plus
interest in the amount of $495 for a total amount of $73,250.  Additionally, B7B
received an  assignment  from ARI for its  entitlement  to future  revenues plus
interest,  or $43,313 and $6,187,  respectively,  or a total  amount from ARI of
$49,500 as part of the transaction. B7B also converted its entitlement of future
revenues  and interest in the amounts of $113,125 and $15,875 for a total amount
of $129,000.  The amounts were converted into a note payable totaling  $251,750.
B7B also loaned us an  additional  $23,250 to complete  the note  payable in the
amount of $275,000.  The $275,000 note payable to B7B bears  interest at 15% per
annum and is due and  payable in one lump sum  including  interest  on or before
October 3, 2003. The total amount due and payable on October 3, 2003 is $275,000
principal and $41,250 interest.

     During the fiscal year ended January 31, 2003, we converted $5,500 from WMH
plus interest  totaling $500 into a note payable to WMH. A principal  payment in
the  amount of $200 was paid to WMH  during  December  2002.  The total of notes
payable is $275,000 to B7B and $5,800 to WMH.

     During the year ended January 31, 2003 we paid CCC $40,000 for office rent.
FJK  reimbursed  the Company  $2,500 for office  space used for  managing  other
affiliated  companies.  The  Company  also  reimbursed  FJK  $94,465 for travel,
inventory purchases,  and other expenses.  The amounts have been recorded in the
accompanying financial statements.

     During the fiscal year ended  January 31, 2002, we recognized a gain on the
sale of real property in the amount of $192,336. The gain had been deferred from
a prior  period  due to the  sale of the  property  to PFF,  an  affiliate.  The
original  agreement with PFF was for  consideration  of $2,800,000 in cash, debt
assumption  and notes.  PFF  assumed all  outstanding  debt  obligations  on the
property.  We  accepted a note  receivable  from PFF in the amount of  $644,403.
Terms of the note included  monthly  principal and interest  payments of $30,000
beginning  December 1, 2001 and maturing on December 1, 2002. The carrying value
of the property totaled $1,941,664 and encumbrances totaled $1,489,2876.

     During the fiscal year ended  January 31, 2002, we deferred the gain on the
sale in the  amount of  $192,336  until  PFF sold the  property  or we  received
payment in full on the  $644,403  promissory  note either by selling the note or
applying payments from PFF to the note.

     Prior to the year ended  January 31,  2003,  we  borrowed  $25,000 for B7B,
$48,000 from FJK, and $2,770 from PFF. The total amount  borrowed for  operating
capital was $75,770.

                                       25
<PAGE>

     During the year ended January 31, 2003, we repaid  short-term  loans in the
amount of $25,000 to B7B, $2,770 to PFF, and $48,000 to FJK. Total amount repaid
to affiliates for short-term loans was $75,770.

     During the year ended  January  31,  2003,  we borrowed  $23,250  from B7B,
$46,439 from JB, $20,000 from CAC, and $10,000 from FJK.  Total amount  borrowed
was $99,689. Amounts borrowed from B7B were consolidated into a note payable.

     During  the  year  ended  January  31,  2003,  we  received  $374,562  from
assignment  agreements  for the sale of specific units to be produced at a later
time. The financial  arrangement  covered the costs of inventory and production,
in order to establish an inventory of completed units to be shipped upon receipt
of orders.

     During the year ended  January 31, 2003,  we received  cash from ARI in the
amount of $43,312,  $113,125  from B7B,  $212,625 from KBP, and $5,500 from WMH.
The terms of the agreements  included  finance  charges on a per unit basis,  or
approximately $19 per unit. Total interest expensed on the financial arrangement
totaled $52,938.

    During the year ended  January 31, 2003 we sold a total of 1,165,000  shares
of common stock to affiliates.  AGO purchased  185,000  shares for $18,500,  CAC
purchased  555,000  shares for $55,500,  and ARI  purchased  425,000  shares for
$42,500. Total cash received from affiliates was $116,500.

     During the year ended  January 31, 2003,  we acquired  inventory for use in
the production of its color measuring  product lines. The value of the inventory
at January  31, 2003  totaled  $250,357.  We also had  payables in the amount of
$271,889 and acquired assets totaling $121,385 and acquired intangibles totaling
$34,540.

