UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-KSB



For the fiscal year ended March 31, 2007



x

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934



o

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



Commission file number 0-23514



ROCKPORT HEALTHCARE GROUP, INC.

(Exact name of small business issuer as specified in its charter)



|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 33-0601497                       
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)



|                                                 |  |           
|------------------------------------------------ |  | ----------
|50 Briar Hollow Lane, Suite 515W, Houston, Texas |  | 77027     
|(Address of principal executive offices)         |  | (Zip Code)



|                                                    |  |               
|--------------------------------------------------- |  | --------------
|Registrants telephone number, including area code: |  | (713) 621-9424





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



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



Check whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.   Yes x  No o



Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.    x



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.   Yes o  No x



Issuers revenues for the fiscal year ended March 31, 2007, were $2,629,144.



The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Issuer as of July 31, 2007, based upon the average bid and asked price as of such date on the OTC Bulletin Board, was $279,395.



The Registrants common stock outstanding as of July 31, 2007, was 19,823,936.



DOCUMENTS INCORPORATED BY REFERENCE:   None



Transitional Small Business Disclosure Format (Check One):  Yes  ̈   No x







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ROCKPORT HEALTHCARE GROUP, INC.







TABLE OF CONTENTS



|         |                                                                                                                             |    |     
|-------- | --------------------------------------------------------------------------------------------------------------------------- | -- | ----
|         |                                                                                                                             |    | Page
|Part I   |                                                                                                                             |   
|         | Item 1.     Description of Business                                                                                         | 3 
|         | Item 2.     Description of Property                                                                                         | 6 
|         | Item 3.     Legal Proceedings                                                                                               | 6 
|         | Item 4.     Submission of Matters to a Vote of Security Holders                                                             | 6 
|         |                                                                                                                             |    |     
|Part II  |                                                                                                                             |   
|         | Item 5.     Market for Common Equity and Related Stockholder Matters                                                        | 7 
|         | Item 6.     Management's Discussion and Analysis and Results of Operations and Financial Condition                          | 8 
|         | Item 7.     Financial Statements                                                                                            | 14
|         | Item 8.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                            | 30
|         | Item 8A.   Controls and Procedures                                                                                          | 30
|         | Item 8B.   Other Information                                                                                                | 31
|         |                                                                                                                             |    |     
|Part III |                                                                                                                             |   
|         | Item 9.     Directors, Executive Officers, Promoters and Control Persons, Compliance with Section 16(a) of the Exchange Act | 31
|         | Item 10.   Executive Compensation                                                                                           | 34
|         | Item 11.   Security Ownership of Certain Beneficial Owners and Management                                                   | 35
|         | Item 12.   Certain Relationships and Related Party Transactions                                                             | 36
|         | Item 13.   Exhibits                                                                                                         | 38
|         | Item 14.   Principal Accountant Fees and Services                                                                           | 38





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Some of the statements contained in this report discuss future expectations, contain projections of results of operations or financial condition, or state other forward-looking information.  The words believe, intend, plan, expect, anticipate, estimate, project and similar expressions identify such statement was made.  These statements are subject to known and unknown risks, uncertainties, and other factors that could cause the actual results to differ materially from those contemplated by the statements.  The forward-looking information is based on various factors and is derived using numerous assumptions.  Important factors that may cause results to differ from projections include, for example:



·

the Companys ability to forge and maintain contractual relationships with healthcare providers and clients;

·

the Companys ability to convince customers of its current clients to access the Companys provider network;

·

continued efforts to control covered workers compensation claims costs;

·

potential regulatory intervention, if the Company fails to comply with regulatory requirements;

·

proposed future efforts to control administrative costs, and future provider utilization rates;

·

future government regulations;

·

the ability of the Company to price its services competitively;

·

sources for sufficient additional capital to meet the Companys growth and operations; and

·

the failure to properly manage and successfully integrate additional providers and/or clients.



The Company does not promise to update forward-looking information to reflect actual results or changes in assumptions or other factors that could affect those statements.  Future events and actual results could differ materially from those expressed in, contemplated by, or underlying such forward-looking statements.





PART I



ITEM 1.  DESCRIPTION OF BUSINESS



Organizational History



The Company was incorporated in the State of Delaware on May 4, 1992, as Protokopus Corporation. On December 17, 1997, the Company acquired all of the issued and outstanding common stock of The Rockport Group of Texas, Inc., a Nevada corporation, in a business combination accounted for as a reverse acquisition.  On January 18, 1998, the Company changed its name from Protokopus Corporation to Rockport Healthcare Group, Inc.



As of March 31, 2006, the Company has three wholly owned subsidiaries: Rockport Community Network, Inc., Rockport Group of Texas, Inc. and Rockport Preferred, Inc.  Rockport Community Network, Inc. (RCN) was incorporated in the State of Nevada on November 14, 1997.  Rockport Group of Texas, Inc. (RGT) was incorporated in the State of Nevada on July 23, 1997.  RCN and RGT, for accounting purposes, are solely disbursing entities for the Company and have no business operations.  RCN prepares and issues invoices to the Companys clients, collects accounts receivable and issues checks to the Companys network partners for network access fees, to outside sales personnel for sales commissions and for commission overwrites.  RGT processes payroll and pays payroll costs and other selling, general and administrative expenses on behalf of the Company.  Rockport Preferred, Inc. is a dormant subsidiary, which has no ongoing operations.



On May 16, 2007, our board of directors, unanimously approved the purchase and sale by and to Nexus Asset Acquisition Co., a Delaware corporation (Nexus), of 100% of the outstanding common stock of our wholly owned subsidiary Rockport Community Network, Inc., a Nevada corporation (RCN). Prior to the consummation of the Stock Purchase, we will transfer substantially all of the assets and certain liabilities relating to our healthcare management business, as a contribution to capital, to RCN.  As such, the consummation of the Stock Purchase may be deemed to result in the sale of substantially all of our assets to Nexus on the terms and subject to the conditions set forth in the Stock Purchase Agreement, dated May 16, 2007. In conjunction with the sale, our board of directors changed the name of Rockport Healthcare Group, Inc. to RPHL Acquisition Corp.



On July 2, 2007, we completed the sale pursuant to the Stock Purchase Agreement dated May 16, 2007.





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Business Prior to Stock Purchase



Rockport Healthcare Group, Inc. (Rockport or the Company) is a management company dedicated to developing, operating and managing networks consisting of healthcare providers and medical suppliers that serve employees with work-related injuries and illnesses.  Rockport offers access to a comprehensive healthcare network at a local, state or national level for its clients and their customers. Typically, Rockports clients are property and casualty insurance companies, employers, bill review/medical cost containment companies, managed care organizations, software/bill review companies and third party administrators.



The Company contracts with physicians, hospitals and ancillary healthcare providers at rates below the maximum allowed by applicable state fee schedules, or if there is no state fee schedule, rates below usual and customary allowables for work-related injuries and illnesses. The Company generates revenue by receiving as a fee, a percentage of the medical cost savings realized by its clients. The medical cost savings realized by its clients is the difference between the maximum rate allowed for workers compensation medical services in accordance with the state allowed fee schedules or usual and customary allowables and the discounted rates negotiated by the Company with its healthcare providers.



The Companys mission to its clients and healthcare providers is to: (1) maintain, update and distribute accurate information on each and every healthcare provider that is directly contracted by the Company or is accessed through the Companys network partner relationship; (2) demonstrate, educate and offer each client and their customer referral products and services that encourage, enable and guide their injured workers to the Companys healthcare providers; and (3) provide clear, concise and accurate preferred provider organization (PPO) repricing information and assistance in facilitating payment to the contracted rates and provide resolution to reimbursement problems in a timely manner.



The Companys goals are to: (1) create and maintain profitability within industry standards and create shareholder value; (2) become the national network of choice for work-related injuries and illnesses; (3) market and position its networks, state by state, to increase business to its healthcare providers while offering significant savings to its clients and their customers; (4) continually develop information systems that improve processes, measurements and the integrity of its healthcare provider data and reporting structure; (5) continue its dedication to client and healthcare provider support services; and (6) provide any payor, managed care organization or bill review/software company an alternative national workers compensation network in a non-competitive relationship.



The Company has healthcare providers and/or network partners in all fifty states and the District of Columbia.  As of March 31, 2007, the Company has in excess of 300,000 healthcare providers nationwide that serve its clients and their customers for their injured employees care.  Should a client or their customer have particular needs in an under-served market, Rockport or its network partner has a skilled team of experienced network development personnel capable of custom building the under-served market for the client.



Stock Purchase Agreement

On May 16, 2007 our board of directors (the Board of Directors or Board), upon the recommendation of a special committee comprised entirely of independent directors and the receipt of a fairness opinion from our financial advisor declaring the proposed transaction fair from a financial point of view to our stockholders unanimously approved, adopted, ratified, and declared advisable to our stockholders, the purchase and sale (the Stock Purchase) by and to Nexus Asset Acquisition Co., a Delaware corporation (Nexus), of 100% of the outstanding common stock of our wholly owned subsidiary Rockport Community Network, Inc., a Nevada corporation (RCN).  Prior to the consummation of the Stock Purchase, we will transfer substantially all of the assets and certain liabilities relating to our healthcare management business, as a contribution to capital, to RCN.  As such, the consummation of the Stock Purchase may be deemed to result in the sale of substantially all of our assets to Nexus on the terms and subject to the conditions set forth in the Stock Purchase Agreement, dated May 16, 2007.

This transaction involves the sale or transfer of a significant portion of our assets, business and operations and could constitute a sale of substantially all of the property and assets of Rockport within the meaning of Section 271(a) of the General Corporation Law of the State of Delaware, which we refer to as the DGCL.  Because a transaction subject to Section 271(a) of the DGCL requires the approval of the holders of a majority of our outstanding stock entitled to vote thereon, under the terms of the Stock Purchase Agreement, the approval of our stockholders is required to complete the Stock Purchase.





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On May 16, 2007, the stockholders of the Company, representing approximately 52% of the aggregate voting power of our common stock, par value $.001 per share (the Common Stock), entered into a voting agreement with Nexus, whereby they delivered to us a written consent in lieu of a special meeting of stockholders approving the Stock Purchase and the Stock Purchase Agreement in accordance with Section 228 of the DGCL.  Therefore, all required corporate approvals of the transaction have been obtained.

Because all trademarks, trade names and service marks used by the Company in connection with the healthcare management business are being contributed to RCN, the Company will amend its certificate of incorporation, as amended, pursuant to Section 242(a) of the DGCL to change its name to RPHL Acquisition Corp. On May 30, 2007, the Board of Directors adopted a resolution setting forth the proposed amendment and declared it advisable and in the best interests of the Company and its stockholders and recommended the proposed amendment for the approval of our stockholders.  Also on May 30, 2007, the holders of a majority of the aggregate voting power of our common stock delivered to us a written consent in lieu of a special meeting of stockholders approving the proposed amendment changing the name of the Company in accordance with Section 228 of the DGCL.



Reasons for the Stock Purchase



We have been funding our operations primarily through the borrowing of funds from one of our directors and from various outside sources.  As of May 16, 2007, we had approximately $1,450,000 of notes payable outstanding.  Of this amount, approximately $1,250,000 consisted of note payables due to Mr. John K. Baldwin, one of our directors, which notes are overdue. Based on our financial position and results of operations, we have not been able to raise additional funds through the issuance of debt or equity securities.  As such, we have been unable to make the required repayments of our debt obligations.

Due to our financial condition, along with other factors including our inability to raise additional debt or equity capital on terms we feel commercially reasonable, our Board of Directors, upon the advice and determination of a special committee, comprised entirely of independent directors, appointed to evaluate this transaction, and upon the receipt of a fairness opinion from our financial advisor declaring the proposed transaction fair from a financial point of view to our stockholders, deemed it advisable and in the best interests of our stockholders to enter into the Stock Purchase Agreement and to consummate the Stock Purchase.  We anticipate that a portion of the purchase price will be used to repay substantially all of our outstanding note payables and other outstanding known indebtedness and other known obligations, including outstanding note payables and accrued expenses and fees payable to certain of our directors and officers.  After payment of the foregoing amounts, we intend to make a dividend to our stockholders of the remaining purchase price.  Accordingly, we have determined that the Stock Purchase is prudent at this time.



Purchase Price and Use of Proceeds



In consideration for the Stock Purchase, Nexus paid Rockport a purchase price of $2,101,149.98.  In addition, Nexus agreed to assume certain liabilities related to Rockports healthcare management business and the payment of Rockports expenses related to the Stock Purchase.  There were no material relationships between Nexus and Rockport, or any of Rockports officers or directors.  Certain officers of Rockport have agreed to employment terms with an affiliate of Nexus upon closing of the Stock Purchase.

Pursuant to the Purchase Agreement, a portion of the purchase price was used to repay substantially all of Rockports outstanding note payables and other outstanding obligations, including outstanding note payables and accrued expenses and fees payable to certain of our directors and officers.  Rockport presently expects that after payment of the foregoing amounts it will retain approximately $550,000 of the purchase price, from which it intends to make a dividend to its stockholders. The record date for the determination of the stockholders entitled to such dividend has not been determined.





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Business after the Stock Purchase

We have not yet made any definitive determination about our future business plans since the Stock Purchase was consummated. Immediately following the consummation of the Stock Purchase, we have no operating business or source of revenues. Our Board of Directors is evaluating several possible options, including a possible transaction in which we sell or merge our public shell company to or with a private operating business whereby our stockholders would retain some ownership interest in the surviving public corporation. To date, we have not entered into any agreements with any parties to complete such a transaction, and, should our Board determine to pursue such a transaction, there is no assurance that we will be able to find a potential suitor on terms favorable to us, if at all.



