---



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-QSB



QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES AND
EXCHANGE ACT OF 1934



For the quarterly period ended: March
31, 2005



Commission File Number: 333-106247



Remote Knowledge, Inc.

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



|                                                              |  |                                       
|------------------------------------------------------------- |  | --------------------------------------
|Delaware                                                      |  | 74-1664837                            
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. EmployerIdentification number)



3657 Briarpark,
Suite 100, Houston, Texas 77042

(Address of Principal Executive offices) (Zip Code)



Issuers telephone number: (281) 599-4800



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



Yes x No ̈



There were 7,061,885 shares of common stock, $.001 par value per share, outstanding as of April 30, 2005.



Transitional Small Business Format (check one); Yes ̈No x



---



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Remote Knowledge, Inc.



INDEX TO ANNUAL REPORT ON FORM 10-QSB



|        |  |                                                                                       |  |     
|------- |  | ------------------------------------------------------------------------------------- |  | ----
|        |  |                                                                                       |  | Page
|PART I  |  |                                                                                       |  |     
|        |  |                                                                                      
|Item 1. |  | Financial Statements                                                                  |  | 2   
|Item 2. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 8   
|Item 3. |  | Controls and Procedures                                                               |  | 12  
|        |  |                                                                                      
|PART II |  |                                                                                       |  |     
|        |  |                                                                                      
|Item 1. |  | Legal Proceedings                                                                     |  | 13  
|Item 2. |  | Unregistered Sales of Equity Securities                                               |  | 13  
|Item 6. |  | Exhibits and Reports on Form 8-K                                                      |  | 15  



- 1 -



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PART I - FINANCIAL INFORMATION



|Item 1. | Financial Statements.
|------- | ---------------------



The Financial Statements of Remote Knowledge, Inc. (the Company) required to be filed with this Quarterly Report, on Form 10-QSB, were prepared by management
and together with the accompanying notes, in the opinion of management, present fairly, in all material respects, the financial condition and results of operations of the Company.



REMOTE KNOWLEDGE, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONDENSED BALANCE
SHEET

UNAUDITED



|                                                                                                            |  |                |             |  
|----------------------------------------------------------------------------------------------------------- |  | -------------- | ----------- | -
|                                                                                                            |  | MARCH 31, 2005 |            
|ASSETS                                                                                                      |  |                |             |  
|CURRENT ASSETS                                                                                              |  |                |             |  
|Cash and cash equivalents                                                                                   |  | $              | 15,272      |  
|Accounts receivable                                                                                         |  |                | 21,065      |  
|Inventory                                                                                                   |  |                | 920,431     |  
|Prepaid and other current assets                                                                            |  |                | 178,273     |  
|                                                                                                            |  |                |             |  
|Total current assets                                                                                        |  |                | 1,135,041   |  
|                                                                                                            | 
|PROPERTY AND EQUIPMENT,net                                                                                  |  |                | 630,422     |  
|                                                                                                            |  |                |             |  
|Total assets                                                                                                |  | $              | 1,765,463   |  
|                                                                                                            |  |                |             |  
|                                                                                                            | 
|LIABILITIES AND SHAREHOLDERS DEFICIT                                                                       |  |                |             |  
|                                                                                                            | 
|CURRENT LIABILITIES:                                                                                        |  |                |             |  
|Accounts payable  trade                                                                                    |  | $              | 863,069     |  
|Accrued expenses                                                                                            |  |                | 1,342,972   |  
|Payable to shareholder                                                                                      |  |                | 132,150     |  
|Notes payable                                                                                               |  |                | 716,640     |  
|                                                                                                            |  |                |             |  
|Total current liabilities                                                                                   |  |                | 3,054,831   |  
|                                                                                                            | 
|SHAREHOLDERS DEFICIT:                                                                                      |  |                |             |  
|Preferred stock - series A, $.001 par value; 15,000 shares authorized; 4,662 shares issued and outstanding  |  |                | 5           |  
|Preferred stock - series B, $.001 par value; 13,500 shares authorized; 10,282 shares issued and outstanding |  |                | 10          |  
|Common stock, $.001 par value; 100,000,000 shares authorized; 6,808,425 shares issued and outstanding       |  |                | 6,809       |  
|Deferred compensation                                                                                       |  |                | (248,326    | )
|Additional paid-in capital                                                                                  |  |                | 53,703,763  |  
|Accumulated deficit                                                                                         |  |                | (10,234,380 | )
|Deficit accumulated during development stage                                                                |  |                | (44,517,249 | )
|                                                                                                            |  |                |             |  
|Total shareholders deficit                                                                                 |  |                | (1,289,368  | )
|                                                                                                            |  |                |             |  
|Total liabilities and shareholders deficit                                                                 |  | $              | 1,765,463   |  
|                                                                                                            |  |                |             |  



