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


                                   Form 10-KSB
 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

               [X]  Annual report pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934
                     For the fiscal year ended July 31, 2005

                                       OR

          [ ] Transition report pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

                        MOBILE REACH INTERNATIONAL, INC.
                  --------------------------------------------
                 (Name of small business issuer in its charter)


           DELAWARE                                      20-0121007
 ------------------------------              ----------------------------------
(State or other jurisdiction of             (I.R.S. Employee Identification No.)
 incorporation or organization)



                          2054 KILDAIRE FARM ROAD #353
                              CARY, NORTH CAROLINA                  27511
                     --------------------------------------        --------
                    (Address of principal executive offices)      (Zip Code)


                                 (919) 336-2500
                            -------------------------
                            Issuer's telephone number


         Securities registered under Section 12(b) of the Exchange Act:

    Title of each Class                Name of each exchange on which registered
          None                                            None

         Securities registered under Section 12(g) of the Exchange Act:

                         Common Stock, par value $0.0001
                                (Title and Class)


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

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

     Documents incorporated by reference. There are no annual reports to
security holders, proxy information statements, or any prospectus filed pursuant
to Rule 424 of the Securities Act of 1933 incorporated herein by reference.

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

The number of shares outstanding of the Issuer's common stock, $.0001 par value
per share, as of July 31, 2005 was 2,394,639 shares.

<PAGE>


                                Table of Contents

                                                                            Page
Part I

      Item 1:  Business                                                       3

      Item 2:  Properties                                                     8

      Item 3:  Legal Proceedings                                              8

      Item 4:  Submission of Matter to a Vote of Security Holders             9


Part II

      Item 5:  Market for Registrants Common Equity and Related
               Stockholders Matter                                            9

      Item 6:  Selected Financial Data                                       10

      Item 7:  Management Discussion and Analysis of Financial
               Condition and Results of Operations                           11

     Item 7A:  Quantitative and Qualitative Disclosure about
               Market Risk                                                   16

      Item 8:  Financial Statements and Supplementary Data                   16

      Item 9:  Changes in and Disagreements with Accountants on
               Accounting and Financial Disclosure                           17

     Item 9A:  Controls and Procedures                                       17

     Item 9B:  Other Information                                             17


Part III

     Item 10:  Directors and Officers of the Registrant                      17

     Item 11:  Executive Compensation                                        19

     Item 12:  Security Ownership of Certain Beneficial Owners
               and Management and Related Stockholder Matters                20

     Item 13:  Certain Relationships and Related Transactions                21

     Item 14:  Principal Accounting Fees and Services                        21


Part IV

     Item 15:  Exhibits, Financial Statement Schedules, and
               Reports on Form 8K                                            22

                                        2

<PAGE>


                                     PART I


ITEM 1.  BUSINESS

FORWARD-LOOKING STATEMENTS

Statements in this Annual Report about future results, levels of activity,
performance, goals or achievements or other future events constitute
forward-looking statements. These statements involve known and unknown risks,
uncertainties and other factors that may cause actual results or events to
differ materially from those anticipated in any forward-looking statements.
These factors include, among others, those described in connection with the
forward-looking statements, and the factors listed in "Risk Factors".

In some cases, forward-looking statements can be identified by the use of words
such as "may", "will", "should", "could", "expect", "plan", "intend",
"anticipate", "believe", "estimate", "predict", "potential" or "continue" or the
negative or other variations of these words, or other comparable words or
phrases.

Although the Company believes that the expectations reflected in its
forward-looking statements are reasonable, it cannot guarantee future results,
levels of activity, performance or achievements or other future events.
Moreover, neither the Company nor anyone else assumes responsibility for the
accuracy or completeness of forward-looking statements. The Company is under no
duty to update any of its forward-looking statements after the date of this
Annual Report. The reader should not place undue reliance on forward-looking
statements.

Company History

     Mobile Reach International, Inc. (the "Company") was incorporated in the
State of Delaware in July 2003. At the time of incorporation, the Company was a
wholly-owned subsidiary of Asphalt Paving International, Inc. ("API"), a company
incorporated in the State of Florida in January 1998. API's shares were publicly
traded. However, API conducted no active business.

     Immediately following the incorporation of the Company, API merged into the
Company and the shareholders of API owned all the stock of the Company. As a
result of the merger, the Company was the surviving corporation in the merger,
the state of incorporation of the corporate entity owned by API's shareholders
was changed to Delaware. On August 6, 2003, the Company's shares became publicly
traded on the Over-the-Counter Bulletin Board, under the symbol MBRI.

     Immediately after the merger with API, the Company acquired all the shares
of Mobile Reach Technologies, Inc. ("MRT"), a North Carolina Corporation, in a
share exchange with all the shareholders of MRT. As a result of the share
exchange, MRT became a wholly owned subsidiary of the Company.

     MRT was incorporated in North Carolina in July 2000, the Registrant
continues to conduct the business according to plan prior to the share exchange.
MRT has developed and sold mobile technology and services for information
systems and communications networks. In late 2000, MRT acquired its wholly-owned
subsidiary, Mobile Reach Technologies, GmbH ("MRT-Germany"), which is located in
Germany, to market the Company's products and services to the European market.
As of the end of the July 31 2005 the Company no longer operates the German
subsidiary of MRT.

     On December 17, 2003 Mobile Reach International, Inc. entered into an
Agreement of Plan of Merger with Waves Consulting Group, Inc. by and between MRI
Acquisitions Corp. As a result, Waves Consulting Group became a wholly owned
subsidiary of the Company.

     In November, 2004 the Company's board voted in favor of closing the
operations of Mobile Reach Solutions, Inc. a wholly owned subsidiary of Mobile
Reach International, Inc. Working capital necessary to run the business was not
available to the Company to successfully operate the subsidiary. The board
resolved it was in the best interests of the shareholders to focus its business
efforts on Mobile Reach Technologies its sole remaining subsidiary. Furthermore,
the Company is continued its efforts and dissolutions of its Germany Subsidiary
of MRT. The Company does not anticipate any losses on this discontinuation other
than losses from operations incurred in the regular course of business after
July 31, 2005.

                                       3

<PAGE>


     On July 28, 2005 the Company affected an 80 to 1 reverse split of its
common shares and the Company's symbol effectively changed from MBRI to MOBR on
the Over-the-Counter Bulletin Board.

     On August 23, 2005, the Company, Objective Spectrum, Inc. ("Objective
Spectrum") and the shareholders of Objective Spectrum (the "Shareholders")
entered into Agreement And Plan Of Merger whereby the Company acquired all of
the issued and outstanding common stock of Objective Spectrum (the "Shares"). In
consideration of the Shares, the Company issued to the Shareholders 375,000
unregistered shares of the common stock of the Company.

     The Company conducts all its business through its subsidiaries. Since
November 2004 the only operating subsidiary is Mobile Reach Technologies, Inc.
("MRT") The Company, and or its subsidiaries are hereafter collectively referred
to as the Company or Mobile Reach or the Registrant.

Mobile Reach Technologies - Business

     The Company began selling products and services in mid 2000 as a mobile
solution provider under the name Mobile Reach Technologies, Inc. The Company's
products and services were based on one of the leading enterprise platforms,
called Remedy Action Request System, a Service Management solution. Today,
Mobile Reach has expanded its goals and offerings. The Company's expanded
business model is to deliver the products and services customers require to
deploy enterprise-wide solutions to its businesses.

     Mobile Reach is the recognized leader for providing IT Asset Management
solutions on bar code scanners to enterprises and government entities. The
Company's mission is to exploit this leadership position to become the world's
leading provider of location-based mobility software.

     The Company has fully developed proprietary software that performs a
function for enterprises and government agencies wishing to access critical data
directly at the point of activity. The Company has many well known and satisfied
customers including some of the largest Fortune 100 companies.

     The Company delivers expertise and experience in providing completely
automated workflow solutions to enterprises and government agencies on a
world-wide basis. This includes consultation, engineering of customized
solutions for specific tasks, creation of associated polices and procedures,
implementation of a system of hardware and/or software to accomplish the task,
integration into existing systems and operations, training of users and
maintenance of the completed project.

Products

The primary product offered by the Company is branded with the name Splitware.

     The primary use of the Company's Splitware product is to:

          -    Automate and standardize the process of disseminating and
               entering critical time-sensitive information to mobile workers in
               both the enterprise and in government agencies.

          -    Make available location, navigation and tracking information to
               both the mobile worker and the central control systems.

While the Company's technology is integrated into critical operations in the
medical and transportation industries, the Company is currently focused on the
IT Infrastructure Management industry.

IT Infrastructure Suite

     IT Infrastructure offers the leading Mobile IT Service Management Suite to
both enterprise and government agencies. This suite of highly flexible mobile
applications takes a uniquely integrated approach to automating IT service and
support. Each application in the suite is a complete solution that can be
implemented independently for quick return on investment (ROI) but that
ultimately function together to deliver business-IT alignment.

     Demand for the Company's Splitware product is from enterprises and
government agencies that need to improve the management of critical IT
infrastructure is on the rise due to compliance regulations from Sarbanes-Oxley.
The Company believes this product suite will strengthen as all business sectors
implement all areas of Sarbanes-Oxley, of which IT infrastructure is high on
many customers needs list.

                                       4

<PAGE>


Healthcare Suite

     Healthcare offers the leading mobile healthcare applications to both
healthcare institutions. This suite of highly flexible mobile applications takes
a uniquely integrated approach to automating common caregiver information needs.

     To date, the Company has focused solely on the needs of one healthcare
customer, Duke University Health System. Three primary solutions have been
provided and used by caregivers at Duke:


Public Safety

     Public Safety is in the formulation stage. Several substantial
opportunities have been identified with significant revenue/profit potential.
The opportunities identified enhance the effectiveness and efficiency of
personnel and officials belonging to law enforcement agencies, fire departments,
border and transportation security agencies, emergency management departments
and other public safety organizations.

Software

     Splitware(TM) - is a scaleable mobile middleware platform Mobile Reach is
developing that will reside within the enterprise networks of its clients. It
provides seamless connectivity from back office systems to simultaneous mobile
users and devices.

     The Company has designed its Splitware(TM) software to be compatible with
legacy, CRM (Customer Relationship Management) and ERP (Enterprise Resource
Planning) systems. This allows Mobile Reach to partner, develop and integrate
its proprietary applications with leading enterprise systems, including Oracle,
SAP, PeopleSoft, Siebel and Remedy, as well as customer-built back-office
databases.

     Splitware's modular design enables IT professionals to plug-in a
stand-alone application or several scalable applications all at once or over an
extended period of time. Its permission based access panel allows administrators
to increase access to any or all-mobile users within minutes.

     Splitware(TM) is compatible with Microsoft's open COM+ architecture and has
been designed to leverage Microsoft's .NET initiative for providing secure
mobile data solutions to enterprises and is currently in use with high security
applications. Splitware(TM) consists of several component capabilities that
Mobile Reach packages for individual customer installations based on the
specific client requirements. The component capabilities are all branded with
the "Split" name and include the following:

o    Server - allows the user to interface to a variety of data sources (for
     example, Oracle, Sybase, Remedy and SAP).

o    Cache - provides data synchronization between mobile devices and network
     servers.

o    Forms - is a tool that provides a simple way to build a mobile applications
     - this tool provides Mobile Reach with a great competitive advantage in
     delivery of production grade mobile applications.

o    Alert - provides a mechanism for urgent notification of individuals in the
     mobile workforce.

o    Scan - provides bar code scanner integration into mobile applications.

o    Workflow - provides the capability to move information from individual to
     individual within the mobile workforce.

o    Chart - provides the capability for data charts and data graphs to display
     complex information in an understandable format.

o    Security - provides the capabilities for both user authentication (via
     advanced password functionality) and privacy of data (via advanced
     encryption functionality).

     For each of the listed capabilities, Mobile Reach has enhanced each
capability based on market actual sales and customer requests. This allows
Mobile Reach to constantly keep its products relevant and competitive.

     Currently, the Company has an agreement with Remedy Corporation to market
and integrate its mobile platforms with the Remedy Action Request System. The
Company's management team is beginning conversations with other enterprise and
mobile operators, but has no agreement with such companies to date.

                                       5

<PAGE>


Marketing


Mobile Reach has identified three separate approaches to reach its clients:


     Direct. Mobile Reach will use its own sales force to market and sell its
products. Mobile Reach's Sales and Marketing teams are combined to respond
rapidly to the market and client needs. Each niche market, such as healthcare
(and within healthcare, markets such as hospitals and pharmacies), requires
teams to fully assess and meet its unique needs. The Company believes having the
most experienced sales reps and sales engineers entrenched in specific niche
markets, rather than broader industries, will lead to sales successes.

     VAR. Mobile Reach will enter into agreements with `value added resellers'
to market the Company's products as part of its own solutions packages. VARs
will receive a discounted price from the Company for each license.

     OEM. ("Original Equipment Manufacturers") Mobile Reach will seek out
established integrators to license one of the Company's products either on a
limited basis or a full proprietary basis. The integrator will essentially
"license" the particular technology from the Company on an exclusive basis for
the purposes of integration. The Company will seek a volume based per user fee
from OEMs.

     The Company will rely primarily on direct sales to sell both its software
and services. The Company intends to expand and recruit a sales force that is
segmented into product specialties and not generalists. Successfully delivering
Mobile Reach services will require experienced reps who understand the client's
industry and daily processes.


Business Strategy


     Clients seek solutions that can be used with multiple products and systems
to better meet their growing needs. However, there can be no assurance that the
larger Enterprise Resource Planning (ERP) and Custom Relationship Management
(CRM) companies will allow or support this much needed change. Proprietary based
technologies often try to hide, allude to or disassociate themselves from
standardization.

The Company strives to become one of the first mobility solutions companies with
a software platform that works with multiple products and systems.

Mobile Reach has based its strategy on the following assumptions in regards to
the mobile industry:

     (i) Other e-business enterprise software vendors will adopt the same
principals Siebel has adopted.

