SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                       ----------------------------------

                                   FORM 10-KSB


|X|   Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934

                   For the fiscal year ended December 31, 2004

|_|   Transition Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

     For the transition period from _______________ to ___________________.


                          Commission File No. 000-50286

                          FENTON GRAHAM MARKETING, INC.
                 (Name of Small Business Issuer in Its Charter)

                     --------------------------------------

                  Nevada                                    86-1042805
(State or other jurisdiction of incorporation) (IRS Employer Identification No.)

             13215 Verde River Drive,
                      Unit 1                                         85268
              Fountain Hills, Arizona                              (Zip Code)
     (Address of Principal Executive Offices)

         Issuer's telephone number, including area code: (480) 836-8720


                         -------------------------------


        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:


                         Common Stock, $0.001 par value
                                (Title of Class)

      Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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.

         |X| Yes |_| No

      Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be

<PAGE>

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
or any amendment to this Form 10-KSB. |X|

      The issuer's total net sales for the fiscal year ended December 31, 2004
were $13,519.

      As of May 18, 2005, there were 6,000,000 outstanding shares of the
issuer's common stock, par value $0.001 per share ("Common Stock"), which is the
only class of common stock of the issuer. As of May 18, 2005, the aggregate
market value of the shares of Common Stock held by non-affiliates of the issuer,
computed based on the proposed maximum offering price per share in the issuer's
Form SB-2/A filed April 25, 2003, was approximately $20,000.

                       Documents Incorporated by Reference

      None.

      Transitional Small Business Disclosure Format:   |_| Yes |X| No


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                                                         TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               Page
<S>         <C>                                                                                                <C>
PART I............................................................................................................1

Item 1.     Business..............................................................................................1
Item 2.     Properties............................................................................................7
Item 3.     Legal Proceedings.....................................................................................7
Item 4.     Submission of Matters to a Vote of Security Holders...................................................7

PART II...........................................................................................................7

Item 5.     Market for Common Equity and Related Stockholder Matters..............................................7
Item 6.     Management's Discussion And Analysis..................................................................8
Item 7.     Financial Statements.................................................................................19
Item 8.     Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.................19
Item 8A.    Controls and Procedures..............................................................................20

PART III.........................................................................................................20

Item 9.     Directors and Executive Officers; Compliance with Section 16(a) of the Exchange Act..................20
Item 10.    Executive Compensation...............................................................................21
Item 11.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.......22
Item 12.    Certain Relationships and Related Transactions.......................................................22
Item 13.    Exhibits, Financial Statements and Reports on Form 8-K...............................................23
Item 14.    Principal Accountant Fees And Services...............................................................23

FINANCIAL STATEMENTS AND NOTES..................................................................................F-1
</TABLE>

<PAGE>

                                     PART I

ITEM 1. BUSINESS

      Unless the context otherwise requires, "Fenton Graham", "Company", "we",
"us" and "our" refer to Fenton Graham Marketing, Inc., a Nevada corporation.

Overview

      Fenton Graham was founded on October 17, 2001 by Ken Greble and J.P.
Schrage. Mr. Greble and Mr. Schrage received 2,500,000 shares each in
consideration of services provided to Fenton Graham, which services were valued
at $2,500 each. Mr. Greble and Mr. Schrage were compensated for assisting in the
formation of the Company.

      On July 5, 2002, Mr. Greble resigned from his positions as President and
director of the Company and he voluntarily tendered back his 2,500,000 shares to
the Company for cancellation. The shares were cancelled and reissued to Mr.
Schrage in consideration of his continued services to the Company, and Mr.
Schrage became President of the Company.

      Since our inception in 2001, we have had no significant revenue and have
generated operating and net losses. We were formed for the purpose of becoming a
results-driven Internet marketing company that specializes in providing its
clients with custom Internet marketing campaigns.

      During fiscal year 2004, we planned to complete development of our
proposed products and target small and medium sized businesses in North America,
primarily in the United States, but now plan to do this in 2005. Because our
President, J.P. Schrage, has worked in the Internet Marketing arena for several
years and has been an avid Internet user since 1995, we believe we can use Mr.
Schrage's media expertise and Internet marketing skills to assist these
companies to build brands, acquire new customers, increase traffic, drive sales
and grow customer relationships. We intend to deliver solutions to marketers
that include pop-ups (advertisements that "pop up" in a new window as people are
browsing Internet sites), domain redirects (renting domain names and redirecting
traffic from the rented domain name to a client's site), banner ads (small
"billboards" placed on web pages), affiliate programs (a marketing tool where
one business pays another business for contributing sales or leads to the
business), and other marketing methods. This will create a compelling marketing
solution: the ability to deliver the right message at the right time to the
right person.

      Since the second half of 2004, our management has given consideration to a
merger with another company as a possible strategy to improve the Company's
outlook. While we continue to believe that our online marketing business is a
viable business strategy, and we plan to continue to develop this business as
cash is available, we plan to concurrently seek candidates for a possible merger
with the Company.


Services

      Our services will allow our clients to interact in an environment that
maximizes e-mail and Web-based advertisements, while driving one-to-one,
business-to-consumer communication that stimulates transactions, optimizes
campaigns in real time and fosters the development of loyal relationships with
customers. Following is a brief description of each of the services we intend to
develop and begin to provide during 2005, if we do not complete a merger with
another company.

      o     Goals Analysis -- We will begin with a phone interview about our
            client's desires, visions and goals for the purpose of developing a
            rough sketch of the scope of the project.

      o     Analysis of Competition -- Part of the preliminary site review that
            we will do includes online searches using keywords to find our
            client's competition. Discovering what their competition is doing
            online can be the launching pad for fresh ideas.

<PAGE>

      o     Web Site Marketing Analysis -- We will analyze our client's existing
            site with respect to titling (the title on each page of the
            website), keyword use (specific keywords sprinkled throughout the
            site for search engine positioning purposes), search engine strategy
            implementation (finding out what search engines the client has
            pursued being listed on), alternative statement (text that appears
            as you mouse over a graphic on a website) use and current online
            marketing strategies. As part of an extensive site review, we will
            create a report listing a client company's current rankings along
            with recommendations for enhancements.

            In addition to market analysis we will perform a technical review,
            checking for coding issues that may impact search engine positioning
            as well as overall Web page performance. The time it takes a
            client's webpage to load is also an important factor in site
            creation and maintenance, as the main incentives for users to buy
            online are convenience and the amount of time saved.

      o     Site Design -- A well-designed web site attracts customers,
            strengthens product awareness and differentiates a company from its
            competition. We plan to develop a design program which will deliver
            a web site that maximizes our client's business opportunities in a
            fast, cost effective way, using proven web architecture. This proven
            web architecture consists of pre-designed templates for web pages as
            well as pre-designed program modules for handling common webpage
            functions such as a shopping cart or e-mail address collector.

      o     Online Ad Creation and Placement -- A targeted campaign of
            well-crafted ads placed in carefully researched locations can lead
            to increased volume of quality traffic. After assessment of goals,
            we will develop a budgeted and targeted program for our client's
            review, and then place ads as planned.

      o     Targeted E-mail Campaigns -- We will attempt to increase traffic to
            our clients' sites by sending mass e-mails to opt-in e-mail lists
            ("opt-in" refers to the process of a web surfer opting to receive
            special notices or offers via e-mail). These lists can be generated
            by placing forms on webpages to capture web surfers' e-mail
            addresses. The web surfers themselves type in their address to
            request inclusion in the list (the web surfer benefits by receiving
            either an incentive or information they see as useful to them). The
            use of these opt-in lists prevents our clients from receiving a bad
            name through spamming (sending unsolicited commercial e-mail).

Online Advertising Services

      We plan to develop and administer the following advertising vehicles for
our clients. We will develop advertising campaigns and review and measure the
results for our clients. We will attempt to prevent fraudulent advertisers by
developing a system to record the IP address of every user who sees one of our
ads. If an ad on a website is served to the same IP address more than once in 24
hours, the ad is not paid for by Fenton Graham. This is standard practice in any
advertising on the Internet today. This prevents someone from having a computer
automatically refresh a webpage thousands of times in one day to get paid for
serving more ads.

      CTP = Content Transfer Pages - these pages appear on Web sites as a
      separate browser usually sized as a 400 by 400 pixel pop-up, which means
      that the pop-up will take up about 33% of the average screen. These are
      fully navigable browsers that show our client's site and its contents.

      CPA = Cost Per Acquisition - these advertisements appear on a Web site and
      the advertiser is charged only when the visitor takes a predetermined
      action (i.e. signing up for a membership or subscription.)


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<PAGE>

      CPC = Cost Per Click Through - these advertisements appear on a Web site
      and the advertiser is charged only when the Web surfer clicks on the
      advertiser's ad.

      CPM = Cost Per Thousand - this type of advertising consists of banner
      style ads that the advertiser is charged per thousand impressions that
      appear on Web sites.

Online Traffic Generation

      Our goal is to continually find new ways to harness highly targeted
Internet traffic. This traffic will be used in campaigns for our future clients.
The primary traffic techniques we are currently developing are:

      o   Pop-up Windows
      o   Domain Names
      o   Banner Advertising
      o   Banner Exchanges
      o   Exit Traffic Retention
      o   Search Engine Positioning
      o   Paid Directory Listings
      o   E-mail Marketing
      o   Affiliate Programs

      "Pop-up Windows" are advertisements that "pop-up" in a new window as
people are browsing Internet sites. Pop-ups can be purchased for relatively low
amounts of money from large networks of web sites. This can provide quick
exposure on large web sites for future clients of Fenton Graham. Pop-ups are low
priced and cannot be marked up much, but large profits can still be realized as
campaigns of 500,000 or 1,000,000 or more pop-ups are generally purchased.
Pop-ups can also be deployed when people leave web sites. These are generally
more cost effective while working just as well.

      "Domain Names" are typed in by Internet users into a web browser to locate
an internet website in which the user is interested (i.e. fentongraham.com).
Many domain names generate significant amounts of traffic from people typing
them into their web browsers. This traffic can be rented from the owners of the
domain names (there would be no affiliation between Fenton Graham and the owners
of these domains). Most of the domains we intend to rent are now defunct
websites that still receive traffic, while others are misspellings of popular
domains such as "yahoo.com." As an example, Fenton Graham might have an online
travel agent as a client. Fenton Graham would then find the people or companies
that own domain names related to travel such as "vacations.com." Searching for
domains to rent can be done at websites such as allfordomains.com or
showcasedomain.net. If Fenton Graham could successfully rent the traffic from
the owner of vacations.com, everyone that types in vacations.com would
essentially be redirected to the travel agent's site. The web surfer gets
redirected to a useful site (when otherwise they might have received a page not
found error notification), the travel agent gets a possible sale, and Fenton
Graham gets paid by the travel agent for marketing their site. In the case of a
misspelled domain, the web surfer may not reach their intended site, but rather
one of our clients' sites. The web surfer could then continue on to their
intended site by properly entering the domain name into their web browser.

