<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

              [x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2004

             [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                                  EXCHANGE ACT

        For the transition period from _______________ to _______________

                         Commission File Number 0-30831

CAPITAL GROWTH SYSTEMS, INC.
--------------------------------------------------------------------------------
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
FLORIDA                                                65-0953505
----------------------------                           -------------------------
(STATE OR OTHER                                        (I.R.S. EMPLOYER
JURISDICTION OF                                        IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
50 EAST COMMERCE DRIVE, SCHAUMBURG, ILLINOIS 60173
--------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
630-872-5800
--------------------------------------------------------------------------------
(ISSUER'S TELEPHONE NUMBER)

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

            Yes [X]  No [ ]

            The total number of shares outstanding of the issuer's common stock,
par value $.0001, as of November 12, 2004 is 16,890,754.

            Transitional Small Business Disclosure Format: Yes [ ] No |X|

<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                          CAPITAL GROWTH SYSTEMS, INC.
                      Successor to Nexvu Technologies, LLC

                    Interim Consolidated Financial Statements
                                   (Unaudited)

                               September 30, 2004

                                       2
<PAGE>

CAPITAL GROWTH SYSTEMS, INC.
SUCCESSOR TO NEXVU TECHNOLOGIES, LLC
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                 SEPTEMBER 30,       DECEMBER 31,
                                                                                      2004               2003
                                                                                 -------------       ------------
<S>                                                                              <C>                 <C>
ASSETS:
Current Assets:
  Cash                                                                           $   3,763,554       $    616,880
  Accounts receivable, net                                                           2,371,827             61,270
  Inventories, net                                                                   1,196,273                  -
  Prepaid expenses                                                                     153,950             51,837
  Other current assets                                                                  47,036                  -
                                                                                 -------------       ------------
Total current assets                                                                 7,532,640            729,987
Fixed assets, net of accumulated depreciation                                        1,152,315            136,341
Goodwill                                                                             7,128,977                  -
Other Assets
                                                                                       315,800            300,000
                                                                                 -------------       ------------
Total Assets                                                                     $  16,129,732       $  1,166,328
                                                                                 =============       ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Current maturities of debt                                                     $   4,527,739       $          -
  Accounts payable                                                                   2,860,344            120,567
  Accrued expenses                                                                     572,268             38,449
  Deferred revenues                                                                  1,575,662                  -
  Advance billings                                                                   1,007,883                  -
  Other current liabilities                                                             97,302              1,955
                                                                                 -------------       ------------
Total current liabilities                                                           10,641,198            160,971
                                                                                 -------------       ------------
Long-term liabilities
  Debt                                                                                  82,848            735,000
                                                                                 -------------       ------------
Total Liabilities                                                                   10,724,046            895,971
                                                                                 -------------       ------------
Stockholders' Equity
  Common Stock, 25,000,000 authorized and 16,890,754 issued and outstanding
as of September 30, 2004                                                                 1,689                  -
  Additional paid-in capital                                                        12,527,454                  -
  Members' Interest                                                                          -          4,034,907
  Retained earnings, (deficit)                                                      (7,123,457)        (3,764,550)
                                                                                 -------------       ------------
Total Stockholders' Equity                                                           5,405,686            270,357
                                                                                 -------------       ------------
Total Liabilities and Stockholders' Equity                                       $  16,129,732       $  1,166,328
                                                                                 =============       ============
</TABLE>

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

                                       3
<PAGE>

CAPITAL GROWTH SYSTEMS, INC.
SUCCESSOR TO NEXVU TECHNOLOGIES, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                     THREE MONTHS ENDED SEPTEMBER 30,        NINE MONTHS ENDED SEPTEMBER 30,
                                     --------------------------------        -------------------------------
                                          2004              2003                 2004               2003
                                     -------------    ---------------        ------------        -----------
<S>                                  <C>              <C>                    <C>                 <C>
REVENUE                              $     593,114    $             -        $    896,587        $         -
                                     -------------    ---------------        ------------        -----------
  COST OF GOODS SOLD                       273,379             10,228             366,744             78,319
                                     -------------    ---------------        ------------        -----------
GROSS MARGIN                               319,735            (10,228)            529,843            (78,319)
OPERATING EXPENSES:

  Compensation                             788,864            528,571           2,381,112          1,277,269
  Travel and entertainment                  70,932             22,648             210,990             45,142
  Occupancy                                145,828             29,001             204,645             99,043
  Professional services                    267,567             47,801             593,036            184,582
  Insurance                                 35,615              1,764              62,195              1,764
  Depreciation and amortization             95,167             22,918             147,542             57,923
  Other operating expenses                 143,693             32,916             316,068             70,105
                                     -------------    ---------------        ------------        -----------
    TOTAL OPERATING EXPENSES             1,547,666            685,619           3,915,588          1,735,828
                                     -------------    ---------------        ------------        -----------
OPERATING INCOME                        (1,227,931)          (695,847)         (3,385,745)        (1,814,147)
  INTEREST EXPENSE (INCOME)                 (9,729)            (3,480)            (26,838)           116,695
                                     -------------    ---------------        ------------        -----------
NET LOSS BEFORE INCOME TAXES            (1,218,202)          (692,367)         (3,358,907)        (1,930,842)
  INCOME TAXES                                   -                  -                   -                  -
                                     -------------    ---------------        ------------        -----------
NET LOSS                             $  (1,218,202)   $      (692,367)       $ (3,358,907)       $(1,930,842)
                                     -------------    ---------------        ------------        -----------
EARNINGS PER SHARE                   $       (0.08)   $         (0.59)       $      (0.23)       $     (1.86)
                                     -------------    ---------------        ------------        -----------
AVERAGE SHARES OUTSTANDING              16,132,778          1,170,000          14,553,990          1,038,564
                                     -------------    ---------------        ------------        -----------
</TABLE>

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

                                       4
<PAGE>

CAPITAL GROWTH SYSTEMS, INC.
SUCCESSOR TO NEXVU TECHNOLOGIES, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                           Nine Months Ended September 30,
                                                               2004               2003
                                                           ------------        -----------
<S>                                                        <C>                 <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss                                                   $ (3,358,907)       $(1,930,842)
Adjustments to reconcile net loss to net cash
  used in operating activities
Depreciation and amortization                                   147,542             57,923
Changes in working capital                                     (140,942)          (111,957)
                                                           ------------        -----------
Net Cash Used in Operating Activities                        (3,352,307)        (1,984,876)
                                                           ------------        -----------
CASH FLOW FROM INVESTING ACTIVITIES:
 Acquisition of Frontrunner, net of cash                     (1,223,654)                 -
 Purchase of fixed assets                                      (171,460)           (27,437)
 (Increase) decrease in other assets                            (21,463)               607
                                                           ------------        -----------
Net Cash Used In  Investing Activities                       (1,416,577)           (26,830)
                                                           ------------        -----------
CASH FLOW FROM FINANCING ACTIVITIES:
 Loans payable - net                                           (578,679)          (390,136)
 Contributions by members - net of repayments                 8,494,237          2,853,401
                                                           ------------        -----------
Net Cash Provided By Financing Activities                     7,915,558          2,463,265
                                                           ------------        -----------
Increase in Cash                                              3,146,674            451,559