     (ii) Wireless networks will advance at the rates projected by industry
analysts.

     (iii) Large clients will be inclined to select a platform that works with
multiple products and systems, as research indicates from Gartner, Aberdeen and
ITC.

     (iv) The Company will be able to gain sales by heavily marketing to
specific niche markets, such as Healthcare.


Sales & Marketing

     The Company's accounts receivable for the period ended July 31, 2005,
decreased by $270,851 to 57,708 compared to $328,559 for the twelve month period
end July 31, 2004. The decrease in the Company's accounts receivable is
attributed to the Company re-aligning its operating subsidiaries and solely
focusing its efforts on its core product offering of Mobile Reach Technologies
(MRT). See the Management Discussion and Analysis for additional notes.

     Mobile Reach's mission is to become the dominant provider of products and
services that enable mobile workers to enter and have access to information when
they need it. To accomplish this mission, Mobile Reach will listen to prospects,
clients, applications software companies, hardware companies, and value added
resellers to identify their key needs, develop products and services to address
their needs and communicate the value proposition in which Mobile Reach products
and services offer.


Intellectual Property

     The Company has prepared two provisional patent applications for submittal,
encompassing the bulk of the Company's core technology processes. These
applications have not yet been filed. Mobile Reach expects to file these

                                       6

<PAGE>


applications soon and to file additional applications as the Company continues
to develop proprietary technologies and processes behind them. There can be no
assurance any patents will be granted as a result of the Company's applications,
or if granted that they will provide the Company with significant competitive
advantages.

     Mobile Reach has not registered any trademarks used with its products nor
any of its copyrights. The Company relies on its common law rights to its
trademarks and on the laws relating to trade secrets and proprietary know-how
for protection of its copyrights. The Company practice is to require each of its
employees, consultants and advisors to execute a Non-Disclosure Agreement (NDA).
In general, the NDA states that the individuals must keep confidential and not
disclose to other parties any confidential information developed or learned by
the individuals during the course of their relationship with Mobile Reach except
in limited circumstances. Also, the NDA will state that Mobile Reach owns all
copyrights and inventions conceived or developed by the individuals during the
course of rendering services to the Company.


Employees

     During the period ended July 31, 2005 the Company re-aligned its employees
as part of both a cost cutting measure and subsidiary restructuring. The Company
reduced its workforce from 21 employees at the beginning of its Fiscal 2004 down
to 12 for the period ending July 31, 2005.

The Company has broken down each employee under the following subsidiary below:

Nine work directly within Mobile Reach Technologies, Inc., as follows:

     -    One in Management & Administrative
     -    Two in Sales and Marketing
     -    Four in Development and Technology
     -    Two Consultants

     The balance of the Company's employees (three), work for the parent
company, Mobile Reach International, Inc. as executives and administrative.

     The Company owes its employees approximately $261,865 of accrued salaries
and expenses. Raising capital and generating revenue to pay accrued salary and
future salaries of current and future employees will be necessary to retain and
recruit the personnel the Company requires to achieve its goals.

Reliance on Key Personnel and Consultants

     The Company is currently dependent upon its senior management, board of
directors and consultants, the loss of any of which may significantly affect the
performance of the Company and its ability to carry out the successful
development and commercialization of its software products and services. Failure
to retain management, directors and consultants or to attract and retain
additional key employees with necessary skills could have a material adverse
impact upon the Company's growth and profitability. The Company may be required
to recruit additional software development personnel, and expand its sales force
and customer support functions as well as train, motivate and manage its
employees. The Company's ability to assimilate new personnel will be critical to
its performance. Competition for qualified software development personnel and
other professionals is expected to increase. There can be no assurance that the
Company will be able to recruit the personnel required to execute its programs
or to manage these changes successfully.

Product Defects

     The Company's complex software products may contain undetected errors or
defects when first introduced or as new versions are released. There can be no
assurance that, despite testing by the Company and by current and potential
customers, errors will not be found in new software products after commencement
of commercial shipments resulting in product recalls and market rejection of the
Company's software products and resulting in damage to the Company's reputation,
as well as lost revenue, diverted development resources and increased support
costs

Potential Fluctuations in Quarterly Financial Results

     The Company's financial results vary from quarter to quarter based on
factors such as the timing of significant orders and contract completions and
the timing of new product introductions, delivery and professional services
against contracts. Any significant fluctuation in revenue could materially
adversely affect the Company. Operating results are difficult to predict and may
fluctuate, which may contribute to fluctuations in our stock price

                                       7

<PAGE>


Effects of Restructuring Activities

     The Company reduced its workforce during the periods ending July 31, 2004
and July 31, 2005 and will continue to monitor the proper level of labor
investment in future to manage expenses accordingly. There have been and may
continue to be substantial costs associated with this workforce reduction
related to 401K's, deferred salaries, and other employee-related costs and the
Company's restructuring plan may yield unanticipated consequences, such as
attrition beyond its planned reduction in workforce. This workforce reduction
has placed an increased burden on the Company's administrative, operational and
financial resources and has resulted in increased responsibilities for each of
its management personnel. As a result, the Company's ability to respond to
unexpected challenges may be impaired and it may be unable to take advantage of
new opportunities.


ITEM 2.  PROPERTIES


     The Company does not own any real estate or land. In connection with the
acquisition of Waves Consulting Group, Inc., The Company has certain obligations
that are assets of its non operating subsidiary and its former President -
specifically these vehicles were used primarily for servicing the Company's
clients. See notes to financial statements and Management Discussion and
Analysis for additional information.

     The Company had a long term lease for 12,000 sq ft. of office space at
Regency Park in Cary North Carolina which it has occupied since November 1,
2003. Subsequent to the Company's fiscal year end, July 31, 2004, the Company
settled the lease obligation and vacated the office, as part of its overall
company restructuring. See note to financial statements and Management
Discussions and Analysis for additional information.

     Since September 2004 the Company has been renting office space on a month
to month basis of approximately 2400 sq ft. in the Research Triangle Park area
of North Carolina.


ITEM 3.  LEGAL PROCEEDINGS

     During the year ended July 31, 2004, the Company had accrued $160,000 for
consulting fees representing a tentative settlement reached in arbitration with
a consultant. In April 2005, the claim went to arbitration and the Company was
found to have no liability to the consultant. As a result of the arbitration,
the Company recorded other income of $160,000 for the year ended July 31, 2005.

     During the period ended July 31 2005 the company still had an unsettled
claim from a former employee for wages earned during 2002 in the amount of
$49,000, reflected in the Company's financials as a note payable. Both parties
have been in communication and are still in the process of attempting to settle
the claim.

     On June 22 2005, a former vendor to Mobile Reach Solutions, Inc. entered
into judgment for $57,739. The judgment pertained to orders in default, placed
by Mobile Reach Solutions during the fiscal year ended July 31 2004. Prior to
the judgment being entered into by Plaintiff, the Company and vendor attempted
to settle the claim. As of the fiscal year end July 31 2005 the Company was not
able to come to terms. As of the time of this report the vendor is still owed
the full amount, plus interest.

     During the fiscal year ended July 31 2005 the Company defended itself
against a claim from a vendor against Mobile Reach International, Inc. for
advertising and related services in the amount of $17,199. The vendor claims has
been recorded into the Wake County Courts as a judgment against Mobile Reach
International, Inc.

     The Company has recorded an account payable at July 31, 2005 of $75,000 to
terminate a lease for office space entered into in September 2003. Additionally,
the Company recorded $34,000 of rent expenses in the forfeiture of rental
security deposits in connection with this lease. The Company entered into an
agreement for termination of these lease in October 2004 and a settlement for
the related debt on June 20, 2005. The terms of the settlement agreement
requires the Company to pay 15,888 in past due expenses and issue 181,250 shares
of the Company's restricted common stock. At July 31, 2005 the $15,888 was
included in the accounts payable.

                                       8

<PAGE>


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

     No matters were submitted to a vote of the Company's shareholders during
the fiscal year ending July 31, 2005. On June 27, 2005, the Company filed with
the Securities and Exchange Commission a definitive Information Statement which
is hereby incorporated by reference (the "Information Statement"). PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
         ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

     The Company's Common Stock is quoted on the Over-the-Counter Bulletin Board
operated by the National Association of Securities Dealers. From August 6, 2003
to July 28, 2005 Mobile Reach shares were listed under the symbol "MBRI". On
July 29, 2005 the Company's symbol was changed to "MOBR" as a result of a 80 to
1 reverse split of its Common Stock described above. Prior to August 6 2003, the
Common Stock of its predecessor, Asphalt, traded under the symbol "API."

     The following table shows the quarterly high and low bid prices and high
and low ask prices for Mobile Reach common stock over the last three fiscal
years, as reported on the OTC Bulletin Board. The most current close price to
the filing date of this report of the company's common stock is on October 21,
2004 was $1.65 per share.



                                                              High       Low
Fiscal year ended
July 31, 2003
                                                              -----      -----
                       First quarter  (Aug, Sept, Oct)        $0.45      $0.17
                       Second quarter   (Nov, Dec, Jan)       $0.40      $0.11
                       Third quarter  (Feb, Mar. Apr.)        $0.25      $0.13
                       Fourth quarter  (May, Jun, Jul)        $1.01      $0.48


Fiscal year ending
July 31, 2004

                       First quarter                          $0.90      $0.13
                       Second quarter                         $0.65      $0.20
                       Third quarter                          $0.40      $0.20
                       Fourth quarter                         $0.30      $0.08


Fiscal year ended
July 31, 2005

                       First quarter                          $0.09      $0.03
                       Second quarter                         $0.06      $0.02
                       Third Quarter                          $0.04      $0.01
                       Fourth quarter                         $0.02      $0.01


     Post reverse of the Company's common stock, since the fiscal year end July
31 2005, the company's common stock has seen a high price of $3.00 and a low of
$1.65 as of October 21 2005.

     As of July 31, 2005, there were approximately 750 holders of record of
Mobile Reach common stock. The Company believes that since its reverse an
undefined number of shares of its common stock are held in either nominee name
or street name brokerage accounts. Consequently, The Company is unable to
determine the exact number of beneficial owners of its common stock. According
to ADP Shareholder reports and Depository Trust Records the total number of
shareholders could be as high as 1300 as of fiscal year end July 31 2005.

     As of July 31, 2005, the Company has 587,500 issued and outstanding common
shares of stock, and 1,808,939 to be issued. Of which, 7,959 are outstanding
options.

     Under Rule 144 - a person (or persons whose shares are aggregated) who has
beneficially owned restricted shares for at least one year (including the
holding period of any prior owner or affiliate) would be entitled to sell within
any three-month period, a number of shares that does not exceed the greater of
(1)% of the number of shares of common stock then outstanding or (2) the average
weekly trading volume of the common stock during the four calendar weeks
preceding the filing of a Form 144 with respect to such sale. Sales under Rule

                                       9

<PAGE>


144 are also subject to certain manner of sale provisions and notice
requirements and to the availability of current public information about the
Company.

     Under Rule 144(k), a person who is not deemed to have been an affiliate of
the Company at any time during the three months preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years
(including the holding period of any prior owner except an affiliate), is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.

     As of July 31, 2005, the Company was in default of filing a registration
statement for the holders of approximately 5,000,000 restricted shares of Common
Stock of the Company. These holders are entitled rights to have the Company
register these shares for resale. Under the Agreement, the Company was required
to file a registration statement on or before July 31 2005.

     As of September 22 2005, the Company filed its registration statement and
included up to 200% of the shares in connection with the notes, warrants and
registration rights agreements. However, at the time of filing the Company
registration statement remains non-effective. The Commission replied to the
Company's submission requesting the Company's updated financials of the most
recent fiscal year. The Company believes the financials from this report will
fulfill the requirement of the commission for further consideration against the
Company's registration statement.

     The Company can not offer assurance that an active public market of the
Company's shares will develop. Future sales of substantial amounts of its shares
in the public market could adversely affect market prices prevailing from time
to time and could impair the Company's ability to raise capital through the sale
of its equity securities.

Dividend Policy

     The Company has never declared or paid any cash dividends on its common
stock. The Company anticipates that any earnings will be retained for
development and expansion of its business and Mobile Reach does not anticipate
paying any cash dividends in the foreseeable future. The Company's board of
directors has sole discretion to pay cash dividends based on the following;
financial condition, results of operations, capital requirements, contractual
obligations and other relevant factors.


ITEM 6.  SELECTED FINANCIAL DATA

     Set forth below is selected financial information of the Company for each
twelve month period ending July 31, 2004 and 2005 respectfully. The selected
annual financial information is derived from the Company's audited financial
statements. The information below should be read in conjunction with "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" along with the financial statements and notes thereto.

     The Following table sets forth certain financial data for fiscal ending
periods indicated as a percentage of total net revenues for Mobile Reach
Technologies, Inc. only, the company's only operating subsidiary.

                                     Year Ended            Year Ended
                                    July 31, 2005         July 31, 2004
                                   ---------------       ---------------
Revenues                                 100%                 100%
Cost of Sales                              1%                  25%
                                   ---------------       ---------------
Gross Margin                              99%                  75%
                                   ---------------       ---------------
Operating expense
Research and development                  51%                  88%
Sales and Marketing                       42%                  71%
Administrative                            63%                 360%
                                   ---------------       ---------------
Total Operating expenses                 156%                 519%
                                   ---------------       ---------------
Operating Loss                            57%                 444%
                                   ---------------       ---------------


     The above table represents a comparison of Mobile Reach Technologies, Inc.
operations year over year for the period ending July 31, 2004 and 2005. The
seven month period ending July 31, 2003 was not compared as it did not represent
a complete fiscal year for comparative purposes.

                                       10

<PAGE>


ITEM 7.  MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

     You should read the following discussion of the Company's business and
results of operations in conjunction with the consolidated financial statements
attached herein. The results shown in this 10-KSB are not necessarily indicative
of the results it will achieve in any future periods.