      Fenton Graham plans to rent many different domain names from various
domain name owners to take advantage of this opportunity. As an example, if
Fenton Graham rented a domain name that is travel related and receives 500 hits
(number of times the domain is typed into web browsers worldwide) per day for


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<PAGE>

approximately $150.00 per month ($0.01 per hit), the traffic could be directed
to a travel agency's website for $0.025 per hit. Another option is to again
direct the traffic to the travel agency's website, but be paid on a per click
basis of $0.125 or on a per action basis of $3.00 to $10.00 per plane ticket or
vacation sold. In total, Fenton Graham's goal is to control 100,000 hits per day
in domain traffic, although there is no assurance that Fenton Graham will reach
this number of hits or increase its revenues each month. Using the money
budgeted for operating expenses, the number of domains rented will slowly
increase each month as revenues increase. No domains have been rented as of the
date of this filing. Fenton Graham intends to begin renting domain names
following completion of the development of our software.

         "Banner Advertisements" are commonly used on most Internet web pages.
They act as small billboards for the countless products and services that are
advertised on the Internet. Fenton Graham intends to locate competitively priced
banner ad inventory from leading publishers. This gives us the potential to
offer our clients a positive return on their advertising dollars while building
product recognition at the same time.

         "Banner Exchanges" allow webmasters to trade advertising space on their
web page in return for advertising space on someone else's web page. Our goal is
to participate in targeted banner exchanges by capitalizing on our ability to
generate online traffic. We intend to accumulate banner credits for each of our
clients. Each banner credit is worth one advertisement on a webpage. In most
cases one banner credit is given to us for every two banners that we display.
For example, Websites A and B are part of a banner exchange. If Website A
displays Website B's advertisement twice, Website A would receive one banner
credit. This credit allows Website A to advertise on another Website that is
participating in the banner exchange. The banner exchange gets the other credit
as payment for making the process possible by serving and tracking the
advertisements.

         "Exit Traffic" is the large amount of "lost" online traffic commonly
known as "404 Error Traffic" or "File Not Found." Management believes that an
estimated 5% of all pages or over 100 million pages daily downloaded from the
Internet end up as 404 Errors. This traffic can be garnered by purchasing the
404 traffic from web hosting companies.

         "Search Engine Positioning" is the process of designing and submitting
a web page to search engines in a way that makes the page be displayed higher in
search results than other, similar pages. Search engine positioning is a
constantly evolving art. Currently, meta tags (script at the beginning of web
pages that can only be seen by robots on the web), keywords, and content are
three of the biggest factors in getting high search engine rankings. Fenton
Graham can apply this search engine positioning knowledge to a client's web site
to attempt to increase its standing on most of the major search engines.

         "Paid Directory Listings" involves paying pay-per-click search engines,
such as overture.com, for rankings. In order to have a high ranking for a
particular key word, you must outbid others who want to be listed high for that
same key word.

         "E-mail Marketing" - consists of using databases of "opt-in"
subscribers, people who have requested to receive various types of offers, via
in-house marketing efforts. We also intend to purchase or rent targeted e-mail
lists from reputable suppliers if needed.

         "Affiliate Programs" - is a marketing tool where the business pays
another entity for contributing sales or leads to the business. For example,
Amazon.com has an affiliate program in which any web site owner may put an
Amazon.com banner on their site in return for a percentage of all sales revenue
that originates from the banner. Affiliate programs basically establish a
network of web sites linking back to our client's web site in return for a CPA
(cost per action) reward. Third party monitoring is provided by sites such as
Commission Junction, BeFree, and Linkshare. We plan to establish affiliate
programs for our clients.

Privacy Concerns

         We believe that issues relating to the privacy of Internet users and
the use of personal information about these users are extremely important. In


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<PAGE>

the course of delivering ads to a Web user, we will only collect non-personally
identifiable information about the Web user. We do not intend to collect any
personally identifiable information about the Web user unless the Web user
voluntarily and knowingly provides personally identifiable information.

      In implementing any service or program designed to gather consumer data,
we will always be mindful of our commitment to uphold the privacy principles of
the Direct Marketing Association. We will actively monitor privacy laws and
regulations and seek to comply with all applicable privacy requirements.

Sales and Marketing

      Our future staff will work strategically with our customers to develop
comprehensive marketing solutions. We believe that our potential clients desire
integrated programs that go beyond the banner to include content integration,
contextual sponsorships, promotions, sweepstakes, e-mail sponsorships, pop-ups,
custom content and other highly effective advertising tools. We intend to hire a
full staff of personnel with the marketing, media, creative and advertising
skills required to develop sophisticated advertising campaigns.

      We intend to train our personnel to use a variety of marketing programs to
generate demand for our products and services, build market awareness, develop
customer leads and establish business relationships. Our marketing activities
will include some combination of public relations, print advertisements, online
advertisements and direct marketing, Web advertising seminars, trade shows,
special events and ongoing customer communications programs.

      We currently have no contracts with advertisers and will not have any
until we are able to begin business.

      The marketing to advertisers that we intend to do will cost approximately
$8,000 per year. This money will be used for media kits and various forms of
advertising.

Seasonality and Cyclicality

J.P. Schrage, who serves as our sole officer and director, has previous
experience in this business and has found that it is subject to seasonal
fluctuations. It has been his experience that marketers generally place fewer
advertisements during the first and third calendar quarters of each year, and
direct marketers generally mail substantially more marketing materials in the
third calendar quarter of each year. In addition, he found that expenditures by
advertisers and direct marketers vary in cycles and tend to reflect the overall
economic conditions, as well as budgeting and buying patterns. Furthermore, user
traffic on the Internet seemed to decrease during the summer months which
resulted in fewer advertisements to sell and deliver. A decline in the general
economy or in the economic prospects of advertisers and direct marketers could
adversely affect our revenue.

Competition

The market for interactive, Internet-based marketing solutions is extremely
competitive. We believe that our ability to compete depends upon many factors
both within and beyond our control, including the following:

      o   the timing and market acceptance of new solutions and enhancements
          to existing solutions developed either by us or our competitors;
      o   the continued and increasing acceptance by marketers of the Internet
          as an effective and cost-efficient means of advertising;
      o   the ability to adapt to the rapidly changing trends of the Internet;
      o   our customer service and support efforts;
      o   our sales and marketing efforts;
      o   our ability to adapt and scale our technology as customer needs
          change and grow; and


                                       5
<PAGE>

      o   the ease of use, performance, price and reliability of solutions
          developed either by us or our competitors.

      As we expand the scope of our Web services, we may face greater
competition from a number of Web sites and other media companies across a wide
range of different Web services, including in vertical markets where competitors
may have advantages in expertise, brand recognition and other factors. Several
companies offer competitive products or services through Web advertising
networks, including DoubleClick, 24/7 Real Media and Engage. Our business may
also encounter competition from providers of advertising inventory and database
management products and related services, including DoubleClick and Engage. We
will also compete with television, radio, cable and print for a share of the
overall advertising budgets of marketers.

Intellectual Property

      We do not plan to seek a patent or other similar intellectual property
protection for any of our currently contemplated technologies. We intend to
enter into confidentiality or license agreements with our employees, consultants
and corporate partners in order to control access to and distribution of our
technologies, documentation and other proprietary information. Despite these
efforts, unauthorized parties may attempt to disclose, obtain or use our
advertising solutions or technologies. Our precautions may not prevent
misappropriation of our advertising solutions or technologies, particularly in
foreign countries where laws or law enforcement practices may not protect our
rights as fully as in the United States.

      We cannot guarantee that any of our intellectual property will be viable
or valuable in the future since the validity, enforceability and scope of
protection of intellectual property in Internet related industries is uncertain
and still evolving. In addition, third parties may assert infringement claims
against us. Any claims could subject us to significant liability for damages and
could result in the invalidation of our intellectual property rights.

      In addition, any claims could result in litigation, which would be
time-consuming and expensive to defend, and divert our time and attention. Even
if we prevail, this litigation could cause our business, results of operations
and financial condition to suffer. Any claims or litigation from third parties
may also result in limitations on our ability to use the intellectual property
subject to these claims or litigation unless we enter into arrangements with the
third parties responsible for these claims or litigation, which could be
unavailable on commercially reasonable terms. We believe that factors such as
the technological and creative skills of our personnel, new service offerings,
brand recognition and reliable customer service are more essential to
establishing and maintaining our position in the marketplace, rather than the
legal protection of our technology. We cannot assure you that others will not
develop technologies that are similar or superior to our technology.

Research and Development

      We have not undertaken any research and development activities as of the
date of this filing.

Employees

      Currently, the only employee is our sole officer, J.P. Schrage. Over the
next year, we plan to hire 3 contract workers to assist in completing the
development of our software and technology. We are not subject to any collective
bargaining agreements and believe that our employee relations are excellent. Our
future success depends in part on our ability to attract, retain, integrate and
motivate highly-skilled employees. Competition for employees in the industry is
moderate.

Possible Merger

      Management may determine that a merger with another company is advisable
in lieu of continuing to develop our online marketing business. During 2005, we


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intend to seek merger candidates while continuing to develop our online
marketing business. To date, we have not identified any such candidates, and
have no plans, preliminary or otherwise, to merge with any particular company.

ITEM 2.       PROPERTIES

      Our principal offices are located at 13215 Verde River Drive, Unit 1,
Fountain Hills, Arizona 85268. These offices consist of 1,485 square feet and we
began using this space on February 1, 2002. We do not lease this space -
instead, Mr. Schrage performs marketing services on a part-time basis for the
company that leases this space and other space in the same building in exchange
for our use of the space. The Company's management believes that all facilities
occupied by the Company are adequate for present requirements, and that the
Company's current equipment is in good condition and is suitable for the
operations involved.

      Our servers will be housed at Technology Alliance Group (TAG) in
Scottsdale, Arizona. VVVRRR, Inc. (VRI) leases, on a month-to-month basis,
approximately half of one server rack in TAG's data center and uses about 2.5
Megabits of bandwidth. VRI is responsible for payment of the monthly datacenter
fees to TAG and we currently pay VRI $200 per month for the use of 1/8 of the
rack of space and 1 Megabit of bandwidth. Until our software has been fully
developed and ready for business use, we lease this limited space and bandwidth
in order to house the one server we use to test and develop our software. The
facility at TAG provides us with a secure area to store and operate our computer
systems and capacity for communications links and Internet connectivity systems.
Once our software is ready for business use and we have purchased additional
hardware, we will need to re-evaluate our facility requirements and possibly
enter into a lease agreement directly with TAG in order to meet our housing
needs.

      Since Fenton Graham is incorporated in Nevada, it is required to maintain
a resident office in that state in which corporate documents are available. The
resident office is located at 1000 East Williams Street, Suite 204, Carson City,
Nevada 89701. No activities take place in the resident office and no fees are
charged by the resident agent at this address. All other activities have been
consolidated to the facilities described above.

