UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-QSB

(Mark One)

                 |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 2004

                                       OR

             |_|  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

          For the transition period from ___________ to ______________.

                         Commission File Number 0-28445.

                             THE PROJECT GROUP, INC.
        (Exact name of small business issuer as specified in its charter)

           Nevada                                             88-0392153
------------------------------                          -------------------
(State or other jurisdiction of                            (IRS Employer
incorporation or organization)                          Identification No.)

        333 North Sam Houston Parkway E, Suite 275, Houston, Texas 77060
               (Address of principal executive offices)(Zip Code)

                                 (713) 622-1100
                    (Registrant's telephone number, including
                                   area code)

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

      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 |_|

      As of August 20, 2004, we had 63,070,506 shares of $0.001 par value
Common Stock outstanding.

Transitional Small Business Disclosure Format (check one) Yes |_|  No |X|

<PAGE>

                             THE PROJECT GROUP, INC.

                                   FORM 10-QSB

                                      INDEX

                                                                        Page No.
PART I.  FINANCIAL INFORMATION

    Item 1.  Financial Statements (Unaudited)

        Consolidated Balance Sheet as of June 30, 2004....................3

        Consolidated Statements of Operations for the three months and six
         months ended June 30, 2004 and June 30, 2003.....................4 - 5

        Consolidated Statements of Cash Flows for the six months
         ended June 30, 2004 and June 30, 2003............................6

        Notes to the Consolidated Financial Statements  ..................7

    Item 2.  Management's Discussion and Analysis of
             Financial Condition and Results of Operations...............11

    Item 3. Controls and Procedures    ..................................13

PART II  OTHER INFORMATION

    Item 2. Changes in Securities      ..................................13

    Item 6.  Exhibits and Reports on Form 8-K............................14

                                       2
<PAGE>

                             THE PROJECT GROUP, INC.
                           CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 2004
                                   (UNAUDITED)

                                     ASSETS

CURRENT ASSETS
   Cash                                                             $   123,397
   Accounts receivable, net of allowance of $75,000                     484,205
   Unbilled receivable                                                   32,684
   Prepaid expense and other current assets                             326,168
                                                                    -----------

   Total current assets                                                 966,454
                                                                    -----------

   Computers, equipment and software development, net                    90,698
   Intangibles, primarily goodwill                                      926,711
                                                                    -----------

TOTAL ASSETS                                                        $ 1,983,863
                                                                    ===========

                       LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
   Accounts payable                                                 $   189,459
   Accrued liabilities                                                1,202,924
   Note payable                                                         238,876
   Accrued interest payable                                              14,152
                                                                    -----------

   Total current liabilities                                          1,645,411
                                                                    -----------

SHAREHOLDERS' EQUITY
   Preferred  stock, par value $.001, 5,000,000 shares, authorized
   Class A convertible preferred stock,
    par value $.001, 2,500,000 shares authorized, none issued                --
   Series B 4% convertible preferred stock, liquidation preference
    of $850,000, par value $.001, 1,700 shares authorized,
    issued and outstanding                                                    2
   Common stock, par value $.001, 100,000,000 shares
    authorized, 63,716,000 shares issued and outstanding                 63,716
   Paid-in capital                                                    3,717,675
   Accumulated deficit                                               (3,442,941)
                                                                    -----------

   Total shareholders' equity                                           338,452
                                                                    -----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                          $ 1,983,863
                                                                    ===========

   The accompanying notes are an integral part of these financial statements


                                       3
<PAGE>

                             THE PROJECT GROUP, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    THREE MONTHS ENDED JUNE 30, 2004 AND 2003
                                   (UNAUDITED)

                                                2004            2003
                                            ------------    ------------

CONSULTING REVENUE                          $    523,197    $    518,456

COST OF CONSULTING REVENUE                       335,819         206,526
                                            ------------    ------------

GROSS PROFIT                                     187,378         311,930
                                            ------------    ------------

GENERAL AND ADMINISTRATIVE
 Salaries and benefits                           674,559         227,569
 Professional and consulting fees                175,533          52,232
 Bad debt expense                                     --          13,000
 Travel and entertainment                         78,554          42,511
 General and administrative, other               179,235          69,877
                                            ------------    ------------