     The Registrant Company conducts primarily all its business through its
subsidiary, Mobile Reach Technologies, Inc. (MRT), The Registrant and its
subsidiaries are also hereafter collectively referred to as the Company or
Mobile Reach.

     The Company's future results of operations will be highly dependent upon
the success of its software products and service offerings, specifically its
Mobile Infrastructure Platform as well its accompanying Wizard Tools. The
Company expects the license fees, services and royalties generated by these
products and services to continue to constitute the majority of its revenue. The
Company is seeing key signs in certain sectors maturing at a greater rate than
expected, thus for the company intends to capitalize on these sectors and
deliver best of breed mobility solutions. By executing against this verifiable
traction, the company expects to garner the competitive advantage it was looking
for with the specific sectors it markets.

     The Company sells its product and services directly to end-users and also
markets and sells many of its products through multiple indirect channels,
primarily resellers. For the twelve-month period ending July 31, 2005, the
company derived its revenues from over 20 customers, of which approximately
thirty-seven percent of the Company's sales were to three customers.


     Financial Discussion

     Mobile Reach revenues primarily comprise of licensing and services fees,
which the Company recognizes as revenue when the product or services are
provided to the client. The attached pro-forma consolidated financial data; is
provided for comparative purpose only and does not claim to be indicative of the
actual financial position or result of the Company's carry forward operations.

     Total revenue for the twelve-month period ended July 31, 2005 was $607,374
compared to $1,589,859 reported for the year ended July 31, 2004. Total Net loss
for the twelve-month period ended July 31, 2005 was $970,881 or $0.97 per
diluted common share, compared to $3,142,860, or $9.01 per diluted common share
for the period ended July 31 2004. In the execution of its operational plan
during the last fiscal year, the Company's management and Board of Director's
were focused on a reorganization and evaluation of its overall business.
Financing activities and the costs associated assisted and funded its
operations.

Sources of Revenue

Revenues are derived from the sale of software licenses, services and
maintenance as well as equipment (hardware). License and maintenance revenues
are normally generated from licensing of our products to end-users and
resellers. Service revenues are generated from consulting services sold to
end-users and software subscription services provided to customers. As described
below:

                                                 Year Ended         Year Ended
Sources of Revenue                              July 31, 2005      July 31, 2004
                                                -------------      -------------

Software Licenses, maintenance and support         405,796            591,193
fees

Professional Services                              113,913            132,225

Product sales (hardware)                            87,665            854,710
                                                 -------------     -------------
 Totals                                            607,374          1,589,859

                                       11

<PAGE>


     The Cost of Sales associated with the delivery of the Company's solutions
is expected to be proportioned as the repeatable model is implemented with
future clients. As a result, the Company recognized an above average cost
associated for the twelve months ended July 31, 2004.

     The Company sales and marketing expenses consist primarily of compensation
and related costs for ramping up efforts around product marketing, associated
personnel, travel and entertainment and other related costs. The Company expects
sales and marketing expenses to decrease as a percentage of sales as the Company
continues to leverage its reseller relationships and strategic clients to
further its sales and marketing initiatives.

     SG&A for the twelve month ended July 31, 2004 consisted primarily of
compensation and related costs associated with financing activities. The Company
expects its general and administrative expenses to decrease as a percentage of
its annual revenues primarily due to traction the Company's products are
receiving in the marketplace.

CRITICAL ACCOUNTING POLICIES

     In preparing the consolidated financial statements in conformity with
accounting principles generally accepted in the United States, the Company makes
estimates, assumptions and judgments that can have a material impact on its net
revenue, operating income and net income (loss), as well as on the value of
certain assets on its consolidated balance sheet. The Company believes that the
estimates, assumptions and judgments involved in the accounting policies
described below have the greatest potential impact on its consolidated financial
statements. The Company considers these to be its critical accounting policies.
The policies described below are not intended to be a comprehensive list of all
the Company's accounting policies. In many cases, the accounting treatment of a
particular transaction is specifically dictated by generally accepted accounting
principles, with no need for management judgment in their application. There are
also areas in which management judgment in selecting any available alternative
would not produce a materially different result. The Company's audited
consolidated financial statements and notes thereto contain significant
accounting policies and other disclosures required by generally accepted
accounting principles. The accounting policies that are considered critical to
an understanding of the consolidated financial statements are highlighted below.


Revenue Recognition

     To recognize revenues the Company applies the provisions of Statement of
Position 97-2, SOFTWARE REVENUE RECOGNITION (SOP 97-2), as amended by SOP 98-9,
and generally recognize revenue when all of the following criteria are met: (1)
persuasive evidence of an arrangement exists, (2) delivery has occurred, (3) the
fee is fixed or determinable and (4) collection of the resulting receivable is
reasonably assured.

     At the time of the transaction, the Company's accounting policies assess
whether the fee associated with the revenue transactions is fixed or
determinable based on the payment terms associated with the transaction. If a
significant portion of a fee is due after the shorter of the Company's normal
payment terms or 90 days, the Company accounts for the fee as not being fixed or
determinable. In these cases, the Company recognizes revenue as the fees become
due and payable. If the Company had assessed the fixed or determinable criterion
differently, the timing and amount of its revenue recognition may have differed
materially from that reported.

     The Company recognizes revenue for support and maintenance services over
the contract term, which is usually twelve-months, and generally, recognizes
revenue from training services as these services are performed. Revenues from
software licensing is generally recognized when delivery and acceptance; for
professional services that involve significant implementation, customization, or
modification that is essential to the functionality of systems, the company
generally recognize the service revenue over the period of the engagement, using
the percentage-of-completion method. In cases where professional services
involve customizations for which the amount of customization effort cannot be
reasonably estimated, where significant uncertainty about the project completion
exists, or where an arrangement provides for customer acceptance, the Company
defers the contract revenue under the completed contract method of accounting
until the uncertainty is sufficiently resolved or the contract is complete. If
the Company was to make different judgments or utilize different estimates of
the total amount of work expected to be required to complete an engagement, the
timing of the companies revenue recognition from period to period, as well as
the related margins, might differ materially from that previously reported.

                                       12

<PAGE>
<TABLE>
<CAPTION>


QUARTERLY FINANCIAL PERFORMANCE DURING THE YEAR ENDED JULY 31, 2005

         The following table summarizes un-audited financial performance for
each quarter of the Company's fiscal 2005 year for the Company and its
subsidiaries.


                                                                       Quarter Ended

                                             ----------    ----------    ----------    ----------    ----------
                                                Total       July 31       April 30     January 31    October 31
                                             ----------    ----------    ----------    ----------    ----------
<S>                                             <C>           <C>            <C>          <C>           <C>
Net Revenues                                    607,374       139,174        62,587       102,264       303,349
Cost of Goods Sold                               68,419           724        11,060       (27,296)       83,931
                                             ----------    ----------    ----------    ----------    ----------
Gross Margin (profit/loss)                      538,955       138,450        51,527       129,560       219,418
                                             ----------    ----------    ----------    ----------    ----------

Operational Expenses
                  Sales and Marketing           226,540        74,515        34,116        51,778        66,131
           General and Administrative         1,319,395       299,243       398,983       335,358       285,811

                                             ----------    ----------    ----------    ----------    ----------
Total Operating Expenses                      1,545,935       373,758       433,099       387,136       351,942
                                             ----------    ----------    ----------    ----------    ----------


Loss from Operations                         (1,006,980)     (235,308)     (381,572)     (257,576)     (132,524)
                                             ----------    ----------    ----------    ----------    ----------

Other (Expense) Income
                     Interest expense          (104,798)     (155,807)      108,235       (28,135)      (29,091)
            Loss of Sales of Property           (19,451)      (19,451)         --            --            --
             Loss on disposal of unit            (7,641)       (7,641)         --            --            --
            Other Income (Settlement)           160,000       160,000          --            --            --
                         Other Income             7,989         7,989          --            --            --
                                             ----------    ----------    ----------    ----------    ----------
    Total Other Income (expenses)                36,099       (14,910)      108,235       (28,135)      (29,091)
                                             ----------    ----------    ----------    ----------    ----------
Net Loss                                       (970,881)     (250,218)     (273,337)     (285,711)     (161,615)



Liquidity and Capital Resources

     At July 31, 2005, the Company had current assets of $136,511 and current
liabilities of $1,540,135. The independent auditors, who audited the financial
statements for the period ended July 31, 2005, have expressed substantial doubt
about the Company's ability to continue as a going concern given its recurring
losses from operations, negative working capital and net stockholders' deficit.
In addition, the Company must deal with the litigation and claims described in
Item 3 of this Form 10-KSB under the heading "Legal Proceedings."

     In response to these issues, the Company raised $500,000 in convertible
debentures during the fourth quarter of the fiscal year. Management believes it
is imperative that the Company raise additional funds, to fund the Company's
operations as well as its sales and marketing efforts; including the costs of
compliance with the continuing reporting requirements of the Securities Exchange
Act of 1934, as amended, for the Company and its subsidiaries; or seek
additional businesses to acquire as part of the Company's strategy. If no
business can be found the Company's board of directors might be forced to look
for other business models that represents the best chances for success to the
company's shareholders. Such acquisition, reversal can not be guaranteed and no
assurances can be given as to the success this may or may not have on the
business currently.

     Failure by the Company to raise capital is likely to have a material
adverse effect on the business of the Company and may cause shareholders to lose
their entire investment in the Company. There can be no assurance the Company
will be successful in its capital raising efforts. In addition, the Company has
substantial risks associated with financing terms that may or may not be
favorable to the company from potential investors, which could harm the
interests of existing investors, as well as by causing substantial dilution and
by downward pressure on the market price of the Company's Common Stock resulting
from re-sales of securities by new investors. The Company will be required to
register the securities of new investors for re-sale.

                                       13
</TABLE>

<PAGE>


Effects of Foreign Currency Exchange Rates

     The Company derives a portion of its net revenue from international sales,
historically through its international subsidiary and through a limited number
of resellers. Over the past fiscal year the Company has had a direct
relationship with its foreign customers and accepts payments directly in US
funds, rather than historically relying upon its international subsidiary to do
so. In the past, fluctuations in exchange rates could have caused the companies
results to fluctuate when a translation of revenues and expenses denominated in
other currencies into U.S. dollars. During the period ended July 31 2005 this
was not the case. However, fluctuations in exchange rates may make our products
more expensive to resellers or customers who purchase the companies products in
U.S. dollars.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This Report contains certain financial information and statements regarding
our operations and financial prospects of a forward-looking nature, including
new products under development and their features and prediction of industry
trends and future partners. Although these statements accurately reflect
management's current understanding and beliefs, we caution you that certain
important factors (including, without limitation, factors described in the
section of this Report entitled "RISK FACTORS") may affect our actual results
and could cause such results to differ materially from any forward-looking
statements which may be deemed to be made in this Report. For this purpose, any
statements contained in this Report that are not statements of historical fact
may be deemed to be forward-looking statements. Without limiting the generality
of the foregoing, words such as, "may", "will", "intend", "expect", "believe",
"anticipate", "could", "estimate", "plan" or "continue" or the negative
variations of those words or comparable terminology are intended to identify
forward-looking statements. There can be no assurance of any kind that such
forward-looking information and statements will reflect in any way our actual
future operations and/or financial results, and any of such information and
statements should not be relied upon either in whole or in part in connection
with any decision to invest in the shares.

RISK FACTORS

     Investing in our common stock involves a high degree of risk. You should
carefully consider the risks and uncertainties described below before you
purchase any of our common stock. These risks and uncertainties are not the only
ones we face. Unknown additional risks and uncertainties, or ones that we
currently consider immaterial, may also adversely affect our business
operations. If any of these risks or uncertainties actually occurs, our
business, financial condition or results of operations could be materially
adversely affected. In this event, you could lose all or part of your
investment.

We have a limited operating history and are not yet profitable.

     We are a relatively new company that is not yet profitable. We expect to
continue to have substantial expenses before we earn significant income in
excess of our expenses. The establishment of any new business involves problems,
expenses, difficulties, complications and delays. It is not possible for anyone,
including us, to predict with certainty what all of these expenses,
complications and delays will be. We cannot guarantee to you that we will be
able to overcome these obstacles, and we cannot guarantee to you that we will
ever be profitable.

Our financial results for the twelve-month fiscal year ending July 31, 2005 show
substantial losses and there is substantial doubt as to our ability to continue
as a going concern.

     The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplates continuations of Mobile Reach International, Inc. ("the Company")
as a going concern. However, the Company has sustained substantial operating
losses for the years ended July 31, 2005 and 2004 of $970,881 and $3,142,860,
respectively. The Company, as of July 31, 2005 is in default on certain notes
payable, payroll taxes and other payables. In addition, the Company current
liabilities exceed current assets by $1,404,074, and the Company has a
stockholders' deficit of $8,759,323.

     In view of these matters, management has sought out additional investment
to raise additional funds. However, no assurances can be given the Company will
continue as a going concern without the successful completion of additional
financing. The accompanying consolidate financial statements do not include any
adjustments that might be necessary if the Company is unable to continue as a
going concern.

     As a result of the delinquencies and defaults, the Company may be subject
to collection actions whenever agreements can not be reached, including, but not
limited to, litigation, foreclosure and/or seizure of assets and bank accounts.

                                       14

<PAGE>


     Scharf Pera & Co., PLLC, our independent auditors, have expressed
substantial doubt about our ability to continue as a going concern given our
recurring losses from operations, negative working capital and net stockholder's
deficit. This opinion could materially limit our ability to raise additional
funds by issuing new debt or equity securities or otherwise. You should consider
our auditor's comments when determining if an investment in the Company is
suitable.

     We depend upon a limited number of clients. A significant portion of the
Company's revenues during fiscal 2005 were derived of orders from a limited
number of clients. The timing of receipt, fulfillment and deployment of orders
from these limited clients is likely to cause significant fluctuations in our
operating results, especially on a quarterly basis. Such factors as deferred
revenues and traditional accounts receivables can and do directly impact the
revenues quarter of quarter.