Employees



As of March 31, 2007, the Company had 20 employees, with 17 employees located in Houston, Texas and three employees located in Florida.  All of the Companys employees are full-time with the exception of one in Houston.  The Company has no collective bargaining agreements with any unions and believes that its overall relations with its employees are good. After the stock purchase, it is anticipated that a substantial number of the employees will continue in the employment of Nexus.



As of July 2, 2007, and pursuant to the terms of the Purchase Agreement, Gregory H. Neer and Mark C. Neer, the Sr. Vice President  Operations and Sr. Vice President  Business Development, respectively, resigned from their respective positions with Rockport and accepted employment with an affiliate of Nexus.

ITEM 2.  DESCRIPTION OF PROPERTY



The Companys executive and administrative offices are located at 50 Briar Hollow Lane, Suite 515W, Houston, Texas 77027, which facilities are leased by the Company from an unaffiliated third party.  The Companys lease on these premises covers 12,219 square feet and expires on June 30, 2011. The Companys monthly lease payment on its leased office space as of March 31, 2006 is $17,341. The Company re-negotiated the lease whereby the monthly payments are $13,746 from July 1, 2006 through June 30, 2007, $14,000 from July 1, 2007 through June 30, 2009 and $14,255 from July 1, 2009 through June 30, 2011.



The Company leases an office in Florida with 1,037 square feet from a stockholder of the Company. The lease began August 1, 2003 and expires on July 31, 2005.  Biannual lease payments are in the amount of $8,296.



In conjunction with the stock purchase, the Company has negotiated the transfer of the aforementioned leases to Nexus.



ITEM 3.  LEGAL PROCEEDINGS



None.



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



No matters were submitted during the fourth quarter of the period covered in this report to a vote of shareholders.



Approval of the Stock Purchase required approval by the holders of a majority of the aggregate voting power of the issued and outstanding shares of capital stock of Rockport. Our stockholders, holding a majority of the aggregate voting power of the issued and outstanding shares of capital stock of Rockport, on May 16, 2007, consented in writing to the Stock Purchase pursuant to the terms of the Stock Purchase Agreement.  This action by our stockholders was sufficient to obtain the stockholder vote necessary to approve the Stock Purchase without the approval of any other stockholder.







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On May 16, 2007, Nexus entered into a voting agreement with each of our directors. Our directors hold a majority of the aggregate voting power of the issued and outstanding shares of capital stock of Rockport. Pursuant to the voting agreement, each of our directors, solely in his capacity as a stockholder of the Company, agreed, among other things, to take certain actions in furtherance of the Stock Purchase, including causing the execution and delivery of a written consent in accordance with Section 228 of the DGCL, pursuant to which our stockholders consented to the adoption of the Stock Purchase Agreement and the approval of the Stock Purchase.



PART II



ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS



On February 12, 1999, the Company's common stock began trading on the OTC Bulletin Board market under the symbol "RPHL".  The market for the Companys common stock on the OTC Bulletin Board is limited, sporadic and highly volatile. The following table sets forth the approximate high and low closing sales prices per share as reported on the OTC Bulletin Board for the Company's common stock for the last two fiscal years.  The quotations reflect inter-dealer prices, without retail markups, markdowns or commissions and may not represent actual transactions.



|                                 |      |      |     |   |     
|-------------------------------- | ---- | ---- | --- | - | ----
|                                 | High |      | Low
|Fiscal Year 2007                 |      |      |     |   |     
|Quarter Ended March 31, 2007     | $    | 0.04 |     | $ | 0.02
|Quarter Ended December 31, 2006  | $    | 0.03 |     | $ | 0.02
|Quarter Ended September 30, 2006 | $    | 0.06 |     | $ | 0.02
|Quarter Ended June 30, 2006      | $    | 0.03 |     | $ | 0.02
|                                 |      |      |     |   |     
|Fiscal Year 2006                 |      |      |     |   |     
|Quarter Ended March 31, 2006     | $    | 0.07 |     | $ | 0.02
|Quarter Ended December 31, 2005  | $    | 0.06 |     | $ | 0.02
|Quarter Ended September 30, 2005 | $    | 0.06 |     | $ | 0.02
|Quarter Ended June 30, 2005      | $    | 0.05 |     | $ | 0.03



As of July 2, 2007, there were approximately 1,024 stockholders of record of the Company's common stock.  The Company has neither declared nor paid any cash dividends to date.  Pursuant to the Purchase Agreement, a portion of the purchase price was used to repay substantially all of Rockports outstanding note payables and other outstanding obligations, including outstanding note payables and accrued expenses and fees payable to certain of our directors and officers.  Rockport presently expects that after payment of the foregoing amounts it will retain approximately $550,000 of the purchase price, from which it intends to make a dividend to its stockholders. The record date for the determination of the stockholders entitled to such dividend has not been determined.



Recent Sales of Unregistered Securities



Set forth below is certain information concerning all issuances of securities by the Company during the fiscal years ended March 31, 2007, March 31, 2006 and through July 2, 2007 (the closing of the stock purchase agreement) that were not registered under the Securities Act.



On May 16, 2007, prior to the execution of the Voting Agreement, Stock Purchase Agreement, or written consent of stockholders discussed above, one of our directors, Mr. John K. Baldwin, agreed to convert certain convertible notes in the aggregate outstanding principal amount, together with accrued interest, of approximately $1 million held by Mr. Baldwin into 4,584,052 shares of our Common Stock in lieu of payment.



On September 30, 2005, under the terms of a written contract executed by the Company, the Company issued 1,811 shares of common stock to Mike Catala in consideration of marketing services valued at $54 pursuant to the exemption provided by Section 4(2) of the Securities Act.



On September 30, 2005, under the terms of a written contract executed by the Company, the Company issued 1,811 shares of common stock to Johnny Fontenot in consideration of marketing services valued at $54 pursuant to the exemption provided by Section 4(2) of the Securities Act.





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On June 30, 2005, under the terms of a written contract executed by the Company, the Company issued 5,140 shares of common stock to Mike Catala in consideration of marketing services valued at $247 pursuant to the exemption provided by Section 4(2) of the Securities Act.



On June 30, 2005, under the terms of a written contract executed by the Company, the Company issued 5,140 shares of common stock to Johnny Fontenot in consideration of marketing services valued at $247 pursuant to the exemption provided by Section 4(2) of the Securities Act.



On June 30, 2005, the Company issued 200,000 shares of common stock to Messrs. Fontenot and Catala as settlement of a dispute valued at $9,600.



The above transactions were completed pursuant to Section 4(2) of the Securities Act.  With respect to issuances made pursuant to Section 4(2) of the Securities Act, the transactions did not involve any public offering and were sold to a limited group of persons.  Each recipient either received adequate information about the Company or had access, through employment or other relationships, to such information, and the Company determined that each recipient had such knowledge and experience in financial and business matters that they were able to evaluate the merits and risks of an investment in the Company.



Purchase of Equity Securities



During the year ended March 31, 2007, the Company did not make any repurchases of its equity securities.



ITEM 6.  MANAGEMENTS DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS AND FINANCIAL CONDITION



The following discussion and analysis of the Companys financial condition as of March 31, 2007, and the Companys results of operations for the years in the two-year period ended March 31, 2007 and 2006, should be read in conjunction with the Companys audited consolidated financial statements and notes thereto included elsewhere in this report.



Overview



Until July 2, 2007 Rockport Healthcare Group, Inc. (Rockport or the Company) was a management company dedicated to developing, operating and managing networks consisting of healthcare providers and medical suppliers that serve employees with work-related injuries and illnesses.  Rockport offered access to a comprehensive healthcare network at a local, state or national level for its clients and their customers. Typically, Rockports clients were property and casualty insurance companies, employers, bill review/medical cost containment companies, managed care organizations, software/bill review companies and third party administrators.



The Company contracted with physicians, hospitals and ancillary healthcare providers at rates below the maximum allowed by applicable state fee schedules, or if there is no state fee schedule, rates below usual and customary allowables for work-related injuries and illnesses.  The Company generated revenue by receiving as a fee, a percentage of the medical cost savings realized by its clients.  The medical cost savings realized by its clients is the difference between the maximum rate allowed for workers compensation medical services in accordance with the state allowed fee schedules or usual and customary allowables and the discounted rates negotiated by the Company with its healthcare providers.



The Company has healthcare providers and/or network partners in all fifty states and the District of Columbia.  As of March 31, 2007, the Company has in excess of 300,000 healthcare providers nationwide that serve its clients and their customers for their injured employees care.  Should a client or their customer have particular needs in an under-served market, Rockport or its network partner has a skilled team of experienced network development personnel capable of custom building the under-served market for the client.



On July 2, 2007, the Company completed the sale of substantially all of its assets including all of the aforementioned services to Nexus.







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Critical Accounting Policies



General



The Consolidated Financial Statements and Notes to Consolidated Financial Statements contain information that is pertinent to this managements discussion and analysis.  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 disclosure of any contingent assets and liabilities.  Management believes these accounting policies involve judgment due to the sensitivity of the methods, assumptions and estimates necessary in determining the related asset and liability amounts.  Management believes it has exercised proper judgment in determining these estimates based on the facts and circumstances available to its management at the time the estimates were made.  The significant accounting policies are described in the Company's financial statements (See Note 2 in Notes to Consolidated Financial Statements in this Form 10-KSB).



Revenue Recognition



Revenue is recognized when earned.  Revenue is earned at such time as the Companys contractual discounts with its healthcare providers are applied to its clients medical bills which produces a medical cost savings.  The Companys revenue is a contractual percentage of the medical cost savings realized.  At the time the contractual discounts are applied and collection is reasonably assured, the revenue is realized.



Allowance for Doubtful Accounts



The Company maintains an allowance for doubtful accounts, which reflects the estimate of losses that may result from the inability of some of the Companys clients to make required payments.  The estimate for the allowance for doubtful accounts is based on known circumstances regarding collectability of client accounts and historical collections experience.  If the financial condition of one or more of the Companys clients were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.  Material differences between the historical trends used to estimate the allowance for doubtful accounts and actual collection experience could result in a material change to the Companys consolidated results of operations or financial position.



Intangible Assets



As of March 31, 2007, the Company had $312,500 of unamortized intangible assets resulting from the acquisition of the Protegrity network.  Effective July 7, 2003, the Company purchased all healthcare provider agreements from Protegrity Services, Inc., (Protegrity), a third party administrator (TPA) and managed care organization.  The Company was acquiring healthcare provider agreements in order to expand the size of its network.  This acquisition did not result in the acquisition of clients or revenue.  This acquisition of provider contracts was funded with the issuance of 500,000 shares of Company common stock valued at $500,000, and because the Company would earn revenue in the future from the acquired provider agreements, the Company recorded the value of the stock issued as an intangible asset.  The value of $500,000 attributed to the acquisition was based on the number of shares issued multiplied by $1.00 per share.  If Protegrity has not sold its shares of Rockport by July 2008, the Company has agreed to purchase from Protegrity at a price of $1.00 per share, all of the remaining outstanding shares then owned by Protegrity.  Amounts paid for provider agreements are being amortized to expense on the straight-line method over the estimated useful lives of the agreements of ten years.  However, intangible assets are subject to an impairment assessment at least annually which may result in a charge to operations if the fair value of the intangible asset is impaired which would have a negative impact on  the Companys financial condition and results would be negatively affected. We are currently in negotiations with Protegrity and Holdings to agree that 1) upon consummation of the Stock Purchase we may redeem the 500,000 shares of Common Stock for $500,000; 2) the Company will pay to Protegrity the earnout fee set forth in the asset purchase agreement through the closing date; and 3) the Company has asked Protegrity to waive the remainder of the earnout fee.







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Accounting for Stock-Based Compensation



The Company accounts for stock-based compensation whereby no compensation expense is recorded for stock options or other stock-based awards to employees that are granted with an exercise price equal to or above the estimated fair value per share of the Companys common stock on the grant date.  The Company adopted the pro forma requirements pursuant to fair value reporting which requires compensation expense to be disclosed based on the fair value of the options granted at the date of the grant.



In December 2002, the Financial Accounting Standards Board issued its Statement No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure  an amendment of Financial Accounting Standards Board Statement No. 123. This Statement amends Statement of Financial Accounting Standards No. 123, to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation.  It also amends the disclosure provisions of Statement of Financial Accounting Standards No. 123 to require prominent disclosure about the effects on reported net income of an entitys accounting policy decisions with respect to stock-based employee compensation. The transition and annual disclosure provisions of Statement of Financial Accounting Standards No. 148 are effective for fiscal years ending after December 15, 2002, and the interim disclosure provisions were effective for the first interim period beginning after December 15, 2002.  The Company did not voluntarily change to the fair value based method of accounting for stock-based employee compensation, therefore, the adoption of Statement of Financial Accounting Standards No. 148 did not have a material impact on its operations and/or financial position.



Results of Operations



Year Ended March 31, 2007 to Year Ended March 31, 2006



The following table sets forth certain operating information regarding the Company for the years ended March 31, 2007 and 2006:



|                                                |      |           |      |   |          
|----------------------------------------------- | ---- | --------- | ---- | - | ---------
|                                                | 2007 |           | 2006
|Revenue                                         | $    | 2,629,144 |      | $ | 3,067,560
|Cost of sales                                   |      | 714,822   |      |   | 914,213  
|Gross profit                                    |      | 1,914,322 |      |   | 2,153,347
|Selling, general and administrative expenses    |      | 1,959,174 |      |   | 2,397,551
|Depreciation and amortization                   |      | 63,485    |      |   | 63,581   
|Loss  from operations                           |      | (108,337) |      |   | (307,785)
|Write-down liabilities to fair market value     |      | (168,515) |      |   | -        
|Interest, net                                   |      | 155,572   |      |   | 145,514  
|Income tax expense (benefit)                    |      | (174,760) |      |   | -        
|Net income (loss)                               | $    | 79,366    |      | $ | (453,299)
|Net income (loss) per share  basic and diluted | $    | 0.01      |      | $ | (0.03)   



Revenue.  The Company's source of revenue is fees it receives from its clients and their customers that access and utilize the Company's healthcare provider network for work-related injuries and illnesses.  When an injured employee utilizes a healthcare provider within the Companys PPO network, the employer realizes medical cost savings, which it would not have realized had the employee utilized a healthcare provider not within the Companys PPO network.  The Companys clients and their customers, where permitted by law, direct their injured employees to healthcare providers within the Companys healthcare provider network, which in turn creates a medical cost savings as a result of the discounts the Company has negotiated with its healthcare providers.  The agreements the Company has with its clients provide the Company with a fee based upon a percentage of the medical cost savings realized by its clients.  The fee percent the Company receives from its clients is negotiated by the Company and usually is determined by the amount of potential business the Company will receive from the client.  Typically, these agreements are short-term in nature, which is standard within the healthcare industry, but which make the predictability of the Companys future revenues difficult.