 Total general and administrative              1,107,881         405,189
                                            ------------    ------------

 Loss from operations                           (920,503)        (93,259)

OTHER (INCOME) EXPENSE
 Interest expense                                 54,400          43,216
                                            ------------    ------------

 Loss before income taxes                       (974,903)       (136,475)

INCOME TAX PROVISION                                  --              --
                                            ------------    ------------

 NET LOSS                                       (974,903)       (136,475)

 Preferred dividends                              12,855              --
                                            ------------    ------------

 LOSS APPLICABLE TO COMMON SHARES           $   (987,758)   $   (136,475)
                                            ============    ============


 Basic and diluted loss per share           $      (0.02)             --
                                            ============    ============

 Basic weighted average shares outstanding    57,188,527      44,808,888
                                            ============    ============


   The accompanying notes are an integral part of these financial statements


                                       4
<PAGE>

                             THE PROJECT GROUP, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     SIX MONTHS ENDED JUNE 30, 2004 AND 2003
                                   (UNAUDITED)

                                                2004            2003
                                            ------------    ------------

CONSULTING REVENUE                          $  1,138,706    $  1,062,511

COST OF CONSULTING REVENUE                       611,547         397,937
                                            ------------    ------------

GROSS PROFIT                                     527,159         664,574
                                            ------------    ------------

GENERAL AND ADMINISTRATIVE
 Salaries and benefits                         1,006,616         490,847
 Professional and consulting fees                334,536          82,736
 Bad debt expense                                     --          13,000
 Travel and entertainment                        127,643          80,795
 General and administrative, other               259,506         114,328
                                            ------------    ------------

 Total general and administrative              1,728,301         781,706
                                            ------------    ------------

 Loss from operations                         (1,201,142)       (117,132)

OTHER (INCOME) EXPENSE
 Interest expense                                 81,198          97,770
                                            ------------    ------------

 Loss before income taxes                     (1,282,340)       (214,902)

INCOME TAX PROVISION                                  --              --
                                            ------------    ------------

 NET LOSS                                    (1,282,340)       (214,902)

 Preferred dividends                             12,855              --
                                            ------------    ------------

 LOSS APPLICABLE TO COMMON SHARES           $ (1,295,195)   $   (214,902)
                                            ============    ============

 Basic and diluted loss per share           $      (0.02)   $     (0.01)
                                            ============    ============

 Basic weighted average shares outstanding    56,802,566      44,532,444
                                            ============    ============


   The accompanying notes are an integral part of these financial statements


                                       5
<PAGE>

                             THE PROJECT GROUP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     SIX MONTHS ENDED JUNE 30, 2004 AND 2003
                                   (UNAUDITED)

                                                        2004           2003
                                                     -----------    -----------
OPERATING ACTIVITIES
 Net loss                                            $(1,282,340)   $  (214,902)
 Adjustments to reconcile net loss to
  net cash used in operating activities:
 Depreciation and amortization                            19,823         10,790
 Stock issued for services                               150,164             --
 (Increase) decrease in assets:
   Accounts receivable                                  (246,534)       118,038
   Unbilled receivable                                   (19,773)        28,252
   Prepaid expense and other current assets             (278,157)         6,443
 Increase (decrease) in liabilities:
   Accounts payable and deferred revenue                 134,317       (100,379)
   Accrued liabilities and interest payable              417,015        267,290
                                                     -----------    -----------

Net cash (used in) provided by operating activities   (1,105,485)       115,532
                                                     -----------    -----------

 INVESTING ACTIVITIES
    Purchase of fixed assets                             (64,752)        (9,347)
    Purchase of investments                              (54,284)            --
                                                     -----------    -----------

Net cash used in investing activities                   (119,036)        (9,347)
                                                     -----------    -----------

FINANCING ACTIVITIES
 Payment of notes payable to shareholder                      --        (10,404)
 Net proceeds from issuance of preferred stock         1,243,622             --
 Net proceeds (payments)
  from issuance of note payable                           79,159       (113,483)
 Proceeds from exercise of warrants                           --         22,000
 Preferred dividends                                     (12,855)            --
 Proceeds from issuance of common stock                       --             --
                                                     -----------    -----------