     We are dependent on certain key personnel, including members of our
management team. The Company currently has a very small senior management team
and is highly dependent on certain key individuals of this team. The operations
would suffer significantly if some or all of these individuals were to terminate
their relationship with the Company for any reason. Retaining and or replacing
these relationships will become even more important as the Company grows. The
Company cannot assure the investing public that it will be able to replace a key
individual who terminates his or her relationship with the Company. The Company
will utilize best practices in recruitment if and when it's necessary to replace
key individuals. The Company does not have any key-man life insurance on its
current employees.

     The wireless communications industry is highly competitive and we may be
unable to compete effectively. The industry of providing mobile solutions for
information technology systems is highly competitive. Many companies compete
nationwide to provide mobile solutions to businesses and entities using
information technology systems and communications networks. If a competitor
offers products and services that are equal to or superior to our products and
services, or offers products and services at lower prices than we do, it may be
difficult or impossible for us to sell our products and services in sufficient
volumes to sustain operations. We cannot assure you that market demand will
continue to grow, and increases in capacity by us and our competitors may lead
to greater competition in the market, which competition would adversely affect
our ability to sells its products and services in sufficient volume to sustain
operations.

     Our market is changing rapidly and we may not be able to move fast enough
to accommodate the market's changes. The market for information technology
systems and communications networks is changing rapidly as new technologies are
introduced and old ones are abandoned. While we will try to make changes in our
products and services to keep up with the changing market, we cannot assure you
that rapid changes in products and services will not make our products and
services obsolete, such that we will be unable to compete in the market.

     Demand for our products may fail to materialize as expected. The market for
the products and services we offer is relatively new and there is little hard
data to validate market demand or predict how this demand will be segmented.
There could be much lower demand than believed, or interest in our products and
services could decline or die out, which would adversely affect our ability to
sustain operations.

     We may be subject to product liability or breach of contract claims if our
wireless solutions do not work as promised. The mobile solutions in which we
provide information technology are designed to facilitate information flows over
such systems. If our mobile solutions fail to work as anticipated, customers may
bring claims against us, despite limitations on such claims in our contracts and
agreements with customers. Defending against such claims can be costly and time
consuming, and could have a material adverse effect on our operations, even if
we are found not to have been at fault. We have liability insurance and
anticipate that we will continue such coverage if it is available at a
reasonable cost. Future increases in insurance premiums may prevent us from
maintaining adequate insurance coverage. A large damage award against us could
exceed our insurance coverage and adversely affect our financial condition.

     Unless an active trading market develops for our common stock, you may not
be able to sell your shares. Although we are a reporting company and our common
stock is listed on the Over-the-Counter Bulletin Board, there is no active
trading market for our common stock. An active trading market may never develop
or, if developed, it may not be maintained even after we register the shares you
purchase. Failure to develop or maintain an active trading market will
negatively affect the price of our securities. You may be unable to sell your
shares or such sales may lower the market price, and therefore your investment
would be a partial or complete loss.

                                       15

<PAGE>


     We are subject to the penny stock rules, and therefore you may find it more
difficult to sell your securities. Broker-dealer practices in connection with
transactions in "penny stocks" are regulated by certain rules adopted by the
Securities and Exchange Commission. Penny stocks generally are equity securities
with a price of less than $5.00 (other than securities registered on certain
national securities exchanges or quoted on the NASDAQ Stock Market provided that
current price and volume information with respect to transactions in such
securities is provided by the exchange or system). The rules require that a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, deliver to the buyer a standardized risk disclosure document that
provides information about penny stocks and the risks in the penny stock market.
The broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in connection with the transaction and monthly account statements
showing the market value of each penny stock held in the customer's account. In
addition, the rules generally require that prior to a transaction in a penny
stock; the broker-dealer must make a special written determination that the
penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the liquidity of penny stocks. Our securities
are subject to the penny stock rules, and thus investors in the offering may
find it difficult to sell their securities.

     Our founders, officers and directors beneficially own approximately 32% of
our stock on a fully diluted basis; their interests could conflict with yours;
significant sales of stock held by any or all of them could have a negative
effect on our stock price; shareholders may be unable to exercise control. In
addition, employees of the Company own additional shares and rights to acquire
shares. As a result, the founders, officers and directors will have significant
ability to:

     o    elect or defeat the election of our directors;
     o    amend or prevent amendment of our articles of incorporation or bylaws;
     o    effect or prevent a merger, sale of assets or other corporate
          transaction; and
     o    control the outcome of any other matter submitted to the stockholders
          for vote.

     As a result of this ownership and position, our founders, officers and
directors are able to significantly influence all matters requiring stockholder
approval, including the election of directors and approval of significant
corporate transactions. In addition, sales of significant amounts of shares held
by any or all of our founders, officers and directors, or the prospect of these
sales, could adversely affect the market price of our common stock. Stock
ownership by our founders and management may discourage a potential acquirer
from making a tender offer or otherwise attempting to obtain control of us,
which in turn could reduce our stock price or prevent our stockholders from
realizing a premium over our stock price.

We do not expect to pay dividends. Therefore, you may not rely on your ownership
of our stock as a source of income.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

N/A      See Financial Statements for any further comments


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.


(1) Financial Statements

The following financial statements are included immediately following the
signature page of this Form 10-KSB.

     Report of Scharf, Pera & Co., P.L.L.C, Independent Certified
     Public Accountants                                                       F1
     Balance Sheet as of July 31, 2005                                        F2
     Statements of Income for the years ended July 31, 2005 and
     July 31, 2004                                                            F3
     Statement of Stockholders' Deficit for the years ended
     July 31, 2005 and July 31, 2004                                          F4
     Statements of Cash Flows for the years ended July 31, 2005
     and July 31, 2004                                                        F5
     Notes to Financial Statements                                            F6

(2) Financial Statement Schedules

All financial statement schedules are omitted because they are not applicable or
the required information is shown in the financial statements or notes thereto.

                                       16

<PAGE>


ITEM 9.   CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DOSCLOSURES.

(i)  Not applicable.

(ii) The independent auditor's report on the consolidated financial statements
     for the year ended July 31, 2005 contained no adverse opinion, no
     disclaimer of opinion, nor was it qualified or modified as to uncertainty,
     audit scope or accounting principles.


ITEM 9A.  CONTROLS AND PROCEDURES.

     Our principal executive officer and principal financial officer evaluated
the effectiveness of the Company's disclosure controls and procedures as of a
date within 90 days prior to the filing of this report. Based on this
evaluation, the Company's principal executive officer and principal financial
officer have concluded that the Company's controls and procedures are effective
in providing reasonable assurance that the information required to be disclosed
in this report has been recorded, processed, summarized and reported within the
time period required for the filing of this report. Subsequent to the date of
this evaluation, there have not been any significant changes in our internal
controls or, to our knowledge, in other factors that could significantly affect
our internal controls.


ITEM 9B.  OTHER INFORMATION.

None

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors and Officers

     The members of the Board of Directors and executive officers of Mobile
Reach International, Inc. together with their respective ages are set forth
below. The Company's' officers are elected by and serve at the designation and
appointment of the Board of Directors.



        Name                       Age            Position
        ----                       ---            --------

 Alan Christopher Johnson (1)      37      Chairman, Director and
                                           Chief Executive Officer

 Brian R. Balbirnie (4)            34      Chief Financial Officer

 Mark Lloyd (2)                    40      Director, President,
                                           Chief Technology Officer

 Richard Rosenblum (3)             46      Director

 David Stefansky (3)               41      Director



Director Change in Controls


(1) - Served on the Board of the Company as a Director since inception. On
August 6, 2004 Mr. Johnson became the interim CEO by Board consent until further
notice.

(2) - Served on the Board of the Company as a Director since inception. Become
President of the Company on October 2004.

(3) - Served on the board of the Company since October 2004.

(4) - Served as Chief Financial Officer since July 2005, previously the
Company's Chief Operating Officer from December 2003 to July 2004, served as
consultant from August 2004 to July 2005.

                                       17

<PAGE>


     Alan Christopher Johnson has been a member of our board of directors since
inception, and became our Chairman and Chief Executive Officer in August 2004.
Mr. Johnson was formally the Head Trader for Index Trading for CMT London, a
firm he joined in March 1999 to set up trading operations on the LIFFE. Mr.
Johnson has an extensive financial banking career that involves several
international derivative trading firms. Prior to joining CMT, in 1996 he
co-founded S & J Derivatives Trading GmbH, a market making firm in Germany that
traded on the Deutshe Terminborse. Mr. Johnson established trading operations
for major international banks in Japan and Germany. He has extensive risk
management and trading skills in equity options, future options, fixed income
options, market making, structuring derivative products and volatility trading.
Previously, Mr. Johnson worked for BNP Securities in Tokyo Japan and was in
charge of re-structuring the Nikkei Index trading operation.

     Mark Lloyd is a Director and our President and Chief Technical Officer. Mr.
Lloyd founded Mobile Reach Technologies in 2000 as a mobile middleware company.
He is responsible for understanding key mobility technology trends across mobile
devices and wireless networks, and how these technologies can be effectively
applied to deliver high-value solutions for Mobile Reach's clients. Mark works
both internally with staff members to set technical direction, as well as
directly with clients to identify areas where mobile and wireless technologies
can provide true business benefit to them. Mr. Lloyd has several years of
mobility experience including wireless device and network experience with
Ericsson, Nortel & AT&T Bell Laboratories in a wide array of technologies
including PDAs, SmartPhone, WAP Browsers, GSM digital cellular phones, dual-mode
cellular phones and SS7 switching systems. In addition, Mr. Lloyd has a deep
background in Software Processes and Object-Oriented development. In 1992, he
founded a company which developed and commercialized a specialized CASE tool
that enabled true Software Engineering via automated support of domain
separation, graphical modeling & source code generation.

     Brian R. Balbirnie has been the Chief Financial Officer since July 19,
2005; previously Mr. Balbirnie served as Chief Operating Officer from December
2003 till July 31, 2004, responsible for the day to day operations, including
all facets of SEC reporting. His duties include directing corporate compliance,
investor relations as well as overseeing different business units. Before
joining Mobile Reach Mr. Balbirnie was a vice president and managing director
with Ivue Corporation and during his tenure, Mr. Balbirnie was involved in the
design and beta of one of the industries first Internet Broadcast player-less
technologies. Preceding Ivue, Mr. Balbirnie spent two years consulting with
several telecommunications companies in the Tampa Bay area, including GCS
Telecom and Target Television, assisting in operations and M&A to build strong
stockholder values and exit strategies. Mr. Balbirnie attended St. Petersburg
College majoring in Business Administration and Marketing.

     Richard Rosenblum has been a director since March 7, 2005. Since July 2004,
Mr. Rosenblum has been a principal of Harborview Advisors, LLC, a firm that
provides structuring and financing advice to publicly and privately held firms.
From August 2004 through November 2004, Mr. Rosenblum was a Managing Director of
Greenfield Capital Partners, LLC, a private investment banking firm. From July
2001 until July 2004, Mr. Rosenblum was a Managing Director of Investment
Banking for vFinance Investments in New York, where he was responsible for
advising, structuring and financing publicly and privately held companies. From
July 2001 until July 2004, Mr. Rosenblum also served as Senior Managing Partner
of ACP Advisors in New York, where he was responsible for advising and raising
capital for emerging growth companies. From April 1999 until July 2001, Mr.
Rosenblum was a Managing Director at Robb Peck McCooey Financial Services, Inc.
in New York. Mr. Rosenblum also serves on the Board of Mobile Reach
International, Inc.

     David Stefansky has been a director since March 7, 2005. Since July 2004,
Mr. Stefansky has been a principal of Harborview Advisors, LLC, a firm that
provides structuring and financing advice to publicly and privately held firms.
From July 2001 until July 2004, Mr. Stefansky was a Managing Director of
Investment Banking for vFinance Investments in New York, where he was
responsible for advising, structuring and financing publicly and privately held
companies.



Board of Directors; Election of Officers

All of our directors hold office until the next annual meeting of the security
holders or until their successors have been elected and qualified. Our officers
are appointed by our board of directors and hold office until their death,
resignation or removal from office.

Board Compensation and Committees

     Currently we do not have a policy in place to compensate our directors for
board related activities until our financial condition improves. Our Audit
Committee comprises Mr. Rosenblum as Audit Chairperson. No member of our board
of directors has the level of experience required to be considered a financial
expert for the purpose of Securities and Exchange Commission rules related to
Audit Committees. Currently, Over-the-Counter Bulletin Board companies, such as
ours, are not required to have an Audit Committee or a "financial expert."

                                       18

<PAGE>
<TABLE>
<CAPTION>


Nevertheless, we are in the process of identifying people to add to our board of
directors and will be seeking additional candidates for an Audit Committee that
fits the commission's criteria of "Financial Expert".

We do not currently have a nominating committee. Nominations for election to the
board of directors may be made by the board of directors, or by any stockholder
entitled to vote for the election of directors. Special meetings may be held
from time to time to consider matters for which approval of the board of
directors is desirable or is required by law.

Code of Ethics

The Company does not currently have a Code of Ethics, but intends to evaluate
provisions for a code of ethics in the future.


ITEM 11.  EXECUTIVE COMPENSATION.

Accounting for stock-based compensation

     Employee stock awards under our compensation plans are accounted for in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25"), and related interpretations. We provide
the disclosure requirements of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS 123"), and related
interpretations. Stock-based awards to nonemployees are accounted for under the
provisions of SFAS 123. SFAS 123 allows and we have elected to continue to only
disclose the effects on net income or loss of the fair value of the options.