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



- 2 -



---



REMOTE KNOWLEDGE, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

UNAUDITED



CONDENSED STATEMENTS OF OPERATIONS



|                                                                                                                                     |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------ | ---------- | - | ------------------------------------------------------------------------- | - | ---------- | - |  | - | ----------- | -
|                                                                                                                                     |  | THREE-MONTH PERIODSENDED |            |   | PERIOD FROMJANUARY 1, 2001 (INCEPTION
OFDEVELOPMENTSTAGE)TO MARCH 31,2005 |  
|                                                                                                                                     |  | March 31,2005            |            |   | March 31,2004                                                             |   |           
|REVENUES                                                                                                                             |  | $                        |           |   |                                                                           | $ |           |   |  | $ | 43,730      |  
|                                                                                                                                     |  |                          |           
|COST OF GOODS SOLD                                                                                                                   |  |                          |           |   |                                                                           |   |           |   |  |   | 38,976      |  
|                                                                                                                                     |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|GROSS PROFIT                                                                                                                         |  |                          |           |   |                                                                           |   |           |   |  |   | 4,754       |  
|                                                                                                                                     |  |                          |           
|OPERATING COSTS AND EXPENSES:                                                                                                        |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|Advisory services                                                                                                                    |  |                          |           |   |                                                                           |   |           |   |  |   | 4,169,146   |  
|Research and development                                                                                                             |  |                          | 99,283     |   |                                                                           |   | 31,241     |   |  |   | 4,344,890   |  
|Loss on impairment of assets                                                                                                         |  |                          |           |   |                                                                           |   |           |   |  |   | 1,525,246   |  
|Professional fees                                                                                                                    |  |                          | 246,207    |   |                                                                           |   | 18,811     |   |  |   | 2,260,833   |  
|Advertising and promotion fees                                                                                                       |  |                          | 40,908     |   |                                                                           |   | 30,095     |   |  |   | 1,338,614   |  
|General and administrative expenses                                                                                                  |  |                          | 733,503    |   |                                                                           |   | 734,629    |   |  |   | 11,275,087  |  
|                                                                                                                                     |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|Total operating costs and expenses                                                                                                   |  |                          | 1,119,901  |   |                                                                           |   | 814,776    |   |  |   | 24,913,816  |  
|                                                                                                                                     |  |                          |           
|OTHER EXPENSE (INCOME):                                                                                                              |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|Interest expense                                                                                                                     |  |                          | 50,315     |   |                                                                           |   | 299,048    |   |  |   | 2,753,385   |  
|Amortization of deferred financing costs                                                                                             |  |                          |           |   |                                                                           |   |           |   |  |   | 1,188,432   |  
|Other income                                                                                                                         |  |                          | (2,675     | ) |                                                                           |   |           |   |  |   | (2,675      | )
|Other expense                                                                                                                        |  |                          |           |   |                                                                           |   |           |   |  |   | 7,500       |  
|Interest income                                                                                                                      |  |                          |           |   |                                                                           |   |           |   |  |   | (27,420     | )
|Debt forgiveness                                                                                                                     |  |                          |           |   |                                                                           |   |           |   |  |   | (1,384,978  | )
|                                                                                                                                     |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|Total other expense (income)                                                                                                         |  |                          | 47,640     |   |                                                                           |   | 299,048    |   |  |   | 2,534,244   |  
|                                                                                                                                     |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|NET LOSS                                                                                                                             |  |                          | (1,167,541 | ) |                                                                           |   | (1,113,824 | ) |  |   | (27,443,306 | )
|                                                                                                                                     |  |                          |           
|EFFECTIVE DIVIDEND FROM AMORTIZATION OF DISCOUNT
RELATED TO BENEFICIAL CONVERSION OF MANDATORILY REDEEMABLE SERIES A PREFERRED
STOCK |  |                          |           |   |                                                                           |   |           |   |  |   | (5,554,000  | )
|                                                                                                                                     |  |                          |           
|WARRANTS ISSUED FOR RELEASE OF REDEMPTION
PROVISION OF SERIES A PREFERRED STOCK                                                      |  |                          |           |   |                                                                           |   | (1,291,912 | ) |  |   | (1,291,912  | )
|                                                                                                                                     |  |                          |           
|EFFECTIVE DIVIDEND FROM AMORTIZATION OF DISCOUNT
RELATED TO BENEFICIAL CONVERSION OF SERIES B PREFERRED STOCK AND WARRANTS           |  |                          | (1,537,538 | ) |                                                                           |   |           |   |  |   | (10,228,031 | )
|                                                                                                                                     |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|NET LOSS ATTRIBUTABLE TO COMMON
SHARES                                                                                               |  | $                        | (2,705,079 | ) |                                                                           | $ | (2,405,736 | ) |  | $ | (44,517,249 | )
|                                                                                                                                     |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|NET LOSS PER SHARE:                                                                                                                  |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|Basic and Diluted                                                                                                                    |  | $                        | (.40       | ) |                                                                           | $ | (.43       | ) |  | $ | (8.03       | )
|                                                                                                                                     |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|NUMBER OF SHARES USED IN CALCULATING
NET LOSS PER SHARE:                                                                             |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|Basic and Diluted                                                                                                                    |  |                          | 6,733,796  |   |                                                                           |   | 5,607,356  |   |  |   | 5,542,175   |  
|                                                                                                                                     |  |                          |            |   |                                                                           |   |            |   |  |   |             |  