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During the fiscal year ended March 31, 2007, the Company continued to expand its PPO network in additional areas of the country in conjunction with the expansion of its client base, either through direct contracting with providers, through strategic network alliances with third party networks, which it refers to as network partners, or through purchases of networks.  The Company utilizes its own network development staff to enhance its PPO network and custom build in a market for a given client.  Effective July 7, 2003, the Company purchased the healthcare provider agreements from Protegrity Services, Inc., (Protegrity) which included certified networks in the states of Florida and Kentucky and providers in a variety of other states.  As consideration for the purchase, the Company issued 500,000 shares of restricted common stock to Protegrity which it recorded as an intangible asset valued at $500,000 and granted Protegrity an earnout of a percentage of the revenue the Company receives in the states of Florida, Kentucky and Missouri over the next five years.  The Company intends to utilize this purchase to expand its sales and marketing strategies in those states and further strengthen its position in the southeastern United States. This purchase brought the total number of providers within the Companys network to in excess of 300,000 physicians, hospitals and ancillary healthcare facilities in all 50 states and the District of Columbia.  Costs associated with developing the Companys networks are charged to expense when incurred and are included in selling, general and administrative expenses.



Revenue for the twelve months ended March 31, 2007, was $2,629,144, which was $438,416 or 14.3%, less than the revenue for the twelve months ended March 31, 2006, of $3,067,560.  The decrease in revenue was primarily attributable to several clients significant loss of customers and decreased access to the Companys network of healthcare providers. These losses were somewhat offset by adding new clients and stronger network utilization by other existing clients.



With respect to the source of the Company's revenue, the Company had four clients, each which provided more than 10% of the Company's revenue for the year ended March 31, 2007.  Those clients were Fair Isaacs Corporation, which contributed 17.6%, MCMC LLC, which contributed 12.2%, Stratacare which contributed 11.1% and Amerisys which contributed 11.7% of total revenue.



Cost of sales.  The Company's cost of sales consists of fees paid for access to third party provider networks, or network partners, fees paid for sales commissions to non-employee sales personnel and commission overwrites.  Cost of sales decreased by $199,391, or 21.8%, from $914,213 during the twelve months ended March 31, 2006, to $714,822 during the twelve months ended March 31, 2007. The primary reason for the decrease was the related to the decrease in revenues. Total fees incurred for the year ended March 31, 2007 for access to third party provider networks were $459,045 and sales commissions to non-employee sales personnel and commission overwrites totaled $255,777. Access fees to third party provider networks and commissions incurred for the year ended March 31, 2006 totaled $699,138 and $215,075, respectively. Fees incurred for access to third party provider networks are based on a percentage of the Companys revenue from using such network.  Sales commissions and commission overwrites paid by the Company are based on a percentage of revenue billed and collected.



During September 1998, the Company acquired Newton Healthcare Network, LLC from Bannon Energy Incorporated (Bannon) of which Robert D. Johnson, a former director of the Company, was sole owner of Bannon.  In accordance with the purchase and sale agreement, Bannon receives a commission overwrite of 2% of the gross revenue attributable to Rockport Community Network, Inc.  For the twelve months ended March 31, 2007, Bannon earned $49,528. On May 15, 2007, Bannon agreed with the Company and RCN to terminate the Overwrite Obligation upon consummation of the Stock Purchase in exchange for $180,000.



Gross profit.  The Company's gross profit decreased by $239,025 from $2,153,347 during the twelve months ended March 31, 2006, to $1,914,322 during the twelve months ended March 31, 2007.  Gross profit as a percentage of sales was 72.8% for the current year period and 70.2% for the prior year period.  The increase in gross profit was attributable to the decrease in access fees incurred to third party provider networks due to decreased utilization in those networks.



Selling, general and administrative expenses.  Selling, general and administrative expenses decreased by $438,377 from $2,397,551 during the twelve months ended March 31, 2006, to $1,959,174 during the twelve months ended March 31, 2007.







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·

Payroll and related expenses decreased from $1,765,558 during the twelve months ended March 31, 2006, to $1,474,530 during the twelve months ended March 31, 2007.  The primary reason for the decrease was due to the resignation of a Company executive in February 2006. The position has not been filled as of March 31, 2007. In addition, the Company incurred $3,113 in non-cash expense for stock options during the current twelve month period.



·

Professional services, which are comprised of accounting and audit, legal, investor relations, consulting and other professional fees, decreased from $216,121 during the twelve months ended March 31, 2006, to $144,591 during the twelve months ended March 31, 2007. The primary component of the decrease was less usage of consulting services.



·

Total office administration expenses increased from $285,165 from March 31, 2006 to $288,423 for the year ended March 31, 2007.



Net loss.  The Company had a net income for the twelve months ended March 31, 2007, of $79,366, or $0.01 per share (basic and diluted), compared with a net loss of $453,299, or $0.03 per share (basic and diluted), for the twelve months ended March 31, 2006.  As discussed above, the primary components, which resulted in the loss for the twelve months ended March 31, 2006, were a decrease in utilization of the Companys provider network by the Companys clients, the loss of selected clients and the loss of customers by some of the Companys significant clients and an increase in operating expenses.



Liquidity and Capital Resources



The following summary table presents comparative cash flows of the Company for the twelve month periods ended March 31, 2007 and 2006:



|                                          |      |          |      |   |         
|----------------------------------------- | ---- | -------- | ---- | - | --------
|                                          | 2007 |          | 2006
|Net cash used in operating activities     | $    | (58,157) |      | $ | (54,321)
|Net cash used in investing activities     | $    | (649)    |      | $ | (15,151)
|Net cash provided by financing activities | $    | 35,944   |      | $ | 91,779  



Changes in cash flow.  The Company currently manages the payment of its current liabilities and other obligations on a monthly basis, as cash becomes available.  Net cash used in operating activities for the twelve months ended March 31, 2007, was $58,157 compared with net cash used in operating activities of $54,321 for the twelve months ended March 31, 2006. The primary reason for the decrease in negative cash flow from operations was the decrease in net loss for the current fiscal year and the increase in the deferred tax benefit.



Liquidity and capital resources.  The Company has funded its operations through the sale of Company common stock, borrowing funds from outside sources and conversion of employee, director and shareholder debt into restricted common stock.  At March 31, 2007, the Company had available cash in non-restrictive accounts of $66,269 and negative working capital of $157,413.

Due to our financial condition, debt repayment obligations, and the inability to continue our ongoing operations with our current cash flow, along with other factors including our inability to raise additional debt or equity capital on terms we feel commercially reasonable, our Board of Directors deemed it advisable and in the best interests of Rockport and our stockholders to enter into the Stock Purchase Agreement with Nexus Asset Acquisition Co.  On July 2, 2007 we completed the sale of our wholly owned subsidiary Rockport Community Network, Inc. to Nexus. The sale resulted in the sale of substantially all of Rockports assets. In consideration for the Stock Purchase, Nexus paid Rockport a purchase price of $2,101,149.98. In addition, Nexus agreed to assume certain liabilities related to Rockports healthcare management business and the payment of Rockports expenses related to the Stock Purchase.  Pursuant to the Purchase Agreement, a portion of the purchase price was used to repay substantially all of Rockports outstanding note payables and other outstanding obligations, including outstanding note payables and accrued expenses and fees payable to certain of our directors and officers.  Rockport presently expects that after payment of the foregoing amounts it will retain approximately $550,000 of the purchase price, from which it intends to make a dividend to its stockholders.





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As of July 2, 2007, we have no future sources of revenue to fund our operations. Our Board of Directors is evaluating several possible options, including a possible transaction in which we sell or merge our public shell company to or with a private operating business whereby our stockholders would retain some ownership interest in the surviving public corporation. To date, we have not entered into any agreements with any parties to complete such a transaction, and, should our Board determine to pursue such a transaction, there is no assurance that we will be able to find a potential suitor on terms favorable to us, if at all.



Off-Balance Sheet Arrangements



On July 7, 2003, the Company purchased the healthcare provider contracts from Protegrity services for 500,000 shares of the Companys common stock.  The Company committed to repurchase the shares for $1.00 per share if Protegrity has not been able to realize this amount by July 2008.  If Protegrity has not sold its shares of Rockport by July 2008, the Company agreed to purchase from Protegrity at a price of $1.00 per share all of the remaining outstanding shares then owned by Protegrity.  As the conditioned redemption of these shares is not within the control of the Company, the stock issuance has been reflected as Temporary Equity. We are currently in negotiations with Protegrity and Holdings to agree that 1) upon consummation of the Stock Purchase we may redeem the 500,000 shares of Common Stock for $500,000; 2) the Company will pay to Protegrity the earnout fee set forth in the asset purchase agreement through the closing date; and 3) the Company has asked Protegrity to waive the remainder of the earn-out fee.



New Accounting Pronouncements



In June 2006, the Financial Accounting Standards Board issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes(FIN 48). FIN 48 clarifies the application of SFAS No. 109, Accounting for Income Taxes, by establishing a threshold condition that a tax position must meet for any part of the benefit of that position to be recognized in the financial statements. In addition to recognition, FIN 48 provides guidance concerning measurement, derecognition, classification and disclosure of tax positions. FIN 48 is effective for fiscal years beginning after December 15, 2006; accordingly, the Company will adopt FIN 48 effective as of January 1, 2007. Currently, the Company does not anticipate that the adoption of FIN 48 will have a material impact on its effective tax rate.



In September 2006, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) AUG AIR-1  Accounting for Planned Major Maintenance Activities. FSP AUG AIR-1 prohibits the use of the accrue-in-advance method of accounting for planned major maintenance activities because it results in the recognition of a liability in a period prior to the occurrence of the transaction or event obligating the entity. FSP AUG AIR-1 is effective for fiscal years beginning after December 15, 2006, and its guidance is applicable to entities in all industries. The Company will adopt the guidance in FSP AUG-AIR-1 as of January 1, 2007. The Company is currently evaluating the impact that the adoption of this guidance will have on its financial position and results of operations.



In September 2006, the Securities and Exchange Commission staff issued Staff Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.SAB 108 provides guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. SAB 108 established a dual approach that requires quantification of errors under two methods: (1) roll-over method which quantifies the amount by which the current year income statement is misstated, and (2) the iron curtain method which quantifies the error as the cumulative amount by which the current year balance sheet is misstated. In some situations, companies will be required to record errors that occurred in prior years even though those errors were immaterial for each year in which they arose. Companies may choose to either restate all previously presented financial statements or record the cumulative effect of such errors as an adjustment to retained earnings at the beginning of the period in which SAB 108 is applied. SAB 108 is effective for fiscal years ending after November 15, 2006. The adoption of this pronouncement did not have an impact on the Companys financial position or results of operations.



In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157), which is intended to increase consistency and comparability in fair value measurements by defining fair value, establishing a framework for measuring fair value and expanding disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company will adopt SFAS 157 on January 1, 2008, and has not yet determined the impact, if any, on its consolidated financial statements.





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ITEM 7.  FINANCIAL STATEMENTS



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM









The Board of Directors

Rockport Healthcare Group, Inc.

Houston, Texas



We have audited the accompanying consolidated balance sheet of Rockport Healthcare Group, Inc. and Subsidiaries as of March 31, 2007, and the related consolidated statement of operations, changes in shareholders deficit and cash flows for the year then ended.  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 audit.



We conducted our audit in accordance with the auditing standards of the Public Accounting Oversight 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 that our audit provide a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Rockport Healthcare Group, Inc. and Subsidiaries as of March 31, 2007 and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.



The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 9 to the financial statements, the Company has suffered recurring losses from operations and its total liabilities exceed its total assets.  This raises substantial doubt about the Companys ability to continue as a going concern.  Managements plans in regard to these matters are also described in Note 9.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.





Thomas Leger & Co., L.L.P.

Houston, Texas

July 16, 2007





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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM









The Board of Directors

Rockport Healthcare Group, Inc.

Houston, Texas



We have audited the accompanying consolidated balance sheet of Rockport Healthcare Group, Inc. and Subsidiaries as of March 31, 2006, and the related consolidated statement of operations, changes in shareholders deficit and cash flows for the year then ended.  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 audit.



We conducted our audit in accordance with the auditing standards of the Public Accounting Oversight 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 that our audit provide a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Rockport Healthcare Group, Inc. and Subsidiaries as of March 31, 2006 and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.



The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 9 to the financial statements, the Company has suffered recurring losses from operations and its total liabilities exceed its total assets.  This raises substantial doubt about the Companys ability to continue as a going concern.  Managements plans in regard to these matters are also described in Note 9.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.