Cash and Cash Equivalents - Beginning of Period                 616,880                  -
                                                           ------------        -----------
Cash and Cash Equivalents - End of period                  $  3,763,554        $   451,559
                                                           ------------        -----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest                                     $     11,611        $   110,487
                                                           ------------        -----------
Cash paid for income taxes                                 $          -        $         -
                                                           ------------        -----------
NONCASH INVESTING AND FINANCING ACTIVITIES:
Contributions by members through conversions of loans      $    550,000        $ 1,028,401
                                                           ------------        -----------
</TABLE>

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

                                       5
<PAGE>

CAPITAL GROWTH SYSTEMS, INC.
SUCCESSOR TO NEXVU TECHNOLOGIES, LLC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                    COMMON                                              ADDITIONAL
                                                    SHARES         MEMBERS'      RETAINED     COMMON     PAID-IN         TOTAL
                                                  OUTSTANDING   CONTRIBUTIONS    DEFICIT      STOCK      CAPITAL        EQUITY
                                                  -----------   -------------   -----------   ------   ------------   -----------
<S>                                               <C>           <C>             <C>           <C>      <C>            <C>
Beginning Balance, February 28, 2002                        -   $           -   $         -        -   $          -             -

Net Loss - 2002                                                                  (1,126,917)                           (1,126,917)
                                                  -----------   -------------   -----------   ------   ------------   -----------
Balance, December 31, 2002                                  -               -    (1,126,917)       -              -    (1,126,917)

Net Loss, 2003                                                                   (2,637,633)                           (2,637,633)
Members' Contribution - Cash                                        1,825,000                                           1,825,000
Members' Contribution - Loan Conversions                            2,209,907                                           2,209,907
                                                  -----------   -------------   -----------   ------   ------------   -----------
Balance, December 31, 2003                                  -       4,034,907    (3,764,550)       -              -       270,357

Net Loss - 9 months ended September 30, 2004                                     (3,358,907)                           (3,358,907)
Reflect reverse merger of CGSI                      1,170,000                                    117         19,678        19,795
Conversion of Members Contributions to Stock        8,558,500      (4,034,907)                   856      4,034,051             -
Conversion of Loans to Common Stock                   577,500                                     58        549,942       550,000
Issuance of Additional Stock                           26,250                                      3         24,997        25,000
Private Offering of Additional Stock                5,633,504                                    563      6,650,128     6,650,691
Issuance of Common Stock to Acquire Frontrunner       925,000                                     92      1,248,658     1,248,750
                                                  -----------   -------------   -----------   ------   ------------   -----------
 Balance, September 30, 2004                       16,890,754   $           -   $(7,123,457)  $1,689   $ 12,527,454   $ 5,405,686
                                                  ===========   =============   ===========   ======   ============   ===========
</TABLE>

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

                                       6
<PAGE>

                          CAPITAL GROWTH SYSTEMS, INC.
                      SUCCESSOR TO NEXVU TECHNOLOGIES, LLC
               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

      The accompanying unaudited condensed consolidated financial statements
include the accounts of Capital Growth Systems, Inc. ("CGSI") and its
wholly-owned subsidiaries,, Nexvu Technologies, LLC ("Nexvu") and Frontrunner
Network Systems Corp. ("Frontrunner"). Except where necessary to distinguish the
three entities, we will refer to all three as the "Company." On January 28,
2004, CGSI completed a merger under which it acquired 100% of the ownership of
Nexvu, a Delaware limited liability company. Simultaneously with the closing of
the merger, a closing was held under a private offering of CGSI's common stock
in which approximately 3.9 million shares of common stock were issued for
approximately $5.3 million of total gross consideration. The private offering
was completed in April 2004 and, including the approximately 3.9 million shares
of common stock issued simultaneously with the closing of the merger, resulted
in a total of 5,633,524 shares being issued for total gross consideration of
$7,605,230. Additionally, simultaneously with the merger, $550,000 of bridge
loans of Nexvu were converted to 577,500 shares of CGSI common stock as part of
a loan conversion agreement. As a result of this merger, the financial
statements of Nexvu became the financial statements of the surviving entity for
accounting purposes. CGSI's assets were recorded at fair value, with the net
assets of Nexvu reflected at historical costs. In addition, as CGSI was a public
shell company acquiring a privately-held company, no goodwill was reported. The
accumulated deficit of Nexvu survived the merger with the accumulated deficit of
CGSI eliminated. Accordingly, the Company's financial position as of September
30, 2004 and December 31, 2003, and the related results of operations for the
three-month and nine-month periods ending September 30, 2004 and 2003 reflect
the historical financial statements of Nexvu, with CGSI's results consolidated
from the date of the merger.

On September 14, 2004, CGSI acquired 100% of the outstanding common stock of
Frontrunner. The results of Frontrunner's operations have been included in the
consolidated financial statements since the acquisition date. Frontrunner is a
single-source provider of business communications equipment and multimedia
integration services for data, voice, video and advanced applications. Most of
Frontrunner's customers are located in the northeast United States. This
acquisition enables CGSI's existing subsidiary, Nexvu to better leverage its
application performance monitoring product into the market as well as provide
leverage for Frontrunner to further expand its existing infrastructure. We also
expect to reduce costs through economies of scale from the combination.

The acquisition was completed by agreeing to issue 1 million shares of CGSI's
common stock, with an estimated fair market value of $1.35 per share. This value
was determined by utilizing the last purchase price of shares of our common
stock in the private offering completed in April 2004. In consideration of these
shares, Frontrunner cancelled all of its common stock, junior preferred stock
and all stock options and warrants. The shares were distributed to certain
creditors of Frontrunner, with total indebtedness of $2.3 million in exchange
for waiver of this indebtedness, less than one percent of the total indebtedness
was provided by us to the former stockholders of Frontrunner per the Merger
(although, the holders of a majority of its shares also received our stock per
their Creditor Waiver Agreements). As of September 30, 2004, all but 75,000
shares of stock had been issued pursuant to this transaction, with the remaining
common stock to be issued in our discretion in the event the final creditor
waiver is received and we choose to effect the exchange.