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



- 3 -



---



REMOTE KNOWLEDGE, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONDENSED STATEMENTS OF CASH FLOWS

UNAUDITED



|                                                                            |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|--------------------------------------------------------------------------- |  | ------------------------ | ---------- | - | ------------------------------------------------------------------------- | - | ---------- | - |  | - | ----------- | -
|                                                                            |  | THREE-MONTH PERIODSENDED |            |   | PERIOD
FROMJANUARY 1, 2001(INCEPTION OFDEVELOPMENTSTAGE) TO MARCH
31,2005 |  
|                                                                            |  | MARCH 31,2005            |            |   | MARCH 31,2004                                                             |   |           
|CASH FLOWS FROM OPERATING ACTIVITIES:                                       |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|Net loss                                                                    |  | $                        | (1,167,541 | ) |                                                                           | $ | (1,113,823 | ) |  | $ | (27,443,306 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|Accretion of debt discount                                                  |  |                          |           |   |                                                                           |   | 209,906    |   |  |   | 2,011,019   |  
|Amortization of deferred financing costs                                    |  |                          |           |   |                                                                           |   |           |   |  |   | 1,188,432   |  
|Depreciation                                                                |  |                          | 49,298     |   |                                                                           |   | 46,663     |   |  |   | 511,749     |  
|Loss on impairment of fixed assets                                          |  |                          |           |   |                                                                           |   |           |   |  |   | 39,036      |  
|Common stock issued for services                                            |  |                          | 41,648     |   |                                                                           |   | 222,835    |   |  |   | 5,821,005   |  
|Common stock issued for rent                                                |  |                          |           |   |                                                                           |   |           |   |  |   | 45,000      |  
|Stock based compensation                                                    |  |                          | 5,441      |   |                                                                           |   | 14,409     |   |  |   | 592,235     |  
|Common stock warrants issued for services                                   |  |                          |           |   |                                                                           |   |           |   |  |   | 23,295      |  
|Common stock options issued for services                                    |  |                          |           |   |                                                                           |   |           |   |  |   | 515,718     |  
|Preferred stock issued for services                                         |  |                          |           |   |                                                                           |   |           |   |  |   | 12,000      |  
|Debt forgiveness                                                            |  |                          |           |   |                                                                           |   |           |   |  |   | (1,384,978  | )
|Impairment of long-lived assets                                             |  |                          |           |   |                                                                           |   |           |   |  |   | 1,525,246   |  
|Bad debt charge offs                                                        |  |                          |           |   |                                                                           |   |           |   |  |   | 173,028     |  
|Expenses offset against related party receivable                            |  |                          |           |   |                                                                           |   |           |   |  |   | 126,973     |  
|Charge off of receivable from sale of stock                                 |  |                          |           |   |                                                                           |   |           |   |  |   | 146,413     |  
|Changes in assets and liabilities:                                          |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|Accounts receivable                                                         |  |                          |           |   |                                                                           |   |           |   |  |   | (21,065     | )
|Inventory                                                                   |  |                          | (512,810   | ) |                                                                           |   |           |   |  |   | (920,431    | )
|Prepaid and other current assets                                            |  |                          | 11,022     |   |                                                                           |   | (7,832     | ) |  |   | (145,777    | )
|Accounts payable - trade                                                    |  |                          | 185,597    |   |                                                                           |   | (15,803    | ) |  |   | 1,421,192   |  
|Accrued expenses                                                            |  |                          | 68,676     |   |                                                                           |   | 87,827     |   |  |   | 575,818     |  
|Related party payable                                                       |  |                          |           |   |                                                                           |   |           |   |  |   | 399,259     |  
|                                                                            |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|Net cash used in operating activities                                       |  |                          | (1,318,669 | ) |                                                                           |   | (555,818   | ) |  |   | (14,788,139 | )
|                                                                            |  |                          |           
|CASH FLOWS FROM INVESTING ACTIVITIES:                                       |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|Additions of fixed assets                                                   |  |                          | (56,751    | ) |                                                                           |   |           |   |  |   | (912,400    | )
|Related party receivable                                                    |  |                          |           |   |                                                                           |   |           |   |  |   | (300,000    | )
|                                                                            |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|Net cash used in investing activities                                       |  |                          | (56,751    | ) |                                                                           |   |           |   |  |   | (1,212,400  | )
|                                                                            |  |                          |           
|CASH FLOWS FROM FINANCING ACTIVITIES:                                       |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|Payments of notes payable                                                   |  |                          | (251,966   | ) |                                                                           |   |           |   |  |   | (512,966    | )
|Net proceeds from sale of Series B preferred stock                          |  |                          | 1,570,000  |   |                                                                           |   | 2,247,147  |   |  |   | 5,895,073   |  
|Capital contributions                                                       |  |                          |           |   |                                                                           |   |           |   |  |   | 27,900      |  
|Proceeds from SMH note payable                                              |  |                          |           |   |                                                                           |   |           |   |  |   | 1,500,000   |  
|Proceeds from sale of common stock                                          |  |                          |           |   |                                                                           |   |           |   |  |   | 903,800     |  
|Proceeds from other notes payable                                           |  |                          | 20,000     |   |                                                                           |   | 49,000     |   |  |   | 3,128,863   |  
|Net proceeds from sale of mandatorily redeemable preferred stock            |  |                          |           |   |                                                                           |   |           |   |  |   | 5,040,033   |  
|                                                                            |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|Net cash provided by financing activities                                   |  |                          | 1,338,034  |   |                                                                           |   | 2,296,147  |   |  |   | 15,982,703  |  
|                                                                            |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|Net Change in Cash and Cash Equivalents                                     |  |                          | (37,386    | ) |                                                                           |   | 1,740,329  |   |  |   | (17,836     | )
|                                                                            |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|CASH AND CASH EQUIVALENTS, beginning of period                              |  |                          | 52,658     |   |                                                                           |   | 18,728     |   |  |   | 33,108      |  
|                                                                            |  |                          |            |   |                                                                           |   |            |   |  |   |             |  
|CASH AND CASH EQUIVALENTS, end of period                                    |  | $                        | 15,272     |   |                                                                           | $ | 1,759,057  |   |  | $ | 15,272      |  
|                                                                            |  |                          |            |   |                                                                           |   |            |   |  |   |             |  