Executive Compensation Summary

     The following table sets forth the annual and long-term compensation for
each of the past three fiscal years of each of (i) the Company's Chief Executive
Officer, and (ii) each of the Company's other executive officers, who were
serving as of July 31, 2004 and whose annual compensation exceeded $100,000,
(collectively, with the Chief Executive Officer, the "Named Officers"):



                                                Summary Compensation Table

--------------------------------------------------------------------------------------------------------------------------
                                          Annual Compensation (1)           Long-Term Compensation
                                          -----------------------           ----------------------
Name and Principal Position                                                 Restricted        Securities
                                        Stock                                 Stock           Underlying         Other
                                        Year (2)   Salary ($) (3)  Bonus     Awards(1)         Options        Compensation
                                        ----       ----------      -----  ---------------      -------        ------------

<S>                                     <C>        <C>               <C>            <C>               <C>              <C>
Alan Christopher Johnson                2005       $160,000(i)       -               -                 -                -
             Chief Executive Officer    2004                 -       -               -                 -                -
                                        2003                 -       -               -                 -                -


Mark J. Lloyd                           2005          $175,000       -               -                 -                -
         President & Chief Technical    2004          $120,000       -               -         1,088,792
                             Officer    2003           120,000       -               -                 -                -
                                        2002           118,850       -               -                 -                -


Brian R. Balbirnie                      2005          $105,000       -               -                 -                -
             Chief Financial Officer    2004          $160,000       -               -                 -                -
                                        2003           $70,000       -               -                 -                -


(1) Excludes perquisites and other personal benefits, the aggregate annual
amount of which for each officer was less than the lesser of $50,000 or 10% of
the total salary and bonus reported.

                                       19
</TABLE>

<PAGE>


(2) The fiscal year for 2002 was twelve-month period ended December 31, Fiscal
year 2003 was a seven-month period ended July 31, 2003. Fiscal 2004 was twelve
month period ended July 31, 2004; Fiscal 2005 was twelve month period ended July
31, 2005.

(3) The salary for the seven-month fiscal year 2003 represents the annualized
salary that would have been paid during a 12-month year.

(i) Deferred Salaries - named executive has not taken compensation from the
first date of employment agreement. Named executive has the option to convert
salaries from compensation into Companies Common shares during his employment
with the company.


     On April, 2005, the Company and A. Christopher Johnson entered into an
employment agreement, effective as of April 1, 2005, pursuant to which Mr.
Johnson shall remain as the Chief Executive Officer of the Company shall be paid
an annual salary at the rate of $120,000. Mr. Johnson's salary is scheduled to
increase to $175,000 in the event the Company closes a financing with proceeds
to the Company in excess of $1 million. At his election, Mr. Johnson may convert
any accrued but unpaid salary into incentive stock options to purchase shares of
the Company's common stock at an exercise price equal to the closing price (on
the principal exchange on which the common stock is traded) of the common stock
on the business day immediately preceding the date of conversion. The agreement
further provides that if Mr. Johnson's employment is terminated other than for
cause (as defined in the employment agreement), he will be entitled to receive
an amount in cash equal to three months' base salary plus benefits for such
period.

     Mark J. Lloyd, President and Chief Technology Officer, is entitled to
receive a base salary of $175,000 per year under his Employment Agreement.
However, due to the financial condition of the Company, Mr. Lloyd has been
deferring his salary at a rate of $4,583.00 per month, since April 2004. Upon
the closing by the Company of financing rounds totaling over $2 million, Mr.
Lloyd's base salary will increase to $175,000 per year. In such an event, Mr.
Lloyd will also receive a bonus equal to 12.5% of the net sales received by the
Company on certain of its contracts. Mr. Lloyd will also receive a cash bonus
equal to $93,600 upon the earlier to occur of the closing by the Company of
financing rounds totaling over $2 million or December 31, 2003. In the event of
termination of Mr. Lloyd's employment for any reason, Mr. Lloyd is eligible for
a severance payment of $93,600 in lieu of the cash bonus mentioned in the
preceding sentence, plus three months of his then-current salary. Mr. Lloyd is
eligible for options under the Company's Equity Compensation Plan at the
discretion of the Board.

     Brian Balbirnie, our Chief Financial Officer, receives a base salary of
$105,000 per year. He currently does not have an employment agreement with us.
Previously Mr. Balbirnie served as a consultant to the company and deferred
compensation in the amount of $21,000.00. As of July 31, 2005, the amount is
still owed and payable.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS.


     The following table sets forth information regarding the beneficial
ownership of our common stock taking into account the stock dividend whose
record date is July 31, 2005. The information in this table provides the
ownership information for:

     o    each person known by us to be the beneficial owner of more than 5% of
          our common stock;

     o    each of our directors;

     o    each of our executive officers; and

     o    our executive officers and director as a group.

     Beneficial ownership has been determined in accordance with the rules and
regulations of the Securities and Exchange Commission and includes voting or
investment power with respect to the shares. Unless otherwise indicated the
persons named in the table below have sole voting and investment power with
respect to the number of shares of Common Stock of Mobile Reach International
indicated as beneficially owned by them. Unless otherwise indicated, the address
of each beneficial owner is: Mobile Reach International, Inc., 2054 Kildaire
Farm Road 353 Cary, North Carolina 27511.

                                       20

<PAGE>


            Name of                         Number of Shares       Percentage of
       Beneficial Owner                    Beneficially Owned       Outstanding
       ----------------                    ------------------       -----------
     Christopher Johnson                         540,243               9.26%
     Mark Lloyd                                  405,481               6.95%
     Brian R. Balbirnie                           56,250               0.96%
     Richard Rosenblum(1)                        462,611               7.35%
     David Stefansky(2)                          462,611               7.35%

     Officers and Directors as a Group         1,927,196              31.87%


(1) Includes 387,500 shares of Common Stock owed indirectly by Harborview
Capital, 40,584 shares of Common Stock issuable upon exercise of warrants issued
to Harborview Master Fund. Also includes 12,500 shares of Common Stock held by
Harborview Capital Management, LLC ("Harborview") of which Mr. Rosenblum is a
principal; Also includes 8,157 shares of Common Stock issuable upon exercise of
warrants issued to Mr. Rosenblum in connection with the 8% convertible
Debenture. Furthermore Mr. Rosenblum owns 749 shares of common stock issued for
services in connection with a February 27(,) 2004 debenture.

(2) Includes 387,500 shares of Common Stock owed indirectly by Harborview
Capital, 40,584 shares of Common Stock issuable upon exercise of warrants issued
to Harborview Master Fund. Also includes 12,500 shares of Common Stock held by
Harborview Capital Management, LLC ("Harborview") of which Mr. Stefansky is a
principal; Also includes 8,157 shares of Common Stock issuable upon exercise of
warrants issued to Mr. Stefansky in connection with the 8% convertible
Debenture. Furthermore Mr. Stefansky owns 749 shares of common stock issued for
services in connection with a February 27(,) 2004 debenture.

The total ownership in the table above represents officers and directors as a
group based on a fully diluted basis of issued and outstanding, to be issued,
options and warrants.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     One of our directors, (now current Chief Executive Officer) Alan
Christopher Johnson part of a group, entered into a Secured Bridge Note dated
May 31, 2004, a short term note payable and other financing documents for a
total amount of $435,000. On January 31 2005 the Company, its management, board
of directors and Alan Christopher Johnson agreed to convert the $435,000 into
840,000 shares of Preferred Series A stock at a ten for 1 conversion ratio. On
May 20, 2005 the Company and Mr. Johnson agreed to converted and surrender the
840,000 preferred Series A shares, all outstanding warrants of 1,333,333 at
$0.16 as well as any other options held for 33,500,000 common shares of the
Company.

     Other than mentioned herein, no director, senior officer or principal
shareholder of the Company, or associate or affiliate of any of the foregoing,
has any other material interest, direct or indirect, in any transaction or in
any proposed transaction which has materially affected or will materially affect
the Company from August 1, 2004 to July 31, 2005.


ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

         The fees billed for accounting and related services for the periods
ended July 31, 2005 and July 31, 2004 were as follows:


                             Fiscal 2005                  Fiscal 2004
                       ----------------------       ----------------------
Total Fees                    $ 65,360.                    $ 106,755.


Audit fees: Consists of fees related to professional services rendered in
connection with the audit of our annual financial statements, the reviews of
financial matters, including but not limited to compliance related activities,
as necessary to comply with generally accepted auditing standards.

Tax fees: Consists of fees billed for professional services related to federal
and state tax return preparation.

All other fees: Consists primarily of fees for a subscription to electronic
filings and research materials.

                                       21

<PAGE>


                                     PART IV


ITEM 15.  EXHIBITS, FINANCIAL STATEMENTS SCHEDULES.


(a) Exhibits

16.1                Letter of Independent Auditor. Incorporated by reference to
                    Exhibit 16.1 to the Company's Current Report on Form 8K

21.1                Subsidiaries

23.1                Consent of Independent Auditors

31.1                Certificate of Chief Executive Officer pursuant to Section
                    302 Certifications

31.2                Certificate of Chief Financial Officer pursuant to Sections
                    302 Certifications

32.1                Certificate of Chief Executive Officer pursuant to Section
                    906 of the SarbanesOxley Act of 2002.

32.2                Certificate of Chief Financial Officer pursuant to Section
                    906 of the SarbanesOxley Act of 2002.


(b) Reports on Form 8-K

For the period ending July 31, 2005, the Company filed the following 8-K
reports:




Items Reported                                      Date Filed
--------------                                      ----------

Current report, items 3.02, 5.02, and 5.03          26-Jul-2005
Current report, item 3.02                            8-Jul-2005
Current report, items 3.02 and 9.01                 13-May-2005
Current report, items 1.01, 3.02, and 9.01           3-May-2005
Current report, item 3.02                            6-Apr-2005
Current report, items 5.02 and 9.01                 18-Feb-2005
Current report, item 6                               9-Aug-2004

                                       22

<PAGE>


                                   SIGNATURES

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


                                            MOBILE REACH INTERNATIONAL, INC.
                                            (Registrant)



                                            By:  /s/   Alan Christopher Johnson
                                               ---------------------------------
                                                       Alan Christopher Johnson
                                                       Chief Executive Officer
                                                       November 14, 2005


Pursuant to the requirements of the Securities and 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.




                                            By:  /s/   Alan Christopher Johnson
                                               ---------------------------------
                                                       Alan Christopher Johnson
                                                       Chief Executive Officer
                                                       November 14, 2005


                                            By:  /s/   Brian R. Balbirnie
                                               ---------------------------------
                                                       Brian R. Balbirnie
                                                       Chief Financial Officer
                                                       November 14, 2005


                                            By:  /s/   Mark J. Lloyd
                                               ---------------------------------
                                                       Mark J. Lloyd
                                                       President,
                                                       Chief Technology Officer
                                                       November 14, 2005


                                            By:  /s/   Richard Rosenblum
                                               ---------------------------------
                                                       Richard Rosenblum
                                                       Director and Audit
                                                       Committee Chairperson
                                                       November 14, 2005


                                            By:  /s/   David Stefansky
                                               ---------------------------------
                                                       David Stefansky
                                                       Director
                                                       November 14, 2005

                                       23

<PAGE>


EXHIBIT INDEX

The following documents are filed as part of this report:

    21.1            Subsidiaries

    23.1            Consent of Independent Auditors

    31.1            Certificate of Chief Executive Officer pursuant to Section
                    302 Certifications

    31.2            Certificate of Chief Financial Officer pursuant to Sections
                    302 Certifications

    32.1            Certificate of Chief Executive Officer pursuant to Section
                    906 of the SarbanesOxley Act of 2002.

    32.2            Certificate of Chief Financial Officer pursuant to Section
                    906 of the SarbanesOxley Act of 2002.

                                       24

<PAGE>




                MOBILE REACH INTERNATIONAL, INC. AND SUBSIDIARIES
                -------------------------------------------------
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                       YEARS ENDED JULY 31, 2005 AND 2004
                       ----------------------------------


                                                                           Pages


INDEPENDENT AUDITORS' REPORT                                                  F1


FINANCIAL STATEMENTS:

    Consolidated Balance Sheet                                                F2


    Consolidated Statements of Income                                         F3


    Consolidated Statement of Stockholders' Deficit                           F4


    Consolidated Statements of Cash Flows                                F5 - F6


    Notes to Consolidated Financial Statements                          F7 - F22

<PAGE>





Board of Directors
Mobile Reach International, Inc. and Subsidiaries
Charlotte, North Carolina



                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------

     We have audited the accompanying consolidated balance sheet of Mobile Reach
International, Inc. and Subsidiaries as of July 31, 2005, and the related
consolidated statements of income, consolidated statement of changes in
stockholders' deficit and consolidated statements of cash flows for the years
ended July 31, 2005 and 2004. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

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

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Mobile Reach International,
Inc. and Subsidiaries as of July 31, 2005 and 2004, and the results of its
operations and its cash flows for the years ended July 31, 2005 and 2004, 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 1 to the
financial statements, the Company has suffered recurring losses from operations
and has net stockholders' deficit, which raise substantial doubt about its
ability to continue as a going concern. Management's plans regarding those
matters are also included in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.