                                       7
<PAGE>

The following table summarizes the estimated fair values of the assets acquired
and liabilities assumed at the date of acquisition. CGSI is in the process of
calculating valuations of certain intangible assets, and obtaining third party
verification of the valuations; thus, the allocation of the purchase price is
subject to refinement.

<TABLE>
<CAPTION>
             At September 14, 2004
<S>                               <C>
Current assets                    $ 3,270,952
Property & equipment                  930,038
Goodwill                            7,128,977
                                  -----------
  Total assets acquired            11,329,967
                                  -----------
Liabilities, excluding debt         5,275,701
Debt                                4,704,266
                                  -----------
  Total liabilities assumed         9,979,967
                                  -----------
  Net assets acquired             $ 1,350,000
                                  ===========
</TABLE>

      These financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America for
interim financial information and the rules and regulations of the Securities
and Exchange Commission for interim financial statements. These financial
statements reflect all adjustments and accruals of a normal recurring nature,
which, in the opinion of management are necessary in order to make the financial
statements not misleading. The results for the interim periods presented are not
necessarily indicative of results to be expected for any future period. All
intercompany accounts have been eliminated in consolidation.

      These financial statements should be read in conjunction with the audited
financial statements and the notes thereto of both companies included in CGSI's
2003 Annual Report on Form 10-KSB filed with the Securities Exchange Commission
for the year ended December 31, 2003.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

      The Company considers those short-term, highly liquid investments with
original maturities of three months or less as cash and cash equivalents.

INVENTORY

      Inventories consist of work in progress and equipment and are stated at
the lower of cost or market. Cost is determined on a first-in, first-out basis.
Work in process consists of labor, inventory, and overhead costs relating to
ongoing customer projects. Generally, inventory for Nexvu is not purchased until
an order for the product is placed.

                                       8
<PAGE>

ALLOWANCE FOR DOUBTFUL ACCOUNTS

      The Company provides an allowance for uncollectible accounts receivable
based upon prior experience and management's assessment of the collectibility of
existing specific accounts. Total reserve for uncollectible accounts was
$129,590 and $0 as of September 30, 2004 and December 31, respectively.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Provision for depreciation is made
generally at rates designed to allocate the cost of the property and equipment
over their estimated useful lives of 3 - 15 years. Depreciation is calculated
using the straight-line method. The cost of ordinary maintenance and repairs is
charged to operations while renewals and replacements are capitalized.

SOFTWARE LICENSING FEE

      The Company accounts for its software licenses in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 142, effective October
1, 2001. The Company also reviews its long-lived assets for impairments.
Impairment losses on long-lived assets are recognized when events or changes in
circumstances indicate that the undiscounted cash flows estimated to be
generated by such assets are less than their carrying value and, accordingly,
all or a portion of such carrying value may not be recoverable. Impairment
losses are then measured by comparing the fair value of assets to their carrying
amounts. The Company recognized no impairment loss at December 31, 2002 and 2003
or in the nine month period ended September 30, 2004.

REVENUE RECOGNITION

      The Company generates revenue from selling and installing hardware,
licensing its software and the provision of services. The Company recognizes
revenues and all related costs on installation contracts with revenues of
$100,000 or more using the percentage of completion method. Progress is measured
by the percentage of actual labor incurred to date to management's estimate of
total labor to be incurred on each contract. This method is used as management
considers labor incurred to be the best available measure of progress on these
contracts. Contract costs include all direct subcontractor labor and supervisory
labor costs and those indirect costs related to contract performance such as
indirect labor, supplies, and other general expenses. Provisions for estimated
losses on uncompleted contracts are made in the period in which such losses are
determined. Changes in job performance, conditions and estimated profitability
may result in revisions to costs and income and are recognized in the period in
which revisions are determined. All installation contracts with revenues less
than $100,000 are accounted for on the completed contract method. The Company
recognizes revenue and all related costs on these contracts upon delivery and
acceptance by the customer.

      The Company recognizes revenue in accordance with Generally Accepted
Accounting Principles, as set forth in Statement of Position ("SOP") 97-2,
Software Revenue Recognition, and SOP 98-9, Modification of SOP 97-2, Software
Revenue Recognition with respect to Certain Transactions, the Securities
Exchange Commission Staff Accounting Bulletin No. 104, Revenue Recognition, and
other related pronouncements. In accordance with these statements, the Company
recognizes revenue upon meeting each of the following criteria:

      -     Existence of persuasive evidence of an arrangement, generally
            consisting of a purchase order, license agreement or other contract.

                                       9
<PAGE>

      -     Delivery of the product and authorization keys, delivery is
            generally considered to have occurred when the customer is provided
            with the Company's software and hardware and the authorization keys
            needed to activate the software.

      -     Fee is fixed and determinable, which is considered to be the case
            when the fee is not subject to subsequent refund or adjustments.

      -     Collection is probable.

      The Company defers maintenance revenue and recognizes it ratably over the
maintenance term. The Company defers consulting and training billings and
recognizes them as those services are performed.

WARRANTY RESERVE

      The financial statements include a warranty reserve of $97,302 as of
September 30, 2004, relating to Frontrunner systems installations. It is based
on estimates of future costs associated with fulfilling the warranty
obligations. The estimates are derived from historical cost experience. Because
of the inherent uncertainties in estimating costs, it is at least reasonably
possible that the estimates used will change within the near term.

INCOME TAXES

      The Company accounts for income taxes under SFAS No. 109, which requires
the asset and liability approach to accounting for income taxes. Under this
method, deferred assets and liabilities are measured based on differences
between financial reporting and tax bases of assets and liabilities measured
using enacted tax rates and laws that are expected to be in effect when
differences are expected to reverse.

NET EARNINGS (LOSS) PER SHARE

      Basic and diluted net loss per share information is presented under the
requirements of SFAS No. 128, Earnings per Share. Basic net loss per share is
computed by dividing the net loss by the weighted-average number of shares of
common stock outstanding for the period, less shares subject to repurchase.
Diluted net loss per share reflects potential dilution of securities by adding
other common stock equivalents, including stock options, shares subject to
repurchase, warrants and convertible preferred stock, in the weighted-average
number of common shares outstanding for a period, if dilutive. All potentially
dilutive securities, including stock options and warrants, have been excluded
from this computation, as their effect is anti-dilutive.

FAIR VALUE OF FINANCIAL INSTRUMENTS

      The carrying amount of cash, accounts receivable, prepaid expenses and
accounts payable are considered representative of their respective fair values
because of the short-term nature of these financial instruments.

USE OF ESTIMATES

      The preparation 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 the disclosures of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.