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



- 4 -



---



REMOTE KNOWLEDGE, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONDENSED STATEMENTS OF CASH FLOWS

UNAUDITED

(CONTINUED)



|                                                                                                                                     |  |   |           |  |   |            |   |  |   |           
|------------------------------------------------------------------------------------------------------------------------------------ |  | - | --------- |  | - | ---------- | - |  | - | ----------
|NON-CASH TRANSACTIONS:                                                                                                               |  |   |           |  |   |            |   |  |   |           
|Issuance of warrants for loans                                                                                                       |  | $ |          |  | $ |           |   |  | $ | 2,011,019 
|Conversion of notes payable to equity                                                                                                |  | $ |          |  | $ | (4,226,000 | ) |  | $ | 4,201,000 
|Issuance of common stock for related party debt                                                                                      |  | $ |          |  | $ |           |   |  | $ | 888,832   
|Issuance of common stock for debt                                                                                                    |  | $ |          |  | $ |           |   |  | $ | 1,154,939 
|Issuance of common stock for assets                                                                                                  |  | $ |          |  | $ |           |   |  | $ | 8,000     
|Conversion of accounts payable to notes payable                                                                                      |  | $ |          |  | $ |           |   |  | $ | 766,484   
|Contribution of capital by shareholders for financing costs                                                                          |  | $ |          |  | $ |           |   |  | $ | 1,188,432 
|Issuance of common stock upon conversion of preferred stock                                                                          |  | $ | 150,742   |  | $ | 235,000    |   |  | $ | 1,183,247 
|Conversion of mandatorily redeemable preferred stock to equity                                                                       |  | $ |          |  | $ |           |   |  | $ | 5,534,000 
|Effective dividend from amortization of discount related to beneficial conversion of mandatorily redeemable Series A preferred
stock |  | $ |          |  | $ |           |   |  | $ | 5,554,000 
|Warrants issued for release of redemption provision of Series A preferred stock                                                      |  | $ |          |  | $ |           |   |  | $ | 1,291,912 
|Effective dividend from amortization of discount related to beneficial conversion of Series B preferred stock and warrants           |  | $ | 1,537,538 |  | $ |           |   |  | $ | 10,228,031
|                                                                                                                                     |  |   |          
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:                                                                                    |  |   |           |  |   |            |   |  |   |           
|Cash paid for interest                                                                                                               |  | $ | 460       |  | $ |           |   |  | $ | 92,623    



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



- 5 -



---

REMOTE KNOWLEDGE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS



NOTE 1 - BASIS OF
PRESENTATION



The unaudited condensed financial
statements have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission (the SEC). Certain information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the United States of American have been omitted pursuant to such SEC rules and regulations; nevertheless, the Company believes that the disclosures are adequate to make the
information presented not misleading. The condensed financial statements and notes should be read in conjunction with financial statements and notes thereto included in the Companys Annual Report on Form 10-KSB for the year ended December 31,
2004. In the opinion of the Company, all adjustments, including normal recurring adjustments necessary to present fairly, in all material respects, the financial position of the Company, as of March 31, 2005, and the results of its operations and
cash flows for the quarter then ended, have been included. The results of operations for the interim period are not necessarily indicative of the results for the full year.



NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES



Stock-Based Compensation  The Company accounts for its stock based
compensation under the intrinsic value method prescribed in Accounting Principles Board (APB) No. 25, Accounting for Stock Issued to Employees. On December 16, 2004, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 123 (revised 2004), Share-Based Payment (SFAS No. 123(R)). SFAS No. 123(R) will require companies to measure all employee stock-based compensation awards using a fair value method and record such
expense in the financial statements. In addition, the adoption of SFAS No. 123(R) will require additional accounting and disclosure related to the income tax and cash flow effects resulting from share-based payment arrangements. For public entities
that file as small business filers, SFAS No. 123(R) is effective beginning as of the first interim or annual reporting period that begins after December 15, 2005.