Net cash provided by financing activities              1,309,926       (101,887)
                                                     -----------    -----------
INCREASE IN CASH                                          85,405          4,298
CASH AT BEGINNING OF PERIOD                               37,992             --
                                                     -----------    -----------
CASH AT END OF PERIOD                                 $  123,397    $     4,298
                                                     ===========    ===========

SUPPLEMENTAL INFORMATION
 Interest paid                                       $    76,959    $   105,473
                                                     ===========    ===========
 Common stock issued for services, including
  deferred portion                                   $   155,500    $        --
                                                     ===========    ===========
 Conversion of note payable to common stock          $        --    $    48,000
                                                     ===========    ===========
 Purchase of investment for stock                    $   792,000    $        --
                                                     ===========    ===========


   The accompanying notes are an integral part of these financial statements


                                       6
<PAGE>

                             THE PROJECT GROUP, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                    UNAUDITED

NOTE 1 - NATURE OF BUSINESS AND BUSINESS COMBINATION

The Company  provides  project  management and integration  consulting  services
throughout the United States. On June 30, 2004 the Company ("TPG") purchased all
the issued and outstanding common stock of Dolphin Knowledge,  Inc.  ("Dolphin")
from  its  shareholders  for  $70,000  in cash  and  6,600,000  shares  of TPG's
restricted  common stock. (See report on Form 8-K filed July 15, 2004 for a more
complete  description of this transaction.) The results of operations of Dolphin
will be included in the  consolidated  results of operations  of TPG  commencing
July 1, 2004.

NOTE 2 - BASIS OF PRESENTATION

The  accompanying  unaudited  consolidated  financial  statements of The Project
Group have been  prepared in accordance  with  accounting  principles  generally
accepted in the United States of America for interim  financial  information and
with the  instructions to Form 10-QSB and Item 310(b) of Regulation S-B. They do
not  include  all  of the  information  and  footnotes  required  by  accounting
principles  generally  accepted  in the United  States of America  for  complete
financial statements. In the opinion of management, all adjustments,  consisting
only  of  normal  recurring   adjustments,   considered  necessary  for  a  fair
presentation,  have  been  included  in  the  accompanying  unaudited  financial
statements.  Operating  results for the periods  presented  are not  necessarily
indicative of the results that may be expected for the full year.

These  financial  statements  should be read in  conjunction  with the financial
statements  and footnotes of The Project Group on Form 10-KSB for the year ended
December 31, 2003.

NOTE 3 - GOING CONCERN

The  Company's  financial  statements  are  prepared  using  generally  accepted
accounting  principles  applicable to a going concern,  which  contemplates  the
realization  of assets and  liquidation  of  liabilities in the normal course of
business. However, the Company has suffered recurring losses from operations and
has experienced  cash flow problems.  This raises questions as to the ability of
the  Company  to  continue  as a going  concern  and to expand as its  customers
require additional  service.  The Company completed a financing  arrangement for
$1,700,000 before offering costs (approximately $1,240,000 net) through the sale
of convertible  preferred stock, with additional  amounts which may be raised in
the future through the exercise of related warrants. The Company is also pursing
a strategy to raise additional working capital through the financing of accounts
receivable  or working  capital  loans,  and is reducing  personnel  and related
salaries in line with delays in commencing certain client projects.

NOTE 4 - DEFERRED INCOME TAXES

No federal  income taxes have been paid since the inception of the Company.  The
net  deferred  tax  assets  that would  result  from use of net  operating  loss
carryforwards has been fully reserved for in the financial statements.