                                       10
<PAGE>

RECLASSIFICATIONS

      Certain amounts previously reported have been reclassified to conform to
the current period presentation.

NOTE 3 - DEVELOPMENTAL STAGE ENTERPRISE

      The Company was a developmental stage company through the first quarter of
2004 engaged in the development and sale of application performance management
software to large and mid-sized companies for use in connection with their
computer network systems. Through March 31, 2004, though planned principal
operations had commenced, no significant revenues from sale of the Company's
software had occurred. During the 2nd quarter, the Company began experiencing
more substantial revenues and is now no longer considered a developmental stage
enterprise.

NOTE 4 - INVENTORIES

Inventories as of September 30, 2004 consist of the following:

<TABLE>
<S>                               <C>
Equipment                         $ 1,868,620
Work in process                       327,653
Less: Inventory reserve            (1,000,000)
                                  -----------
Net inventory                     $ 1,196,273
                                  ===========
</TABLE>

The entire inventory represents balances from Frontrunner. There were no
inventory levels as of December 31, 2003. The reserve balance is estimated by
management based on previous experience and considers the on-hand inventory
needs based on the networks under maintenance service agreements.

NOTE 4 - SOFTWARE LICENSE AGREEMENT

      On August 31, 2003, the Company entered into a software licensing
agreement with a third party to acquire a non-exclusive license for the
worldwide rights to market and distribute the proprietary software. The term of
the agreement is for five years with provision for annual renewals thereafter.
The cost of the software licensing fee was $300,000 with annual upgrade and
maintenance charges of $30,000. The software and licensing fees are being
amortized on a straight-line basis over a 36 month period. Commencement of the
amortization began during the 2nd quarter of 2004 with $50,000 of amortization
included in the results of operation through September 30, 2004.

      The agreement also calls for minimum annual royalty payments totaling
$500,000 over the first five year period following customer shipment, payable
quarterly as follows:

<TABLE>
<S>        <C>
2004       $ 50,000
2005         75,000
2006        100,000
2007        125,000
2008        150,000
</TABLE>

      If in any year the calculation of the royalty fee is greater than the
minimum, this excess will reduce the final amount due in the fifth year.

                                       11
<PAGE>

NOTE 5 - STOCK OPTIONS

      In December 2003, we adopted the 2003 Long-Term Incentive Plan for key
employees and other persons providing assets or services to us. The plan
provides for the issuance of stock-based awards to key employees as part of
their overall compensation. We consider our option program a core component of
our operating productivity. A total of 2,285,000 restricted shares of common
stock, stock options or other equity-based compensation can be issued under the
plan. As of September 30, 2004, we have issued and outstanding 1,029,907
restricted shares under the plan, net of forfeitures.

      We account for stock-based compensation for our employee stock plans using
the intrinsic value method as prescribed by Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to Employees. Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, as
amended by SFAS No. 148, Accounting for Stock-Based Compensation, requires
disclosure of pro forma earnings as if we had adopted the SFAS No. 123 fair
value method since our inception. The fair value of stock-based awards to
employees is calculated utilizing the minimum value model, as our shares are not
publicly traded.

      The weighted-average fair value of stock-based compensation to our
employees is based on the single option value approach. Forfeitures are
recognized as they occur, and it is assumed that no dividends will be declared.
The weighted average fair value calculations are based on the following
assumptions

<TABLE>
<CAPTION>
                                 Three months          Nine months
                              Ended September 30,   Ended September 30,
                              -------------------   -------------------
                               2004         2003    2004          2003
                              -----         ----    ----          ----
<S>                           <C>           <C>     <C>           <C>
Estimated life (in years)       3.0          N/A     3.0           N/A
Risk-free interest rate         3.5%         N/A     3.5%          N/A
</TABLE>

      For pro-forma purposes, the estimated fair value of stock-based
compensation awards to employees is amortized using the straight-line method
over the vesting period of the options. Our pro-forma results are as follows:

<TABLE>
<CAPTION>
                                                      Three Months                            Nine Months
                                                   Ended September 30,                     Ended September 30,
                                             --------------------------------      --------------------------------
                                                2004                2003              2004                 2003
                                             -----------        -------------      -----------        -------------
<S>                                          <C>                <C>                <C>                <C>
Reported net loss                            $(1,218,202)       $    (692,367)     $(3,358,907)       $  (1,930,842)
Employee stock-based compensation                (11,842)                 N/A          (18,957)                 N/A
                                             -----------        -------------      -----------        -------------
Pro forma net loss                           $(1,230,044)       $    (692,367)     $(3,377,864)          (1,930,842)
                                             ===========        =============      ===========        =============
Net loss per share, basic and diluted:

  As reported                                $     (0.08)       $       (0.59)     $     (0.23)       $       (1.86)
  Pro forma                                  $     (0.08)       $       (0.59)     $     (0.23)       $       (1.86)
</TABLE>

                                       12
<PAGE>

NOTE 6 - DEBT

      Debt as of September 30, 2004 and December 31, 2003 consist of the
following:

<TABLE>
<CAPTION>
                                                                                            Sept. 30,       Dec. 31,
                                                                                              2004            2003
                                                                                           ----------       --------
<S>                                                                                        <C>              <C>
Demand note payable to Harris Bank, payable in monthly principal installments of           $3,720,000       $      -
$10,000, plus interest at 1.50% above prime rate; 4.75% at September 30, 2004, until
the loan is paid in full or demand is made by the bank.  Secured by substantially
all of the assets of Frontrunner and personal guarantee by principle.

Note payable to Global Crossing North America, due in monthly installments of                 425,478              -
$16,667 through May 2006.  The note bears interest (imputed at 8%) and is
subordinated to the outstanding bank debt.  As of September 30, 2004, Frontrunner
was in default under the terms of the agreement.

Note payable to creditor, unsecured, payable in monthly installments of $12,500,              265,077              -
including interest at 8.25%, through December 2005.  The company has ceased making
payments under this agreement

Installment payment agreement to New York State Department of Taxation and Finance,            98,782              -
payable in monthly installments of $5,455 through June 2006.  Includes principle and
imputed interest and penalties at 16.67%

Note payable to members, unsecured, interest at 8%, convertible to membership                       -        625,000
interest

Note payable to bank, interest at 9%, interest only due monthly, principle due March                -        110,000
31, 2004, secured by certain personal assets of a member and all assets of Nexvu.
Other misc. notes payable                                                                     101,250
                                                                                           ==========       ========
Total debt                                                                                  4,610,587        735,000
  Less: Current maturities                                                                  4,527,739              -
                                                                                           ----------       --------
Long term portion                                                                          $   82,848       $735,000
                                                                                           ==========       ========
</TABLE>

      As of December 31, 2003, Nexvu had $735,000 of Notes Payable, of which
$625,000 was to its members and convertible to equity and $110,000 was a secured
note payable to a bank. Subsequent to the merger with CGSI, the Note Payable to
the bank was repaid, as was $75,000 of the Notes Payable to a member of the LLC.
The remaining $550,000 of Notes Payable was converted to 577,500 shares of
common stock of CGSI during the first quarter of 2004.