Hein & Associates LLP

Houston, Texas

June 23, 2006









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ROCKPORT HEALTHCARE GROUP, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                               |           |             |      |   |            
|---------------------------------------------------------------------------------------------------------------------------------------------- | --------- | ----------- | ---- | - | -----------
|                                                                                                                                               | March 31,
|                                                                                                                                               | 2007      |             | 2006
|ASSETS                                                                                                                                        
|Current assets:                                                                                                                                |           |             |      |   |            
|Cash                                                                                                                                           | $         | 66,269      |      | $ | 89,131     
|Accounts receivable, net of allowance of $50,000  at
March 31, 2007 and 2006, respectively                                                     |           | 633,554     |      |   | 663,279    
|Prepaid expenses                                                                                                                               |           | -           |      |   | 1,278      
|Deferred tax asset                                                                                                                             |           | 174,760     |      |   | -          
|Total current assets                                                                                                                           |           | 874,583     |      |   | 753,688    
|Property and equipment:                                                                                                                        |           |             |      |   |            
|Office furniture and equipment                                                                                                                 |           | 43,838      |      |   | 43,838     
|Computer equipment and software                                                                                                                |           | 134,593     |      |   | 133,944    
|Telephone equipment                                                                                                                            |           | 15,844      |      |   | 15,844     
|                                                                                                                                               |           | 194,275     |      |   | 193,626    
|Less accumulated depreciation                                                                                                                  |           | (183,114)   |      |   | (169,630)  
|Net property and equipment                                                                                                                     |           | 11,161      |      |   | 23,996     
|Other assets:                                                                                                                                  |           |             |      |   |            
|Deposits                                                                                                                                       |           | 8,915       |      |   | 8,915      
|Intangible assets, net                                                                                                                         |           | 312,500     |      |   | 362,500    
|                                                                                                                                               |           | 321,415     |      |   | 371,415    
|Total assets                                                                                                                                   | $         | 1,207,159   |      | $ | 1,149,099  
|                                                                                                                                               |           |             |      |   |            
|LIABILITIES AND SHAREHOLDERS' DEFICIT                                                                                                         
|Current liabilities:                                                                                                                           |           |             |      |   |            
|Accounts payable, trade                                                                                                                        | $         | 490,938     |      | $ | 490,004    
|Due to directors, officers and employees                                                                                                       |           | 302,593     |      |   | 234,478    
|Other current liabilities                                                                                                                      |           | 238,465     |      |   | 367,877    
|Total current liabilities                                                                                                                      |           | 1,031,996   |      |   | 1,092,359  
|Long-term debt                                                                                                                                 |           | 1,492,623   |      |   | 1,456,679  
|Commitments and contingencies (Note 4)                                                                                                         |           |             |      |   |            
|Temporary equity:                                                                                                                              |           |             |      |   |            
|Redeemable common stock, 500,000 shares issued and outstanding at March 31, 2007
and 2005, respectively                                        |           | 500,000     |      |   | 500,000    
|Shareholders' deficit:                                                                                                                         |           |             |      |   |            
|Preferred stock, $.001 par value, 1,000,000 shares authorized, none issued                                                                     |           | --          |      |   | --         
|Common stock, $.001 par value, 50,000,000 shares authorized, 14,739,884
shares issued and outstanding at March 31, 2007 and 2006, respectively |           | 14,740      |      |   | 14,740     
|Additional paid-in capital                                                                                                                     |           | 6,479,154   |      |   | 6,476,041  
|Accumulated deficit                                                                                                                            |           | (8,311,354) |      |   | (8,390,720)
|Total shareholders deficit                                                                                                                    |           | (1,817,460) |      |   | (1,899,939)
|Total liabilities and shareholders' deficit                                                                                                    | $         | 1,207,159   |      | $ | 1,149,099  





See accompanying notes to consolidated financial statements.













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ROCKPORT HEALTHCARE GROUP, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED MARCH 31, 2007 AND 2006





|                                                      |      |            |      |   |           
|----------------------------------------------------- | ---- | ---------- | ---- | - | ----------
|                                                      | 2007 |            | 2006
|                                                      |      |            |      |   |           
|Revenue                                               | $    | 2,629,144  |      | $ | 3,067,560 
|Cost of sales                                         |      | 714,822    |      |   | 914,213   
|Gross profit                                          |      | 1,914,322  |      |   | 2,153,347 
|                                                      |      |            |      |   |           
|Operating expenses:                                   |      |            |      |   |           
|Selling, general and administrative expenses:         |      |            |      |   |           
|Payroll and related expenses                          |      | 1,474,530  |      |   | 1,765,558 
|Stock option expense                                  |      | 3,113      |      |   | -         
|Office administration                                 |      | 288,423    |      |   | 285,165   
|Professional services                                 |      | 144,591    |      |   | 216,121   
|Other                                                 |      | 48,517     |      |   | 130,707   
|Total selling, general and administrative expenses    |      | 1,959,174  |      |   | 2,397,551 
|Depreciation and amortization                         |      | 63,485     |      |   | 63,581    
|Total operating expenses                              |      | 2,022,659  |      |   | 2,461,132 
|                                                      |      |            |      |   |           
|Loss from operations                                  |      | (108,337)  |      |   | (307,785) 
|Write-down liabilities to fair market value           |      | (168,515)  |      |   | -         
|Interest, net                                         |      | 155,572    |      |   | 145,514   
|Net loss before income taxes                          |      | (95,394)   |      |   | (453,299) 
|Income tax expense (benefit)                          |      | (174,760)  |      |   | -         
|Net income (loss)                                     | $    | 79,366     |      | $ | (453,299) 
|                                                      |      |            |      |   |           
|Net income (loss) per share:                          |      |            |      |   |           
|Basic and diluted                                     | $    | 0.01       |      | $ | (0.03)    
|                                                      |      |            |      |   |           
|Weighted average number of common shares outstanding: |      |            |      |   |           
|Basic and diluted                                     |      | 15,239,884 |      |   | 15,186,229





See accompanying notes to consolidated financial statements.







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ROCKPORT HEALTHCARE GROUP, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS DEFICIT

FOR THE YEARS ENDED MARCH 31, 2007 AND 2006







|                          |              |  |         |        |            |             |           |               |  |         |             |  |   |            
|------------------------- | ------------ |  | ------- | ------ | ---------- | ----------- | --------- | ------------- |  | ------- | ----------- |  | - | -----------
|                          |              |  |         |        | Additional |             |           |               |  | Total  
|                          | Common Stock |  | Paid-in |        |            | Accumulated |           | Shareholders'
|                          | Shares       |  | Amount  |        | Capital    |             |           | Deficit       |  | Deficit
|Balances March 31, 2005   | 14,525,982   |  | $       | 14,526 |            | $           | 6,466,053 |               |  | $       | (7,937,421) |  | $ | (1,456,842)
|Stock issued for services | 213,902      |  |         | 214    |            |             | 9,989     |               |  |         | --          |  |   | 10,202     
|Net loss                  | --           |  |         | --     |            |             | --        |               |  |         | (453,299)   |  |   | (453,299)  
|Balances March 31, 2006   | 14,739,884   |  | $       | 14,740 |            | $           | 6,476,041 |               |  | $       | (8,390,720) |  | $ | (1,899,939)
|Value of stock options    | --           |  |         | --     |            |             | 3,113     |               |  |         | --          |  |   | 3,113      
|Net income                | --           |  |         | --     |            |             | --        |               |  |         | 79,366      |  |   | 79,366     
|Balances March 31, 2007   | 14,739,884   |  | $       | 14,740 |            | $           | 6,479,154 |               |  | $       | (8,311,354) |  | $ | (1,817,460)





See accompanying notes to consolidated financial statements.







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ROCKPORT HEALTHCARE GROUP, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED MARCH 31, 2007 AND 2006



|                                                                                 |      |           |      |   |          
|-------------------------------------------------------------------------------- | ---- | --------- | ---- | - | ---------
|                                                                                 | 2007 |           | 2006
|Cash flows from operating activities:                                            |      |           |      |   |          
|Net income (loss)                                                                | $    | 79,366    |      | $ | (453,299)
|Adjustments to reconcile net income (loss) to cash
used in operating activities: |      |           |      |   |          
|Depreciation                                                                     |      | 13,485    |      |   | 13,581   
|Amortization                                                                     |      | 50,000    |      |   | 50,000   
|Liabilities write-down                                                           |      | (168,515) |      |   | --       
|Deferred tax asset                                                               |      | (174,760) |      |   | --       
|Value of stock options                                                           |      | 3,113     |      |   | --       
|Issuance of stock for services                                                   |      | --        |      |   | 10,202   
|Changes in assets and liabilities:                                               |      |           |      |   |          
|Accounts receivable  trade and other                                            |      | 29,724    |      |   | 64,464   
|Prepaid expenses and other                                                       |      | 1,278     |      |   | (39)     
|Accounts payable                                                                 |      | 934       |      |   | 112,010  
|Due to directors, officers and employees                                         |      | 68,115    |      |   | 95,058   
|Other current liabilities                                                        |      | 39,103    |      |   | 53,702   
|Cash used in operating activities                                                |      | (58,157)  |      |   | (54,321) 
|                                                                                 |      |           |      |   |          
|Cash flows from investing activities:                                            |      |           |      |   |          
|Purchase of fixed assets                                                         |      | (649)     |      |   | (15,151) 
|Cash used in investing activities                                                |      | (649)     |      |   | (15,151) 
|                                                                                 |      |           |      |   |          
|Cash flows from financing activities:                                            |      |           |      |   |          
|Interest accrued on long-term debt                                               |      | --        |      |   | 97,315   
|(Repayment) proceeds from notes payable                                          |      | 35,944    |      |   | (5,536)  
|Cash provided by financing activities                                            |      | 35,944    |      |   | 91,779   
|Net increase (decrease) in cash                                                  |      | (22,862)  |      |   | 22,307   
|Cash and cash equivalents, beginning of year                                     |      | 89,131    |      |   | 66,824   
|Cash and cash equivalents, end of year                                           | $    | 66,269    |      | $ | 89,131   
|                                                                                 |      |           |      |   |          
|Supplemental cash flow information:                                              |      |           |      |   |          
|Interest paid                                                                    | $    | 47,544    |      | $ | 48,119   





See accompanying notes to consolidated financial statements.







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ROCKPORT HEALTHCARE GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2007



Note 1.

Organization and Nature of Business



Rockport Healthcare Group, Inc. (Rockport or the Company) was incorporated in the State of Delaware on May 4, 1992, as Protokopus Corporation. The Company had no operating history other than organizational matters until December 17, 1997.  On December 17, 1997, the Company acquired all of the issued and outstanding common stock of The Rockport Group of Texas, Inc. (Rockport Texas), a Nevada corporation, in a business combination accounted for as a reverse acquisition.  Pursuant to an Agreement and Plan of Reorganization dated December 12, 1997, between the Company and Rockport Texas, each outstanding share of common stock of Rockport Texas was converted to the right to receive 961.6212 shares of common stock of the Company.  On January 18, 1998, the Company changed its name from Protokopus Corporation to Rockport Healthcare Group, Inc.



Rockport is a management company dedicated to developing, operating and managing networks consisting of healthcare providers and medical suppliers that serve employees with work-related injuries and illnesses.  Rockport offers access to a comprehensive healthcare network at a local, state or national level for its clients and their customers.  Typically, Rockports clients are property and casualty insurance companies, employers, bill review/medical cost containment companies, managed care organizations, software/bill review companies and third party administrators.



The Company contracts with physicians, hospitals and ancillary healthcare providers at rates below the maximum allowed by applicable state fee schedules or if there is no state fee schedule, rates below usual and customary charges for work-related injuries and illnesses.  The Company generates revenue by receiving as a fee, a percentage of the medical cost savings realized by its clients.  The medical cost savings realized by its clients is the difference between the maximum rate allowed for workers compensation claims in accordance with the state allowed fee schedules or usual and customary charges and the discounted rates negotiated by the Company with its healthcare providers.



The Company has contracts with healthcare providers and/or network partners in all fifty states and the District of Columbia.  The Company currently has in excess of 300,000 healthcare providers nationwide that serve its clients and their customers for their injured employees care.  Should a client or their customer have particular needs in an under-served market, Rockport or its network partner has a skilled team of experienced network development personnel capable of custom building the under-served market for the client.



Note 2.

Summary of Significant Accounting Policies



a)

Consolidation



As of March 31, 2007, the Company has three wholly owned subsidiaries: Rockport Community Network, Inc., Rockport Group of Texas, Inc. and Rockport Preferred, Inc.  Rockport Community Network, Inc. (RCN) was incorporated in the State of Nevada on November 14, 1997.  Rockport Group of Texas, Inc. (RGT) was incorporated in the State of Nevada on July 23, 1997.  RCN and RGT, for accounting purposes, are solely disbursing entities for the Company and have no business operations.  RCN prepares and issues invoices to the Companys clients, collects accounts receivable and issues checks to the Companys network partners for network access fees, to outside sales personnel for sales commissions and for commission overwrites.  RGT processes payroll and pays payroll costs and other selling, general and administrative expenses on behalf of the Company.  Rockport Preferred, Inc. is a dormant subsidiary, which has no ongoing operations.  All material inter-company balances and inter-company transactions have been eliminated for the purpose of presenting the accompanying audited consolidated financial statements.



b)

Cash and Cash Equivalents



Cash and cash equivalents consist of cash on hand, time deposits and liquid debt investments with original maturities of three months or less at the time of purchase.







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c)

Property and Equipment



Property and equipment are stated at cost.  Depreciation is computed on the straight-line method over the estimated economic lives of the assets, which range from three to seven years.



d)

Income Taxes



The Company accounts for income taxes on the liability method, under which the amount of deferred income taxes is based on the tax effects of the differences between the financial and income tax basis of the Companys assets, liabilities and operating loss carryforwards at the balance sheet date based upon existing tax laws.  Deferred tax assets are recognized if it is more likely than not that the future income tax benefit will be realized.  Since utilization of net operating loss carryforwards is not assured, no benefit for future offset of taxable income has been recognized in the accompanying financial statements.



e)

Long-lived Assets



The Company reviews for the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount.