- 6 -



---

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)



Had the Company used the fair-value-based
method of accounting for the stock option plan prescribed by SFAS No. 123(R) and charged compensation expense against income over the vesting period based on the fair value of options at the date of grant, net income (loss) and earnings (loss) per
share as reported would have been reduced to the following pro forma amounts:



|                                                                                                         |  |                           |            |   |               |   |            |  
|-------------------------------------------------------------------------------------------------------- |  | ------------------------- | ---------- | - | ------------- | - | ---------- | -
|                                                                                                         |  | THREE-MONTH PERIODS ENDED |           
|                                                                                                         |  | March 31,2005             |            |   | March 31,2004 |  
|Net loss attributable to common shareholders as reported                                                 |  | $                         | (2,705,079 | ) |               | $ | (2,405,736 | )
|Stock based employee compensation included in reported net loss                                          |  |                           | 5,441      |   |               |   | 14,409     |  
|Total stock-based employee compensation expense determined under fair value based method for all options |  |                           | (97,666    | ) |               |   | (128,787   | )
|                                                                                                         |  |                           |            |   |               |   |            |  
|Pro forma net loss                                                                                       |  | $                         | (2,797,304 | ) |               | $ | (2,520,114 | )
|                                                                                                         |  |                           |            |   |               |   |            |  
|Basic and diluted loss per share                                                                         |  |                           |            |   |               |   |            |  
|As reported                                                                                              |  | $                         | (0.40      | ) |               | $ | (0.43      | )
|Pro forma                                                                                                |  | $                         | (0.42      | ) |               | $ | (0.45      | )



The Company used the Black-Scholes
option pricing model to value stock options using the following assumptions: proceeds as set forth in the option agreements; no expected dividend yield; expected volatility ranging from 157% to 301%; risk-free interest rates ranging from 3.1% to
5.0%; and expected lives of 3-8 years.



NOTE 3 -
NET LOSS PER SHARE



Loss per share (LPS) is computed by dividing the net loss for the period by the weighted-average number of common shares outstanding for the period. Diluted LPS is based on the weighted-average number of shares of common stock outstanding
for the period and common stock equivalents, warrants and options, outstanding at the end of the period. Common stock equivalents of 54,315,512 and 11,953,734 for the quarters ended March 31, 2005, and 2004, respectively, have been excluded from the
calculation of weighted-average shares for purposes of calculating diluted loss per share, as such inclusion is anti-dilutive.



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|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations.
|------- | --------------------------------------------------------------------------------------



Forward-Looking Statements



Except for historical information contained herein, this Form 10-QSB contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not statements of historical fact may be deemed to be forward-looking statements. Such statements reflect the current
views and assumptions of the Company and are not guarantees of future performance. These statements are subject to various risks and uncertainties. The Companys actual results could differ materially from those anticipated in these
forward-looking statements as a result of the risk factors described in this Form 10-QSB. The Company expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statement to reflect any changes in
expectations, or any change in events or circumstances on which those statements are based, unless otherwise required by law.



Such Forward-Looking statements are not guarantees of future performance and actual results could differ materially from those expressed or implied in such statements as
a result of certain factors, including those set forth in Plan of Operation, and elsewhere in this report. All statements, other than statements of historical facts, included in this report that address activities, events or developments
that we expect, believe, intend or anticipate may occur in the future, including the following matters, are forward looking statements:



| |  |  | timing of products and new product releases,
| | - |  | --------------------------------------------



| |  |  | research and development expenditures, including the timing, amount and nature thereof,
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | estimates of additional capital requirements,
| | - |  | ---------------------------------------------



| |  |  | sales projections,
| | - |  | ------------------



| |  |  | repayment of debt,
| | - |  | ------------------



| |  |  | business strategies,
| | - |  | --------------------



| |  |  | product pricing and demand, and
| | - |  | -------------------------------



| |  |  | expansion and growth of business operations.
| | - |  | --------------------------------------------



These statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and
expected future developments as well as other factors we believe are appropriate in the circumstances. These forward-looking statements are subject to risks and uncertainties, including those associated with:



| |  |  | the availability of additional financing on favorable conditions,
| | - |  | -----------------------------------------------------------------



| |  |  | general economic, market and business conditions,
| | - |  | -------------------------------------------------



| |  |  | the success of our engineering efforts,
| | - |  | ---------------------------------------



| |  |  | our ability to protect our intellectual property,
| | - |  | -------------------------------------------------



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| |  |  | business opportunities that may be presented to and pursued by us,
| | - |  | ------------------------------------------------------------------



| |  |  | changes in laws or regulations, and
| | - |  | -----------------------------------



| |  |  | successful exploitation of our market opportunities.
| | - |  | ----------------------------------------------------



Significant factors that could prevent us from achieving our stated goals include:



| |  |  | our inability to obtain financing for research and development, manufacturing, and marketing expenditures,
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | our inability to compete against existing or future competitors,
| | - |  | ----------------------------------------------------------------



| |  |  | a substantial increase in the cost of our products,
| | - |  | ---------------------------------------------------



| |  |  | declines in the market prices for our products, and
| | - |  | ---------------------------------------------------



| |  |  | adverse changes in our target markets.
| | - |  | --------------------------------------



The cautionary statements contained or referred to in this report should be considered in connection with any subsequent written or oral forward-looking statements that
may be issued by us or persons acting on our behalf.