                                       13
<PAGE>

NOTE 7 - PROPERTY AND EQUIPMENT [NEED TO UPDATE

      Property and equipment at September 30, 2004 and December 31, 2003
consists of the following:

<TABLE>
<CAPTION>
                                    Sept. 30,         Dec. 31,
                                      2004              2003
                                   -----------        ---------
<S>                                <C>                <C>
Furniture & fixtures               $   169,193        $  89,376
Computer equipment                     872,355          147,898
Leasehold improvements                  88,154                -
Machinery & equipment                  231,035           21,865
                                   -----------        ---------
                                     1,360,737          259,139
                                   -----------        ---------
Accumulated depreciation              (208,422)        (122,798)
                                   -----------        ---------
  Net property and equipment       $ 1,152,315        $ 136,341
                                   ===========        =========
</TABLE>

NOTE 8 - RELATED PARTIES

      On December 1, 2003, the Company entered into an agreement for business
and financial advisory services to be provided by an entity controlled by one of
the Company's directors. Fees for these services totaled $761,000 and were all
paid in 2004. As these fees were related to the raise of capital described in
Note 1 above, they are reflected as a reduction in Paid-in-Capital in the
Shareholders' Equity.

      In addition, on March 31, 2004, the Company issued warrants to purchase
250,000 shares of common stock to two Board members in connection with advisory
service agreements with each of these individuals. All warrants have an exercise
price of $1.35 per share and are exercisable on or before March 31, 2007. These
two board members are now operating in the capacity of interim CEO's of the
Company.

NOTE 9 - INDEMNIFICATIONS AND CONTINGENCIES

      As permitted under Florida law, the Company has agreements indemnifying
its executive officers and directors for certain events and occurrences while
the officer or director is, or was, serving at the Company's request in such
capacity. The maximum potential amount of future payments the Company could be
required to make under these indemnification agreements is not estimable. The
Company has secured an insurance policy for this coverage, which will enable the
Company to recover a portion of any future amounts that may be paid. No
liabilities have been recorded for these indemnification agreements as of
September 30, 2004 or December 31, 2003.

NOTE 10 - SEGMENT REPORTING

      The Company follows the provisions of SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information. This standard establishes
standards for reporting information regarding operating segments in annual
financial statements and requires selected information for those segments to be
presented in interim financial reports issued to stockholders. Operating
segments are identified as components of an enterprise about which separate,
discrete financial information is available for evaluation by the chief
operating decision makers in making decisions on how to allocate resources and
assess performance. Frontrunner is a single-source provider of business
communications equipment and multimedia integration services for data, voice,
video, and advanced applications. Most of

                                       14
<PAGE>

Frontrunner's customers are located in the northeast United States. Nexvu
licenses its proprietary application performance monitoring software along with
related hardware. They also provide consulting services to their customers. For
purposes of segment reporting, the Company considers Nexvu and Frontrunner as
two separate identifiable businesses and will report segment reporting from the
date of acquisition of Frontrunner through the end of September 30, 2004. These
two segments have separate management teams and financial statements. During the
third quarter, the Company also started splitting out its corporate costs from
the Nexvu financial statements. Accordingly, the segment results reflect this
change during the third quarter.

Results of Operation:

Three months ended September 30, 2004

<TABLE>
<CAPTION>
                                              Frontrunner          Nexvu           Corp/elim           Total
                                              -----------       -----------        ---------        ------------
<S>                                           <C>               <C>                <C>              <C>
Revenues                                      $   531,594       $    61,520        $       -        $    593,114


Gross margin                                      277,810            41,925                -             319,735

Expenses                                          231,063         1,081,761          234,842           1,547,666
                                              -----------       -----------        ---------        ------------
Operating income                                   46,747        (1,039,836)        (234,842)         (1,227,931)
                                              -----------       -----------        ---------        ------------
</TABLE>

Nine months ended September 30, 2004

<TABLE>
<CAPTION>
                                              Frontrunner          Nexvu           Corp/elim           Total
                                              -----------       -----------        ---------        ------------
<S>                                           <C>               <C>                <C>              <C>
Revenues                                      $   531,594       $   364,993        $       -        $    593,114
Gross margin                                      277,810           252,033                -             529,843

Expenses                                          231,063         3,449,683          234,842           3,915,588
                                              -----------       -----------        ---------        ------------
Operating income                                   46,747        (3,197,650)        (234,842)         (3,385,745)
                                              -----------       -----------        ---------        ------------
</TABLE>

Segment assets as of September 30, 2004

<TABLE>
<CAPTION>
                                              Frontrunner          Nexvu           Corp/elim           Total
                                              -----------       -----------        ---------        ------------
<S>                                           <C>               <C>                <C>              <C>
Tangible assets                               $ 4,520,138       $ 4,591,572        $(110,955)       $  9,000,755
                                              -----------       -----------        ---------        ------------
Goodwill                                        7,128,977                 -                -           7,128,977
                                              -----------       -----------        ---------        ------------
Total assets                                  $11,649,115       $ 4,591,572        $(110,955)       $ 16,129,732
                                              -----------       -----------        ---------        ------------
</TABLE>


                                       15
<PAGE>

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

      Certain statements in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and elsewhere in this quarterly
report on Form 10-QSB constitute "forward looking statements" within the meaning
of the Federal Private Securities Litigation Reform Act of 1995. These forward
looking statements involve known and unknown risks, uncertainties and other
factors which may cause the Company's actual results, performance or
achievements to be materially different from any future results, performance or
achievements express or implied by these forward looking statements. Examples of
factors which could affect the Company's performance are set forth in the
Company's annual report on Form 10-KSB/A for the year ended December 31, 2003,
as filed with the Securities and Exchange Commission on November 12, 2004 (SEC
File No. 000-30831) under the heading "Factors Affecting Future Performance."