ITEM 3. LEGAL PROCEEDINGS

      We are not currently involved in any legal proceedings.

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

      No matters were submitted to a vote of shareholders of the Company during
the fiscal year ended December 31, 2004.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      Fenton Graham had 6,000,000 shares of common stock outstanding as of May
18, 2005. There is no public market for our shares as of the date of this
filing. Management has not undertaken any discussions, preliminary or otherwise,
with any prospective market maker concerning its participation in the
after-market for our securities and management does not intend to initiate any
discussions until we have raised enough capital to conduct our business. There
is no assurance that a trading market will ever develop or, if a market does
develop, that it will continue.


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<PAGE>

Number of Shareholders

         The number of beneficial shareholders of record of the Common Stock of
the Company as of the close of business on May 18, 2005 was approximately 19.

Dividend Policy

         To date, the Company has paid no cash dividends on its Common Stock,
and does not expect to pay cash dividends in the near term. The Company intends
to retain future earnings, if any, to provide funds for operation and growth of
its business.

Disclosure of Equity Compensation Plans


         The Company does not have any equity compensation plans.


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

Overview

         Fenton Graham was formed on October 17, 2001 to provide online
marketing services to small to medium sized companies. We plan to supply
Internet traffic to the Websites of our clients by using marketing expertise and
traffic generation techniques such as popup windows, domain names, banner
exchanges, exit traffic, search engine positioning, paid directory listings,
e-mail marketing and affiliate programs. We will also assist our clients in
developing relationships with vendors.

         As additional funds become available, our objective is to position
ourselves as a leading provider of technology and marketing solutions that are
designed to go beyond simple banners to produce better customer conversion
rates, resulting in higher prices for our clients' inventory and more value for
marketers. However, there is no assurance that we will be successful in doing
so.

Plan of Operation

         Since the filing of our Form 10-QSB for the quarter ended March 31,
2004, our management has given consideration to a merger with another company as
a possible strategy to improve the Company's outlook. While we continue to
believe that our online marketing business is a viable business strategy, and we
plan to continue to develop this business as cash is available, we plan to
concurrently seek candidates for a possible merger with the Company.

         If we do not locate a suitable merger candidate then, during 2005, we
plan to purchase or lease hardware, hire an initial staff, and begin our online
marketing business. We anticipate requiring approximately $100,000 to fund our
minimum level of operations during this period. Approximately $8,000 will be
used to purchase or lease hardware, $13,000 will be used toward office space and
related equipment, $7,000 will be used in sales and advertising, $5,000 will be
set aside for legal and accounting assistance, $43,000 to facilitate the hiring
of staff, and $24,000 will be general working capital.

         Our current cash is not adequate to satisfy our requirements. The
timing and extent of our growth will depend upon our ability to raise funds
through the sale of our common stock in a public offering or through one or more
private placements. Management believes we will need to raise between $100,000
and $200,000 over the next 24 months. The exact amount we will need to raise
will be determined by the then current market conditions, and the status of such
cash flow within Fenton Graham. It is anticipated that an initial injection of
$100,000 will be required within the next 6 to 9 months. Should we fail to raise
at least $100,000 during the next 9 months, it could affect our ability to
continue as a going concern.


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         Should management decide that raising funds by means of one or more
private placements or a secondary public offering would be detrimental to Fenton
Graham and its shareholders due to adverse stock market conditions or because
our cash flow is limited as a result of little or no revenues, we will attempt
to secure a line of credit with an established financial institution to assist
with staffing, marketing and general working capital purposes.

         E. James Wexler has loaned us a total of $39,500 through four
promissory notes, dated October 30, 2003, December 30, 2003, March 15, 2004,
July 21, 2004, and December 7, 2004. Each note has a two-year term, with the
entire principal and accrued interest due at maturity, and an interest rate of
9% per annum.

Costs and Expenses

         Currently, we have minimal monthly expenditures. By the end of 2005, we
intend to hire one employee to handle administrative and marketing tasks and we
intend to hire, on a contract basis, three technical consultants to handle
hardware issues.

         To date, our business has had only limited operations. Accordingly, we
have not had significant revenues. All incurred expenses have been funded by our
private offering. We are dependent upon the raising of capital through placement
of our common stock. There can be no assurance that we will be successful in
raising the capital we require to complete each of our Milestones detailed below
through the sale of our common stock.

Milestones

         In our Form 10-KSB for the period ended December 31, 2003, we included
discussion of seven milestones we are seeking to meet during the twelve month
period ending June 30, 2005. The following is an update on which milestones we
have achieved, and provides our estimate as to when the remaining milestones
will be achieved.

         Milestone 1: Establish an Office. We currently have an office from
where we conduct operations. We anticipate total office costs to be $23,000 for
the next 12 months. This includes legal and accounting expenses, rent, equipment
such as computers and telephones, and utilities.

         Milestone 2: Complete Software Development. We previously reported our
intent to complete the development of the Redirector and WarRoom software, which
was purchased in July of 2002 from Quantum Leap Media, Inc. for $20,000 cash. We
used the proceeds from our private offering completed in January 2002 to make
this purchase. At the time of the purchase, the software was not fully
developed. Due to lack of funding, the software was never fully developed, and
our management has decided not to pursue further development of the software.
Our management believes that we will be able to provide comparable services
without completing development of these software programs.

         Milestone 3: Purchase/Lease Hardware. We intend to lease three dual
Pentium systems with a minimum of 1 Gigabyte of RAM and purchase all peripherals
including a backup device and miscellaneous cabling. This will allow us to serve
and track the traffic we buy. (Accurate tracking of the traffic is very
important as it is how we will bill our clients). This will cost at least $8,000
over the next 12 months. We previously estimated that this would occur during
the third quarter of 2004, but we now expect the hardware to be purchased during
2005, subject to cash availability.

         Milestone 4: Hire Staff. We will engage an administrative person as
well as addition technical people. We expect that we may hire one administrative
person during our first year of operations. We expect that we may engage two to
three technical people on a contract basis to help design future software,


                                       9
<PAGE>

configure hardware, and keep our systems up and running. The hiring process
would include running advertisements in the local newspaper and on the Internet
and conducting interviews. It is estimated that to hire a full time
administrative person, as well as have a technical team available on a contract
basis will cost $43,000 per year. We previously estimated that hiring would
occur during the third quarter of 2004, but we now expect the hiring to take
place during 2005, subject to cash availability.

         Milestone 5: Develop Marketing Campaign. Another step is to develop an
advertising campaign, including establishing a list of prospects based on
potential clients identified in the market survey, and designing and printing
sales materials. The cost of developing the first campaign was approximately
$3,000. We completed this planning stage in the third quarter of 2003.
Additional advertising campaigns will be developed as we begin operations.

         Milestone 6: Implementation of Advertising Campaign and Sales Calls.
Implementation of the advertising campaign would begin with sending out e-mails
and calling prospective clients. Immediately following this, we would begin
telephone follow ups. The cost of these first round sales efforts is estimated
at $7,000. The advertising campaign and sales calls cannot begin until we
acquire the hardware and hire staff. We anticipate that the implementation of
advertising campaigns and sales calls will begin in the quarter following
completion of Milestones 3 and 4.

         Potential clients of Fenton Graham Marketing are small to medium sized
companies in North America, and primarily the United States. These companies in
most cases will already be offering a product on the Internet.

         It is difficult to determine how long it will take to convert our
efforts into actual sales and revenues. We hope that clients begin using our
services within days of implementation of our advertising campaign, but it may
take several weeks before people begin to purchase our services. Moreover,
customers may not be willing to pay for the service at the time they order, and
may insist on buying on account, which would delay receipt of revenues. Our
revenue will come from clients that receive our Internet marketing efforts which
include things like banner ads, pop-up ads, and domain redirects. We will be
paid based on the number of people we send to a client's site or on a percentage
of sales generated from the people we send to their site. During fiscal year
2003 and 2004, we have achieved revenues from Internet marketing for clients,
although management does not consider these revenues to be significant. We
anticipate that completion of Milestones 1-6 (not including completion of
Milestone 2, which our management has determined is not needed) will result in
increased revenues.

         Management may determine that a merger with another company is
advisable in lieu of continuing to develop our online marketing business. During
2005, we intend to seek merger candidates while continuing to develop our online
marketing business. To date, we have not identified any such candidates, and
have no plans, preliminary or otherwise, to merge with any particular company.

Cautionary Note Regarding Forward-looking Statements and Risk Factors

         The Company's Form 10-KSB, any Form 10-QSB or any Form 8-K of the
Company or any other written or oral statements made by or on behalf of the
Company may contain forward-looking statements which reflect the Company's
current views with respect to future events and financial performance. The words
"believe," "expect," "anticipate," "intends," "estimate," "forecast," "project,"
and similar expressions identify forward-looking statements. All statements
other than statements of historical fact are statements that could be deemed
forward-looking statements, including any statements of the plans, strategies
and objectives of management for future operations; any statements concerning
proposed new products, services, developments or industry rankings; any
statements regarding future economic conditions or performance; any statements
of belief; and any statements of assumptions underlying any of the foregoing.

         The Company wishes to caution investors that any forward-looking
statements made by or on behalf of the Company are subject to uncertainties and
other factors that could cause actual results to differ materially from such
statements. These uncertainties and other factors include, but are not limited
to the Risk Factors listed below (many of which have been discussed in prior SEC


                                       10
<PAGE>

filings by the Company). Though the Company has attempted to list
comprehensively these important factors, the Company wishes to caution investors
that other factors could in the future prove to be important in affecting the
Company's results of operations. New factors emerge from time to time and it is
not possible for management to predict all of such factors, nor can it assess
the impact of each such factor on the business or the extent to which any
factor, or combination of factors, may cause actual results to differ materially
from those contained in any forward-looking statements.

         Readers are further cautioned not to place undue reliance on such
forward-looking statements as they speak only of the Company's views as of the
date the statement was made. The Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.

Risk Factors

         You should consider the following discussion of risks as well as other
information regarding our common stock. The risks and uncertainties described
below are not the only ones. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial also may impair our business
operations. If any of the following risks actually occur, our business could be
harmed.

         Risks Related to the Company and Its Business

         If our services are not perceived as useful, we will be unable to
attract and maintain advertising clients. If we are unable to generate revenue
from advertising clients our business may prove unsuccessful.

         If the online advertising market does not develop further, or develops
more slowly than expected, we may not generate enough advertising revenue to
turn a profit. Since we expect to derive substantially all of our revenue from
online advertising, our future success is highly dependent on the increased use
of the Internet as an advertising medium. Because we have not yet fully
developed the services we intend to offer and they have not been proven
effective for business use, we cannot assure you that our services will be
effective in serving, targeting and tracking advertisements or other marketing
and promotional activities. Once we begin operations, our revenue would be
adversely affected if marketers do not perceive that the use of our services
improve the effectiveness of their marketing campaigns.