OVERVIEW AND COMPANY
STATUS



Remote Knowledge, Inc. is a Houston, Texas based company that
develops, markets and delivers end-to-end communications and innovative asset management solutions to remote locations. Enabled by its proprietary telematics technologies, Remote Knowledge provides real-time connectivity and monitoring services to
assets located remotely from their owners or users via two-way wireless data transfer and GPS. We also own a proprietary satellite communications system and earth station which will provide communication, including high-speed Internet, VOIP, fax and
two-way data transmission to remote areas. Remote Knowledges products are designed to service the marine pleasure craft, commercial maritime, oil and gas production, construction, agriculture and recreational vehicle industries.



Twelve Month Plan of Operation



Revenue Goals



Initially, our marketing efforts have been directed towards the marine commercial, marine
pleasure craft and oil and gas production markets. Also, from time to time other market opportunities are presented to us that we will continue to evaluate. Sales of the RK3000 device to these markets will produce two revenue streams. The first is
from the sale and installation of the device itself. The second is from the recurring monthly fees for our monitoring services, which will be sold under contracts ranging from one to three year terms.



Based on our current pricing models, gross profit should average about $300 per device, the
exact amount depending on the mix of devices sold, and the gross profit per device on the recurring revenue should range between $10 and $44 per month.



Our goal is to have revenue commence from the sale of the device during the second quarter of 2005. In this regard, we have established a dealership for individual
consumer sales on the Gulf Coast of Texas and are seeking to establish other dealerships in Florida as well as on the Alabama, Georgia, Mississippi



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and Louisiana Gulf Coast. We have also established pilot programs with Raymarine LTD, a substantial seller of marine electronics; FLW Outdoors, the
administrator of eight national fishing tournament circuits; and with a firm that is testing the system with regulatory authorities and a commercial fishing association in Brazil. Sales from successful completion of these pilot programs potentially
could be substantially larger than those from individual consumers in the after market.



Operational Goals



Suntron Corporation, a large contract manufacturer of electronics, manufactures our devices at its Sugarland, Texas facility. The devices are manufactured on a monthly
basis as we issue purchase orders based on price quotes received from Suntron Corporation. We have determined it is necessary to have a third party manufacture our devices as it is not economically feasible for us to have our own facilities,
personnel and quality controls. We do not expect to manufacture our own devices in the foreseeable future.



To date we have had 450 devices manufactured for sale in the marine consumer after market and for use in pilot programs. The cost of these devices is approximately $625,000, and we do not plan to manufacture
additional units until such time as orders have been received for substantially all of these devices or unless orders are received for devices outside the marine markets such as the oil and gas market which will have a different configuration.



As part of our budget and expenditure projection, we have included funds for
our research and development contract with Niobrara Research and Development to add several features to our device as to well as make modifications to make our device suitable for use in the oil and gas production industry. This research and
development contract also covers work to be done on our satellite communication technology.



Communication Assets



In September 2003, the Company acquired a satellite earth station in Joplin, Missouri and all of the technology and software associated with a satellite transmission
product.



Using this acquired technology, during the last half of 2005, we also
plan to introduce a service to provide high-speed Internet, voice and data transmission to remote areas where such services are not currently available. These areas would include rural areas in the U.S., remote areas in foreign countries, and ocean
based commercial operations. The impact of this service on operations in 2005, if any, is uncertain since its introduction will not begin until the last half of 2005. In addition, we have not determined sales, and cost structure as no market
analysis has been done to determine pricing. In addition, the engineering and development of the technology have not been completed so manufacturing costs cannot be determined and satellite transmission contracts and costs also remain to be
negotiated.



The Company has a verbal understanding with Stallion Oil Field
Services (Stallion) as to an undertaking to sell communication services in the oil and gas industry using our satellite communication technology. The terms are currently being put in definitive, written form by counsel. The terms include
Stallion using the services in their own operation and Stallion and the Company joining efforts to market the communication services to other oil field service companies and oil and gas operating companies. Before any sales can commence, however,
some updating of both the hardware and software will be required which will likely take several months.



The timing of additional activities of both our telematics system and satellite communication system and the penetration of other markets beyond those described immediately above depends primarily on reaching a
meaningful level of sales or obtaining, if possible, new funding from outside and unknown sources.



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Financial Position



Since the inception of our current business plan in 1998, we have financed our operations primarily through private sales of our common
stock, preferred stock and short-term notes. As of March 31, 2005, we had approximately $15,000 of cash and cash equivalents and a working capital deficit of $1,920,000.



Our auditors included an explanatory paragraph in their opinion on our financial statements for the year ended December 31, 2004 to state
that our losses, working capital deficit and net shareholder deficit at December 31, 2004 raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon receiving the additional
capital as described below and achieving profitable operations through the manufacture and sale of our RK3000 product. We cannot assure you that we will be able to obtain additional capital or that sales of our RK3000 product will generate
significant profits.