OVERVIEW

      As of December 31, 2003, we were a development stage company that had
conducted virtually no business operations, other than efforts to effect a
business combination. On January 28, 2004, we completed a merger under which
Nexvu Technologies, LLC, which we will refer to in this report as "Nexvu",
became a subsidiary of ours. As a result of the merger, the owners of Nexvu
became the majority owners of our company, which resulted in the transaction
being deemed a reverse acquisition for accounting purposes. Under this
treatment, Nexvu became the surviving company for financial statement purposes.
Our net assets were recorded at fair value, with the net assets of Nexvu
reflected at historical costs. In addition, as we were a public shell company
acquiring a privately-held company, no goodwill was reported. Our financial
statements after the merger reflect the historical financial statements of
Nexvu, the operating company. Our accumulated deficit prior to the merger was
eliminated as of the merger and only the accumulated deficit of Nexvu is
reflected in our consolidated balance sheet.

      During the second quarter, we started experiencing more revenues and we
therefore are no longer a developmental stage company. However, the revenues are
not nearly sufficient to eliminate our operating losses. To reflect this
softness in the business, we reduced headcount of Nexvu by an additional 20%
during August.

      During the third quarter, we announced the acquisition of Frontrunner
Network Systems, Corp. This transaction was a stock-based transaction whereby we
will issue up to 1,000,000 shares of our common stock in exchange for
cancellation of indebtedness from certain creditors in the approximate amount of
$2.3 million dollars. There also was a nominal payment of $228 in exchange for
all of the Senior Preferred Stock of Frontrunner. All shares of Junior Preferred
Stock, Common Stock and all stock options and warrants of Frontrunner were
cancelled without consideration. As of September 30, 2004, 925,000 shares of our
common stock had been issued with regard to this transaction with the remaining
75,000 shares to be issued subject to one creditor waiver being signed. We
expect this waiver to be signed and the remaining common stock issued prior to
December 31, 2004, but we are under no obligation to consummate this share
exchange. Once this waiver is received and the common stock is issued, current
maturities of long-term debt will be reduced by $101,250, with a corresponding
increase in equity in the form of common stock and additional paid-in capital.

      As of September 30, 2004, we had approximately $1.3 million of working
capital excluding current debt maturities and $3.8 million in cash and cash
equivalents. We believe that our working capital levels are sufficient to fund
our operations for the next twelve months.

                                       16
<PAGE>

      We presently have approximately 100 full time employees between Nexvu and
Frontrunner. We do not anticipate that this number will increase in the near
future. In addition, there are no current plans to significantly increase our
capital spending on software or equipment.

RESULTS OF OPERATIONS

      Revenues for the three and nine month periods ended September 30, 2004
were heavily influenced by the acquisition of Frontrunner. During the period
September 15 through September 30, 2004, Frontrunner generated approximately
$530 thousand of revenue. This revenue represented 90% of the revenues for the
third quarter. These revenues were generated from installation of voice and data
systems as well as through maintenance contracts on installed systems. The
maintenance revenues represented approximately 69% of the total revenues, with
installation and other revenues comprising the remaining revenues. The Nexvu
revenues for the three month period ended September 30, 2004 of $61.5 thousand
are comprised of primary sales of our product as well as consulting fees and
maintenance. The percentage of total revenue for Nexvu is 56% for product sales,
39% for consulting services and approximately 5% maintenance. For the nine month
period ended September 30, 2004, the Nexvu revenues were $365 thousand. The
revenues were derived by product sales of 66%, consulting services of 27% and 7%
for maintenance revenues and other miscellaneous revenues.

      Gross margins for Frontrunner were 52% with the installation revenues,
having a 42% gross margin and maintenance revenues having a 59% gross margin.
The Nexvu gross margin rates were 68% and 69% for the three and nine month
periods ended September 30, 2004, respectively. These margins include the costs
of the appliances included in the product sales, amortization of software
licensing fees related to the development of our product, sales commissions and
incidental expenses billable to customers. Total amortization of the software
licensing fees was $25,000 and $50,000 for the three and nine month periods
ended September 30, 2004. No amortization of the licensing fees occurred during
2003.

           Total operating expenses were as follows:

<TABLE>
<CAPTION>
                                       Three months ended,              Nine months ended,
                                   ----------------------------    ------------------------------
                                   September 30,  September 30,    September 30,    September 30,
                                        2004          2003             2004             2003
                                   -------------  -------------    -------------    -------------
<S>                                <C>                 <C>         <C>              <C>
  Compensation                     $     788,864  $     528,571    $   2,381,112    $   1,277,269
  Travel and entertainment                70,932         22,648          210,990           45,142
  Occupancy                              145,828         29,001          204,645           99,043
  Professional services                  267,567         47,801          593,036          184,582
  Insurance                               35,615          1,764           62,195            1,764
  Depreciation and amortization           95,167         22,918          147,542           57,923
  Other operating expenses               143,693         32,916          316,068           70,105
                                   -------------  -------------    -------------    -------------
Total operating expenses           $   1,547,666  $     685,619    $   3,915,588    $   1,735,828
                                   =============  =============    =============    =============
</TABLE>

      The majority of our operating expenses consist of compensation expenses
and professional fees. During the third quarter, we took steps to reduce the
overall number of Nexvu employees by over 50%. This was accomplished by a
partial reduction in July and another reduction in August. Annual savings from
this reduction are estimated to be over $1.5 million due to decreased
compensation, travel and other incidental expenses. Nexvu currently has 11 full
time employees and one part time employee, down from a level during the second
quarter that reached 30. The professional fees are primarily related to legal
fees

                                       17
<PAGE>

related to acquisitions and securities work related to filings with the
Securities and Exchange Commission. Our travel and entertainment expenses relate
primarily to cost associated with our sales force. The significant increase in
these expenses in the three and nine months ended September 30, 2004 as compared
with the comparable periods in 2003 is due to the fact that we were still in the
developmental stage of the business in 2003 and are now fully staffed with a
sales force to market our product. Our occupancy expense represents the costs of
our corporate offices in Schaumburg, IL along with offices for Frontrunner in
Rochester, NY, as well as 11 other sales offices. During September, we made the
decision to move our corporate offices to another location in Schaumburg, IL,
sharing space with the Frontrunner division. All future costs associated with
closing the corporate office were accrued for in September and represented
approximately $100,000. We are currently in the process of finding a sub-lessor
for the space for the remaining life of the lease, which is December 31, 2005.

      The current quarter and year to date results reflect interest income on
the investment of the cash raised during the private placement of our stock,
which occurred primarily during the 1st quarter of 2004. With the approximate
$7.5 million of gross cash raised from this stock offering, all debt was removed
from our balance sheet. Total debt reduction during 2004 was $735,000. The 2003
results include interest expense from debt related to former members of Nexvu.

LIQUIDITY AND CAPITAL RESOURCES

      We have historically met our liquidity needs through loans from
individuals and through equity contributions. As of September 30, 2004, we held
$3.8 million of cash and cash equivalents. The cash was generated from the
private placement of our common stock primarily during the first quarter of
2004. Total gross proceeds from this offering were $7.6 million with net
proceeds after advisory, legal and accounting fees bringing the net total to
$6.6 million. Additionally, $185,000 of the capital raised was utilized to pay
down long term debt, with the remaining debt of $550,000 from December 31, 2003
converted into shares of our common stock subsequent to the merger.