         Our ongoing reporting obligations as a public company may result in
ongoing operating losses.

         Operating a public company involves substantial costs to comply with
reporting obligations under federal securities laws which are continuing to
increase as provisions of the Sarbanes Oxley Act of 2002 are implemented. These
reporting obligations have already increased our operating costs. We may not
reach sufficient size to justify our public reporting status. If we were forced
to become a private company, then our shareholders may lose their ability to
sell their shares or to sell them at a premium over what they paid for them.

         We have limited operating history, which makes an evaluation of us
extremely difficult.

         We were incorporated in October of 2001 as a Nevada corporation. As a
result of our recent start up, Fenton Graham has yet to generate significant
revenues from operations and anticipates losses for the foreseeable future.
Since incorporation, our business activities have been limited to raising funds
and developing our business plan. Because we have no customers, there is nothing
at this time on which to base an assumption that our business operations will
prove to be successful or that we will ever be able to operate profitably. Our
future operating results will depend on many factors, including our ability to
raise adequate working capital, demand for our products and services, the level
of our competition and our ability to attract and maintain key management and
employees.


                                       11
<PAGE>

         Because we will need to raise additional funds and these funds may not
be available to us when we need them, we may need to change our business plan or
we could face bankruptcy and cease operations.

         Based on our current projections, we will need to raise funds within
the next twelve months through the issuance of equity, equity-related or debt
securities. Additional capital may not be available to us on favorable terms
when required, or at all. If this additional financing is not available to us,
we may need to dramatically change our business plan, sell or merge our business
or face bankruptcy and cease operations. In addition, our issuance of equity or
equity-related securities will dilute the ownership interest of existing
shareholders and our issuance of debt securities could increase the risk or
perceived risk of our company. Any of these actions could cause our stock price
to fall.

         Our independent accountants have expressed doubt about our ability to
continue as a going concern, which may hinder our ability to obtain future
financing.

         Our ability to continue as a going concern is an issue raised as a
result of the material operating losses incurred in 2004 and 2003, and
stockholders' deficit. We continue to experience net operating losses. Our
ability to continue as a going concern is subject to our ability to obtain
necessary funding from outside sources, including obtaining additional funding
from the sale of our securities or obtaining loans and grants from various
financial institutions where possible. The going concern increases the
difficulty in meeting such goals.

         We depend on J.P. Schrage and the loss or unavailability to Fenton
Graham of his services would have an adverse effect on our business, operations
and prospects.

         Mr. Schrage is vital to our continued operations, as he is our sole
officer, director and employee. We do not have "key person" life insurance
policies covering Mr. Schrage. In the event we should lose the services of Mr.
Schrage prior to hiring additional management, we would be required to cease
pursuing our business plan, which would result in the Company ceasing its
operations altogether.

         We may not be able to generate profits from our products and services.

         A significant part of our business model involves generating revenue by
providing marketing technology and data products and services to advertisers.
The long term profit potential for our business model has not yet been proven.
The profitability of our business model is subject to external and internal
factors. Any single factor or combination of factors could limit the profit
potential, long-term and short-term, of our business model. Like other
businesses in the marketing and advertising sectors, our revenue outlook is
sensitive to downturns in the economy, including declines in advertising and
marketing budgets. The profit potential of our business model is also subject to
the acceptance of our products and services by advertisers. Intensive marketing
and sales efforts may be necessary to educate prospective customers regarding
the uses and benefits of, and to generate demand for, our products and services.
Enterprises may be reluctant or slow to adopt a new approach that may replace
existing techniques, or may feel that our offerings fall short of their needs.
If these outcomes occur, it could have an adverse effect on the profit potential
of our business model.

         Misappropriation of confidential information could cause us to lose
customers or incur liability.

         We intend to retain highly confidential information on behalf of our
customers in secure database servers. Although we observe security measures
throughout our operations, we cannot assure you that we will be able to prevent
unauthorized individuals from gaining access to these database servers. Any
unauthorized access to our servers, or abuse by our employees, could result in
the theft of confidential customer information. If confidential information is
compromised, we could lose customers or become subject to liability or
litigation and our reputation could be harmed, any of which could materially and
adversely affect our business and results of operations.


                                       12
<PAGE>

      Online advertising and related products and services are competitive
markets and we may not be able to compete successfully.

      The market for marketing technology and data products and services is very
competitive. We expect this competition to continue because there are low
barriers to entry in our industry. Also, industry consolidation may lead to
stronger, better capitalized entities against which we must compete. We expect
that we will encounter additional competition from new sources if we expand our
product and service offerings.

      We believe that our ability to compete depends on many factors both within
and beyond our control, including the following:

      o     the features, performance, price and reliability of products and
            services offered either by us or our competitors;

      o     the launch timing and market success of products and services
            developed either by us or our competitors;

      o     our ability to adapt, integrate and scale our products and services,
            and to develop and introduce new products and services that respond
            to market needs;

      o     our ability to adapt to evolving technology and industry standards;

      o     our customer service and support efforts;

      o     our sales and marketing efforts; and

      o     the relative impact of general economic and industry conditions on
            either us or our competitors.

      Some of our existing and potential competitors have longer operating
histories, greater name recognition, larger customer bases and significantly
greater financial, technical and marketing resources than do we. These factors
could allow them to compete more effectively than we can, including devoting
greater resources to the development, promotion and sale of their products and
services, engaging in more extensive research and development, undertaking more
far-reaching marketing campaigns, adopting more aggressive pricing policies and
making more attractive offers to existing and potential employees, strategic
partners and advertisers. We cannot assure you that our competitors will not
develop products or services that are equal or superior to our products and
services or that achieve greater acceptance than our products and services. In
addition, current and potential competitors have or may merge or have
established or may establish cooperative relationships among themselves or with
third parties to increase the ability of their products or services to address
the needs of our prospective advertising customers. As a result, it is possible
that new competitors may emerge and rapidly acquire significant market share. We
cannot assure you that we will be able to compete successfully or that
competitive pressures will not materially and adversely affect our business,
results of operations or financial condition.

      Seasonal trends may cause our operating results to fluctuate.

      Our business is subject to seasonal fluctuations. Advertisers generally
place fewer advertisements during the first and third calendar quarters of each
year, which will directly affect our proposed business. Further, Internet user
traffic typically drops during the summer months, which reduces the amount of
online advertising. The email technology business may experience seasonal
patterns similar to the traditional direct marketing industry, which typically
generates lower revenues earlier in the calendar year and higher revenues later
in the year.

      We will depend on third-party Internet and telecommunications providers,
over whom we have no control, to operate our services.

      We will depend heavily on third-party providers of Internet and related
telecommunication services, including hosting and co-location facilities, in


                                       13
<PAGE>

delivering our products and services. These companies may not provide services
to us without disruptions in service. The costs associated with any transition
to a new service provider could be substantial and require us to reengineer our
computer systems and telecommunications infrastructure to accommodate a new
service provider. This process could be both expensive and time consuming. In
addition, failure of our Internet and related telecommunications providers to
provide the data communications capacity in the time frame we require could
cause interruptions in the services we will provide. Unanticipated problems
affecting our computer and telecommunications systems in the future could cause
interruptions in the delivery of our services, causing a loss of revenue and
potential loss of customers.

         If we fail to adequately protect our intellectual property, we could
lose our intellectual property rights or be liable for damages to third parties.

         We intend to enter into confidentiality, assignments of proprietary
rights and license agreements, as appropriate, with our future employees,
consultants and business and technology partners, and generally control access
to and distribution of our technologies, documentation and other proprietary
information. Despite these efforts, we cannot be certain that the steps we take
to prevent unauthorized use of our intellectual property rights will be
sufficient to prevent misappropriation of our products and services or
technologies, particularly in foreign countries where laws or law enforcement
practices may not protect our intellectual property rights as fully as in the
United States. In addition, we cannot assure you that we will be able to
adequately enforce the contractual arrangements that we will enter into to
protect our proprietary technologies and intellectual property. If we lose our
intellectual property rights, this could have a material and adverse impact on
our business, financial condition and results of operations.

         If we face a claim of intellectual property infringement, we may be
liable for damages and be required to make changes to our technology or
business.

         Third party infringement claims and any resultant litigation against
us, should it occur, could subject us to significant liability for damages,
restrict us from using our technology or operating our business generally, or
require changes to be made to our technology. Even if we prevail, litigation is
time consuming and expensive to defend and would result in the diversion of
management's time and attention. Claims from third parties may also result in
limitations on our ability to use the intellectual property subject to these
claims unless we are able to enter into royalty, licensing or other similar
agreements with the third parties asserting these claims.

         Such agreements, if required, may not be available on terms acceptable
to us, or at all. If we are unable to enter into these types of agreements, we
would be required to either cease using the subject product or change the
technology underlying the applicable product. If a successful claim of
infringement is brought against us and we fail to develop non-infringing
technology as an alternative or to license the infringed or similar technology
on a timely basis, it could materially adversely affect our business, financial
condition and results of operations.

         Our business may be materially adversely affected by lawsuits related
to privacy, data protection and our business practices.

         The Federal Trade Commission and the attorneys general of several
states have brought actions against some of our competitors alleging, among
other things, that they unlawfully obtained and used Internet users' personal
information and that their use of ad serving cookies violated various laws.

         Should any claims or regulatory inquiries of this sort, whether
successful or not, be brought against us, they could require us to devote
significant amounts of monetary or human resources to defend ourselves and could
harm our reputation. We may need to spend significant amounts on our legal
defense, management may be required to divert their attention from other
portions of our business, new product launches may be deferred or canceled as a
result of any proceedings, and we may be required to make changes to our present
and planned products or services, any of which could materially and adversely
affect our business, financial condition and results of operations. If, as a


                                       14
<PAGE>

result of any proceedings, a judgment is rendered or a decree is entered against
us, it may materially and adversely affect our business, financial condition and
results of operations and harm our reputation.

         Activities of our clients could damage our reputation or give rise to
legal claims against us.

         Our future clients' promotion of their products and services may not
comply with federal, state and local laws, including but not limited to laws and
regulations relating to the Internet. Failure of our customers to comply with
federal, state or local laws or our policies could damage our reputation and
adversely affect our business, results of operations or financial condition. We
cannot predict whether our role in facilitating our customers' marketing
activities would expose us to liability under these laws. Any claims made
against us could be costly and time-consuming to defend. If we are exposed to
this kind of liability, we could be required to pay substantial fines or
penalties, redesign our business methods, discontinue some of our services or
otherwise expend resources to avoid liability.

         We also may be held liable to third parties for the content in the
advertising and emails we plan to deliver on behalf of our customers. We may be
held liable to third parties for content in the advertising we serve if the
music, artwork, text or other content involved violates the copyright, trademark
or other intellectual property rights of such third parties or if the content is
defamatory, deceptive or otherwise violates applicable laws or regulations. Any
claims or counterclaims could be time consuming, result in costly litigation or
divert management's attention.