                                       7
<PAGE>

                             THE PROJECT GROUP, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                    UNAUDITED

NOTE 5 - PREFERRED STOCK

On March 9, 2004, and as amended May 7, 2004,  TPG finalized  agreements for the
sale of 1,700 shares of TPG's newly  created 4% Series B  Convertible  Preferred
Stock for  $1,700,000,  to be funded in two equal  tranches  of  $850,000.  Each
preferred  share is convertible  into 12,500 shares of TPG common stock.  During
March 2004, the first tranche was received and 850 shares of preferred stock and
warrants to purchase  11,050,000  shares of common stock at $.135 were issued to
the investors,  resulting in the receipt by TPG of net proceeds of approximately
$480,000.  During June 2004, a registration  statement on Form SB-2 covering the
shares  underlying  the  Series  B  Convertible  Preferred  Stock  was  declared
effective and the second tranche was received and 850 shares of preferred  stock
were issued for net proceeds of approximately $760,000.  Warrants to purchase
1,100,000  shares of common stock at $.135 were issued to the selling  agent and
warrants to  purchase  700,000  shares of common  stock at $.10 were issued to a
consultant/attorney. The warrants have a term of three years.

NOTE 6 - UNAUDITED PRO FORMA AS ADJUSTED FINANCIAL STATEMENTS

On June 30, 2004, TPG purchased all the issued and  outstanding  common stock of
Dolphin Knowledge, Inc. ("Dolphin") from its shareholders,  Mark Beatty and Thor
Schueler,  for $70,000 in cash and 6,600,000 shares of TPG's  restricted  common
stock.  Pursuant to the terms of the stock purchase agreement,  and a Conversion
Rights  Agreement  entered  into in  connection  therewith,  the former  Dolphin
shareholders  have the  right to  convert  the TPG  shares  into a new  Series C
Preferred Stock which are then  convertible  into 9% of the  outstanding  common
stock of the company,  after  conversion.  This  conversion is exercisable  only
after a conversion  by the TPG founders of their shares of TPG common stock into
Series A Preferred Stock.

The following  unaudited pro forma as adjusted financial  statements give effect
to the  acquisition  of Dolphin  Knowledge  on June 30, 2004 using the  purchase
method  of  accounting  as  prescribed  by  Statement  of  Financial  Accounting
Standards No. 141 "Business  Combinations." The following supplemental unaudited
pro forma as adjusted financial  statements and the accompanying notes should be
read in  conjunction  with the  historical  financial  statements of The Project
Group which are  included in its annual  filing on form 10-KSB for  December 31,
2003 and the historical financial statements of Dolphin Knowledge,  Inc. and the
description  of the  transaction  and unaudited pro forma  financial  statements
include in the Company's report on Form 8-K dated July 15, 2004.

The unaudited pro forma as adjusted  statements of operations for the six months
ended June 30, 2004 give effect to the acquisition of Dolphin  Knowledge,  Inc.,
as if this event had occurred on January 1, 2004.

The unaudited pro forma as adjusted  financial  information  does not purport to
represent  what our  results of  operations  actually  would have been had these
events  occurred on the dates  indicated,  nor are they  intended to project our
results of  operations  for any future  period or date.  The unaudited pro forma
financial statements are presented for illustrative purposes only. The pro forma
adjustments are based upon available information and assumptions that management
believes are reasonable.


                                       8
<PAGE>

                             THE PROJECT GROUP, INC.
                  UNAUDITED PRO FORMA AS ADJUSTED BALANCE SHEET
                                  JUNE 30, 2004

<TABLE>
<CAPTION>
                                                                 HISTORICAL
                                     ASSETS
                                                          The Project                  PRO FORMA          PRO FORMA
                                                          Group, Inc.  DOLPHIN, INC.   ADJUSTMENTS        AS ADJUSTED
                                                         -----------    -----------    -----------       -----------
<S>                                                      <C>            <C>            <C>               <C>
CURRENT ASSETS
Cash                                                     $    91,655    $    31,742    $        --       $   123,397
Accounts receivable, net                                     479,805          4,400             --           484,205
Unbilled receivable                                           32,684             --             --            32,684
Prepaid expense and other current assets                     321,798          4,370             --           326,168
                                                         -----------    -----------    -----------       -----------

Total current assets                                         925,942         40,512             --           966,454
                                                         -----------    -----------    -----------       -----------

Investment                                                   962,000             --       (962,000)(1)            --

Fixed assets and software development, net                    87,537          3,161             --            90,698
Intangibles, primarily goodwill                                   --             --        926,711(1)        926,711
                                                         -----------    -----------    -----------       -----------