      As part of the acquisition of Frontrunner, we assumed approximately $4.7
million in debt. The majority of debt is a callable demand loan and is currently
classified in current liabilities. We currently have no knowledge that the
noteholder plans to call the debt.

      During the nine months ended September 30, 2004, we utilized $3.3 million
cash from operating activities. This use of cash was primarily the result of our
net loss of $3.4 million realized during the nine months ended September 30,
2004.

      We have spent approximately $171,000 on fixed assets during 2004. These
expenditures were primarily for computer equipment utilized in testing our
Application Performance Management product and other computer-related equipment
at Nexvu. We do not expect to require significant capital expenditures in the
near future.

                                       18
<PAGE>

      We have future contractual obligations for leases of our offices and for
minimum future royalty payments related to a software licensing agreement with a
third party. This software is being utilized as a component of our own
proprietary software. The following table summarizes our future contractual
obligations as of September 30, 2004:

<TABLE>
<CAPTION>
                                                                    Minimum
                                   Operating          Debt          Royalty
                                     Leases       Obligations       Payments
                                   ---------      -----------       --------
<S>                                <C>            <C>               <C>
2004                               $ 122,062      $ 4,384,149       $ 12,500
2005                                 428,253          195,238         75,000
2006                                 198,870           31,200        100,000
2007                                  45,261                -        125,000
2008                                       -                -        150,000
                                   ---------      -----------       --------
Total contractual obligations      $ 794,446      $ 4,610,587       $462,500
                                   ---------      -----------       --------
</TABLE>

      All debt that is callable or not in compliance is reflected in the 2004
obligations. However, we have no reason to believe that these obligations will
be called by the lendor.

      At the present time we believe that our current cash and cash equivalent
balances will be sufficient to satisfy our anticipated cash needs for working
capital for at least the next 12 months.

      From time to time, we may evaluate potential acquisitions of businesses,
products or technologies. A portion of our cash may be used to acquire or invest
in complementary businesses or products or to obtain the right to use third
party technologies. In addition, in making such acquisitions or investments, we
may assume obligations or liabilities that may require us to make payments or
otherwise use additional cash in the future.

CRITICAL ACCOUNTING POLICES

      We generate revenue from licensing our software, selling hardware,
consulting services and maintenance agreements. We recognize revenue in
accordance with Generally Accepted Accounting Principles, as set forth in
Statement of Position ("SOP") 97-2, Software Revenue Recognition, and SOP 98-9,
Modification of SOP 97-2, Software Revenue Recognition with respect to Certain
Transactions, the Securities Exchange Commission Staff Accounting Bulletin No.
104, Revenue Recognition, and other related pronouncements. In accordance with
these statements, we recognize revenue upon meeting each of the following
criteria:

      -     Existence of persuasive evidence of an arrangement, generally
            consisting of a purchase order, license agreement or other contract.

      -     Delivery of the product and authorization keys, delivery is
            generally considered to have occurred when the customer is provided
            with our software and hardware and the authorization keys needed to
            activate the software.

                                       19
<PAGE>

      -     Fee is fixed and determinable, which is considered to be the case
            when the fee is not subject to subsequent refund or adjustments.

      -     Collection is probable.

      We defer maintenance revenue and recognize it ratably over the maintenance
term. We defer consulting and training revenues and recognize them as those
services are performed.

MERGER WITH FRONTRUNNER NETWORK SYSTEMS, CORP.

      On August 9, 2004, we executed an Agreement and Plan of Merger to purchase
Frontrunner Network Systems, Corp., a Delaware corporation ("Frontrunner"). The
merger was approved by our board of directors, the board of directors of
Frontrunner, and a majority of Frontrunner's shareholders. The merger was
completed on September 15, 2004. In order to complete the merger, we elected to
waive the following conditions precedent:

      -     the execution of a creditors' waiver agreement by one of the
            creditors of Frontrunner;

      -     our entering into an employment agreement with James Cuppini, an
            executive of Frontrunner. Mr. Cuppini has continued his employment
            with Frontrunner without an employment agreement as of this date;

      -     entry by Frontrunner into certain payment agreements calling for
            amortization of outstanding past due obligations of Frontrunner plus
            a market rate of interest with two of its creditors (Nortel
            Networks, Inc. and Review Video, Inc.); and

      -     Frontrunner's obtaining from Harris Trust and Savings Bank a written
            consent to the merger and a commitment that it will extend and
            maintain a loan to Frontrunner with a principal amount of not less
            than the principal balance outstanding as of the date of the merger
            agreement. The loan is a demand loan, which is presently in place as
            of this date.

      In consideration for Frontrunner shares, we paid $222.18 in total in
exchange for all of Frontrunner's Senior Preferred Stock. All of the shares of
Frontrunner's Junior Preferred Stock, Convertible Preferred Stock and common
stock, and all outstanding unexpired and unexercised options and warrants to
acquire Frontrunner common stock were cancelled without consideration as part of
the merger.

      Each share of Senior Preferred Stock outstanding immediately prior to the
effective time of the merger has been cancelled and extinguished and converted
automatically into the right to receive $1.00 per share (i.e., $222.18 in the
aggregate). Each share of Frontrunner's Junior Preferred Stock, Convertible
Preferred Stock and common stock and any outstanding options, warrants,
convertible notes, or other convertible securities or other rights to acquire
shares of Frontrunner have been extinguished and cancelled without conversion or
exercise. Each share of stock owned by Frontrunner or any direct or indirect
wholly-owned subsidiary of Frontrunner immediately prior to the effective time
of merger will be cancelled and extinguished without any conversion thereof.

      As primary consideration to be given by us in connection with the merger
agreement, but not as part of the merger consideration, and for the benefit of
Frontrunner, prior to the effective time of the merger, we agreed to issue up to
1,000,000 shares of our common stock to certain creditors of Frontrunner in
exchange for the cancellation of indebtedness to Frontrunner by those creditors
in the approximate amount of $2,252,433, excluding accrued unpaid interest and
other claims. The most recent

                                       20
<PAGE>

private placement of our common stock was made at $1.35 per share, which is
assumed to constitute its fair market value. As of the date of this form 10-QSB,
we have issued 925,000 of the 1,000,000 shares.