         There is no current public market for our common stock.

         As of the date of this filing, there is no public market for our common
stock. Although we plan to contact an authorized OTC Bulletin Board market maker
for sponsorship of our securities on the Over-the-Counter Bulletin Board, there
can be no assurance that our attempts to do so will be successful. Furthermore,
if our securities are not quoted on the OTC Bulletin Board or elsewhere, there
can be no assurance that a market will develop for the common stock or that a
market in the common stock will be maintained. As a result of the foregoing, our
shareholders may be unable to sell their shares for any reason.

         Our common stock is subject to penny stock regulation.

         Our shares are subject to the provisions of Section 15(g) and Rule
15g-9 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain
requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates
the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.
The Commission generally defines penny stock to be any equity security that has
a market price less than $5.00 per share, subject to certain exceptions. Rule
3a51-1 provides that any equity security is considered to be penny stock unless
that security is: registered and traded on a national securities exchange
meeting specified criteria set by the Commission; authorized for quotation on
The NASDAQ Stock Market; issued by a registered investment company; excluded
from the definition on the basis of price (at least $5.00 per share) or the
registrant's net tangible assets; or exempted from the definition by the
Commission. Since our shares are deemed to be "penny stocks", trading in the
shares will be subject to additional sales practice requirements on
broker-dealers who sell penny stocks to persons other than established customers
and accredited investors.

Risks Related To Our Industry

         Advertisers may be reluctant to devote a portion of their budgets to
online advertising.

         Companies doing business on the Internet, including us, must compete
with traditional advertising media, including television, radio, cable and
print, for a share of advertisers' total marketing budgets. Potential customers
may be reluctant to devote a significant portion of their marketing budget to
online advertising or marketing technology and data products and services if
they perceive the Internet to be a limited or ineffective marketing medium. Any
shift in marketing budgets away from online advertising spending, or our future
offerings in particular, could materially and adversely affect our business,


                                       15
<PAGE>

results of operations or financial condition. In addition, online advertising
could lose its appeal to those advertisers using the Internet as a result of its
ad performance relative to other media.

         If the delivery of Internet advertising on the web, or the delivery of
our email messages, is limited or blocked, demand for our future products and
services may decline.

         Our business may be adversely affected by the adoption by computer
users of technologies that harm the performance of our products and services.
For example, computer users may use software designed to filter or prevent the
delivery of emails or Internet advertising, including pop-up and pop-under
advertisements, or Internet browsers set to block the use of cookies. We cannot
assure you that the number of computer users who employ these or other similar
technologies will not increase, thereby diminishing the efficacy of our products
and services. In the event that one or more of these technologies became widely
adopted by computer users, demand for our products and services would decline.

         We will also depend on our ability to deliver emails over the Internet
through Internet service providers and private networks. Internet service
providers are able to block messages from reaching their users and we do not
intend to seek agreements with any Internet service providers to deliver emails
to their customers. As a result, we could experience temporary or permanent
blockages of our delivery of emails to their customers, which would limit the
effectiveness of email marketing. Some Internet service providers also use
proprietary technologies to handle and deliver email. If Internet service
providers or private networks materially limit or block the delivery of our
emails, or if our technology fails to be compatible with their email
technologies, then our business, results of operations or financial condition
could be materially and adversely affected. In addition, the effectiveness of
email marketing may decrease as a result of increased consumer resistance to
email marketing in general.

         New laws and regulations or changing interpretations of existing laws
and regulations could harm our business.

         Laws and regulations have been adopted in the U.S. affecting important
aspects of our proposed Internet commerce business, such as Internet
communications, electronic contracting, privacy and data protection, taxation,
advertising and direct marketing.

         In addition, laws have been adopted in the U.S. that restrict the
transmission of unsolicited commercial email. U.S. law requires senders of
commercial electronic mail messages to, among other things, identify their
messages as advertisements or solicitations and provide recipients a mechanism
to decline (opt out) future commercial email from the sender. The Federal Trade
Commission is authorized to regulate commercial email and may impose additional
measures such as labeling requirements or a national "Do Not E-Mail" registry.
Although our email delivery will be consent-based, we may be subjected to
increased liabilities and may be required to change our current email practices
in ways that make email communications less effective or more costly.

         Among the technologies we intend to use are "cookies," or small pieces
of data that are recorded on the computers of Internet users. New technologies
may make it easier or less inconvenient for Internet users to reject "cookies"
or other online tracking technologies. If a high percentage of Internet users
refuse to accept "cookies" or other online tracking technologies, or if future
laws require express consent for the use of "cookies" or otherwise restrict our
use of related Internet technologies, Internet advertising may become more
costly and less effective, and the demand for our proposed services may
decrease.

         Meanwhile, many areas of the law affecting the Internet remain
unsettled, and it can be difficult to determine whether and how existing laws,
such as those governing data protection, privacy, intellectual property,
financial services, content standards, libel, data security and taxation, may be
applied to Internet-based businesses. Our business could be negatively impacted
by new applications or interpretations of existing laws and regulations to
Internet marketing.

         Future laws and regulations could also have a material adverse effect
on our business. In particular, new online consumer protection requirements
could impose significant, unanticipated compliance costs and could make it
inefficient or infeasible to operate certain parts of our business. Governments


                                       16
<PAGE>

in the U.S. are considering new limitations on the collection, use and
disclosure of personal information for marketing purposes. Any legislation
enacted or regulation issued could dampen the growth and acceptance of our
industry in general and of our offerings in particular. We are unable to predict
whether any particular proposal will pass, or the nature of the limitations that
may be imposed.

         Any changes in applicable legal requirements may cause us to change or
discontinue an existing offering, business or business model; cancel a proposed
offering or new business; or incur significant expenses or liability that
materially and adversely affect our business, financial condition and results of
operations.

         Our business may suffer if the web experiences unexpected interruptions
or delays that may be caused by system failures.

         Our success depends, in large part, upon the maintenance of the Web
infrastructure, such as a reliable network backbone with the necessary speed,
data capacity and security and timely development of enabling products. We
cannot assure you that the Web infrastructure will effectively support the
demands placed on it as the Web continues to experience increased numbers of
users, frequency of use or increased bandwidth requirements of users.
Furthermore, the Web has experienced unexpected interruptions and delays caused
by system failures and computer viruses. These interruptions and delays could
impact user traffic and the advertisers using our products and services. In
addition, a lack of security over the Internet may cause Internet usage to
decline and could adversely impact our business, financial condition and results
of operations.

         The lack of appropriate advertising measurement standards or tools may
cause us to lose customers or prevent us from charging a sufficient amount for
our products and services.

         Because online marketing technology and data products and services
remain relatively new disciplines, there are currently no generally accepted
methods or tools for measuring the efficacy of online marketing and advertising
as there are for advertising in television, radio, cable and print. Many
traditional advertisers may be reluctant to spend sizable portions of their
budget on online marketing and advertising until widely accepted methods and
tools exist that measure the efficacy of their campaigns.

         We could lose customers or fail to gain customers if our products and
services do not utilize the measuring methods and tools that may become
generally accepted. Further, new measurement standards and tools could require
us to change our business and the means used to charge our customers, which
could result in a loss of customer revenues and adversely impact our business,
financial condition and results of operation.

Risks Related to Possible Mergers and Acquisitions.

         We may not be able to locate and acquire suitable companies for our
future mergers or acquisitions.

         The Company has not yet identified any target company, nor has it
identified any particular industry or field with which it intends to become
involved. Intense competition can be expected from existing, better financed and
more established competitors, who are also seeking to create or purchase
profitable businesses. Numerous other firms have substantially greater resources
in locating and/or acquiring potential merger and acquisition candidates.
Management has no previous experience in identifying suitable merger and
acquisition candidates.


         We may not have access to sufficient capital to pursue our acquisition
strategies and therefore would be unable to achieve our planned future growth.

         We intend to pursue a growth strategy that includes acquiring new
companies. There is a risk that we will not have access to sufficient capital to
pursue our acquisition strategies. We may take an extended period of time to


                                       17
<PAGE>

locate and investigate specific target companies, and if one or more target
companies are located, the negotiation and execution of the relevant agreements
may require substantial time, effort and expense. Our ability to continue to
make acquisitions will depend primarily on our ability to obtain additional
private or public equity or debt financing. There can be no assurance that such
financing will be available to make future investments.


         We have not yet identified any specific businesses or specific
industries that we intend to enter through a purchase or merger.

         We have not presently identified any specific business or specific
industry that we intend to enter through a purchase or merger. Our shareholders
will have no opportunity to review or evaluate the target companies that we may
choose to become involved with. As of the date of this Form 10-KSB, there are no
plans, proposals, arrangements or understandings with respect to any possible
business combination or opportunity. It is possible that any business we target
will present such a level of risk that conventional private or public offerings
of securities or conventional bank financing would not be available to the
business.

         We have not developed criteria for our proposed business acquisitions.

         We have not developed and do not presently intend to develop criteria
for the search and selection of a business acquisition. Thus, our shareholders
will have no prior indication as to the industries or businesses that we may
acquire if we are able to finalize an acquisition. In some instances, the
potential acquisition or merger candidate may not need substantial additional
capital but instead would like to establish a public trading market for its
shares through a combination with Fenton Graham. A business attempting to
consolidate its operations by a merger, reorganization, asset acquisition or
some other form of combination with us may desire to do so to avoid perceived
adverse consequences of undertaking a public offering itself.

         We have not conducted research to determine whether there is demand in
the market for a business combination with Fenton Graham.

         We have no market research to indicate that a demand exists for a
merger or acquisition as contemplated by Fenton Graham. Consequently, investors
are relying exclusively upon the judgment of our management and their efforts in
locating and selecting possible acquisition candidates.

         We may be subject to the risks associated with a lack of
diversification.

         In the event we are successful in identifying and evaluating one or
more suitable merger or acquisition candidates, of which there is no assurance,
we may be required to issue shares of our common stock in an acquisition or
merger transaction. Inasmuch as our capitalization is limited, it is unlikely
that we will be capable of completing more than a limited number of mergers or
acquisitions. Consequently, our potential lack of diversification may subject us
to economic fluctuation within the particular industries in which our target
companies conduct business.

         Control of Fenton Graham may change.

         An acquisition involving the issuance of shares of our common stock may
result in shareholders of the acquired business obtaining a significant interest
in Fenton Graham. This may result in a change in control of Fenton Graham, which
could result in the removal of our present officers and directors. No assurance
can be given as to the experience or qualifications of any new management in the
operation of any of our activities or in the operations of the business
acquired.


                                       18
<PAGE>

      We are subject to currently unforeseeable risks associated with our
potential business combinations.