     During the year ended January 31, 2003 the Company paid principal  payments
totaling $10,484.  We have notes payable to individuals  totaling  $395,664.  We
borrowed $50,000 from an individual for operating  capital during the year ended
January 31,  2003.  We paid the debt in full  during July 2002 by selling  notes
receivable  and accrued  interest to date for $2,401 cash,  net. In exchange for
the  notes  receivable  and  cash,  we  acquired  from  the  individual,  a note
receivable  from PFF in the  amount of  $160,857  which was been  sold.  Accrued
interest and interest  expense on the $50,000 note payable  totaled  $1,136.  We
also borrowed  $50,000 from a profit  sharing plan during the fourth  quarter of
this year. Terms of the notes are listed below.

          Note payable to an individual for $316,164 bearing interest at 6% with
               monthly payments of $3,000 starting February 1, 2003 and maturing
               December 18, 2003.

          Note payable to an individual for $14,500  bearing  interest at 6% due
               with  principal and interest  totaling  approximately  $14,938 on
               June 3, 2003.

          Note payable to a profit sharing plan for $50,000 with interest at 12%
               with payments of $1,707 due on January 31, 2003 and the principal
               and interest of $52,120 due May 10, 2003.

     Note payable to an  individual  for $15,000  with  interest at 12% due with
          principal and interest in the amount of $15,311 on February 17, 2003.

     During the year ended January 31, 2003, we received $78,750 from assignment
for the sale of specific  units to be produced  at a later time.  The  financial
arrangement covers the costs of inventory and production,  in order to establish
an inventory  of completed  units  to be  shipped upon  receipt  of  orders.  We

                                       26
<PAGE>

received cash from individuals  totaling $78,750 for 600 units. The terms of the
agreements include finance charges on a per unit basis, or approximately $19 per
unit. Cost of the financing totaled $5,625. $39,375 of the $78,750 was converted
to sales of units  including  236  BronzCheck  units,  20 ColorQA  units,  and 7
ColorCheck units. The individual also paid us an additional $9,000 for the total
amount of sale of $48,375.

     During the year ended January 31, 2003,  non-cash  interest  expense in the
amount of $5,625 was recorded  when two  individuals  converted  their rights to
receive future revenues into notes payable. $26,250 of the $316,164 note payable
above had  accrued  interest  due in the  amount of $3,750  and  $13,125  of the
$15,000 note payable had accrued interest due in the amount of $1,875.

     During the year ended January 31, 2003, discount on sale of note receivable
was recorded when we sold portions of a note  receivable from PFF to individuals
for cash.  Total cash received on the sales of the note was  $293,316.  Non-cash
discount  totaled  $45,198.  Additional  notes  receivable sold for cash totaled
$200,605.  The  $493,921  cash  acquired  from the sales was used for  operating
capital.

     During the year ended January 31, 2003, we reacquired 244,850 shares of its
common stock for cash totaling $86,206. The Company reacquired 700,000 shares of
its common  stock when it acquired  Color-Spec  Technologies,  Inc.  The Company
cancelled  1,027,208 shares and returned the shares to authorized and not issued
status.  We recorded  the  transactions  as treasury  stock in the  accompanying
financial statements.

     Other  transactions  during the year ended  January 31, 2003  included  the
Company  entering into a lease agreement for storage space.  The lease agreement
requires  monthly  payments  of $500 per month on a  year-to-year  basis.  Lease
payments started May 1, 2002.

     During  the year  ended  January  31,  2003 the CEO and CFO  along  with an
employee  took a reduction in monthly  salary in order to help reduce  operating
costs and  enhance  cash  flows for us.  The salary  reductions  were  effective
October 15, 2002. Cost savings created in the salary  reductions  total $35,963.
The reductions will continue until we become profitable.

     During the first  quarter of our fiscal  year  ending  January  31, 2003 we
issued 5,000 shares of its common stock to an employee as a bonus. The stock was
valued at $1,850,  or $.37 per share.  We also issued 5,000 shares to a director
for services provided to us. The stock was valued at $1,850 or $.37 per share.

     During the third quarter of our fiscal year ended January 1, 2003 we issued
30,000  shares of our common  stock to  employees  for  services.  The stock was
valued at $6,000 or $.20 per share.

     During the fourth  quarter of our fiscal  year ended  January  31,  2003 we
issued 5,000 shares of our common stock to an employee for  services.  The stock
was valued at $1,200 or $.24 per share.

     During the year ended January 31, 2003 total common stock shares issued for
stock  based  compensation  to related  parties  were  45,000  shares  valued at
$10,900, which was expensed in the accompanying financial statements.

     During the third  quarter of our fiscal year ended January 31, 2003 we sold
1,165,000 shares of our common stock to affiliates. AGO purchased 185,000 shares
for cash  totaling  $18,500.  CAC  purchased  555,000  shares for cash  totaling
$55,500.  ARI purchased  425,000  shares for cash totaling  $42,500.  Total cash
received  from the  transactions  was  $116,500  which  was  used for  operating
capital.