October 26, 2005

/s/  Scharf Pera & Co., PLLC
-----------------------------
     Scharf Pera & Co., PLLC
     Charlotte, North Carolina

                                      (F1)

<PAGE>


                MOBILE REACH INTERNATIONAL, INC. AND SUBSIDIARIES
                -------------------------------------------------
                           CONSOLIDATED BALANCE SHEET
                           --------------------------
                                  JULY 31, 2005
                                  -------------


                                     ASSETS
                                     ------

CURRENT ASSETS:
  Cash                                                              $    78,353
  Accounts receivable - trade                                            57,708
  Other assets                                                              450
                                                                    -----------


    Total current assets                                                136,511

PROPERTY AND EQUIPMENT - NET                                             74,920
                                                                    -----------

                                                                    $   211,431
                                                                    ===========


                      LIABILITIES AND STOCKHOLDERS' DEFICIT
                      -------------------------------------

CURRENT LIABILITIES:
  Current portion of long-term debt                                 $    23,038
  Notes payable                                                          88,759
  Accounts payable                                                      580,016
  Accrued expenses                                                      261,865
  Accrued taxes and withholdings                                        538,170
  Deferred income                                                        48,287
                                                                    -----------

    Total current liabilities                                       $ 1,540,135

LONG-TERM DEBT (net of current portion)                                  63,267

CONVERTIBLE DEBENTURES                                                1,025,000

COMMITMENTS AND CONTINGENCIES                                              --

STOCKHOLDERS' DEFICIT:
  Preferred stock; $.0001 par value;
   100,000,000 shares authorized                                           --
  Common stock; par value $.0001; 500,000,000
    shares authorized, 585,700 shares issued
    and outstanding, 1,808,939 shares to be
    issued                                                            6,342,352
  Accumulated deficit                                                (8,759,323)
                                                                    -----------

                                                                     (2,416,971)
                                                                    -----------
                                                                    $   211,431
                                                                    ===========


                 See Notes to Consolidated Financial Statements

                                      (F2)

<PAGE>


               MOBILE REACH INTERNATIONAL, INC. AND SUBSIDIARIES
               -------------------------------------------------
                        CONSOLIDATED STATEMENTS OF INCOME
                        ---------------------------------
                   FOR THE YEARS ENDED JULY 31, 2005 AND 2004
                   ------------------------------------------



                                                        2005           2004
                                                     -----------    -----------
NET REVENUES:
    Software license, maintenance, and support
      fees                                           $   405,796    $   591,193
    Product sales                                         87,665        854,710
    Professional services                                113,913        132,225
    Other revenue                                           --           11,731
                                                     -----------    -----------
         Total revenues                                  607,374      1,589,859

COST AND EXPENSES:
    Cost of revenues                                      68,419        937,833
    Sales and administrative                           1,488,735      3,547,034
    Depreciation                                          39,635         46,548
    Bad debt expense                                      17,565         31,705
                                                     -----------    -----------
         Total cost and expenses                       1,614,354      4,563,120
                                                     -----------    -----------

LOSS FROM OPERATIONS                                  (1,006,980)    (2,973,261)
                                                     -----------    -----------

OTHER (EXPENSE) INCOME:
    Interest expense                                    (104,798)      (242,532)
    Contingency gain                                        --          105,000
    Net liabilities exceeding assets on
      acquisition                                           --          (22,148)
    Loss on sale of property                             (19,451)       (10,263)
    Loss on disposal of unit                              (7,641)          --
    Other income - litigation settlement                 160,000           --
    Other income                                           7,989            344
                                                     -----------    -----------
         Total other income (expenses)                    36,099       (169,599)
                                                     -----------    -----------

NET LOSS BEFORE INCOME TAXES                            (970,881)    (3,142,860)
                                                     ===========    ===========

INCOME TAX (EXPENSE) BENEFIT                                --             --
                                                     -----------    -----------

NET LOSS                                                (970,881)    (3,142,860)
                                                     ===========    ===========

NET LOSS PER SHARE - BASIC AND DILUTED                     (0.97)         (9.01)
                                                     ===========    ===========

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
  - BASIC AND DILUTED                                    996,728        348,646
                                                     ===========    ===========


                 See Notes to Consolidated Financial Statements

                                      (F3)

<PAGE>
<TABLE>
<CAPTION>


                           MOBILE REACH INTERNATIONAL, INC. AND SUBSIDIARIES
                           -------------------------------------------------
                            CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
                            -----------------------------------------------
                              FOR THE YEARS ENDED JULY 31, 2005 AND 2004
                              ------------------------------------------



                                             Common Stock
                                ---------------------------------------
                                Pre-reverse  Post-reverse
                                   Split         Split                   Accumulated
                                  Shares        Shares         Amount       Deficit         Total
                                -----------   -----------   -----------   -----------    -----------
<S>                              <C>              <C>       <C>           <C>            <C>
Balances at July 31,2003         23,636,180       295,453   $ 3,321,288   $(4,645,582)   $(1,324,294)

Issuance of common stock          5,005,168        62,565     1,006,027          --        1,006,027

Issuance of stock as fee for
 services                           803,125        10,039        86,500          --           86,500

Issuance of stock in
 settlement of litigation           700,000         8,750        74,716          --           74,716

Issuance of stock on option
 exercise                         1,949,962        24,375         4,026          --            4,026

Issuance of stock on
 acquisition                      1,300,000        16,250          --            --             --

Net Loss                               --            --            --      (3,142,860)    (3,142,860)
                                -----------   -----------   -----------   -----------    -----------

Balances at July 31,2004         33,394,435       417,432     4,492,557    (7,788,442)    (3,295,885)


Issuance of stock in
 settlement of debt             158,168,686     1,977,109     1,849,795          --        1,849,795

Shares issued due to rounding
 on reverse split                      --              98          --            --             --

Net Loss                               --            --            --        (970,881)      (970,881)
                                -----------   -----------   -----------   -----------    -----------

Balances at July 31,2005        191,563,121     2,394,639   $ 6,342,352   $(8,759,323)   $(2,416,971)
                                ===========   ===========   ===========   ===========    ===========


                            See Notes to Consolidated Financial Statements

                                                 (F4)
</TABLE>

<PAGE>


                MOBILE REACH INTERNATIONAL, INC. AND SUBSIDIARIES
                -------------------------------------------------
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
                   FOR THE YEARS ENDED JULY 31, 2005 AND 2004
                   ------------------------------------------


                                                        2005           2004
                                                     -----------    -----------
Cash flows from operating activities:
  Net loss                                           $  (970,881)   $(3,142,860)

  Adjustments to reconcile net loss to net cash
    used in operating activities:
      Depreciation                                        39,635         48,068
      Stock issued for compensation and fees             220,720        161,216
      Loss on disposal of equipment                       19,451         17,693
      Liabilities in excess of assets                       --           22,148
    Changes in operating assets and liabilities:
      Decrease (increase) in accounts receivable         270,851       (153,197)
      (Increase) in prepaid expenses                        (450)          --
      Increase in accounts payable                           499        669,120

      (Decrease) increase in accrued expenses,
       taxes & withholdings                              (93,389)       376,302
      (Decrease) increase in deferred revenue             (2,539)        50,214
                                                     -----------    -----------

         Net cash used in operating activities          (516,103)    (1,951,296)
                                                     -----------    -----------

Cash flows from investing activities:
    Proceeds from the sale of equipment                     --            4,730
    Purchases of property and equipment                     --          (46,223)
                                                     -----------    -----------

         Net cash used in investing activities              --          (41,493)
                                                     -----------    -----------

Cash flows from financing activities:
    Proceeds from issuance of notes payable              180,000           --
    Principal payments on notes payable                  (80,180)          --
    Proceeds from long-term debt                            --          605,000
    Principal payments on long-term debt                 (15,603)      (170,440)
    Proceeds from issuance of debentures                 500,000        525,000
    Proceeds from common stock issuance                     --        1,006,220
                                                     -----------    -----------

         Net cash provided by financing
          activities                                     584,217      1,965,780
                                                     -----------    -----------

Net increase (decrease) in cash                           68,114        (27,009)

Cash - beginning of year                                  10,239         37,248
                                                     -----------    -----------

Cash - end of year                                   $    78,353    $    10,239
                                                     ===========    ===========


                 See Notes to Consolidated Financial Statements

                                      (F5)

<PAGE>


                MOBILE REACH INTERNATIONAL, INC. AND SUBSIDIARIES
                -------------------------------------------------
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
                   FOR THE YEARS ENDED JULY 31, 2005 AND 2004
                   ------------------------------------------
                                   (continued)



SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
--------------------------------------------------

                                                             2005         2004
                                                           --------     --------
Cash payments for:
  Interest                                                 $ 20,166     $  6,579

Cash received from:
  Interest                                                        2          215

Conversion of notes payable to common stock                 926,770         --

Conversion of long-term debt to common stock                396,450         --

Conversion of accrued interest to common stock              147,746         --

Conversion of accounts payable and accrued
 wages to common stock                                      388,579         --


Acquisition of Waves
  Assets assumed:
    Cash                                                   $   --       $  2,923
    Accounts receivable                                        --        143,194
    Inventory                                                  --          7,457
    Property and equipment - net                               --        127,494
                                                           --------     --------

                                                               --        281,068
                                                           --------     --------

  Liabilities assumed:
    Accounts payable                                           --         67,134
    Notes payable                                              --        109,024
    Long-term debt                                             --        110,965
    Accrued expenses                                           --         16,093
                                                           --------     --------

                                                               --        303,216
                                                           --------     --------

  Net liabilities in excess of assets assumed              $   --       $ 22,148
                                                           ========     ========


                 See Notes to Consolidated Financial Statements

                                      (F6)

<PAGE>


                MOBILE REACH INTERNATIONAL, INC. AND SUBSIDIARIES
                -------------------------------------------------
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                   FOR THE YEARS ENDED JULY 31, 2005 AND 2004
                   ------------------------------------------


Note 1 - Going Concern:
-----------------------

     The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplates continuation of Mobile Reach International, Inc. (the "Company") as
a going concern. However, the Company has sustained substantial operating losses
for the years ended July 31, 2005 and 2004 of $970,881 and $3,142,860,
respectively. The Company, as of July 31, 2005, is in default on certain notes
payable, payroll taxes and other payables. In addition, the Company has used
substantial amounts of working capital in its operations. Further, at July 31,
2005, the Company's current liabilities exceed current assets by $1,404,074, and
the Company has a stockholders' deficit of $8,759,323.

     In view of these matters, management has sought out additional investment
sources to raise additional funds. However, no assurance can be given that the
Company will continue as a going concern without the successful completion of
additional financing. The accompanying consolidated financial statements do not
include any adjustments that might be necessary if the Company is unable to
continue as a going concern.

     As a result of the delinquencies and defaults, the Company may be subject
to collection actions whenever agreements can not be reached, including, but not
limited to, litigation, foreclosure and/or seizure of assets and bank accounts.



Note 2 - Business Combinations:
-------------------------------

     Mobile Reach International, Inc., a Delaware Corporation, was formed in
July 2003. The Company completed a share exchange agreement with Asphalt Paving
International, Inc. ("API") on July 30, 2003. Subsequently, the Company
completed a share exchange agreement with Mobile Reach Technologies, Inc.
("MRT") (including its German subsidiary, Mobile Reach Technologies, GmbH) on
July 31, 2003. Former stockholders of MRT received 231,547 shares of common
stock of the Company, and the former stockholders of API received 63,906 shares
of common stock of the Company. Due to the stockholders of MRT receiving the
larger portion of the voting rights of the combined entity (Mobile Reach
International, Inc.), the share exchange agreements and mergers have been
treated as a reverse acquisition of API by MRT. The Company accounted for the
acquisition of API as prescribed by the Statement of Financial Accounting
Standards ("SFAS") No. 141, "Business Combinations". The Company did not record
any amount for goodwill on the acquisition of API, because API had no assets or
liabilities on the date of acquisition.


     Effective January 2, 2004, the Company completed a share exchange agreement
with Waves Consulting Group, Inc. ("Waves"), which sells and services digital
telecommunications and computer network systems. The Company exchanged 16,250
shares of restricted common stock for all the issued and outstanding common

                                      (F7)

<PAGE>


stock of Waves. The Company accounted for the acquisition of Waves as prescribed
by SFAS No. 141, "Business Combinations". The Company did not record any amount
of goodwill for this merger. However, the Company did record an expense of
$22,148 representing the amount that Waves' liabilities exceeded assets on
January 2, 2004. The consolidated financial statements include the results from
operations for Waves from January 2, 2004 to July 31, 2004. Subsequent to the
acquisition, the Company changed this subsidiary's name to Mobile Reach
Solutions, Inc. ("MRS").


     During the year ended July 31, 2004, management of the Company began the
process of discontinuation of the businesses of Mobile Reach Solutions, Inc. and
Mobile Reach Technologies, GmbH. The Company did not anticipate any losses on
this discontinuation other than losses from operations incurred in the regular
course of business.



Note 3 - Summary of Significant Accounting Policies:
----------------------------------------------------

     Organization and principles of consolidation:

         The accompanying consolidated financial statements include the accounts
of MRS, Mobile Reach Technologies, Inc. ("MRT") and its subsidiary company,
Mobile Reach Technologies, GmbH (German Company).

         The Company's principle operations have been conducted under the names
of its wholly owned subsidiaries MRS and MRT. The consolidated financial
statements include the holding company Mobile Reach International, Inc. along
with its subsidiaries mentioned above. All significant inter-company
transactions and balances have been eliminated on consolidation.

     Nature of business:

         Mobile Reach Technology, Inc. sells mobility software products and
development services in the United States of America and Europe.

         Mobile Reach Solutions, Inc. sells and services digital
telecommunication and computer network systems in the United States of America.

     Reverse stock split:

         On July 29, 2005, the Company obtained written consent of its Board of
Directors and the holders of a majority of its outstanding voting securities to
effectuate a 1 for 80 reverse stock split. All share amounts and per share
amounts have been retroactively restated to reflect the reverse stock split.

     Cash and cash equivalents:

         The Company considers all highly liquid investments having an original
maturity of three months or less to be cash equivalents. Amounts invested may
exceed federally insured limits at any given time.

                                      (F8)

<PAGE>


     Property and equipment:

         Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the assets ranging from
two to five years. Maintenance and repairs are charged to operations and
betterments are capitalized.

     Income taxes:

         The Company accounts for income taxes under the provisions of SFAS No.
109, "Accounting for Income Taxes." SFAS No.109 requires recognition of deferred
income tax assets and liabilities for the expected future income tax
consequences, based on enacted tax laws, of temporary differences between the
financial reporting and tax bases of assets and liabilities.