The Company performed a review of the provider contracts it had acquired from Protegrity and based upon the projected estimated future cash flows from the provider contracts acquired determined an impairment was not required as of such date.



f)

Use of Estimates



The preparation of the Companys financial statements in conformity with accounting principles generally accepted in the United States of America requires the Companys management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes.  Actual results could differ from those estimates.



g)

Provider Contracts



Healthcare provider contracts are contracts between a preferred provider organization (PPO) and physicians, hospitals and ancillary healthcare providers which, among other things, provide a discount to a client when an injured employee is treated by the healthcare provider.  The discounts the PPO network obtains from the healthcare providers are normally less than the maximum rate allowed by applicable state fee schedules, or if there is no state fee schedule, at rates below usual and customary allowables for work-related injuries and illnesses.  Effective July 7, 2003, the Company purchased all healthcare provider agreements from Protegrity Services, Inc., (Protegrity), a third party administrator (TPA) and managed care organization.  The Company was acquiring healthcare provider agreements in order to expand the size of its network.  This acquisition did not result in the acquisition of clients or revenue.  This acquisition of provider contracts was funded with the issuance of 500,000 shares of Company common stock valued at $500,000, and because the Company would earn revenue in the future from the acquired provider agreements, the Company recorded the value of the stock issued as an intangible asset.  Amounts paid for provider agreements are being amortized to expense on the straight-line method over the estimated useful lives of the agreements of ten years.  If Protegrity has not sold its shares of Rockport by July 2008, the Company agreed to purchase from Protegrity at a price of $1.00 per share  all of the remaining outstanding shares then owned by Protegrity.  As the conditioned redemption of these shares is not within the control of the Company, the stock issuance has been reflected as Temporary Equity.  In addition to the stock issuance, Protegrity obtained an earnout fee equal to a percentage of the Companys gross revenue billed and collected in the states of Florida, Kentucky and Missouri for a period of five years following the effective date of the agreement.  The Company has not capitalized any additional amounts as a result of this earnout fee.  Accumulated amortization aggregated $187,500 at March 31, 2007 pursuant to this acquisition.  The remaining amortization for this intangible asset will be $50,000 per year through fiscal year 2013 and $12,500 in fiscal year 2014.





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h)

Comprehensive Income (Loss)



Comprehensive income is defined as all changes in shareholders equity, exclusive of transactions with owners, such as capital instruments.  Comprehensive income includes net income or loss, changes in certain assets and liabilities that are reported directly in equity such as translation adjustments on investments in foreign subsidiaries, changes in market value of certain investments in securities and certain changes in minimum pension liabilities.  The Companys comprehensive loss was equal to its net loss for the years ended March 31, 2007 and 2006.



i)

Revenue Recognition



Revenue is recognized when earned.  Revenue is earned at such time as the Companys contractual discounts with its healthcare providers are applied to its clients medical bills, which produces a savings.  The Companys revenue is a contractual percentage of the savings realized.  At the time the contractual discounts are applied, the revenue is realized and collection is reasonably assured.



j)

Loss Per Share



The Company computes net loss per share by dividing income or loss applicable to common shareholders by the weighted average number of shares of the Companys common stock outstanding during the period.  Diluted net income per share is determined in the same manner as basic net income per share except that the number of shares is increased assuming exercise of dilutive stock options and warrants using the treasury stock method and dilutive conversion of the Companys convertible debt.



During the year ended March 31, 2007, 170,000 stock options exercisable at prices ranging from $0.19 to $0.33 per share and 1,000,000 warrants exercisable at $0.345 per share were excluded from the calculation of diluted earnings per share as their exercise prices were below the average stock price for the year, and the Companys net loss would make those items anti-dilutive.  At March 31, 2007, the Company had $887,380 principal amount of convertible debt and $377,749 of accrued interest on the convertible debt, which debt and interest is convertible into the Companys common stock at prices ranging from $0.18 to $0.36 per share. 3,828,540 shares were excluded from diluted earnings per share calculation as their inclusion would be anti-dilutive.



k)

Stock Compensation Plan



The Company maintains stock-based compensation plans described as follows:



On August 5, 2002, the Board of Directors of the Company adopted the 2002 Stock Option Plan (the 2002 Plan).  The Shareholders of the Company approved the 2002 Plan on October 9, 2002.  The 2002 Plan provides for the granting of awards up to 1,000,000 shares of the Companys common stock to key employees, directors and other persons who have contributed or are contributing to the Companys success.  Awards under the 2002 Plan will be granted as determined by the Companys Board of Directors.  The options that may be granted pursuant to the 2002 Plan may be either incentive stock options qualifying for beneficial tax treatment for the recipient or nonqualified stock options.  As of March 31, 2007, non-qualified stock options to purchase 120,000 shares exercisable at $0.25 per share expiring in February 2009 and immediately exercisable were outstanding.



On December 7, 2000, the directors of the Company adopted the 2000 Long-Term Incentive Plan (the 2000 Plan).  The 2000 Plan was approved by the Companys shareholders at its annual shareholder meeting held in September 2001.  The 2000 Plan provides for the granting of awards of up to 1,000,000 shares of the Companys common stock to key employees, directors and other persons who have contributed or are contributing to the Companys success.  Awards under the 2000 Plan will be granted as determined by the Companys Board of Directors.  The options that may be granted pursuant to the 2000 Plan may be either incentive stock options qualifying for beneficial tax treatment for the recipient or nonqualified stock options.  The Companys board of directors extended the expiration date for all options originally expiring in December 2004 pursuant to the 2000 Plan to December 2006.  As of March 31, 2007, non-qualified stock options to purchase a total of 50,000 shares, 25,000 shares exercisable at $0.19 per share and 25,000 shares exercisable at $0.33 per share and immediately exercisable were outstanding.







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Prior to April 1, 2006, the Company accounted for these plans under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations as permitted by Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting for Stock-Based Compensation.  Substantially no expense associated with employee stock options was recognized prior to April 1, 2006 as all options granted under the plans had an exercise price equal to the market value of the underlying common stock on the date of the grant.



Effective April 1, 2006, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards No. 123 (R) (SFAS 123(R)), Share-Based Payment using the modified prospective transition method.  Under this transition method, compensation cost recognized on or after April 1, 2006 includes (a) compensation cost for all share-based payments granted prior to, but not yet vested as of April 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, and (b) compensation cost for all share-based payments granted on or after April 1, 2006, based on the grant date fair value estimated in accordance with SFAS No. 123 (R).  In accordance with this transition method, the Companys financial statements for the prior periods have not been restated to reflect, and do not include the impact of SFAS No. 123 (R).



During fiscal 2007, the Company recorded stock option compensation cost of $3,113.  Stock-based compensation expense on current year grants and all share-based payments granted prior to, but not yet vested as of April 1, 2007, are recorded on a straight-line basis over the vesting period directly to additional paid-in-capital. There were no stock options granted subsequent to March 31, 2006. There were 170,000 stock options outstanding at March 31, 2007. 1,398,900 stock options expired during the year ended March 31, 2007.



The following table shows what the Companys net earnings and earnings per share would have been using the fair value based method under SFAS No. 123 for the year ended March 31, 2007:



|                                                                                                  |   |        
|------------------------------------------------------------------------------------------------- | - | -------
|Net income as reported                                                                            | $ | 79,366 
|Add:  Stock-based employee compensation expense included in reported net income, net of taxes     |   | 3,113  
|Deduct:  Stock-based compensation expense determined under fair value based method for all awards |   | (3,113)
|                                                                                                  |   |        
|Pro forma net income                                                                              | $ | 79,366 
|                                                                                                  |   |        
|Net income per share  basic and diluted:                                                         |   |        
|As reported                                                                                       | $ | (0.01) 
|Pro forma in accordance with SFAS No. 123                                                         | $ | (0.01) 
|                                                                                                  |   |        

l)

Fair Value of Financial Instruments



The fair value of financial instruments, primarily accounts receivable, accounts payable and other current liabilities, closely approximate the carrying values of the instruments due to the short-term nature of such instruments.



m)

Reclassifications



Amounts in the prior years financial statements have been reclassified as necessary to conform to the current years presentation.







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n)

New Accounting Pronouncements



In June 2006, the Financial Accounting Standards Board issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes(FIN 48). FIN 48 clarifies the application of SFAS No. 109, Accounting for Income Taxes, by establishing a threshold condition that a tax position must meet for any part of the benefit of that position to be recognized in the financial statements. In addition to recognition, FIN 48 provides guidance concerning measurement, derecognition, classification and disclosure of tax positions. FIN 48 is effective for fiscal years beginning after December 15, 2006; accordingly, the Company will adopt FIN 48 effective as of January 1, 2007. Currently, the Company does not anticipate that the adoption of FIN 48 will have a material impact on its effective tax rate.



In September 2006, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) AUG AIR-1  Accounting for Planned Major Maintenance Activities. FSP AUG AIR-1 prohibits the use of the accrue-in-advance method of accounting for planned major maintenance activities because it results in the recognition of a liability in a period prior to the occurrence of the transaction or event obligating the entity. FSP AUG AIR-1 is effective for fiscal years beginning after December 15, 2006, and its guidance is applicable to entities in all industries. The Company will adopt the guidance in FSP AUG-AIR-1 as of January 1, 2007. The Company is currently evaluating the impact that the adoption of this guidance will have on its financial position and results of operations.



In September 2006, the Securities and Exchange Commission staff issued Staff Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.SAB 108 provides guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. SAB 108 established a dual approach that requires quantification of errors under two methods: (1) roll-over method which quantifies the amount by which the current year income statement is misstated, and (2) the iron curtain method which quantifies the error as the cumulative amount by which the current year balance sheet is misstated. In some situations, companies will be required to record errors that occurred in prior years even though those errors were immaterial for each year in which they arose. Companies may choose to either restate all previously presented financial statements or record the cumulative effect of such errors as an adjustment to retained earnings at the beginning of the period in which SAB 108 is applied. SAB 108 is effective for fiscal years ending after November 15, 2006. The adoption of this pronouncement did not have an impact on the Companys financial position or results of operations.



In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157), which is intended to increase consistency and comparability in fair value measurements by defining fair value, establishing a framework for measuring fair value and expanding disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company will adopt SFAS 157 on January 1, 2008, and has not yet determined the impact, if any, on its consolidated financial statements.







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Note 3.

Notes Payable



Notes payable consisted of the following at:

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |                |           |                |   |          
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | --------- | -------------- | - | ---------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | March 31,
2007 |           | March 31,
2006
|Convertible unsecured notes payable to a shareholder, with interest payable monthly at 15% per annum.  The notes are personally guaranteed by two officers of the Company.  On March 31, 2002, the Company renegotiated the terms of the notes which were originally convertible into Company common stock at an average conversion price of $1.50 per share and due April 1, 2003.  The notes are now convertible into Company common stock at any time prior to April 1, 2005 at a conversion price of $.36 per share and were due April 1, 2004.  On December 31, 2002, the due date of the notes was extended to April 1, 2006.  During June 2005 the Company obtained an extension on the due date of these notes to April 2007.  The Company issued 150,000 shares of its common stock in connection with these notes, the cost of which was recorded as loan fees and amortized using the interest yield method over the original term of the notes.                                                                                                                                                                                                                                                                                                                                                                                                      |  | $              | 122,380   |                | $ | 194,464  
|Unsecured note payable due to a director with interest at 8% per annum and principal and interest due April 1, 2004.  During June 2005 the Company renegotiated the due date of the note which is now due April 1, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                | 227,494   |                |   | 227,493  
|Three-year 10% convertible subordinated unsecured notes to a director due April 2007.  Interest is either accrued or paid quarterly, as determined by the Board of Directors.  The notes are convertible into Company common stock at conversion prices ranging from $.18 to $.36 per share anytime prior to their maturity in April 2007.  On December 31, 2002, the Company renegotiated the terms of $300,000 principal amount of these notes with Mr. Baldwin, a director of the Company, and extended the due date and conversion date to April 1, 2005, which has now been extended to April 2007.  On March 31, 2004, the Company issued $60,000 principal amount to Mr. Baldwin which is due now April 1, 2007 and is convertible into Company common stock at a conversion price of $.18 per share.  In June 2004, the Company retired $200,000 principal amount and accrued interest.  To raise the needed funds for the retirement, the Company issued Mr. Baldwin additional 10% convertible notes in the amount of $270,000 which notes are due April 2007 and which have a conversion price of $.20 per share.  In November 2004, the Company issued Mr. Baldwin additional 10% convertible notes in the amount of $135,000 to retire $100,000 principal amount due October 2004 which notes are due April 2007 and convertible at $.18 per share. |  |                | 765,000   |                |   | 765,000  
|Accrued interest due on long-term portion of three-year 10% convertible unsecured notes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                | 377,749   |                |   | 269,722  
|Total notes payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                | 1,492,623 |                |   | 1,456,679
|Less current maturities of long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                | --        |                |   | --       
|Long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | $              | 1,492,623 |                | $ | 1,456,679



See Note 4 Commitments and Contingencies for a discussion of financing provided by related parties.





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Note 4.

Commitments and Contingent Liabilities



One of the Companys subsidiaries has assumed leases for office space and equipment under operating leases expiring at various dates through 2011.  Management expects that in the normal course of business, leases will be renewed or replaced by similar leases.  Effective July 2, 2007, the Company transferred all leases to Nexus Asset Acquisition Co. The following table reflects the Companys lease obligations from March 31, 2007 through June 30, 2007:



|                     |   |       
|-------------------- | - | ------
|Year Ended March 31, |   |       
|2008                 |   | 41,238
|Total                | $ | 41,238



One of the Companys subsidiaries, Rockport Group of Texas, Inc., has issued 1,000 shares of its 8%, cumulative, non-participating preferred stock.  The stock is redeemable at the option of the Company at $200 per share and is redeemable out of future cash flows of the Company.  These shares are owned by a director of the Company and were issued prior to the reverse merger.