                                       27
<PAGE>

     During the year ended  January 31, 2003 KBP  acquired  2,430,000  shares of
common stock  valued at $243,000 in exchange for debt related to future  revenue
entitlements.  KBP entered  into an  agreement  with the Company to exchange its
entitlement to future revenues plus interest for stock. The transaction  totaled
$243,000,  or  principal  of  $212,625  plus  interest in the amount of $30,375.
2,430,000 shares of common stock were issued at the closing market price of $.10
per share.

     During the first  quarter of our fiscal  year ended  January 31,  2003,  we
issued  20,000  shares of our common stock to  individuals  for  promotion.  The
shares were valued at $7,000 or $.35 per share.

     During the third  quarter of our fiscal  year  ended  January  31,  2003 we
issued  48,000  shares of its common stock to  individuals  for  promotion.  The
shares were valued at $15,600 or $.33 per share.

     During the third  quarter of our fiscal  year  ended  January  31,  2003 we
issued 15,000 shares of our common stock to  individuals  promotion.  The shares
were valued at $2,400, or $.16 per share.

     During the fourth  quarter of our fiscal  year ended  January  31,  2003 we
issued 160,771 shares of our common stock to individuals  promotion.  The shares
were valued at $25,952 or $.11 per share.

     Total  common  stock  shares  issued for stock  based  compensation  to our
non-affiliates  for services were 243,771  shares  valued at $50,952,  which was
expensed in the accompanying financial statements.

     We sold 436,996 share of its common stock to individuals  for cash totaling
$61,746. The cash was used for operating capital.

     We exchanged  130,000  shares of its common stock to  extinguish an account
payable to a vendor. The value of the stock at the time issued was $34,433.

     During the fiscal year ended January 31, 2003 we reacquired  244,850 shares
of our common stock for cash totaling $86,206.  We reacquired  700,000 shares of
our common  stock when we acquired  Color-Spec  Technologies,  Inc. We cancelled
1,048,708 shares and returned the shares to authorized and not issued status.


ITEM 13. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The  Audit  Committee  reviews  and  determines  whether  specific  projects  or
expenditures  with our independent  auditors,  HEIN & ASSOCIATES LLP potentially
affect  their  independence.  The Audit  Committee's  policy  requires  that all
services the Company's independent auditor may provide to the Company, including
audit services and permitted  audit-related services, be pre-approved in advance
by the Audit Committee. In the event that an audit or non-audit service requires
approval prior to the next scheduled meeting of the Audit Committee, the auditor
must contact the Chairman of the Audit  Committee to obtain such  approval.  The
approval will be reported to the Audit Committee at its next scheduled meeting.

The  following  table  sets  forth  the  aggregate  fees  billed to us by HEIN &
ASSOCIATES LLP for the years ended January 31, 2004 and January 31, 2003:

                                                  2004              2003
                                               ---------         ---------
Audit fees (1)                                  $50,168 (1)       $ 63,877
Audit-related fees (2)                            --    (2)            --
Tax fees (3)                                      --    (3)            --
All other fees                                    --                   --
                                               ---------         ---------
Total audit and non-audit fees                 $  50,168          $ 63,877
                                               =========         =========

                                       28
<PAGE>

-----------------------
     (1)  Includes  fees for  professional  services  rendered  for the audit of
          PocketSpec  Technologies Inc.'s annual financial statements and review
          of PocketSpec Technologies Inc.'s annual report on Form 10-KSB for the
          year 2004 and 2003 for reviews of the financial statements included in
          PocketSpec  Technologies  Inc.'s quarterly  reports on Form 10-QSB for
          the first three quarters of fiscal 2004.

     (2)  Includes fees billed for professional services rendered in fiscal 3004
          and 2003, in connection with acquisition  planning,  due diligence and
          related SEC registration statements.

     (3)  Includes fees billed for professional services rendered in fiscal 2004
          and 2003, in connection with tax compliance  (including  U.S.  federal
          and state returns) and tax consulting.
-----------------------

                                     PART IV

ITEM 14. CONTROLS AND PROCEDURES.