      Upon consummating a business combination, we will become subject to the
risks inherent in the business operations and industry of the acquired business.
These risks are presently unknown and unforeseeable. We may be dependent upon
existing or new management of the target company, and may thus lack the control
necessary to adjust the direction of the business in the event such operating
management is unable to cope with business problems that may arise. Because we
may participate in a business combination with newly-organized firms or with
firms which are attempting to expand through new products, markets or methods of
distribution, we may face additional special risks associated with development
stage operations or operating management lacking in specific experience
pertinent to the business involved. Regardless of the type of business with
which we may become involved through a business combination, we will be subject
to all of the risk factors, which are presently unpredictable and associated
with the particular industry in which the business operates.

      We may be subject to the risks associated with leveraged transactions.

      It is possible that an acquisition or merger may be structured or
consummated through the use of leverage. Leveraged transactions generally refer
to the use of debt to acquire a business or assets. Typically, borrowed funds
are used to purchase shares of selling shareholders, thus encumbering the assets
and cash flow of the acquired business.

      We may not disclose potential business combinations to investors.

      We do not intend to provide shareholders with complete disclosure
documentation, including audited financial statements, concerning a target
company and its business prior to merger or acquisition. Under Nevada law, a
variety of corporate actions, including acquisitions, may be taken by holders of
a majority of outstanding shares without notice or approval by remaining
shareholders. Thus, our shareholders may not have the opportunity to review,
approve or consent to the terms of an intended acquisition or business
combination. In addition, consummation of a business combination may involve the
issuance of authorized but unissued shares of our common stock. Our shareholders
may not have the opportunity to approve or consent to such additional issuances
of securities.


ITEM 7. FINANCIAL STATEMENTS

      The information required by this Item is submitted as a separate section
of this Form 10-KSB. See Item 13.

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

Change in Certifying Accountants

      As reported in our Form 8-K filed November 7, 2003, on October 30, 2003,
Stonefield Josephson, Inc. was dismissed as the independent auditors for the
Company and Epstein, Weber & Conover, PLC was engaged as the new independent
auditors for the Company.

      As reported in our Form SB-2/A filed on April 25, 2003, on January 24,
2003, the Company dismissed Merdinger, Fruchter, Rosen & Co., P.C. and engaged
Stonefield Josephson, Inc. as the Company's independent auditors.


                                       19
<PAGE>

ITEM 8A. CONTROLS AND PROCEDURES

      (a) Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we
conducted an evaluation of the design and operation of our disclosure controls
and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e)
promulgated under the Securities Exchange Act of 1934, as amended, within 90
days of the filing date of this report. Based on that evaluation, our principal
executive officer and our principal financial officer concluded that the design
and operation of our disclosure controls and procedures were effective in timely
alerting them to material information required to be included in the Company's
periodic reports filed with the SEC under the Securities Exchange Act of 1934,
as amended. The design of any system of controls is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions, regardless of how remote.

      (b) In addition, there were no significant changes in our internal control
over financial reporting identified in connection with the evaluation that
occurred during the last fiscal quarter that have materially affected, or that
are reasonably likely to materially affect, our internal control over financial
reporting.

                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS; COMPLIANCE WITH SECTION 16(A) OF THE
        EXCHANGE ACT

      The name of our sole director and executive officer, his age and certain
other information about him is set forth below:

<TABLE>
<CAPTION>
             Name                     Age                                      Position
-------------------------------     ---------      -----------------------------------------------------------------
<S>                                  <C>           <C>
J.P. Schrage                           28            President, Secretary, Treasurer, Director
</TABLE>


      J.P. Schrage. Mr. Schrage has been Secretary/Treasurer and a director of
Fenton Graham since its inception. On July 5, 2002, he was appointed President
when the Company's former President resigned. Mr. Schrage began working full
time for Fenton Graham on November 1, 2002. From May 2002 to November 1, 2002,
Mr. Schrage served on a part-time basis as Operations Manager for VVVRRR, Inc.
(VRI), an Internet marketing firm which deals with affiliate programs, a service
also offered by Fenton Graham. VRI is not a direct competitor to Fenton Graham
as VRI does nothing more than affiliate programs, which are designed to assist
its clients in establishing a network of links on other businesses' websites
which will direct the user to the client's website. VRI is a small company with
few employees and Mr. Schrage assisted the CEO in overseeing its daily
operations. Mr. Schrage performed project manager duties and bookkeeping duties.
In July 2002, Fenton Graham entered into a co-location agreement with VRI for
the use of a portion of the space VRI leases from Technology Alliance Group to
house its servers. From January 2000 to August 2002, Mr. Schrage served on a
part-time basis as the Operations Manager with Quantum Leap Media, Inc., another
small Internet marketing firm which provided products and services similar to
those offered by Fenton Graham. Mr. Schrage acted as a project manager, taking
many Internet sites and projects from start to finish. He also handled the
company's finances, hired and dealt with employees, and assisted the CEO with
both professional and personal matters. Quantum Leap Media ceased operations in
August 2002. In December 1999, Mr. Schrage graduated with Honors from the
University of Arizona, with a triple major in Entrepreneurship, Finance, and
Marketing. From May to August 1999, he was employed as a management intern for
Wal-Mart. There he supervised many employees and processes while learning all
aspects of running a Wal-Mart store.


                                       20
<PAGE>

Code of Ethics

      The Company has not adopted a code of ethics with standards as set out by
the SEC's regulations as of the date of this filing, due to the small size of
the Company. Should the Company increase in size, management intends to
reconsider the need for a code of ethics.

Committees of the Board of Directors

      The Company's Board of Directors has not established any committees. The
entire Board of Directors is currently acting as the audit committee. There is
no "audit committee financial expert," as such term is defined in rules and
regulations of the SEC, currently serving on the Board of Directors. However,
our sole director believes that he has sufficient knowledge and experience to
fulfill his duties and obligations with respect to audit committee functions of
the Board.

Section 16(a) Beneficial Ownership Reporting Compliance

      To our knowledge, based solely upon our review of Forms 3 and 4 and
amendments thereto furnished to use pursuant to Rule 16a-3(e) of the Exchange
Act during our most recent fiscal year and Form 5 and amendments thereto
furnished to use with respect to our most recent fiscal year, no director,
officer, beneficial owner of more than 10.0% of any class of our equity
securities registered pursuant to Section 12 of the Exchange Act, or any other
persons so required, failed to file on a timely basis, as disclosed in the above
forms, reports required by Section 16(a) of the Exchange Act during the most
recent fiscal year or prior fiscal year.

ITEM 10. EXECUTIVE COMPENSATION

                                                SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                                                                                         Long Term Compensation
                                                  Annual Compensation
-----------------------------------------------------------------------------------------------------------------------
                                                                                           Awards             Payouts
-----------------------------------------------------------------------------------------------------------------------
    Name and Principal                                           Other Annual    Restricted    Securities
         Position              Year       Salary      Bonus      Compensation       Stock      Underlying      LTIP
                                            ($)        ($)           ($)           Awards        Options      Payouts
-----------------------------------------------------------------------------------------------------------------------
<S>                            <C>        <C>        <C>         <C>             <C>            <C>           <C>
J.P. Schrage (President,       2002        5,000        0             0               0             0            0
Secretary, Treasurer &
Director)
-----------------------------------------------------------------------------------------------------------------------
                               2003       40,000        0             0               0             0            0
-----------------------------------------------------------------------------------------------------------------------
                               2004          0          0             0               0             0            0
-----------------------------------------------------------------------------------------------------------------------
Ken Greble (former
President & Director)          2002          0          0             0               0             0            0
-----------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------
</TABLE>

      Our sole Director did not receive any compensation for his service as a
Director in 2004, but, should the Company have additional Directors in the
future, the Company may determine to pay Directors a per meeting fee if these
Directors are not separately compensated by the Company for other services.

      Director liability insurance may be provided to current and future members
of the Board of Directors at a later date. Fenton Graham has not yet obtained
such insurance and does not have any specifics for available cost and coverage.
Fenton Graham does not have a specific time frame to obtain the insurance.

      Employment Agreements

      Effective January 1, 2003, the Company entered into a formal employment
agreement with J.P. Schrage.


                                       21
<PAGE>

      Under the employment agreement, the Company has agreed to employ Mr.
Schrage as the Company's President, Secretary and Treasurer. The term of the
employment contract is one year from effective date. The agreement renews
automatically for succeeding one-year terms unless otherwise terminated under
the terms of the agreement. Mr. Schrage's compensation will be a base salary of
$40,000 per year (which may be increased by consent of the Board), incentive
bonus in accordance with Company performance, and various benefits.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

      There are 6,000,000 common shares outstanding as of the date of this
filing. The following tabulates holdings of shares of Fenton Graham by each
person who, subject to the above, as of May 18, 2005, holds of record or is
known by management to own beneficially more than 5.0% of the common shares and,
in addition, by all directors and officers of Fenton Graham individually and as
a group.


                                         SHARE OWNERSHIP AS OF MAY 18, 2005

<TABLE>
<CAPTION>
                    Name and Address of                       Amount of                   Percent of
                    Beneficial Owner (1)                 Common Shares Owned         Common Shares Owned
         <S>                                             <C>                         <C>
         J.P. Schrage (2)                                      5,000,000                    83.3%
         c/o Fenton Graham Marketing, Inc.
         13215 Verde River Drive, Unit 1
         Fountain Hills, Arizona 85268

         All Officers and Directors
         as a group (1 person)                                 5,000,000                    83.3%
</TABLE>

(1) Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared voting
power (including the power to vote or direct the voting) and/or sole or shared
investment power (including the power to dispose or direct the disposition) with
respect to a security whether through a contract, arrangement, understanding,
relationship or otherwise. Unless otherwise indicated, each person indicated
above has sole power to vote, or dispose or direct the disposition of all shares
beneficially owned, subject to applicable community property laws.

(2) Mr. Schrage is the Company's sole director and its President, Secretary and
Treasurer.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      On October 17, 2001, our founding officers and directors, Ken Greble and
J.P. Schrage, each received 2,500,000 shares of our common stock for assisting
in the formation of Fenton Graham. Their services were valued at $2,500 each.

      In December 2001, Ken Greble, former President and a former director of
Fenton Graham, loaned the Company $1,100, which was used to pay the costs
related to certain sales of the Company's common stock in a private placement.
The loan was non-interest bearing. $1,000 of the loan was repaid on April 8,
2002 from the proceeds of the private placement.

      On July 1, 2002, Fenton Graham entered into a co-location agreement with
VVVRRR, Inc. (VRI) for the use of a portion of the space VRI leases from
Technology Alliance Group (TAG) to house its servers. Fenton Graham agreed to
pay VRI $200 per month, on a month-to-month basis, for partial use of the space
it leases from TAG. At the time Fenton Graham entered into the agreement, our
President, J.P. Schrage, was employed by VRI on a part-time basis. Mr. Schrage
received no benefit from the lease payments made by Fenton Graham to VRI.


                                       22
<PAGE>

         On July 5, 2002, Mr. Greble resigned as an officer and director and
returned his 2,500,000 shares to the Company for cancellation. The shares were
cancelled and reissued to Mr. Schrage in consideration of his continued services
to the Company.