Mr. Baldwin, a director of the Company, has an engagement agreement with the Company effective April 1, 2001, whereby he earns a fee for performance of legal services of $250 per hour, with a minimum guaranteed payment of $5,000 per month.  Effective April 1, 2002, the agreement was amended and the minimum guaranteed payment was increased to $6,500 per month.  This agreement has a one-year term and automatically renews for one-year periods thereafter unless either party terminates the agreement within sixty days prior to the end of any annual period.  This agreement automatically renewed effective April 1, 2005.  During the years ended March 31, 2007 and 2006, Mr. Baldwin earned $58,500 and $78,000, respectively, from this agreement.



Note 5.

Stock Options and Warrants



Stock Option Plans



On August 5, 2002, the Board of Directors of the Company adopted the 2002 Stock Option Plan (the 2002 Plan).  The shareholders of the Company approved the 2002 Plan on October 9, 2002.  The 2002 Plan provides for the granting of awards of up to 1,000,000 shares of the Companys common stock to key employees, directors and other persons who have contributed or are contributing to the Companys success.  Awards under the 2002 Plan will be granted as determined by the Companys Board of Directors.  The options that may be granted pursuant to the 2002 Plan may be either incentive stock options qualifying for beneficial tax treatment for the recipient or nonqualified stock options. As of March 31, 2007, non-qualified stock options to purchase 120,000 shares exercisable at $0.25 per share expiring in February 2009 and immediately exercisable were outstanding.



On December 7, 2000, the directors of the Company adopted the 2000 Long-Term Incentive Plan (the 2000 Plan).  The 2000 Plan was approved by the Companys shareholders at its annual shareholder meeting held in September 2001.  The 2000 Plan provides for the granting of awards of up to 1,000,000 shares of the Companys common stock to key employees, directors and other persons who have contributed or are contributing to the Companys success.  Awards under the 2000 Plan will be granted as determined by the Companys Board of Directors.  The options that may be granted pursuant to the 2000 Plan may be either incentive stock options qualifying for beneficial tax treatment for the recipient or nonqualified stock options. As of March 31, 2007, non-qualified stock options to purchase a total of 50,000 shares, 25,000 shares exercisable at $0.19 per share and 25,000 shares exercisable at $0.33 per share and immediately exercisable were outstanding.





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Stock option activity during the periods indicated was as follows:



|                            |                  |  |                                 |     
|--------------------------- | ---------------- |  | ------------------------------- | ----
|                            | Number
of
Shares |  | Weighted
Average
Exercise
Price
|Outstanding, April 1, 2005  | 1,568,900        |  |                                 | 0.29
|Granted                     | --               |  |                                 | --  
|Exercised                   | --               |  |                                 | --  
|Forfeited                   | --               |  |                                 | --  
|Expired                     | --               |  |                                 | --  
|Outstanding, March 31, 2006 | 1,568,900        |  | $                               | 0.29
|Granted                     | --               |  |                                 | --  
|Exercised                   | --               |  |                                 | --  
|Forfeited                   | --               |  |                                 | --  
|Expired                     | 1,398,900        |  |                                 | --  
|Outstanding, March 31, 2007 | 170,000          |  | $                               | 0.25
|Exercisable, March 31, 2007 | --               |  |                                 | --  



As of March 31, 2007, the range of exercise prices was from $0.19 to $0.33 per share and the weighted average remaining contractual life of outstanding options was two years.



Stock Warrants



On November 26, 2001, in conjunction with a consulting services agreement with an individual, the Company issued warrants to purchase 1,000,000 shares of restricted common stock of the Company at any time until November 25, 2011, at a price of $.345 per share, the fair market value on the date of grant determined by the mean between the closing bid and asked price.  The consulting services agreement is for a period of ten years, however, the warrants issued pursuant to the consulting agreement vested immediately and are currently exercisable regardless of whether the consulting agreement is terminated prior to the expiration of its ten-year term.  Since the warrants are immediately exercisable, the Company has expensed the full amount of the fair value of the warrants issued as of the date of issuance, which was $345,000.  No warrants have been exercised as of March 31, 2007.  The fair value of the warrants was estimated at the date of grant using the Black-Scholes option pricing model with the following assumptions: risk free rate of 6%; volatility of 320%; no assumed dividend yield and an estimated life of three years.



Note 6.

Related Party Transactions



See Note 3 Notes Payable for a discussion of financing provided by Mr. Baldwin, chairman of the board and a director.



See Note 4 Commitments and Contingent Liabilities for a discussion of legal services provided by Mr. Baldwin.



Note 7.

Income Taxes



The following table sets forth a reconciliation of the statutory federal income tax for the year March 31, 2007.  The loss before taxes was $95,394 in 2007 and $453,299 in 2006.



|                                              |      |           |      |   |          
|--------------------------------------------- | ---- | --------- | ---- | - | ---------
|                                              | 2007 |           | 2006
|Income tax benefit computed at statutory rate | $    | (32,434)  |      | $ | (154,122)
|Accrual to cash conversion                    |      | 12,723    |      |   | 30,530   
|Increase(decrease) in valuation allowance     |      | (155,049) |      |   | 123,592  
|Tax benefit                                   | $    | (174,760) |      | $ | -        









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The Company will file a consolidated income tax return.



Deferred Income Taxes



The tax effects of the temporary differences between financial statement income and taxable income are recognized as deferred tax asset and liability as of March 31, 2007 is set below.



|                                 |           |             |      |   |            
|-------------------------------- | --------- | ----------- | ---- | - | -----------
|                                 | March 31,
|                                 | 2007      |             | 2006
|Deferred tax assets:             |           |             |      |   |            
|Net operating loss carryforwards | $         | 2,065,873   |      | $ | 2,046,162  
|Valuation allowance              |           | (1,891,113) |      |   | (2,046,162)
|Net deferred asset               | $         | 174,760     |      | $ | -          



At March 31, 2007, the Company has a net operating loss carryforward of approximately $6,076,098 which will begin to expire, if unused, beginning in 2015.  Future utilization of the net operating loss carryforwards will be limited by changes in the ownership of the Company under Section 382 of the Internal Revenue Code.  The Company estimates $5,038,000 of its net operating loss carryforward will be limited by Section 382.



Note 8.

Significant Concentration



Four clients accounted for approximately 17.6%, 12.2%, 11.7% and 11.1% of sales for the fiscal year ended March 31, 2007. No other clients represented more than 10% of sales of the Company for the fiscal year ended March 31, 2007.  These four clients represented 27.1%, 21.0%, 7.4% and 10.7%, respectively, of the Companys accounts receivable balance at March 31, 2007.



Two clients accounted for approximately 26.9% and 15.2% of sales for the fiscal year ended March 31, 2006. No other clients represented more than 10% of sales of the Company for the fiscal year ended March 31, 2006.  These two clients represented 27.8% and 21.7%, respectively, of the Companys accounts receivable balance at March 31, 2006.



Note 9.

Going Concern and Liquidity



The accompanying financial statements have been prepared assuming that Rockport Healthcare Group, Inc. will continue as a going concern.  The Company has suffered recurring losses from operations and its total liabilities exceed its total assets as of March 31, 2007.



The Company has funded its operations through the sale of Company common stock, borrowing funds from outside sources and conversion of employee, director and shareholder debt into restricted common stock.  At March 31, 2007, the Company had available cash in non-restrictive accounts of $66,592 and negative working capital of $157,413.  As of March 31, 2007, the Company had outstanding debt of: (a) $765,000 in principal amount in the form of 10% convertible notes, (b) $227,494 in principal amount in the form of an 8% note, and (c) $122,380 in principal amount in the form of a 15% convertible note.



10% convertible notes.  As of March 31, 2007, the Company had outstanding $765,000 principal amount in the form of 10% convertible notes, all of which was held by Mr. Baldwin, a director of the Company.  As of the date of this report, the Company has the following 10% convertible notes outstanding: (a) $135,000 in principal amount due April 2006 convertible at a price of $.18 per share; (b) $300,000 in principal amount due April 2006 convertible at a price of $.36 per share; (c) $60,000 in principal amount due April 2006 convertible at a price of $.18 per share; and (d) $270,000 in principal amount due April 2006 convertible at a price of $.20 per share. During June 2005 the Company obtained an extension on the due date of these notes to April 2007.



Interest on the 10% convertible notes is payable quarterly out of available cash flow from operations as determined by the Companys Board of Directors, or if not paid but accrued, will be paid at the next fiscal quarter or at maturity.  The conversion prices of the notes were calculated based on the average of the high bid and low asked stock quotations on the date of funding.





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Accrued debenture interest on the convertible debentures has been added to the principal of the debentures resulting in a reclassification of some of the accrued interest to long-term debt.



8% notes.  In November 2001 and in January 2002, the Company borrowed an aggregate of $100,000 from Mr. Baldwin.  In June 2002, the Company renegotiated the terms of the notes and added $93,000 of accrued consulting fees due and $34,493 of accrued overwrite fees due to the principal amount of the note.  In December 2002, the Company renegotiated the terms of the note and extended the due date to April 1, 2005 and in June 2004 extended the due date to April 1, 2006. During June 2005 the Company renegotiated the due date of the note which is now due April 1, 2007. This debt is accruing interest at 8% payable monthly, however, in accordance with a verbal agreement with the note holder, the Company ceased paying the interest on this note on October 1, 2003.



15% convertible notes.  In 1998, the Company borrowed $200,000 from a shareholder on two separate notes which were convertible into Company common stock with interest payable monthly at 15% per annum.  Two officers of the Company personally guarantee the notes.  In March 2002, the Company renegotiated the terms of the notes which were originally convertible into Company common stock at an average conversion price of $1.50 per share and were due April 1, 2003.  The notes have been modified on three occasions and are now convertible into Company common stock at a conversion price of $.36 per share and the due date and the conversion date of the notes is April 1, 2007. The balance of these notes was $122,380 as of March 31, 2007.



The Company has been seeking sources of financing to retire these notes, as it has no current means to pay the notes as they become due.  If the Company is unable to refinance these notes, it will be required to raise funds to retire the notes, or it will be in default of the notes.  The Company has no commitments for the needed funds to retire these notes, and the failure to raise such funds or refinance the notes could subject the Company to a claim by the note holders for repayment, which would materially adversely affect the Companys financial condition.



Note 10.

Subsequent Events



On July 2, 2007, Rockport Healthcare Group, Inc. completed the sale of its wholly owned subsidiary Rockport Community Network, Inc., a Nevada corporation pursuant to a Stock Purchase Agreement dated May 16, 2007 between Rockport and Nexus Asset Acquisition Co., a Delaware corporation (Nexus).  Rockport sold to Nexus 100% of the outstanding common stock of RCN (the Stock Purchase), which resulted in the sale of substantially all of Rockports assets.

In consideration for the Stock Purchase, Nexus paid Rockport a purchase price of $2,101,149.98.  In addition, Nexus agreed to assume certain liabilities related to Rockports healthcare management business and the payment of Rockports expenses related to the Stock Purchase.  There were no material relationships between Nexus and Rockport, or any of Rockports officers or directors.  Certain officers of Rockport have agreed to employment terms with an affiliate of Nexus upon closing of the Stock Purchase.

Pursuant to the Purchase Agreement, a portion of the purchase price was used to repay substantially all of Rockports outstanding note payables and other outstanding obligations, including outstanding note payables and accrued expenses and fees payable to certain of our directors and officers.  Rockport presently expects that after payment of the foregoing amounts it will retain approximately $550,000 of the purchase price, from which it intends to make a dividend to its stockholders. The record date for the determination of the stockholders entitled to such dividend has not been determined.





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



(a) On August 14, 2006, Rockport Healthcare Group, Inc. (the "Company") engaged Thomas Leger & Co., L.L.P. ("Thomas Leger") as the Company's independent accountants to audit the Company's consolidated financial statements for the year ending March 31, 2007. Hein & Associates LLP ("Hein"), who had been engaged as the Company's principal independent accountants since January 6, 2000 was dismissed on such date. Thomas Leger will also perform a review of the unaudited condensed quarterly financial statements to be included in the Company's quarterly reports on Form 10-QSB beginning with the June 30, 2006 Form 10-QSB.



(b) The decision to change the Company's independent accountants from Hein to Thomas Leger was made by the Company's Board of Directors.



(c) Hein's reports on the Company's consolidated financial statements during either of the two-year periods ended March 31, 2006 did not contain an adverse opinion or disclaimer opinion, nor were such reports qualified or modified as to uncertainty, audit scope or accounting principles, with the exception of a going concern disclaimer in the report dated June 23, 2006.



(d) During the two-year period ended March 31, 2006, and the subsequent interim period preceding such dismissal, the Company did not have any disagreements with Hein on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Hein, would have caused it to make a reference to the subject matter of the disagreements in connection with its reports.



(e) During the two-year period ended March 31, 2006 and the subsequent interim period preceding such dismissal, there were no "reportable events" (as hereinafter defined) requiring disclosure pursuant to Item 304(a)(1)(iv) of Regulation S-B. As used herein, the term "reportable event" means any of the items listed in paragraphs (a)(1)(iv)(B)(1)-(3) of Item 304 of Regulation S-B.



(f) During the two-year period ended March 31, 2006 and the subsequent interim period prior to Thomas Leger's engagement, neither the Company nor anyone on its behalf consulted Thomas Leger regarding either the application of accounting principles to a specified transaction, whether completed or proposed, or the type of audit opinion that might be rendered on the Company's consolidated financial statements, nor has Thomas Leger provided to the Company a written report or oral advice regarding such principles or audit opinion.