TOTAL ASSETS                                             $ 1,975,479    $    43,673    $   (35,289)      $ 1,983,863
                                                         ===========    -----------    ===========       ===========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
   Accounts payable                                      $   189,741    $      (282)   $        --       $   189,459
   Accrued liabilities                                     1,194,258          8,666             --         1,202,924
   Note payable                                              238,876             --             --           238,876
   Accrued interest payable                                   14,152             --             --            14,152
                                                         -----------    -----------    -----------       -----------

   Total current liabilities                               1,637,027          8,384             --         1,645,411
                                                         -----------    -----------    -----------       -----------

SHAREHOLDERS' EQUITY
Preferred stock                                                    2             --             --                 2
Common stock                                                  63,716          2,000         (2,000)(1)        63,716
Paid-in capital                                            3,717,675         12,650        (12,650)(1)     3,717,675
Accumulated deficit                                       (3,442,941)        20,639        (20,639)(1)    (3,442,941)
                                                         -----------    -----------    -----------       -----------

Total shareholders' equity                                   338,452         35,289        (35,289)          338,452
                                                         -----------    -----------    -----------       ===========

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY               $ 1,975,479    $    43,673    $   (35,289)      $ 1,983,863
                                                         ===========    ===========    ===========       ===========
</TABLE>

----------
 (1) To eliminate investment in Dolphin and allocate purchase price.


                                       9
<PAGE>

                        UNAUDITED PRO FORMA AS ADJUSTED
                            STATEMENT OF OPERATIONS
                         SIX MONTHS ENDED JUNE 30, 2004
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                      HISTORICAL
                                             THE PROJECT                     PRO FORMA           PRO FORMA
                                             GROUP, INC.      DOLPHIN       ADJUSTMENTS         AS ADJUSTED
                                            ------------    ------------    ------------       ------------
<S>                                         <C>             <C>             <C>                <C>
CONSULTING REVENUE                          $  1,138,706    $    258,823    $         --       $  1,397,529

COST OF CONSULTING REVENUE                       611,547          13,586              --            625,133
                                            ------------    ------------    ------------       ------------
GROSS PROFIT                                     527,159         245,237              --            772,396
                                            ------------    ------------    ------------       ------------

GENERAL AND ADMINISTRATIVE
General and administrative, other                259,506          13,902          (7,500)(1)        265,908
Salaries and benefits                          1,006,616         288,192        (125,000)(2)      1,169,808
Professional and consulting fees                 334,536              --              --            334,536
Travel and entertainment                         127,643           7,250              --            134,893
                                            ------------    ------------    ------------       ------------

Total general and administrative               1,728,301         309,344        (132,500)         1,905,145
                                            ------------    ------------    ------------       ------------

Loss from operations                          (1,201,142)        (64,107)        132,500         (1,132,749)

OTHER (INCOME) EXPENSE
Interest expense                                  81,198              --              --             81,198
                                            ------------    ------------    ------------       ------------

Loss before income taxes                      (1,282,340)        (64,107)        132,500         (1,213,947)

INCOME TAX PROVISION                                  --              --              --                 --
                                            ------------    ------------    ------------       ------------

NET LOSS                                    $ (1,282,340)   $    (64,107)   $    132,500       $ (1,213,947)
                                            ============    ============    ============       ============

Basic and diluted loss per share            $      (0.02)                                      $      (0.02)
                                            ============                                       ============

Basic weighted average shares outstanding     56,802,566                                         63,402,566
                                            ============                                       ============
</TABLE>

----------
(1)  Adjusts  rental  expense  to  reflect  space  changes   occuring  with  the
     acquisition.

(2)  Reflects the difference between Dolphin's historical employee  compensation
     expense, including pension benefits, and what would have been recorded as a
     subsidiary  of TPG,  based on  employment  agreements  entered  into at the
     Dolphin acquisition date.


                                       10
<PAGE>

NOTE  7 - COMMITMENTS AND CONTINGENCIES

Concurrent  with  the  acquisition  of  Dolphin,  TPG  entered  into  three-year
employment  agreements  with the two  former  shareholders  of  Dolphin.  Annual
compensation  is $140,000 for each under the  agreement.  They were also granted
stock options to purchase  1,000,000  shares each of TPG common stock at a price
of $.12 per share.  The options  vest  ratably  over a period of three years and
expire on June 30, 2014.