On March 30, 2004 the Company closed an equity offering
of $1,000 units consisting of one share of its Series B Preferred Stock, and a seven year warrant to purchase 1,333 shares of its common stock at $0.75 per share (a Unit). Each share of the Series B Preferred stock converts into 1,333
shares of common stock. The cash received from the offering was $2,282,147 net of $149,853 of commissions and expenses or a total of $2,432,000.



The subscription agreements received for the Units sold in the March 30, 2004 close also required the subscribers to purchase an additional 961 units for $961,000 at such
time as the company sells 2,300 of its RK3000 devices so long as that occurs prior to September 30, 2004. Additional subscription agreements were also received separately for the purchase of 4,913 units for $4,913,000 also at such time as the
Company sold 2,300 of its RK3000 devices.



In August 2004, it became apparent
that the 2,300 device sales threshold would not be reached by September 30, 2004. As a result, on August 31, 2004 the Company received subscription agreements for 6,000 new units consisting of one share of Series B preferred stock and warrants to
purchase 4,000 shares of common stock at $0.75 per share. These agreements cancelled the subscriptions for 240.5 of the 961 units noted above plus all of the 4,913 units noted above. The 6,000 units were to be purchased in three tranches; 1,250
units currently, 2,500 units upon sale of 100 RK3000 devices and 2,250 units upon sale of 400 more RK3000 devices. Although the Company has not achieved the sales threshold to activate the second tranche subscriptions, the subscribers have been
waiving the sales requirement and provided some funds, from time to time, to meet the Companys current obligations. Through April 30, 2005, $2,085,000 has been received on the second tranche of which $1,735,000 was received between December
31, 2004 and March 31, 2005, with $2,665,000 remaining on the second and third tranches of the subscription.



We have prepared budgets, marketing plans and expenditure plans for 2005 based on the assumption that the Company will receive the remaining $2.7 million. However, there can be no assurance that these investors will
continue to waive the device sales requirements or that these device sales thresholds can be achieved without the additional funding. The $2.7 million of additional funds are projected to meet all of our funding needs through December 31, 2005
without significant gross profits from sales of our devices. However, additional funds are likely to be needed after that date and management is formulating terms and contacting sources of additional funding in order to raise approximately $3
million of additional funds by the middle of the fourth quarter.



Results of Operations



Since the
inception of our becoming a development stage company on January 1, 2001, our operations



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have consisted primarily of various start-up activities relating to our current business, including developing GPS/communications technologies, building our
strategic marketing plan, identifying and contacting potential customers in our target industries, recruiting personnel and raising capital. We have had minimal revenues to date, and our expenses have consisted primarily of research and development,
sales and marketing and general and administrative expenses, resulting in an operating loss since January 1, 2001 as a development stage company through March 31, 2005 of $27,443,306.



Research and development costs have been expensed as they were incurred. Research and development costs for the first three months of 2005
increased $68,042 to $99,283, compared to $31,241 for the same period in 2004. The increase in costs for the first three months of 2005 as compared to the same period in 2004 is a result of increased personnel and a working agreement with an outside
contractor to continue development of the RK3000 and future products.



Professional fees for the first three months of 2005 increased $227,396 to $246,207, compared to $18,811 for the same period in 2004. The increase in professional fees in the first three months of 2005 as compared to the same period in 2004
mainly reflects costs incurred developing the documentation required to comply with the requirements imposed by the Sarbanes-Oxley Act of 2002, including related rules and regulations. Also, the Company incurred additional legal expenses regarding
the settlement of a lawsuit relating to the payment of software, and expenses for audit work in the first quarter of 2005 for audit work that began in the second quarter of 2004.



Advertising and promotional fees for the first three months of 2005 increased $10,813 to $40,908, compared to $30,095 for the same period in
2004. Advertising and promotional fees increased in the first three months of 2005 as compared with that same period in 2004 because the Company hired an outside party to assist in the development of a marketing strategy for the after-market.



General and administrative expenses for the first three months of 2005
decreased $1,126 to $733,503, compared to $734,629 for the same period in 2004. The decrease in general and administrative expenses in the first quarter of 2005 compared with the same period in 2004 reflects a reduction, due to the vesting of
options, in the amount of deferred compensation recognized related to options issued to non-employees of the Company. This amount is mostly offset by an increase in staff and their related support costs such as payroll taxes, health insurance and
phones. In addition, the Company incurred moving expenses in the first quarter of 2005 related to the relocation of the Companys corporate office and an increase in travel expenses in connection with several sales efforts and trade shows in
the first quarter of 2005.



Interest expense for the first three months of 2005
decreased $248,733 to $50,315, compared to $299,048 for the same period in 2004 because the amortization of debt discount related to notes sold as of January 31, 2003 and April 15, 2003 was completed in March 2004.



|Item 3. | Controls and Procedures.
|------- | ------------------------



The Company maintains a system of disclosure controls and procedures that are designed for the purposes of ensuring that information required to be disclosed in our SEC
reports is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive and Chief Financial
Officer, as appropriate to allow timely decisions regarding required disclosure.