     Loss per share:

         The Company calculates loss per share in accordance with SFAS No. 128,
"Earnings per Share", which requires the presentation of basic and diluted
earnings per share. Basic loss per share excludes dilution and is computed by
dividing loss by the weighted-average number of common shares outstanding for
the period. Diluted loss per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity. Potential common shares are excluded
from the computation of diluted earnings per share when a loss exists because
the effect would be antidilutive (Note 12).

     Use of accounting estimates:

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
certain assets and liabilities and disclosures. Accordingly, the actual amounts
could differ from those estimates. Any adjustments applied to estimated amounts
are recognized in the year in which such adjustments are determined.

     Fair value of financial instruments:

         The Company's financial instruments include cash, accounts receivable,
accounts payable, accrued liabilities, credit facilities and long-term debt. The
carrying amounts of these financial instruments approximate fair value due to
their short maturities and variable rates of interest. The carrying amounts of
long-term debt approximate their fair values based on current rates available
for similar types of instruments.

         The Company did not have any outstanding financial derivative
instruments.

     Reclassifications:

         Certain amounts in the financial statements for the year ended July 31,
2004 have been reclassified for comparative purposes to conform with the
presentation in the current year financial statements.

                                      (F9)

<PAGE>


     Revenue recognition:

         Revenues are generated from the license of software products,
professional service arrangements, maintenance and support services. Software
license revenue is recognized in accordance with the American Institute of
Certified Public Accountants ("AICPA") Statement of Position ("SOP") 97-2
"Software Revenue Recognition" ("SOP 97-2") and related interpretations and
amendments as well as Technical Practice Aids issued from time to time by the
AICPA.

         Revenue from software arrangements is recognized only when persuasive
evidence of an agreement exists, delivery has occurred, the fee is fixed or
determinable, and collectibility is probable. Under certain circumstances,
software license revenue is deferred until all criteria of SOP 97-2 are met.
Certain arrangements contain provisions which result in the recognition of
revenue from software licenses ratably over the term of the contract or in
accordance with long-term contract accounting.

         In instances when professional services are performed on fixed price
agreements of relatively short duration, the completed contract method of
accounting is used whereby revenue is recognized when the work is completed.
Customer payments and billed amounts due from customers in excess of recognized
revenue are recorded as deferred revenue.

         Revenue from maintenance and support agreements is recognized on a
straight-line basis over the term of the related agreement.

         Revenue from product sales is recognized when the product is shipped
from suppliers to the customer. Customer prepayments for hardware products are
classified as customer deposits.

         For software arrangements with multiple elements, revenue is recognized
using the residual method prescribed by SOP 98-9, "Modification of SOP 97-2
`Software Revenue Recognition' with Respect to Certain Transactions." Revenue
applicable to undelivered elements, principally software maintenance, training
and implementation services, is determined based on vendor specific objective
evidence ("VSOE") of the fair value of those elements. VSOE is established by
the price of the element when it is sold separately (i.e., the renewal rate for
software maintenance and normal prices charged for training and professional
services). Revenue applicable to elements for which VSOE of fair value is not
determinable is deemed equal to the remainder/residual amount of the fixed
arrangement price. Assuming none of the undelivered elements and VSOE of fair
value exists for all undelivered elements are essential to the functionality of
any of the delivered elements, the residual revenue attributed to the delivered
elements is recognized when all other criteria for revenue recognition for those
elements have been met.

     Product development:

         Costs for advertising and research and development are expensed as
incurred.

     Accounting for stock-based compensation:

         Employee stock awards under the Company's compensation plans are
accounted for in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"), and related

                                     (F10)

<PAGE>


interpretations. The Company provides the disclosure requirements of SFAS No.
123, "Accounting for Stock-Based Compensation" and related interpretations.
Stock-based awards are accounted for under the provisions of SFAS No. 123, which
allows the Company only to disclose the effects on net income or loss of the
fair value of the options.

     Segment information:

         The Company adopted SFAS No.131, "Disclosures about Segments of an
Enterprise and Related Information" regarding operating segments in financial
statements. SFAS 131 also establishes standards for related disclosures about
products, services and geographic areas. Operating segments are identified as
components of an enterprise about which separate discrete financial information
is available for evaluation by the chief operating decision maker, or decision
making group, in making decisions how to allocate resources and assess
performance. The information disclosed herein, materially represents all of the
financial information related to the Company's principal operating segments.

     Concentrations of credit risk:

         The Company has no significant off-balance-sheet concentration of
credit risk such as foreign exchange contracts, options contracts or other
foreign hedging arrangements. The Company maintains its cash balances with
multiple reputable financial institutions in the form of demand deposits.

     Recent pronouncements:

         In November 2004, the FASB has issued FASB Statement No. 151,
"Inventory Costs, an Amendment of ARB No. 43, Chapter 4" ("SFAS No. 151"). The
amendments made by SFAS No. 151 are intended to improve financial reporting by
clarifying that abnormal amounts of idle facility expense, freight, handling
costs, and wasted materials (spoilage) should be recognized as current-period
charges and by requiring the allocation of fixed production overheads to
inventory based on the normal capacity of the production facilities. The
guidance is effective for inventory costs incurred during fiscal years beginning
after June 15, 2005. Earlier application is permitted for inventory costs
incurred during fiscal years beginning after November 23, 2004. The provisions
of SFAS No. 151 will be applied prospectively. The Company does not expect the
adoption of SFAS No. 151 to have a material impact on its consolidated financial
position, results of operations or cash flows.

         In December 2004, the FASB issued FASB Statement No. 123R, "Share-Based
Payment, an Amendment of FASB Statement No. 123" ("SFAS No. 123R"). SFAS No.
123R requires companies to recognize in the statement of operations the
grant-date fair value of stock options and other equity-based compensation
issued to employees. SFAS No. 123R is effective beginning in the Company's first
quarter of the 2006 fiscal year. The Company believes that the adoption of this
standard will have no material impact on its financial statements.

         In December 2004, the FASB issued SFAS Statement No. 153, "Exchanges of
Nonmonetary Assets." The statement is an amendment of APB Opinion No. 29, which
eliminates the exception for nonmonetary exchanges of similar productive assets
and replaces it with a general exception for exchanges of nonmonetary assets
that do not have commercial substance. The Company believes that the adoption of
this standard will have no material impact on its financial statements.

                                     (F11)

<PAGE>


         In March 2004, the Emerging Issues Task Force ("EITF") reached a
consensus on Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and
its Application to Certain Investments." The EITF reached a consensus about the
criteria that should be used to determine when an investment is considered
impaired, whether that impairment is other-than-temporary, and the measurement
of an impairment loss and how that criteria should be applied to investments
accounted for under SFAS No. 115, "Accounting In Certain Investments In Debt and
Equity Securities." EITF 03-1 also included accounting considerations subsequent
to the recognition of an other-than-temporary impairment and requires certain
disclosures about unrealized losses that have not been recognized as
other-than-temporary impairments. Additionally, EITF 03-1 includes new
disclosure requirements for investments that are deemed to be temporarily
impaired. In September 2004, the FASB delayed the accounting provisions of EITF
03-1; however the disclosure requirements remain effective for annual reports
ending after June 15, 2004. The Company will evaluate the impact of EITF 03-1
once final guidance is issued.


         In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and
Error Corrections." This statement applies to all voluntary changes in
accounting principle and requires retrospective application to prior periods'
financial statements of changes in accounting principle, unless this would be
impracticable. This statement also makes a distinction between "retrospective
application" of an accounting principle and the "restatement" of financial
statements to reflect the correction of an error. This statement is effective
for accounting changes and corrections of errors made in fiscal years beginning
after December 15, 2005. We are evaluating the effect the adoption of this
interpretation will have on its financial position, cash flows and results of
operations.


Note 4 - Property and Equipment:
--------------------------------

     The principal categories and estimated useful lives of property and
equipment at July 31, 2005 are as follows:

                                                                  Estimated
                                                                 Useful Lives
                                                                 ------------
   Computer equipment and software                $ 18,455          3 Years
   Automobiles & trucks                            120,747          5 Years
                                                 ---------
                                                   139,202
   Less: accumulated depreciation                  (64,282)
                                                 ---------

                                                $   74,920
                                                ==========

                                     (F12)

<PAGE>


Note 5 - Notes Payable:
-----------------------

     Notes payable at July 31, 2005 consisted of the following:


   Note payable to a vendor dated February
     2005; due in eighteen monthly installments
     of $1,007 including interest at six percent.                        11,731

   Note payable to a vendor dated July 2005;
     due in eighteen monthly installments of
     $390 including interest at eight percent.                            6,153

   Note payable to a vendor dated December
     2004; due in six monthly installments of
     $2,836 including interest at eighteen
     percent, note is in default.                                        17,027

   Note payable to former employee and former
     owner of Waves dated December 2004; bearing
     no interest and no specified
     repayment terms.                                                     3,940

   Note payable for accrued wages; bearing
     interest at six percent; due and payable
     with interest at the earliest of (a)
     Company obtaining debt or equity funding
     greater than $1,000,000 in a quarter or
     (b) Company earns revenues of $1,000,000
     in a quarter                                                        49,908
                                                                    -----------
                                                                    $    88,759



Note 6 - Accrued Expenses:
--------------------------

     Accrued expenses at July 31, 2005 consisted of the following:



     Accrued salaries and wages                                     $   210,260
     Accrued interest                                                    33,600
     Accrued other expenses                                              18,005
                                                                    -----------
                                                                    $   261,865


     Accrued salaries and wages arise from the Company's inability to pay
certain employees their full salaries and wages at certain periods throughout
2004, 2003, 2002 and 2001.


Note 7 - Accrued Taxes and Withholdings:
----------------------------------------

     Accrued taxes and withholdings at July 31, 2005 of $538,170 are comprised
of employee withholdings, payroll taxes, interest and penalties. The Company is
in arrears in remitting withholdings and payroll taxes as required by the
Internal Revenue Service.


Note 8 - Long-Term Debt:
------------------------

     Long-term debt at July 31, 2005 consisted of the following:


   Notes payable dated August and October
     2003; due in sixty monthly installments of
     $1,873 including interest at 6.98 percent;
     secured by vehicles costing $120,747.                          $    86,305
                                                                    -----------
                                                                         86,305
   Less: current portion                                                (23,038)
                                                                    -----------
                                                                    $    63,267

                                     (F13)

<PAGE>


     At July 31, 2005, long-term debt is due in aggregate annual installments as
follows:

                          Year ending July 31,
                                  2006                              $    23,038
                                  2007                                   24,699
                                  2008                                   26,480
                                  2009                                   12,088
                               Thereafter                                  --
                                                                     -----------
                                                                    $    86,305
                                                                    ===========

Note 9 - Convertible Debentures:
--------------------------------

     In March 2004, the Company issued $525,000 of five percent convertible
debentures that mature on March 15, 2007. The debentures were convertible into
the Company's common stock at a conversion price of $0.16 per share. In an
effort to entice the debenture holders from this series of debentures to invest
in the second series mentioned later, the Company agreed to re-price the
conversion feature and the warrants of the March 2004 issuance to $0.01 per
share through a settlement agreement signed by all parties. All interest and
penalties accrued through March 2005 on the five percent debentures was treated
as additional paid-in capital on warrants issued with the March 2005 series
debenture mentioned below. See Note 11 for further details. Interest accrued on
debentures that are converted into common stock may be paid in cash or with
common stock (conversion price $0.01 per share). In connection with the issuance
of these debentures, the Company issued 12,202 common stock purchase warrants at
the original exercise price of $0.32 per share. However, as part of the
settlement agreement, these warrants were also re-priced to $0.01 per share. The
warrants expire March 31, 2006 and no warrants were exercised at July 31, 2005.

     In March 2005, the Company began offering a second series of convertible
debentures. This series required investors from the March 2004 series to invest
a minimum of twenty percent over and above the value of their holdings in the
March 2004 series. This series of convertible debentures mature April 27, 2007
and have an interest rate of eight percent. The debentures are convertible into
the Company's common stock at a conversion price of $0.01 per share. Interest
accrues from March 17, 2005 and may be paid in cash or in the Company's common
stock at a conversion price of $0.01 per share. In connection with these
debentures, the Company issued to the holders of the March 2004 five percent
convertible debentures that invested additional funds an additional 202,046
common stock purchase warrants at an exercise price of $0.01 per share.
Subsequent investors were issued 608,766 common stock purchase warrants at an
exercise price of $0.0077 per share. These warrants expire April 27, 2010 and no
warrants were exercised at July 31, 2005.


Note 10 - Stockholders' Equity:
-------------------------------

     In November 2004, the Company obtained written consent of its Board of
Directors and the holders of a majority of its outstanding voting securities to
raise the authorized amount of common stock shares from 50,000,000 to
500,000,000 shares and raise preferred stock shares authorized from 10,000,000
to 100,000,000.

                                     (F14)

<PAGE>


     On July 29, 2005, the Company obtained written consent of its Board of
Directors and the holders of a majority of its outstanding voting securities to
effectuate a 1 for 80 reverse stock split. The reverse stock split did not
change the number of authorized shares or the par value of the Company's common
stock. Except for changes as a result of the treatment of fractional shares,
each shareholder holds the same percentage of common stock outstanding
immediately following the reverse split as such shareholder had immediately
prior to the reverse stock split. The effect of this action is reflected in the
accompanying financial statements as of the first day of the first period
presented.

     In June 2005, the Company settled debt to a vendor of $32,612 with 181,250
shares of the Company's restricted common stock.

     In May 2005, the Company settled $19,250 in debt to consultants and
employees with 255,428 shares of the Company's restricted common stock. The debt
consisted of $8,000 in deferred wages and $11,250 in consulting and professional
fees. Additionally, the Company settled approximately $498,118 in notes payable
and accrued interest owed to an officer with 418,750 shares of the Company's
restricted common stock.