(g) The Company has requested that Hein furnish it with a letter addressed to the Securities and Exchange Commission stating whether or not it agrees with the above statements. A copy of the letter from Hein dated August 14, 2006 was filed as Exhibit 16 to Form 8-K filed on August 28, 2006.



ITEM 8A.  CONTROLS AND PROCEDURES.



Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in company reports filed or submitted under the Securities Exchange Act of 1934 (the Exchange Act) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commissions rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed under the Exchange Act is accumulated and communicated to management, including the Companys Chief Executive Officer and Chief Financial Officer (the Certifying Officers), as appropriate to allow timely decisions regarding required disclosure.







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Evaluation of disclosure controls and procedures. In connection with the audit of the Company's financial statements for the year ended March 31, 2007, the Company's president/chief executive officer conducted an evaluation regarding the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the evaluation of these controls and procedures and discussions with our independent accountants, our president/chief executive officer concluded that our determined that our disclosure controls and procedures were ineffective as of March 31, 2007. The president/chief executive officer determined that the Company did not maintain effective controls over the financial reporting process due to an insufficient complement of personnel with an appropriate level of accounting knowledge, experience and training in the application of generally accepted accounting principles commensurate with its financial reporting requirements and the complexity of the Company's operations and transactions. The Company did not maintain effective controls to ensure that there were adequate analysis, documentation, reconciliation and review of accounting records and supporting data and monitoring and oversight of the work performed by completeness of the consolidated financial statements in accordance with generally accepted accounting principles. Specifically, the Company did not have effective controls designed and in place over the consolidation of the financial statements of its subsidiaries, including the reconciliation of inter-company accounts and other expenses.



ITEM 8B.  OTHER INFORMATION



None



PART III



ITEM 9.  DIRECTORS AND EXECUTIVER OFFICERS OF REGISTRANT



As of July 2, 2007, the Companys directors and executive officers are as follows:



|     |  |     |  |            
|---- |  | --- |  | -----------
|Name |  | Age |  | Office Held



|              |  |    |  |                                              
|------------- |  | -- |  | ---------------------------------------------
|Harry M. Neer |  | 67 |  | Director, Chief Executive Officer, President,
|              |  |    |  | Chief Financial Officer and Treasurer        



|                |  |    |  |                      
|--------------- |  | -- |  | ---------------------
|John K. Baldwin |  | 73 |  | Chairman of the Board



|                |  |    |  |         
|--------------- |  | -- |  | --------
|Eric H. Kolstad |  | 46 |  | Director



|                |  |    |  |                                
|--------------- |  | -- |  | -------------------------------
|Gregory H. Neer |  | 39 |  | Sr. Vice President  Operations



|             |  |    |  |                                          
|------------ |  | -- |  | -----------------------------------------
|Mark C. Neer |  | 43 |  | Sr. Vice President  Business Development



Harry M. Neer.  Mr. Neer has been President, Chief Executive Officer and a director of Rockport since 1997. Mr. Neer has a Masters degree in Hospital Administration and his entire career has been in the healthcare delivery and managed healthcare industry.  Mr. Neers experience includes serving as President of USA Health Network, as Division Vice President of the Hospital Corporation of America and as President of the Presbyterian Hospital System in Oklahoma City, Oklahoma.  Prior to 1993, Mr. Neer was a consultant for USA Healthcare Network, Inc. and Columbia Hospital Systems.  From January 1993 to October 1994, Mr. Neer was President of USA Health Holding, a holding company for a group of managed healthcare companies.  From November 1994 to November 1997, Mr. Neer provided consulting services to the healthcare industry.  Mr. Neer is the father of Gregory H. Neer and Mark C. Neer. As a condition to closing, Harry Neer entered into an employment or consulting agreement with RCN or an affiliate of Nexus on terms reasonably satisfactory to Nexus.



John K. Baldwin.  Mr. Baldwin has been Chairman of the Board and a director of Rockport since 1997.  Mr. Baldwin is an attorney and possesses an MBA degree in finance.  During the period 1961 through 1970, Mr. Baldwin served as corporate counsel and held various executive positions with Litton Industries and Dart Industries. Thereafter, as an entrepreneur, he founded businesses that operated profitably in the areas of real estate development, direct sales to consumers and providing marketing and financial services to healthcare providers.  His wholly owned Athena Company, a direct marketing business, was sold to the Gillette Company in 1976.  In 1977, Mr. Baldwin co-founded and served as Vice Chairman of American Sterling Corporation that engaged in providing insurance and data processing services to major financial institutions.  This business was sold to Zurich Insurance Company in 1997.





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Eric H. Kolstad.  Mr. Kolstad has been a director of Rockport since March 2000.  Mr. Kolstad is currently an investment advisor with Capstone Investments, Newport Beach, California.  In 1985, Mr. Kolstad joined Merrill Lynchs Private Client Group in Newport Beach and then in 1997 joined Capstone Investments.  Mr. Kolstad, in addition to his Capstone responsibilities, is currently General Partner of Cristal Investments, LLC, the general partner of a hedge fund for accredited investors.



Gregory H. Neer.  Mr. Neer joined the Company in May 1997 as Director of MIS which ended March 2001 and was promoted to Senior Vice President - Operations effective as of April 2001.  Mr. Neers responsibilities include the development and maintenance of the Companys proprietary repricing software system.  Mr. Neer has in excess of seven years experience in information systems, sales and project management.  Through the past five years, Mr. Neer has improved and maximized companies resources through development of user-friendly interfaces including: Information System Consultant for Vauter Door Co. from August 1993 to January 1994, where he created and developed an interactive door manufacturing Windows based application while working closely with management and staffed employees to tailor the program to specific needs and Sales Engineer/Project Manager for Stewart & Stevenson Services from October 1994 to May 1997, where he created and integrated Microsoft Access applications to track, manage and analyze trends and the status of requests for quotes, business contracted and loss. As a condition to closing, Gregory Neer entered into an employment or consulting agreement with RCN or an affiliate of Nexus on terms reasonably satisfactory to Nexus.



Mark C. Neer.  Mr. Neer joined the Company in January 2000 as Vice President  Business Development which ended March 2001 and was promoted to Senior Vice President - Business Development effective as of April 2001.  Mr. Neer has a Bachelors degree in English Literature with a double minor in Business Administration and Psychology.  Mr. Neer has over thirteen years experience in physician practice management and healthcare consulting.  He served as Director of Regional Operations for CareSelect Group, Inc. from October 1996 to February 2000, a national physician practice management company.  Prior to CareSelect, Mr. Neer served as a principal and senior healthcare consultant for Tactical Integration, Inc. from June 1994 to October 1996, representing Baylor College of Medicine, OrNda Health Care Systems, Cigna Health Care, and Blue Cross/Blue Shield of Texas.  From 1988 to 1994, Mr. Neer served as the Administrator for a group of occupational medical clinics with responsibility for operating the facilities and developing the marketing programs. As a condition to closing, Mark Neer entered into an employment or consulting agreement with RCN or an affiliate of Nexus on terms reasonably satisfactory to Nexus.



Section 16(a) Beneficial Ownership Reporting Compliance



Section 16(a) of the Securities Exchange Act of 1934 requires the Companys directors, executive officers and persons who own beneficially more than ten percent of the common stock of the Company, to file reports of ownership and changes of ownership with the SEC.  Based solely on the reports received by the Company and on written representations from certain reporting persons, the Company believes that the directors, executive officers and greater than ten percent beneficial owners have complied with all applicable filing requirements during the last fiscal year.



Audit Committee



The Companys audit committee oversees its corporate accounting and financial reporting process.  Among other duties, it:



·

evaluates its independent auditors qualifications, independence and performance;

·

determines the engagement of the independent auditors;

·

approves the retention of its independent auditors to perform any proposed permissible non-audit services;

·

reviews its financial statements;

·

reviews its critical accounting policies and estimates;

·

oversees its internal audit function; and

·

discusses with management and the independent auditors the results of the annual audit and the review of its quarterly financial statements.







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The current members of the Company's audit committee are Mr. Kolstad, who is the committee chair, and Mr. Baldwin.  The Company's Board of Directors has determined that neither Messrs. Kolstad nor Baldwin qualifies as an "audit committee financial expert" as defined by the SEC in Item 401(e) of Regulation S-B.  However, the Company believes that each of the members of the Company's Board of Directors and the members of the Company's audit committee are collectively capable of analyzing and evaluating its financial statements and understanding internal controls and procedures for financial reporting.  In addition, the Company believes that retaining an independent director who would qualify as an "audit committee financial expert" would be overly costly and burdensome and is not currently warranted in its financial circumstances.



Code of Ethics



The Company has adopted a Code of Ethics that applies to all of its directors, officers (including its chief executive officer, chief financial officer, chief accounting officer and any person performing similar functions) and employees.



Stockholder Nominations Procedures



Stockholders, meeting the following requirements, who want to recommend a director candidate may do so in accordance with the Companys Bylaws and the following procedures established by the Board of Directors.  The Company will consider all director candidates recommended to the Board of Directors by shareholders owning at least 5% of the Companys outstanding shares at all times during the year preceding the date on which the recommendation is made that meet the qualifications established by the Board.  To make a nomination for director at an annual meeting, a written nomination solicitation notice must be received by the Board of Directors at the Companys principal executive office not less than 120 days before the date the Companys proxy statement was mailed to stockholders in connection with the Companys previous annual meeting.  The written nomination solicitation notice must contain the following material elements, as well as any other information reasonably requested by the Board of Directors:



·

the name and address, as they appear on the Companys books, of the stockholder giving the notice and of the beneficial owner, if any, on whose behalf the nomination is made;

·

a representation that the stockholder giving the notice is a holder of record of the Companys stock entitled to vote at the annual meeting and intends to appear in person or by proxy at the annual meeting to nominate the person or persons specified in the notice;

·

a complete biography of the nominee, as well as consents to permit the Company to complete any due diligence investigations to confirm the nominees background, as the Company believes to be appropriate;

·

a description of all litigation to which the nominee or any of his or her affiliates have been a party within the past ten years;

·

the disclosure of all special interests and all political and organizational affiliations of the nominees;

·

a signed, written statement from the director nominee as to why the director nominee wants to serve on the Companys Board, and why the director nominee believes that he or she is qualified to serve;

·

a description of all arrangements or understandings between or among any of the stockholders giving the notice, the beneficial owner, if any, on whose behalf the notice is given, each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder giving the notice;

·

such other information regarding each nominee proposed by the stockholder giving the notice as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission; and

·

the signed consent of each nominee to serve as a director of the Company if so elected.



In considering director candidates, the Board of Directors will consider such factors as it deems appropriate to assist in developing a board and committees that are diverse in nature and comprised of experienced and seasoned advisors.  Each director nominee is evaluated in the context of the full Boards qualifications as a whole, with the objective of establishing a Board that can best perpetuate the success of the Companys business and represent shareholder interests through the exercise of sound judgment.  Each director nominee will be evaluated considering the relevance to the Company of the director nominees respective skills and experience, which must be complimentary to the skills and experience of the other members of the Board.







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ITEM 10.  EXECUTIVE COMPENSATION



The following table sets forth in summary form the compensation received during each of the last three successive completed fiscal years by the Companys named executive officers:



SUMMARY COMPENSATION TABLE



|                                      |  |      |  |        |         |       |   |     |        |        |        |              |       |    |  |   |        
|------------------------------------- |  | ---- |  | ------ | ------- | ----- | - | --- | ------ | ------ | ------ | ------------ | ----- | -- |  | - | -------
|                                      |  |      |  |        |         |       |   |     |        | STOCK  |        |              |       |    |  |  
|                                      |  |      |  | SALARY |         |       |   |     | AWARDS |        | OPTION |              | TOTAL
|NAME AND                              |  |      |  | (1)    |         | BONUS |   | (2) |        | AWARDS |        | COMPENSATION
|PRINCIPAL POSITION                    |  | YEAR |  | ($)    |         | ($)   |   | ($) |        | ($)    |        | ($)         
|                                      |  |      |  |        |         |       |   |     |        |        |        |              |       |    |  |   |        
|Harry M. Neer                         |  | 2007 |  | $      | 150,000 |       | $ | --  |        | $      | --     |              | $     | -- |  | $ | 150,000
|President, Chief Executive Officer,   |  | 2006 |  | $      | 200,000 |       | $ | --  |        | $      | --     |              | $     | -- |  | $ | 200,000
|Chief Financial Officer and Treasurer |  | 2005 |  | $      | 200,000 |       | $ | --  |        | $      | --     |              | $     | -- |  | $ | 200,000
|                                      |  |      |  |        |         |       |   |     |        |        |        |              |       |    |  |   |        
|Gregory H. Neer                       |  | 2007 |  | $      | 145,000 |       | $ | --  |        | $      | --     |              | $     | -- |  | $ | 145,000
|Senior Vice President                |  | 2006 |  | $      | 145,000 |       | $ | --  |        | $      | --     |              | $     | -- |  | $ | 145,000
|Operations                            |  | 2005 |  | $      | 145,000 |       | $ | --  |        | $      | --     |              | $     | -- |  | $ | 145,000
|                                      |  |      |  |        |         |       |   |     |        |        |        |              |       |    |  |   |        
|Mark C. Neer                          |  | 2007 |  | $      | 150,000 |       | $ | --  |        | $      | --     |              | $     | -- |  | $ | 150,000
|Senior Vice President                |  | 2006 |  | $      | 150,000 |       | $ | --  |        | $      | --     |              | $     | -- |  | $ | 150,000
|Business Development                  |  | 2005 |  | $      | 150,000 |       | $ | --  |        | $      | --     |              | $     | -- |  | $ | 150,000



Option Issuances



There were no individual grants of stock options made during the Companys last fiscal year to its named executive officers.