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

The  following  discussion  is intended to provide an analysis of our  financial
condition and should be read in  conjunction  with our  financial  statements at
June 30, 2004 included herein and our financial statements, at December 31, 2003
included in Form 10-KSB and the notes  thereto.  The matters  discussed  in this
section that are not  historical  or current  facts deal with  potential  future
circumstances and developments. Such forward-looking statements include, but are
not limited to, the development  plans for our growth,  trends in the results of
our  development,  anticipated  development  plans,  operating  expenses and our
anticipated capital requirements and capital resources. Our actual results could
differ materially from the results discussed in the forward-looking statements.

On June 30, 2004 the Company  ("TPG")  purchased all the issued and  outstanding
common  stock of Dolphin  Knowledge,  Inc.  ("Dolphin")  for $70,000 in cash and
6,600,000 shares of TPG's restricted common stock. (See report on Form 8-K filed
July 15, 2004). The  results of  operations  of Dolphin  will be included in the
consolidated results of operations of TPG commencing July 1, 2004.

LIQUIDITY AND CAPITAL RESOURCES

To date we have raised  funds  through the  issuance of shares of our common and
preferred stock and have increased liquidity through borrowing and factoring our
accounts receivable. On March 9, 2004, we entered into a Selling Agent Agreement
with First Montauk  Securities,  Inc. ("First Montauk") to assist us in the sale
of our Class B 4%  Convertible  Preferred  Stock.  We  entered  into  Securities
Purchase  Agreements,  as amended May 7, 2004,  with  investors  for the Sale of
1,700 Class B 4% Preferred Shares for an aggregate  purchase price of $1,700,000
(net proceeds to the Company of approximately  $1,240,000,  after expense). Each
share of the Class B  Convertible  Preferred  Stock is  convertible  into 12,500
shares of our Common Stock. In addition,  we issued warrants to the investors to
purchase an  aggregate of  11,050,000  shares of our Common Stock at an exercise
price of $.135  per  share.  The  warrants  have a term of three  years  and the
exercise  price is also  subject  to  adjustment  if there are  certain  capital
adjustments or similar transactions, such as stock splits or mergers.

As of June 30, 2004, we had cash  available of $123,397 and total current assets
of $966,454 . At that same date, we had total current  liabilities of $1,645,411
with total  liabilities  and  shareholders'  equity of  $1,983,863.  We have not
established  a limit  as to the  amount  of debt we may  incur  and we have  not
adopted a ratio of our equity to a debt allowance.  The Company needs to be able
to attain  profitable  operations and obtain additional equity or debt financing
to support  operations  for the next twelve month  period.  If we need to obtain
additional financing, the financing may not be available from any source, or may
not be available on terms acceptable to us.

RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2004

Revenues were  approximately  $1,138,000 for the six months ended June 30, 2004,
an increase of approximately $76,000 as compared to the same period in 2003. The
increase in revenues was principally attributable to new contracts with existing
and new customers,  but was lower than anticipated  because of delays in planned
starts of certain  contracts now scheduled to begin in late 2004 and early 2005.
Future  revenues  will also  reflect  revenues  attributable  to the purchase of
Dolphin knowledge beginning July 1, 2004.

Cost of  consulting  revenue as a percent of  consulting  revenue  increased  by
approximately  16% over the same period in 2003.  The Company  hired  additional
consultants  for  planned  work  and  anticipated  growth  during  this  period,
primarily in the second quarter.  These additional  personnel were a part of the
strategic plan to increase revenue by having  additional  capabilities in place.
This plan has resulted in new client  assignments,  but many are starting  later
than anticipated.  All consultants salaries and related costs are now classified
as cost of consulting revenues;  previously such costs were reflected in cost of
sales based on the utilization or billable percentage.  Management believes that
carrying the cost of  consultants  in this category  more closely  relates these
costs to the production of revenue.