ITEM 3.  CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURE

      Our Co-Chief Executive Officers and Chief Financial Officer have evaluated
our disclosure controls and procedures as of September 30, 2004, and have
concluded that, as of September 30, 2004, these controls and procedures have
been effectively designed to ensure that information required to be disclosed in
reports that we file with or submit to the United States Securities and Exchange
Commission is recorded, processed, summarized and reported within the time
periods specified in the Commission's rules and forms and is accumulated and
communicated to management as appropriate to allow timely decisions regarding
this disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

      No changes in our internal control over financial reporting have come to
management's attention during our last fiscal quarter that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting. Review and evaluation of disclosure controls and
procedures is an ongoing process that we will continue to refine as we perform
quarterly evaluations.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

      None.

ITEM 2. CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY
SECURITIES

On September 14, 2004, the Company issued 889,122 shares of the Company's common
stock and on September 24, the Company issued 35,878 shares of the Company's
common stock. These issuances were pursuant to the Merger and Merger Agreement
and the Creditor Waiver Agreements as filed in our 8-K's filed on August 9, 2004
and September 20, 2004. In connection with the issuance pursuant to the Merger,
the Company relied upon the exemption from registration available under Section
4(2) of the Securities Act of 1933, as amended. The Creditors were accredited
investors, small in number, and all of them had access to information about the
Company, Frontrunner and the Merger.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

      None.

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

      None.

ITEM 5. OTHER INFORMATION

      None.

                                       21
<PAGE>

ITEM 6. EXHIBITS

<TABLE>
<CAPTION>
Exhibit Number                 Description of Document
--------------                 -----------------------
<S>               <C>
      2.1         Agreement and Plan of Merger By and Among Capital Growth Systems,
                  Inc. (the "Company"), a Florida corporation, Frontrunner
                  Acquisition, Inc., a Delaware corporation and wholly-owned
                  subsidiary of the Company, and Frontrunner Network Systems Corp., a
                  Delaware corporation, was previously filed as an exhibit to the
                  Company's Current Report on Form 8-K, filed August 13, 2004 (SEC
                  File No. 000-30831), and is incorporated herein by reference.

      10.1        Creditor Waiver and Consent Agreement By and Among Frontrunner
                  Network Systems Corp., Capital Growth Systems, Inc., a Florida
                  corporation (the "Company"), and Bluestem Capital Partners II,
                  Limited Partnership, Mesirow Capital Partners VI, The Edgewater
                  Private Equity Fund II, L.P., Philip Kenny and James Cuppini, was
                  previously filed as an exhibit to the Company's Current Report on
                  Form 8-K, filed September 20, 2004 (SEC File No. 000-30831) and is
                  incorporated herein by reference.

      10.2        Escrow Agreement By and Among Capital Growth Systems, Inc., a
                  Florida corporation (the "Company"), Frontrunner Representative,
                  Inc., as the escrow agent, and Bluestem Capital Partners II, Limited
                  Partnership, Mesirow Capital Partners VI, The Edgewater Private
                  Equity Fund II, L.P., Philip Kenny and James Cuppini, was previously
                  filed as an exhibit to the Company's Current Report on Form 8-K,
                  filed September 20, 2004 (SEC File No. 000-30831) and is
                  incorporated herein by reference.

      31.1        Certification of co-CEO Pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.

      31.2        Certification of co-CEO Pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.

      31.3        Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.

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

      99.1        Separation and Severance Agreement Between Capital Growth Systems,
                  Inc., a Florida corporation (the "Company"), and Scott Allen, dated
                  August 30, 2004 was previously filed as an exhibit to the Company's
                  Current Report on Form 8-K, filed September 3, 2004 (SEC File No.
                  000-30831), and is incorporated herein by reference.
</TABLE>

                                       22
<PAGE>

                                   SIGNATURES

      In accordance with the requirements of the Exchange Act, the registrant
has duly caused this report to be signed by the undersigned, thereunto duly
authorized.

                                         CAPITAL GROWTH SYSTEMS, INC.

                                         BY: /s/ Lee Wiskowski
                                           -------------------------------------
                                             Lee Wiskowski, Co-Chief Executive
                                             Officer

                                         BY: /s/ Douglas Stukel
                                           -------------------------------------
                                             Douglas Stukel, Co-Chief Executive
                                             Officer

                                         BY: /s/ Derry L. Behm
                                           -------------------------------------
                                             Derry L. Behm, Chief Financial
                                             Officer

Dated:  November 15, 2004

                                       23
<PAGE>

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit Number                 Description of Document
--------------                 -----------------------
<S>              <C>
     2.1         Agreement and Plan of Merger By and Among Capital Growth Systems,
                 Inc. (the "Company"), a Florida corporation, Frontrunner
                 Acquisition, Inc., a Delaware corporation and wholly-owned
                 subsidiary of the Company, and Frontrunner Network Systems Corp., a
                 Delaware corporation, was previously filed as an exhibit to the
                 Company's Current Report on Form 8-K, filed August 13, 2004 (SEC
                 File No. 000-30831), and is incorporated herein by reference.

     10.1        Creditor Waiver and Consent Agreement By and Among Frontrunner
                 Network Systems Corp., Capital Growth Systems, Inc., a Florida
                 corporation (the "Company"), and Bluestem Capital Partners II,
                 Limited Partnership, Mesirow Capital Partners VI, The Edgewater
                 Private Equity Fund II, L.P., Philip Kenny and James Cuppini, was
                 previously filed as an exhibit to the Company's Current Report on
                 Form 8-K, filed September 20, 2004 (SEC File No. 000-30831) and is
                 incorporated herein by reference.

     10.2        Escrow Agreement By and Among Capital Growth Systems, Inc., a
                 Florida corporation (the "Company"), Frontrunner Representative,
                 Inc., as the escrow agent, and Bluestem Capital Partners II, Limited
                 Partnership, Mesirow Capital Partners VI, The Edgewater Private
                 Equity Fund II, L.P., Philip Kenny and James Cuppini, was previously
                 filed as an exhibit to the Company's Current Report on Form 8-K,
                 filed September 20, 2004 (SEC File No. 000-30831) and is
                 incorporated herein by reference.

     31.1        Certification of co-CEO Pursuant to Section 302 of the
                 Sarbanes-Oxley Act of 2002.

     31.2        Certification of co-CEO Pursuant to Section 302 of the
                 Sarbanes-Oxley Act of 2002.

     31.3        Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley
                 Act of 2002.

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

     99.1        Separation and Severance Agreement Between Capital Growth Systems,
                 Inc., a Florida corporation (the "Company"), and Scott Allen, dated
                 August 30, 2004 was previously filed as an exhibit to the Company's
                 Current Report on Form 8-K, filed September 3, 2004 (SEC File No.
                 000-30831), and is incorporated herein by reference.
</TABLE>

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