     In March 2005, the Company settled debt amounting to approximately
$1,029,779 for 579,500 shares of the Company's restricted common stock. The debt
consisted of $856,494 in notes payable and accrued interest along with
approximately $173,285 in accounts payable. Additionally, the Company settled
$16,154 in accrued wages to an officer of the Company for 56,250 shares of the
Company's restricted common stock.

     In February 2005, the Company settled debt amounting to approximately
$218,250 for 266,636 shares of the Company's restricted common stock. The debt
settled included notes payable and accrued interest of $154,941 along with
accounts payable to vendors of $63,309. Additionally, the Company settled $100
in unreimbursed expenses with its former chairman for 12,500 shares of the
Company's restricted common stock.

     In November 2004, the Company settled $1,668 in accounts payable with a
former employee for 1,875 shares of the Company's restricted common stock.

     In December 2004, the Company settled approximately $12,305 in notes
payable with a former employee and former owner of Waves for 37,500 shares of
the Company's restricted common stock.

     As discussed in Note 2, the Company issued 16,250 shares of restricted
common stock in the acquisition of Waves.

     During the year ended July 31, 2004, the Company received $1,006,027 for
62,565 shares of common stock.

                                     (F15)

<PAGE>


     During the year ended July 31, 2004, the Company recorded expenses for
services from consultants for investment banking and investor relations fees of
$86,500 in exchange for 10,039 shares of restricted common stock.

     In May 2004, the Company settled litigation with a former employee in
exchange for 8,750 shares of common stock. The Company had previously accrued
$74,716 for compensation due to the former employee.

     During the year ended July 31, 2004, options for 24,375 shares of
restricted common stock were exercised (See Note 11).

     The Company is authorized to issue 100,000,000 shares of preferred stock.
At July 31, 2005, no shares were issued or outstanding.


Note 11 - Stock Options and Warrants:
-------------------------------------

     The following table summarizes the changes in options outstanding and the
related prices for the shares of the Company's restricted common stock issued to
employees, consultants and shareholders at July 31, 2005:

                                              Number of       Weighted- Average
                                               Options          Exercise Price
                                               -------          --------------
   Outstanding July 31, 2003                       48,895            0.07
     Options issued                                54,250            0.02
     Options expired                                 (872)           0.02
     Options exercised                            (24,375)           0.002
                                            -------------
   Outstanding July 31, 2004                       77,898            0.05
     Options issued                                16,667            0.16
     Options cancelled/expired                    (61,594)           0.10
     Options exercised                            (25,012)           0.01
                                            -------------
   Outstanding July 31, 2005                        7,959            0.01
                                            =============


     The Company has adopted the disclosure only provisions of SFAS 123
"Accounting for Stock-Based Compensation". The Company determined that the
options issued had no value using the Black-Scholes pricing model and a fifty
percent volatility factor at the date of grant. Accordingly, the net loss of
$970,881 and $3,142,860 for the years ended July 31, 2005 and 2004,
respectively, would be unchanged because no compensation would be recognized.

     During the year ended July 31, 2005, the Company issued 202,046 warrants at
an exercise price of $0.01 per share. As part of the agreement for the eight
percent convertible debenture offering, the five percent convertible debenture
holders had agreed to waive all penalties and interest accrued on the five
percent debentures. The $22,969 of accrued interest is included in paid-in
capital as the value of the warrants offered. In addition, the Company issued
608,766 warrants at an exercise price of $0.0077 per share to the holders of
eight percent interest bearing convertible debentures mentioned in Note 9 that
did not hold any of the five percent debentures. Using the Black-Scholes pricing
model and fifty percent volatility factor, the Company determined that these
warrants had no value and there was no expense recorded for the grant of the
warrants. The warrants had not been exercised at July 31, 2005.

                                     (F16)

<PAGE>


     During the year ended July 31, 2004, the Company issued 2,500 warrants at
an exercise price of $0.001 per share and 12,500 warrants at an exercise price
of $0.01 per share in connection with the issuance of notes payable. Using the
Black-Scholes pricing model and fifty percent volatility factor, the Company
determined the warrants had no value and there was no expense recorded for the
grant of the warrants. During the year ended July 31, 2005, these warrants had
either been cancelled as part of the debt settlements mentioned in Note 10 or
have terminated due to their expiration date.

     In March 2004, the Company issued 12,202 warrants at an exercise price of
$0.32 per share to holders of debentures (Note 9). Additionally, investment
banking consultants involved in the issuance of the debentures were issued 7,786
warrants at the exercise price of $0.32 per share. As mentioned in Note 9 on
March 27, 2005, these warrants were re-priced to $0.01 per share. Using the
Black-Scholes pricing model and fifty percent volatility factor, the Company
determined the warrants had no value and there was no expense recorded for the
grant of the warrants. The warrants had not been exercised at July 31, 2005.


Note 12 - Loss Per Share:
-------------------------

     A reconciliation of basic loss per share to diluted earnings per share is
presented below:

                                                                    Per Share
                                        Net Loss      Shares          Amount
                                      -----------   -----------    -----------
   Year ended July 31, 2004:
   Basic EPS
     Loss available to common
       shareholders                   $(3,142,860)     348,646     $     (9.01)
   Effect of dilutive securities
     Stock options and warrants              --           --             --
                                      -----------   -----------    -----------
                                      $(3,142,860)      348,646    $     (9.01)
                                      ===========   ===========    ===========

   Year ended July 31, 2005:
   Basic EPS
     Loss available to common
       shareholders                   $  (970,881)      996,728    $     (0.97)
   Effect of dilutive securities
     Stock options and warrants              --            --             --
                                      -----------   -----------    -----------
                                      $  (970,881)      996,728    $     (0.97)
                                      ===========   ===========    ===========


Note 13 - Income Taxes:
-----------------------

     Deferred income taxes are provided in recognition of temporary differences
in reporting certain revenues and expenses for financial statement and income
tax purposes.

                                     (F17)

<PAGE>


     Net deferred tax assets (liabilities) consisted of the following components
as of July 31, 2005:

                                        Current      Long-Term       Total
   Year ended July 31, 2005:
     Deferred tax assets:
       Net operating loss carryover   $   197,106   $ 1,354,495    $ 1,551,601
                                      -----------   -----------    -----------

     Deferred tax liabilities                --          (5,249)        (5,249)
                                      -----------   -----------    -----------
                                          197,106     1,349,246      1,546,352
   Valuation allowance                   (197,106)   (1,349,246)    (1,546,352)
                                      -----------   -----------    -----------
   Net deferred tax asset             $      --     $      --      $      --
                                      ===========   ===========    ===========

     The ultimate realization of these assets is dependent upon the generation
of future taxable income sufficient to offset the related deductions and loss
carryover within the applicable carryover period. The valuation allowance is
based on the uncertainty of the Company's ability to generate sufficient taxable
income in future years to fully utilize the net operating loss carryover.
Additionally, the realization of these assets is dependent upon the filing of
tax returns for the current and prior years which are unfiled.

     The income tax provision differs from the amount of income tax determined
by applying the U.S. Federal income tax rate to pretax income for the year ended
July 31, 2005 due to the following:

                                                       Year           Year
                                                       ended          ended
                                                     7/31/2005      7/31/2004
                                                    -----------    -----------
   Computed "expected" tax benefit                  $ 1,546,352    $ 1,100,000
     Increase (decrease) in income taxes
        resulting from:
         Temporary differences                       (1,551,601)    (1,068,030)
         Permanent differences                            5,249        (31,970)
                                                    -----------    -----------
                                                    $      --      $      --
                                                    ===========    ===========

     The Company has net operating loss carryforwards of approximately
$7,860,000, which begin to expire in 2020.

     The Tax Reform Act of 1986 contains provisions which limit the ability to
utilize net operating loss, capital loss, and various tax credit carryovers in
the case of certain events including significant changes in ownership interest.
If the Company's tax carryovers are limited, and the Company has taxable income
which exceeds the permissible yearly net operating loss carryover, the Company
would incur a federal income tax liability even though these loss carryovers
would be available in future years.

Note 14 - Pro-Forma Financial Information:
------------------------------------------

     The following pro-forma data summarizes the results of operations for the
years ended July 31, 2004, as if the mergers with Waves had been completed
August 1, 2003:

                                                                      Year
                                                                      ended
                                                                    7/31/2004

   Net revenue                                                     $ 2,125,115
   Operating loss                                                   (3,326,744)
   Loss per shared - basic and diluted                                   (9.01)

                                     (F18)

<PAGE>


Note 15 - Employee Benefit Plan:
--------------------------------

     During the year ended July 31, 2004, the Company established a 401(k) plan
covering all employees over twenty-one years of age with more than thirty days
of service. Under the plan, participants are able to make voluntary
contributions of up to sixty percent of compensation and one hundred percent of
any bonuses received, subject to limitations. In addition, the Company can match
contributions on a discretionary but uniform basis. The Company included
contributions payable of $20,671 and $8,381 in accrued taxes and withholdings at
July 31, 2005 and 2004, respectively.

     For the year ended July 31, 2005, the Company recorded no expenses related
to the plan.

Note 16 - Segment Information:
------------------------------

     The Company reports financial results on the basis of two business
segments: a computer hardware application group and a software application
group.


     The following is selected business segment financial information for the
year ended July 31, 2005:

                              Software      Hardware
                            Applications  Applications  Eliminations    Total
                            ------------  ------------  ------------    -----

Revenues                      $463,018     $ 144,356      $  -        $ 607,374
Operating loss                (830,608)     (140,273)        -         (970,881)
Depreciation                    13,336        26,299         -           39,635
Segment assets                  18,455       120,747         -          139,202
Expenditures for property
 and equipment                    -             -            -             -


     The following is selected business segment financial information for the
year ended July 31, 2004:

                              Software      Hardware
                            Applications  Applications  Eliminations    Total
                            ------------  ------------  ------------    -----

Revenues                    $  446,918   $ 1,144,458     $ (1,517)  $ 1,589,859
Operating loss              (2,921,648)     (221,212)        -       (3,142,860)
Depreciation                    25,730        20,728         -           46,458
Segment assets                  96,837       380,843         -          477,680
Expenditures for property
 and equipment                  19,011        31,436         -           50,447


Note 17 - Legal Matters:
------------------------

     During the year ended July 31, 2004, the Company had accrued $160,000 for
consulting fees representing a tentative settlement reached in arbitration with
a consultant. In April 2005, the claim went to arbitration and the Company was
found to have no liability to the consultant. As a result of the arbitration,
the Company recorded other income of $160,000 for the year ended July 31, 2005.

                                     (F19)

<PAGE>


     The Company has been in communication with and attempting to settle a claim
from a former employee for past due wages of approximately $49,900. The Company
has included the amount in notes payable for the years ended July 31, 2005 and
2004.

     The Company has recorded an account payable at July 31, 2004 of $75,000 to
terminate a lease for office space entered into in September 2003. Additionally,
the Company recorded $34,000 of rent expense in the forfeiture of rental
security deposits in connection with this lease. The Company entered into an
agreement for termination of the lease in October 2004 and a settlement for the
related debt on June 20, 2005. The terms of the settlement agreement requires
the Company to pay $15,888 in past due expenses and issue 181,250 shares of the
Company's restricted common stock. At July 31, 2005, the $15,888 was included in
accounts payable.

    The Company is delinquent with a number of unsecured creditors for which no
payment arrangements exist or for which no agreement to forestall collection
action has been agreed upon. Whenever feasible the Company negotiates with these
creditors to reach settlement agreements that are acceptable to the Company. As
a result of the delinquencies and defaults, the Company may be subject to
collection actions whenever agreements cannot be reached, including, but not
limited to, litigation, foreclosure and/or seizure of assets and bank accounts.

         During the fiscal year ended July 31, 2005, the Company had not had
their interim financial statements, contained in forms 10-QSB, reviewed by an
independent certified public accountant as required by the Security and Exchange
Commission.

Note 18 - Other Matters:
------------------------

     Concentrations:

         During the year ended July 31, 2005, approximately thirty percent of
the Company's sales were to three customers.

     Advertising:

         Advertising costs are expensed as incurred. Total advertising costs
were approximately $9,000 and $7,500 for the years ended July 31, 2005 and 2004,
respectively.

     Foreign cash and operations:

         The Company's subsidiary Mobile Reach Technologies, GmbH ceased
operations in the year ended July 31, 2004. This subsidiary had foreign sales of
$7,724 for the year ended July 31, 2004. For the year ended July 31, 2005, the
Company recognized a loss of $7,641 for the closing of the segment.

     Operating leases:

         The Company leases office space on a month to month basis. Rent expense
of $50,200 and $150,501 were incurred for the years ended July 31, 2005 and
2004, respectively. The rent expense for the year ended July 31, 2004 includes
expenses from termination of lease (Note 17).

                                     (F20)

<PAGE>


     Contingency gain (loss):

         At July 31, 2003 the Company accrued a loss of $105,000 for a possible
claim arising from the Company's merger with API. Since the former majority
stockholder of API indemnified the Company against claims and during the year
ended July 31, 2004 there were no claims, the Company recorded a gain on the
reversal of the accrual.

Note 19 - Subsequent Events:
----------------------------

     In August 2005, the Company executed an agreement and plan of merger with
Objective Spectrum, Inc. ("Objective"). The Company has agreed to purchase all
of Objective's issued and outstanding common stock for 375,000 shares of the
Company's restricted common stock. At the date of the agreement, a current
director and officer of the Company owned approximately ninety-two percent of
Objective's common stock. As a result of the acquisition, the Company will
obtain intellectual property rights to source code for use with the Company's
Splitware product.

     In August 2005, the Company entered into two investment banking and
investor relations consulting contracts. In exchange for twenty-four months of
contracted service, the Company has agreed to issue 1,000,000 shares of the
Company's restricted common stock.

     In August 2005, the Company received an additional $250,000 in funding on
the March 2005 eight percent convertible debentures. The additional debentures
included 405,844 in common stock purchase warrants with an exercise price of
$0.0077 per share expiring April 20, 2010.

                                     (F21)