                                       11
<PAGE>

General and Administrative

Total General and Administrative  costs increased by approximately  $947,000 for
the six  months  ended  June  30,  2004 to a total of  approximately  $1,728,000
compared with approximately $782,000 for the same period in 2003.

Salaries and benefits increased by approximately  $516,000 for the first half of
fiscal year 2004,  compared with same period 2003. The primary  factors  include
costs  associated  with  additional  personnel  employed for increased  business
development  activities and technical  support that were added  primarily in the
second quarter and stock awards to new and key  employees.  The non cash expense
for stock  awards  in the first  half of 2004 was  approximately  $160,000.  The
Company also adopted a vacation policy to attract and retain  employees that had
a cumulative impact of approximately $80,000 in additional accrued costs in this
period.

Professional and consulting fees increased by  approximately  $252,000 in in the
first half of 2004 compared to the same period in 2003.  The increase  primarily
reflects  costs  associated  with  increased  use of  consultants  for  investor
relations and strategic planning, and costs associated with cancelled consulting
agreements.

General and administrative travel increased  approximately $47,000 for the first
half of 2004,  compared with the same period 2003. This primarily  reflected the
hiring of additional  sales personnel based in Houston,  Dallas,  and Ann Arbor,
Michigan,  and  related  travel,  plus  costs  associated  with  other  business
development travel.

General and administrative, other increased approximately $145,000 for the first
half of 2004  compared to the same period in 2003.  This  increase is  primarily
related to costs  associated  with  administrative  personnel  added  during the
latter  part  of 2003  and in  2004  (telephone,  insurance,  supplies,  other),
approximately  $60,000 associated with increased  investor relations  activities
and increased advertising expenditures.


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<PAGE>

ITEM  3. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we have evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures under the supervision and with the participation of our chief
executive officer ("CEO") who also serves as chief financial officer. Based on
this evaluation, our management, including the CEO, concluded that our
disclosure controls and procedures were effective. There have been no
significant changes in our internal controls or in other factors that could
significantly affect internal control subsequent to the evaluation.

                                     PART II

ITEM  2. CHANGES IN SECURITIES

In June 2004, the Company sold 850 shares of Series B Convertible Preferred
Stock to twelve investors for $850,000. The Company paid commissions totaling
$85,000 to First Montauk Securities as placement agent in connection with the
sale of the Series B Convertible Preferred Stock.

On June 30, 2004, the Company issued 6,600,000 shares of its common stock to the
two shareholders of Dolphin Knowledge, Inc. as partial consideration for the
acquisition of all of the outstanding shares of stock of Dolphin Knowledge.
Pursuant to the terms of the stock purchase agreement, and a Conversion Rights
Agreement entered into in connection therewith, the former Dolphin shareholders
have the right to convert the TPG shares into a new Series C Preferred Stock
which are then convertible into 9% of the outstanding common stock of the
company, after conversion. This conversion is exercisable only after a
conversion by the TPG founders of their shares of TPG common stock into Series A
Preferred Stock.

The issuance of the shares of our common stock and Series B Convertible
Preferred Stock described above was pursuant to the exemption from registration
provided by Section 4(2) of the Securities Act of 1933, as amended and related
state private offering exemptions. The shares were issued to investors who took
the shares for investment purposes without a view to distribution and had access
to information concerning the Company and its business prospects, as required by
the Securities Act.

In addition, there was no general solicitation or advertising in connection with
the issuance of the shares. All certificates for our shares contain a
restrictive legend. Finally, our stock transfer agent has been instructed not to
transfer any of such shares, unless such shares are registered for resale or
there is an exemption with respect to their transfer.

No commissions were paid in connection with the issuance of shares relating to
the Dolphin acquisition.


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<PAGE>

ITEM  6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

      Exhibit
      Number                Description

        31.1        Certification of CEO and CFO pursuant to Section 302 of the
                    Sarbanes-Oxley Act of 2002

        32.1        Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
                     Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

      None

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf by the undersigned
thereunto duly authorized.

                                             THE PROJECT GROUP, INC.

                                             By: /s/ Craig Crawford
                                                 ------------------
                                                 Craig Crawford
                                                 CEO and President

Date: August 23, 2004

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