Employment Contracts and Termination of Employment and Change-in-Control Agreements



The Company has entered into identical employment agreements with Messrs. Harry M. Neer and Larry K. Hinson. The employment agreements have one-year terms initially expiring December 31, 2001, which are automatically renewed for successive one-year periods, unless terminated by either party on three months notice, whereby each individual receives a fixed annual salary.  Effective October 1, 2002, the Companys Board of Directors approved an increase of Mr. Neers annual salary to $200,000 per year and an increase of Mr. Hinsons annual salary to $180,000 per year.  If the Company terminates the employment agreements without cause before the expiration of the agreements, the terminated executive will receive a lump-sum payment equal to one-half of his base annual salary.  Mr. Hinson resigned from his positions as Chief Financial Officer and Treasurer on February 28, 2006. His employment agreement was terminated upon his resignation and no compensation was paid under the terms of his employment agreement. There are no employment agreements with Gregory H. Neer or Mark C. Neer and their annual salaries are $145,000 and $150,000, respectively.



Compensation of Directors



Directors who are employees or consultants of the Company do not receive any compensation for serving as directors.  All directors are reimbursed for ordinary and necessary expenses incurred in attending any meeting of the Board of Directors or any committee thereof or otherwise incurred in their capacities as directors.



Mr. Baldwin has an engagement agreement with the Company effective April 1, 2001, whereby he earns a fee for performance of legal services of $250 per hour, with a minimum guaranteed payment of $5,000 per month.  Effective April 1, 2002, the agreement was amended and the minimum guaranteed payment was increased to $6,500 per month.  This agreement has a one-year term and automatically renews for one-year periods thereafter unless either party terminates the agreement within sixty days prior to the end of any annual period.  This agreement automatically renewed effective April 1, 2005.  During the years ended March 31, 2007 and 2006, Mr. Baldwin earned $58,500 and $78,000, respectively, from this agreement.







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



As of July 2, 2007, 19,823,936 shares of common stock were outstanding.  The following table sets forth, as of such date, information with respect to shares beneficially owned by: (a) each person who is known to be the beneficial owner of more than 5% of the outstanding shares of common stock, (b) each of the Companys directors and executive officers and (c) all current directors and executive officers as a group.



Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act.  Under this rule, shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares).  In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire shares (for example, upon exercise of an option or warrant or conversion of convertible debt) within sixty days of the date as of which the information is provided.  In computing the percentage ownership of any person, the amount of shares is deemed to include the amount of shares beneficially owned by such person by reason of such acquisition rights.  As a result, the percentage of outstanding shares of any person as shown in the following table does not necessarily reflect the persons actual voting power at any particular date.



Except as noted below, each person has sole voting and investment power with respect to the shares beneficially owned by such person.  Our Common Stock is the only voting security of our Company.  A person is deemed to beneficially own a security if he or she has or shares the power to vote or dispose of the security or has the right to acquire it within 60 days.



|                                                            |                                                |                 
|----------------------------------------------------------- | ---------------------------------------------- | ----------------
|Name and Address of Beneficial Owner                        | Amount and Nature of 
Beneficial Ownership (1) | Percent
of Class
|John K. Baldwin (2)                                         | 9,001,405                                      | 45.4%           
|Harry M. Neer (3)                                           | 1,096,755                                      | 5.5%            
|Larry K. Hinson (4)                                         | 216,637                                        | 1.1%            
|Eric H. Kolstad (5)                                         | 120,983                                        | *               
|Gregory H. Neer (6)                                         | 25,000                                         | *               
|Mark C. Neer (7)                                            | 50,000                                         | *               
|All Executive Officers and Directors as a group (6 persons) | 10,510,780                                     | 53.0%           
|George Bogle (8)                                            | 1,025,000                                      | 5.2%            



* Less than one percent



(1)  As of May 16, 2007, there were 19,823,936 shares of Common Stock outstanding, which includes 4,584,052 shares of common stock from the conversion of principal and interest on convertible notes held by Mr. Baldwin. This does not include any stock options or warrants which are currently exercisable or shares of Common Stock to be issued upon the conversion of principal and accrued interest of the Companys convertible notes.



(2) Mr. Baldwins business address is 901 Highland Avenue, Del Mar, California 92014. Includes 4,584,052 shares of common stock from the conversion of principal and interest on convertible notes. Mr. Baldwin is a party to the Voting Agreement.



(3) Mr. Harry Neers business address is that of Rockport. Mr. Neer is a party to the Voting Agreement.



(4) Mr. Hinsons business address is 4819 Stillbrooke, Houston, Texas 77035. Mr. Hinson is a party to the Voting Agreement.



(5) Mr. Kolstads business address is 2600 Michelson Drive, 17th Floor, Irvine, California 92612.  Mr. Kolstad is a party to the Voting Agreement.







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(6) Mr. Gregory Neers business address is that of Rockport.



(7) Mr. Mark Neers business address is that of Rockport.



(8) Mr. Bogles business address is 916 S. Capital of Texas Highway, Austin, Texas 78746.  Includes warrants to purchase 1,000,000 shares of common stock at an exercise price of $0.345 per share, expiring November 25, 2011.



Equity Compensation Plans



The following table gives information about the Companys common stock that may be issued upon the exercise of options under its 2000 Long-Term Incentive Plan and 2002 Stock Option Plan as of March 31, 2007, which have been approved by the Companys stockholders, and under compensation arrangements that were not approved by the Companys stockholders.



|                                                           |  |                                                                                                 |  |                                                                                 |  |                                                                                                                                              
|---------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|Plan Category                                              |  | Number of Securities
To be Issued Upon
Exercise of Outstanding
Options, Warrants and
Rights
(A) |  | Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights
(B) |  | Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding Securities
Reflected in Column A)
(C)
|Equity Compensation Plans
Approved by Security Holders     |  | 170,000                                                                                         |  | $  0.25                                                                         |  | 331,100                                                                                                                                      
|Equity Compensation Plans
Not Approved by Security Holders |  | 1,000,000(1)                                                                                    |  | $0.345                                                                          |  | --                                                                                                                                           
|Total                                                      |  | 2,568,900                                                                                       |  | $  0.31                                                                         |  | 331,100                                                                                                                                      



(1)

In conjunction with a consulting services agreement with George Bogle, the Company issued warrants to purchase 1,000,000 shares of restricted common stock at any time until November 25, 2011, at a price of $.345 per share, the fair market value on the date of grant, which was determined by the mean of the closing bid and asked prices, and are immediately exercisable.



ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



Voting Agreement



As a condition and in order to induce Nexus to enter into this transaction each of our directors entered into an agreement with Nexus pursuant to which each such person in his capacity as a stockholder of the Company agreed, among other things, to take certain actions in furtherance of the Stock Purchase, including causing the execution and delivery of a written consent in accordance with Section 228 of the DGCL, pursuant to which such individual consented to the adoption of the Stock Purchase Agreement and the approval of the Stock Purchase.



Neer Employment or Consulting Agreements



As a condition to closing, each of Harry Neer, Gregory Neer and Mark Neer entered into employment or consulting agreements with RCN or an affiliate of Nexus on terms reasonably satisfactory to Nexus.







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Conversion and/or Repayment of Debts and Fees



Baldwin Note Conversions

On May 16, 2007, prior to the execution of the Voting Agreement, Stock Purchase Agreement, or written consent of stockholders discussed above, one of our directors, Mr. John K. Baldwin, agreed to convert certain convertible notes in the aggregate outstanding principal amount, together with accrued interest, of approximately $1 million held by Mr. Baldwin into 4,584,052 shares of our Common Stock in lieu of payment.  The convertible notes consisted of:

(i) a convertible note dated June 18, 2001, in the original principal amount of $300,000, convertible at $0.36 per share;

(ii) convertible note dated March 30, 2004 in the original principal amount of $60,000, convertible at $0.18 per share;

(iii) convertible note dated June 10, 2004 in the original principal amount of $270,000 (which was extended June 13, 2005), convertible at $0.20 per share; and

(iv) convertible note dated November 1, 2004 in the original principal amount of $135,000 (which was extended June 13, 2005), convertible at $0.18 per share.

The above notes were past due as of May 16, 2007.  Mr. Baldwin agreed to waive any penalties related thereto.

Repayment of Non Convertible Baldwin Note

In addition to the convertible notes discussed above, Mr. Baldwin has a promissory note in the original principal amount of $250,000 with accrued but unpaid interest of approximately $30,000, all of which shall be paid to Mr. Baldwin upon consummation of the Stock Purchase.

Harry Neer Past Due Expenses

Upon consummation of the Stock Purchase, we will pay approximately $11,000 to Harry Neer for accrued but unpaid past due expenses owed to him for services rendered to the Company.

Baldwin Legal Fees

Upon consummation of the Stock Purchase, we will pay Mr. Baldwin approximately $250,000 in accrued and unpaid legal fees.

Other Agreements

Bannon Overwrite Obligation

During September 1998, the Company acquired Newton Healthcare Network, LLC from Bannon Energy Incorporated (Bannon) of which Robert D. Johnson, a former director of the Company, was sole owner of Bannon, pursuant to a purchase and sale agreement.  In accordance with the purchase and sale agreement, Bannon received a commission overwrite of 2% of the gross revenue attributable to RCN, and the Company (the Overwrite Obligation).  For the nine months ended December 31, 2006, Bannon earned $39,966.  On May 15, 2007, Bannon agreed with the Company and RCN to terminate the Overwrite Obligation upon consummation of the Stock Purchase in exchange for $180,000.







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Protegrity Redemption



In July 2003, we purchased all healthcare provider agreements from Protegrity Services, Inc., (Protegrity), a wholly owned subsidiary of Protegrity Holdings, Inc. (Holdings), pursuant to an asset purchase agreement that included an earnout fee through July 2008.  We issued 500,000 shares of our Common  Stock to Holdings as consideration for the purchased assets, and provided that our Common Stock did not trade above $1.00 per share prior to July 2008, we agreed to purchase from Holdings at a price of $1.00 per share any outstanding shares then owned by Holdings that had not been otherwise been sold.  To date, no shares have been sold and our Common Stock has not traded over $1.00 per share since the acquisition.  We are currently in negotiations with Protegrity and Holdings to agree that 1) upon consummation of the Stock Purchase we may redeem the 500,000 shares of Common Stock for $500,000; 2) the Company will pay to Protegrity the earnout fee set forth in the asset purchase agreement through the closing date; and 3) the Company has asked Protegrity to waive the remainder of the earnout fee.



ITEM 13.  EXHIBITS



(a)

Exhibits.  The following exhibits of the Company are included herein.



Exhibit No.

Description



2.1

Stock Purchase Agreement between Rockport and Nexus Asset Acquisition Co. (2)



31.1

Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002. (1)



31.2

Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002. (1)



32.1

Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002. (1)

_____________________

(1)

Filed herewith.

(2)

Previously filed with Form DEF 14C on June 11, 2007.



ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES



Audit Fees



The aggregate fees billed by Thomas Leger & Co., LLP for professional services rendered for the audit of the Companys annual financial statements for the fiscal year ended March 31, 2007, and for the reviews of the financial statements included in its quarterly reports on Form 10-QSB for that fiscal year were $39,967.



The aggregate fees billed by Hein & Associates LLP for professional services rendered for the audit of the Companys annual financial statements for the fiscal year ended March 31, 2006, and for the reviews of the financial statements included in its quarterly reports on Form 10-QSB for that fiscal year were $43,388.



Audit-Related Fees



Thomas Leger & Co., LLP did not render any audit-related fees, which represent fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Companys financial statements and are not reported under Audit Fees.



Tax Fees



Thomas Leger & Co., LLP did not receive any fees for tax compliance, tax advice or tax planning from the Company during the fiscal years ended March 31, 2007.





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All Other Fees



Other than the services described above under Audit Fees and Tax Fees for the fiscal year ended March 31, 2006 and 2005, our independent accountants did not receive any other fees.



Audit Committee Pre-Approval Policies and Procedures



The 2007 audit services provided by Thomas Leger & Co., LLP and the 2006 audit services provided by Hein & Associates were approved by the Audit Committee. The Audit Committee implemented pre-approval policies and procedures related to the provision of audit and non-audit services.  Under these procedures, the Audit Committee pre-approves both the type of services to be provided by the Companys independent accountants and the estimated fees related to these services.  During the approval process, the Audit Committee considers the impact of the types of services and related fees on the independence of the auditor. Throughout the year, the Audit Committee reviews revisions to the estimates of audit and non-audit fees initially approved.







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SIGNATURES



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



| |  |                                 |                                        
| |  | ------------------------------- | ---------------------------------------
| |  | ROCKPORT HEALTHCARE GROUP, INC.
| |  |                                 |                                        
| |  | By:                             | /s/ Harry M. Neer                      
| |  |                                 | Harry M. Neer, Chief Executive Officer,
| |  |                                 | Chief Financial Officer and Treasurer  
| |  |                                 |                                        
| |  | Date:                           | August 8, 2007                         





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





|          |  |       |  |     
|--------- |  | ----- |  | ----
|Signature |  | Title |  | Date



|                    |  |                       |  |               
|------------------- |  | --------------------- |  | --------------
|/s/ John K. Baldwin |  | Chairman of the Board |  | August 8, 2007
|John K. Baldwin     |  |                       |  |               



|                  |  |                                                                                     |  |               
|----------------- |  | ----------------------------------------------------------------------------------- |  | --------------
|/s/ Harry M. Neer |  | President, Chief Executive Officer, Chief Executive Officer, Treasurer and Director |  | August 8, 2007
|Harry M. Neer     |  |                                                                                     | 



|                    |  |          |  |               
|------------------- |  | -------- |  | --------------
|/s/ Eric H. Kolstad |  | Director |  | August 8, 2007
|Eric H. Kolstad     |  |          |  |               









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Exhibit Index



Exhibit No.

Description



31.1

Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002. (1)



31.2

Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002. (1)



32.1

Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002. (1)



_____________________

(1)  Filed herewith









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