         On July 12, 2002, Fenton Graham purchased for $20,000 cash all rights,
title and interest in the Redirector and WarRoom software from Quantum Leap
Media, Inc. ("QLM"). Mr. Schrage was employed by QLM from January 2000, on a
part-time basis as the Operations Manager, until it ceased operations in August
2002. Mr. Schrage was not an officer, director or owner of QLM and received no
benefit from the sale of the software to Fenton Graham.

         Fenton Graham had five (5) notes payable to a shareholder at December
31, 2004 in an aggregate amount of $39,500. Principal along with interest accrue
at 9% per annum and the notes are due in October 2005, December 2005, March
2006, July 2006 and December 2006, respectively.

ITEM 13. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K

     (a) The following documents are filed as part of this report:

<TABLE>
<CAPTION>
                                                                                     Page Number
<S>      <C>                                                                         <C>
1.       Financial Statements:
         Report of Independent Registered Public Accounting Firm                        F-1
         Balance Sheet at December 31, 2004                                             F-2
         Statements of Operations for each of the two years ended
         December 31, 2004 and December 31, 2003                                        F-3
         Consolidated Statements of Stockholders' Deficit for each of the two years
         ended December 31, 2004 and December 31, 2003                                  F-4
         Consolidated Statements of Cash Flows for each of the two years
          ended December 31, 2004 and December 31, 2003                                 F-5
         Notes to Consolidated Financial Statements                                     F-6
         Exhibits included or incorporated herein:  See Exhibit Index.

(b)      Reports on Form 8-K:
         None.
</TABLE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

         For the fiscal year ended December 31, 2004 and 2003, Epstein, Weber &
Conover, PLC ("EWC") served as our principal independent accountant. EWC billed
the approximate fees respectively set forth below:

                                               2003                2004
                                               ----                ----

              Audit fees                      $1,500              $7,800
              Audit related fees
              Tax fees
              All other fees

                   Total fees                 $1,500              $7,800
                                              ------              ------


         The Board of Directors pre-approves all auditing and permitted
non-audit services to be performed for the Company by its independent auditor,
including the fees and terms of those services.


                                       23
<PAGE>

                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                       FENTON GRAHAM MARKETING, INC.,
                                       a Nevada corporation


Date:  May 18, 2005                    By: /s/ J.P. Schrage
                                           -------------------------------
                                           J.P. Schrage
                                           Sole Director, President, Chief
                                           Financial Officer and Chief
                                           Executive Officer


                                       24
<PAGE>

                                  EXHIBIT INDEX



Exhibit
No.         Description

3.1(1)      Amended and Restated Articles of Incorporation
3.2(1)      Bylaws
10.1(2)     Assignment of the Redirector and WarRoom software to Fenton Graham
            by Quantum Leap Media, Inc.
10.2(4)     Employment Agreement with J.P. Schrage
10.3(3)     Co-Location Agreement between the Company and VVVRRR, Inc. dated
            July 1, 2002.
10.4(6)     Promissory Note dated October 30, 2003 to E. James Wexler
10.5(6)     Promissory Note dated December 30, 2003 to E. James Wexler
10.6(7)     Promissory Note dated March 15, 2004 to E. James Wexler
10.7(8)     Promissory Note dated July 21, 2004 to E. James Wexler
10.8(9)     Promissory Note dated December 7, 2004 to E. James Wexler
16.1(4)     Letter from former accountants, Merdinger, Frucher, Rosen & Company,
            P.C.
16.2(5)     Letter from former accountant Stonefield Josephson, Inc.
31(9)       Rule 13a-14(a)/15d-14(a) Certification of Principal Executive
            Officer and Principal Financial Officer

32(9)       Section 1350 Certification

1.    Incorporated by reference from the Company's Form SB-2, filed with the SEC
      on May 13, 2002.
2.    Incorporated by reference from the Company's Form SB-2/A, filed with the
      SEC on July 24, 2002.
3.    Incorporated by reference from the Company's Form SB-2/A, filed with the
      SEC on March 24, 2003.
4.    Incorporated by reference from the Company's Form SB-2/A, filed with the
      SEC on April 25, 2003.
5.    Incorporated by reference from the Company's Form 8-K, filed with the SEC
      on November 7, 2003.
6.    Incorporated by reference from the Company's Form 10-KSB, filed with the
      SEC on August 4, 2004.
7.    Incorporated by reference from the Company's Form QSB, filed with the SEC
      on August 26, 2004.
8.    Incorporated by reference from the Company's Form 10-QSB, filed with the
      SEC on January 4, 2005.
9.    Filed herewith.


<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Stockholders and Board of Directors of Fenton Graham Marketing, Inc.:

We have audited the accompanying balance sheet of Fenton Graham Marketing, Inc
(the Company), a development stage company, as of December 31, 2004 and the
related statements of operations, stockholders' deficit and cash flows for the
two years in the period ended December 31, 2004. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Standards Board (United States). 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 our audits provide a reasonable
basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Fenton Graham Marketing, Inc.
as of December 31, 2004, and the results of its operations and cash flows for
the year then ended in conformity with accounting principles generally accepted
in the United States of America.

As disclosed in Note 1, the accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. The Company has
experienced material operating losses and has an accumulated deficit of $195,413
at December 31, 2004. The uncertainty of the Company's ability to obtain future
funding and the lack of cash flow from operations raise substantial doubt about
the Company's ability to continue as a going concern. The accompanying financial
statements do not include any adjustments that might be necessary should the
Company be unable to continue as a going concern.


     EPSTEIN, WEBER & CONOVER, PLC
     Scottsdale, Arizona
     March 25, 2005


                                      F-1
<PAGE>

FENTON GRAHAM MARKETING, INC.
BALANCE SHEET AT DECEMBER 31, 2004

ASSETS:

          TOTAL ASSETS                             $      999
                                                   ==========

LIABILITIES AND STOCKHOLDERS' DEFICIT:

CURRENT LIABILITIES:

     Accounts payable and accrued expenses         $    3,845
     Due to officer                                       100
     Current portion of long term debt                 12,500
                                                   ----------

     Total Current Liabilities                         16,445

LONG TERM LIABILITIES
     Notes payable to shareholders                     27,000
                                                   ----------

          TOTAL LIABILITIES                            43,445
                                                   ----------

STOCKHOLDERS' DEFICIT:

     Common stock, $0.001 par value, 100,000,000
        shares authorized, 6,000,000 issued
        and outstanding                                 6,000
     Additional paid-in capital                       145,300
     Accumulated deficit                             (193,746)
                                                   ----------

          TOTAL STOCKHOLDERS' DEFICIT:                (42,446)
                                                   ----------

TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT                              $      999
                                                   ==========


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


                                      F-2
<PAGE>

FENTON GRAHAM MARKETING, INC.
STATEMENTS OF OPERATIONS FOR THE YEARS
ENDED DECEMBER 31, 2004 AND 2003

                                    For the year            For the year
                                    ended December        ended December
                                       31, 2004              31, 2003
                                  ------------------    ------------------

NET REVENUES                      $           13,519    $           57,302
                                  ------------------    ------------------

SELLING, GENERAL
AND ADMINISTRATIVE
EXPENSES                                      35,510               100,045
                                  ------------------    ------------------

LOSS BEFORE OTHER
INCOME/EXPENSES                              (21,991)              (42,743)

OTHER INCOME/(EXPENSES)
     Interest expense                         (2,187)                 (150)
     Loss on disposal of assets                   --               (20,000)
                                  ------------------    ------------------

NET LOSS                          $          (24,178)   $          (62,893)
                                  ==================    ==================

NET LOSS PER SHARE:
     Basic and diluted            $                *    $            (0.01)
                                  ==================    ==================

WEIGHTED AVERAGE
NUMBER OF SHARES-
BASIC AND DILUTED
     Basic and diluted                     6,000,000             6,000,000
                                  ==================    ==================

*- less than $0.01 per share



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


                                      F-3
<PAGE>

FENTON GRAHAM MARKETING, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT FOR
THE YEARS ENDED DECEMBER 31, 2004 AND DECEMBER 31, 2003

<TABLE>
<CAPTION>
                                                                                 Additional                   Total
                                                    Common Stock                   Paid-in    Accumulated  Stockholders'
                                                       Shares        Amount        Capital      Deficit    Equity/Deficit
                                                     ----------    ----------    ----------   ----------    ----------
<S>                                                   <C>               <C>         <C>         <C>             <C>
BALANCE, December 31, 2002                            6,000,000         6,000       145,300     (106,675)       44,625

     Net loss for the year ended December 31, 2003                                               (62,893)      (62,893)
                                                     ----------    ----------    ----------   ----------    ----------

BALANCE, December 31, 2003                            6,000,000         6,000       145,300     (169,568)      (18,268)

     Net loss for the year ended December 31, 2004                                               (24,178)      (24,178)
                                                     ----------    ----------    ----------   ----------    ----------
BALANCE, December 31, 2004                            6,000,000    $    6,000    $  145,300   $ (193,746)   $  (42,446)
                                                     ==========    ==========   ==========    ==========    ==========
</TABLE>

    The accompanying notes are an integral part of these financial statements


                                      F-4
<PAGE>

FENTON GRAHAM MARKETING, INC.
STATEMENTS OF CASH FLOWS FOR THE YEARS
ENDED DECEMBER 31, 2004 AND DECEMBER 31, 2003

                                                          2004          2003
                                                       ----------    ----------
CASH FLOWS FROM OPERATING ACTIVITIES:

     Net loss                                          $  (24,178)   $  (62,893)
     Adjustments to reconcile net income to net cash
     provided by (used in) operating activities:
        Loss on disposal of assets                             --        20,000
        Non-cash compensation                                  --            --
     Changes in assets and liabilities:
        Increase (decrease) in accounts payable            (1,823)        4,068
                                                       ----------    ----------
          Net cash used by operating activities           (26,001)      (38,825)
                                                       ----------    ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of property and equipment                        --            --
                                                       ----------    ----------
          Net cash used by investing activities                --            --
                                                       ----------    ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Payment on officer advance                                --            --
     Proceeds from loans payable                           27,000        12,500
     Issuance of common stock                                  --            --
                                                       ----------    ----------
          Net cash provided by financing activities        27,000        12,500
                                                       ----------    ----------

INCREASE (DECREASE) IN CASH                                   999       (26,325)

CASH, BEGINNING OF PERIOD                                      --        26,325
                                                       ----------    ----------

CASH, END OF PERIOD                                    $      999    $       --
                                                       ==========    ==========

SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
     Interest paid                                     $       --    $       --
                                                       ==========    ==========
     Income taxes paid                                 $       --    $       --
                                                       ==========    ==========


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


                                      F-5
<PAGE>

FENTON GRAHAM MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2004

1. ORGANIZATION AND BASIS OF PRESENTATION

Nature of Business:
Fenton Graham Marketing, Inc. (the "Company") was incorporated under the laws of
the State of Nevada on October 17, 2001. The Company is an internet marketing
company that offers marketing solutions to Internet businesses. The Company
generates revenue primarily by purchasing large blocks of internet
advertisements and then reselling those advertisements to its customer base in
smaller lots.