     Within the 90 days prior to the date of this Annual  Report on Form 10-KSB,
we evaluated the  effectiveness  of the design and  operation of our  disclosure
controls and procedures  and our internal  controls and procedures for financial
reporting.  This  evaluation  was  done  under  the  supervision  and  with  the
participation of our management, including the President and the Chief Financial
Officer.  In accord with SEC  requirements,  the President  and Chief  Financial
Officer notes that,  since the date of the evaluation to the date of this Annual
Report,  there have been no significant changes in internal controls or in other
factors that could significantly affect internal controls, including any factors
that could  significantly  affect  internal  controls,  including any corrective
actions with regard to significant  deficiencies and material weaknesses.  Based
upon our evaluation,  the President and Chief  Financial  Officer have concluded
that our disclosure  controls are effective to ensure that material  information
relating to us is made known to  management,  including  the President and Chief
Financial  Officer,  particularly  during the period when the Company's periodic
reports are being  prepared,  and that our internal  controls  are  effective to
provide reasonable  assurance that our financial statements are fairly presented
in conformity with generally accepted accounting principles.

ITEM 15. EXHIBITS AND REPORTS ON FORM 8-K.

The following financial information is filed as part of this report:

(1)  FINANCIAL STATEMENTS

(2)  SCHEDULES

(3)  EXHIBITS.  The following exhibits required by Item 601 to be filed herewith
     are incorporated by reference to previously filed documents:

EXHIBIT NO.       DESCRIPTION
-----------    -----------------------------------------------------------------


       3A+     Articles of Incorporation for Monument Galleries, Inc.

       3B+     Bylaws for Monument Galleries

       3C+     Articles  of   Amendment   changing   the  name  to  Real  Estate
               Opportunities, Inc.

       3D+     Amended Bylaws for Real Estate Opportunities, Inc.


                                                        29
       3E      Amended and Restated Articles of Incorporation.

      10.1+    Warranty Deed dated December 27, 2000 for acquisition of Denver
               real estate

      10.2+    Deed of Trust dated December 15, 2000 for acquisition of Denver
               real estate.

      10.3+    Purchase and Sale Agreements for Frederick, Colorado real
               estate between Real Estate Opportunities, Inc. and
               Krupka-Brophy Profit Sharing Plan.

      10.4+    Combined Purchase Agreement and Settlement Agreement for
               Firestone, Colorado real estate between Real Estate
               Opportunities, Inc. and Krupka- Brophy Profit Sharing Plan
               dated February 3, 2000.

      10.5+    Modification  of Promissory  Note related to Firestone,  Colorado
               real estate transaction.

      10.6 +   Technology License Agreement from Color-Spec Technologies, Inc.

      10.7 +   Trademark License Agreement from Color-Spec Technologies,
               Inc.

      10.8 +   Employment Agreement with F. Jeffrey Krupka.

      10.9 +   Employment Agreement with Janet Brophy.

      10.10+   Employment Agreement with Cynthia Kettl.

      10.11+   Employment Agreement with Gregg Wagner.

      10.12+   Wrigley Agreement

      10.13+   Tyger POS Agreement

      10.14+   Amendment to Agreement

      10.15+   Solartech Agreement

      10.16+   Solartech License Agreement

      10.17+   2003 Employment Agreement with Jeff Krupka

      10.18+   2003 Employment Agreement with Cynthia Kettl

      31.1     Certification of CEO pursuant to Sec. 302
      31.2     Certification of CFO pursuant to Sec. 302
      32.1     Certification of CEO pursuant to Sec. 906
      32.2     Certification of CFO pursuant to Sec. 906


 + Previously Filed

(c)  REPORTS  ON FORM 8-K.  We filed no  reports  on Form 8-K  during the fourth
     quarter of the fiscal year ended January 31, 2004.

                                       30
<PAGE>

                                   SIGNATURES

In  accordance  with  Section 12 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.



PocketSpec Technologies Inc.

CHIEF EXECUTIVE OFFICER

Dated: MAY 17, 2004                                 By: /s/ JANET BROPHY
       ------------                                     ----------------------
                                                         Janet Brophy
                                                         President

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated.

CHIEF FINANCIAL OFFICER

Dated: MAY 17, 2004                                 By:  /s/ CYNTHIA KETTL
       --------------                                    ----------------------
                                                         CYNTHIA KETTL
                                                         Treasurer


Dated: MAY 17, 2004                                 By:  /s/ PHILIP ROBERTSON
       --------------                                    ----------------------
                                                         Philip Robertson
                                                         Director


Dated: MAY 17, 2004                                 By:  /s/ CYNTHIA KETTL
       --------------                                    ----------------------
                                                         CYNTHIA KETTL
                                                         Director


Dated: MAY 17, 2004                                 By:  /s/ JANET BROPHY
       --------------                                    ----------------------
                                                         JANET BROPHY
                                                         Director


Dated: MAY 17, 2004                                By:   /s/ GREGG WAGNER
       --------------                                    ----------------------
                                                         GREGG WAGNER
                                                         Director