Going Concern:
The accompanying audited financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America,
which contemplate continuation of the Company as a going concern. The Company
has experienced material operating losses of $24,178 and $62,893 in the years
ended 2004 and 2003 respectively. The Company also has an accumulated deficit of
$193,746 at December 31, 2004. These matters raise substantial doubt about the
Company's ability to continue as a going concern. These financial statements do
not include any adjustments relating to the recoverability and classification of
recorded asset amounts, or amounts and classification of liabilities that might
be necessary should the Company be unable to continue as a going concern.

The Company plans to raise funds by further stock issuances under their
registration statement which became effective on May 12, 2003. The offering
registered 5,000,000 shares for sale by the Company at $0.02 per share.
Management is also looking to secure a line of credit with an established
financial institution to assist with general working capital concerns.
Management believes that these steps will be sufficient to provide the Company
with the ability to continue in existence.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The presentation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reported periods.

Revenue Recognition

The Company recognizes revenue when purchased advertising slots are resold. In
the case of internet marketing services, revenue is recognized when the service
are performed.

Cash and Cash Equivalents

The Company includes all short-term highly liquid investments that are readily
convertible to known amounts of cash and have original maturities of three
months or less to be cash equivalents.


                                      F-6
<PAGE>

Research and Development

Costs incurred in research and development activities are charged to expense as
incurred.

Income Taxes

Income taxes are provided for based on the liability method of accounting
pursuant to SFAS No. 109, "Accounting for Income Taxes". Deferred income taxes,
if any, are recorded to reflect the tax consequences on future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year-end.

Comprehensive Income

Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" establishes standards for the reporting and display of
comprehensive income and its components in the financial statements. For the
year ended December 31, 2004, the Company had no items that represent other
comprehensive income and, therefore, has not included a Statement of
Comprehensive Income in the financial statements.

Basic and Diluted Loss per Share

In accordance with SFAS No. 128, "Earnings Per Share," the basic income (loss)
per common share is computed by dividing net income (loss) available to common
stockholders by the weighted average number of common shares outstanding.

Diluted income (loss) per common share is computed similar to basic income per
common share except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were dilutive.
As of December 31, 2004, the Company did not have any equity or debt instruments
outstanding that can be converted into common stock.

Fair Value of Financial Instruments

The Company's financial instruments consist of cash and cash equivalents, notes
payable and accrued expenses. The carrying amounts of these assets and
liabilities approximate their fair value due to the highly liquid nature of
these short-term instruments.

Stock-Based Compensation

The Company accounts for stock-based employee compensation arrangements in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees" and complies with the
disclosure provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation". Under APB No. 25, compensation cost is recognized over the
vesting period based on the exercise price. When the exercise price of the
employee share options is less than the fair value price of the underlying
shares on the grant date, deferred stock compensation is recognized and
amortized to expense in accordance with FASB Interpretation No. 44 over the
vesting period of the individual options. Accordingly, if the exercise price of
the Company's employee options equals or exceeds the market price of the
underlying shares on the date of grant, no compensation expense is recognized.


                                      F-7
<PAGE>

Options or shares awards issued to non-employee or non-employee directors are
valued using the fair value method and expensed over the period services are
provided.

Recently Issued Accounting Pronouncements

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities", effective for contracts entered
into or modified after June 30, 2003, except as stated below and for hedging
relationships designated after June 30, 2003. In addition, except as stated
below, all provisions of this Statement should be applied prospectively. The
provisions of this Statement that relate to Statement 133 Implementation Issues
that have been effective for fiscal quarters that began prior to June 15, 2003,
should continue to be applied in accordance with their respective effective
dates. In addition, paragraphs 7(a) and 23(a), which relate to forward purchases
or sales of when-issued securities or other securities that do not yet exist,
should be applied to both existing contracts and new contracts entered into
after June 30, 2003. The Company is evaluating the effect of this new
pronouncement, if any, and will adopt FASB 149 within the prescribed time.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
is effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. SFAS No. 150 requires the classification as a
liability of any financial instruments with a mandatory redemption feature, an
obligation to repurchase equity shares, or a conditional obligation based on the
issuance of a variable number of its equity shares. The Company does not have
any financial instruments with a mandatory redemption feature. The Company
believes the adoption of SFAS No. 150 will not have a material effect on the
Company's financial statements.

In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" (FIN 45). FIN 45 clarifies the
requirements for a guarantor's accounting for and disclosure of certain
guarantees issued and outstanding. The initial recognition and initial
measurement provisions of FIN 45 are applicable to guarantees issued or modified
after December 31, 2002. The disclosure requirements of FIN 45 are effective for
financial statements for periods ending after December 15, 2002. The adoption of
FIN 45 did not have a significant impact on the Company's financial statements.

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities" (FIN 46). FIN No. 46 states that companies that have exposure to the
economic risks and potential rewards from another entity's assets and activities
have a controlling financial interest in a variable interest entity and should
consolidate the entity, despite the absence of clear control through a voting
equity interest. The consolidation requirements apply to all variable interest
entities created after January 31, 2003. For variable interest entities that
existed prior to February 1, 2003, the consolidation requirements are effective
for annual or interim periods beginning after June 15, 2003. Disclosure of
significant variable interest entities is required in all financial statements
issued after January 31, 2003, regardless of when the variable interest was
created. The adoption of FIN 46 did not have a significant impact on the
Company's financial statements.

3. SOFTWARE

On July 12, 2002, the Company entered into an agreement, with an entity that
formerly employed the Company's president, to purchase the software technology


                                      F-8
<PAGE>

that the Company planned to implement into its operations. The acquired software
was purchased for $20,000 but due to lack of additional funding, the software
was never fully developed and management determined that the Company would not
pursue product lines using that software. The investment in the software was
written off in the year ended December 31, 2003.

4. INCOME TAXES

The components of the provision for income taxes for the year ended December 31,
2004 and December 31, 2003 are as follows:

                             December 31, 2004   December 31, 2003
                                --------------    --------------

Current tax expense
     U.S. federal               $       (3,627)   $       (9,434)
     State and local                    (1,692)           (4,403)
                                --------------    --------------

Total current                           (5,319)          (13,836)
                                --------------    --------------

Deferred tax expense
     U.S. federal               $        3,627    $        9,434
     State and local                     1,692             4,403
                                --------------    --------------

Total deferred                           5,319            13,836
                                --------------    --------------

Total tax provision (benefit)
   from continuing operations   $           --    $           --
                                ==============    ==============

The reconciliation of the effective tax rates to the statutory rates in effect
during the years ended December 31 2004 and 2003 are as follows:

                              December 31, 2004   December 31, 2003
                                --------------     --------------

Federal income tax rate                   15.0%              15.0%

State income tax rate                      7.0%               7.0%

Effect of valuation allowance            (22.0)%            (22.0)%
                                --------------     --------------

Effective income tax rate                  0.0%               0.0%
                                ==============     ==============

At December 31, 2004 the Company had a federal and state cumulative loss
carryforward of $193,746. Because of the current uncertainty of realizing the
benefits of the tax carryforward, a valuation allowance equal to the tax
benefits for the deferred income tax assets has been established. The full
realization of the tax benefit associated with the carryforward depends
predominantly upon the Company's ability to generate taxable income during the
carryforward period.

Deferred tax assets and liabilities reflect the net tax effect of temporary
differences between the carrying amount of assets and liabilities for financial
reporting purposes and amounts used for income tax purposes. Significant
components of the Company's deferred tax assets and liabilities as of December
31, 2004 and 2004 are as follows:


                                      F-9
<PAGE>

                                December 31, 2004  December 31, 2003
                                  --------------    --------------

Deferred tax assets

     Loss carryforwards           $       42,824    $       37,305

     Less:  valuation allowance          (42,824)          (37,305)
                                  --------------    --------------

Net deferred tax assets           $           --    $           --
                                  ==============    ==============

State net operating loss carryforwards begin to expire in 2006 while federal
operating loss carryforwards begin to expire in 2021.

5. NOTES PAYABLE

Notes payable are comprised of the following at December 31, 2004:

Notes payable to shareholder, original balance of
$10,000, 9% interest rate, principal and interest
due on 10/29/05.                                            $ 10,000

Notes payable to shareholder, original balance
of $2,500, 9% interest rate, principal and interest
due on 12/30/05.                                               2,500

Notes payable to shareholder, original balance
of $10,000, 9% interest rate, principal and interest
due on 3/16/06.                                               10,000

Notes payable to shareholder, original balance
of $7,000, 9% interest rate, principal and interest
due on 7/20/06.                                                7,000

Notes payable to shareholder, original balance
of $10,000, 9% interest rate, principal and interest
due on 12/7/06.                                               10,000

                                                         ------------
              Total                                           39,500

              Less Current Portion                           (12,500)
                                                         ------------

              Total long-term portion                       $ 27,000
                                                         ============

Future maturities of principal at December 31, 2004 are as follows:

              2005                        $ 12,500
              2006                          27,000
                                      -------------
              Total                       $ 39,500
                                      =============


                                      F-10
<PAGE>

6. STOCKHOLDERS' EQUITY

In October 2001, the Company issued 5,000,000 shares of common stock for
services valued at $5,000.

In December 2001, the Company sold 385,000 shares of common stock at $0.10 per
share for gross proceeds of $38,500, less $1,200 for private placement costs.

In December 2001, an additional 295,000 shares of common stock were subscribed
at $0.10 per share for a total of $29,500. During January 2002, the Company
collected the subscription receivables of $29,500. The 295,000 shares of common
stock were issued during the month.

In January 2002, the Company sold an additional 320,000 shares of common stock
at $0.10 per share for gross proceeds of $32,000

In July 2002, the President and Director of the Company resigned and tendered
back the 2,500,000 shares of common stock issued to him. The shares were
canceled and reissued to the remaining founder as consideration for his
continued service to the Company. The shares reissued were valued at $50,000,
the value of the services provided.

7. RELATED PARTY TRANSACTIONS

The officers/directors of the Company provided office and other services without
charge. Such costs are immaterial to the financial statements and, accordingly,
have not been reflected therein.

As of December 31, 2001, the Company was obligated to a stockholder in the
amount of $1,100 for funds advanced for working capital. The funds were used to
pay the cost of the sale of common stock described in Note 4. The advances bear
no interest and were due upon demand. On April 8, 2002, the Company paid $1,000
of the outstanding balance. As of December 31, 2004, the Company was still
obligated to the stockholder for the remaining $100.

As discussed in note 5, the Company has five notes payable to a shareholder at
December 31, 2004 in the total amount of $39,500. Principal along with interest
accruing at 9% per annum are due on these notes in 2005 and 2006.

                                    * * * * *


                                      F-11