The Company carried out an evaluation under the supervision and with the participation of the Companys management, including Randy S. Bayne, who serves as the Companys Chief Executive Officer, and Henry Houston, who serves as
our Chief Financial Officer, of the effectiveness of the design



- 12 -



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and operation of the Companys disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-QSB. Based
upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures were adequate and effective for the purposes discussed above as of the end of the period covered by
this report. There were no significant changes in the Companys internal control over financial reporting that occurred during the Companys most recent fiscal quarter that have materially affected, or are likely to materially affect, the
Companys internal control over financial reporting.



PART II - OTHER INFORMATION



|Item 1. | Legal Proceedings.
|------- | ------------------



On October 12, 2004, Oracle Corporation filed suit in Superior Court of California, County of Santa Cruz, seeking $270,475 for payment of software allegedly delivered to the Company in August of 2002. We filed a
defense stating we had never received the software. The litigation was settled on March 24, 2005 pursuant to an agreement whereby the Company will make 24 monthly payments of $9,000 to Oracle Corporation.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds.
|------- | ------------------------------------------------------------



We have sold the following unregistered securities:



|        |  |                |  |               |     |  |               |        
|------- |  | -------------- |  | ------------- | --- |  | ------------- | -------
|Date    |  | Name           |  | Security Sold |     |  | Consideration
|1/6/05  |  | Granader, Dan  |  | 300 Units     | (1) |  | $             | 300,000
|1/31/05 |  | Granader, Dan  |  | 200 Units     | (1) |  | $             | 200,000
|2/1/05  |  | Granader, Dan  |  | 75 Units      | (1) |  | $             | 75,000 
|2/14/05 |  | Granader, Neil |  | 20 Units      | (1) |  | $             | 20,000 
|2/15/05 |  | Granader, Alan |  | 80 Units      | (1) |  | $             | 80,000 
|2/28/05 |  | Granader, Dan  |  | 120 Units     | (1) |  | $             | 120,000
|3/9/05  |  | Granader, Alan |  | 655 Units     | (1) |  | $             | 655,000
|3/28/05 |  | Granader, Alan |  | 100 Units     | (1) |  | $             | 100,000
|3/29/05 |  | Granader, Neil |  | 20 Units      | (1) |  | $             | 20,000 



|(1) | The units represent the same number of Series B Preferred Shares convertible into 1,333 common shares per unit and warrants for each unit to purchase 4,000 shares of common stock at
$0.75 per share of common stock.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



All sales were made pursuant to
exemption provided by Section 4 (2) of the Securities Act of 1933 and Regulation D Section 506 promulgated thereunder.



In connection with all of the offerings and sales made pursuant to Rule 506 of Regulation D promulgated under the Securities Act of 1933, as amended: (i) no advertising
or general solicitation was employed in offering the securities; (ii) the offerings and sales were made to a limited number of persons, all of whom were accredited investors, or business associates of the Company; and (iii) transfer was restricted
by the Company in accordance with the requirements of the Securities Act of 1933, as amended. In addition, the investors made representations, and we have made independent determinations, that all of the investors were accredited or sophisticated
investors, and that they were capable of analyzing the merits and risks of their investment, and that they understood the speculative nature of their investment. All of the individuals and/or entities that purchased the unregistered securities were
known to the Company and its management through pre-existing business or personal relationships, as long standing business associates,



- 13 -



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friends, employees, relatives or members of the immediate family of management or other shareholders. All purchasers were provided access to the material
information, which they requested, and all information necessary to verify such information, and were afforded access to management of the Company in connection with their purchases. All purchasers of the unregistered securities acquired such
securities for investment and not with a view toward distribution, acknowledging such intent to the Company.



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



| | (a) | The following exhibits are furnished as part of this report:
| | --- | ------------------------------------------------------------



|   |  |              |  |                                                                         
|-- |  | ------------ |  | ------------------------------------------------------------------------
|1. |  | Exhibit 10.1 |  | Summary of Director Compensation                                        
|   |  |             
|2. |  | Exhibit 31.1 |  | Certification required by Section 302 of the Sarbanes-Oxley Act of 2002.
|   |  |             
|3. |  | Exhibit 31.2 |  | Certification required by Section 302 of the Sarbanes-Oxley Act of 2002.
|   |  |             
|4. |  | Exhibit 32   |  | Certification required by Section 906 of the Sarbanes-Oxley Act of 2002.



| | (b) | Reports on Form 8-K: None
| | --- | -------------------------



SIGNATURES



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



|                   |  |  |  |                        |  |                      |  |                                       
|------------------ |  |  |  | ---------------------- |  | -------------------- |  | --------------------------------------
|                   |  |  |  | Remote Knowledge, Inc.
|                   |  |  |  |                       
|                   |  |  |  |                        |  | By:                  |  | /s/ Randy S. Bayne                    
|                   |  |  |  |                        |  |                      |  | Randy S. Bayne                        
|                   |  |  |  |                        |  |                      |  | Chief Executive Officer               
|                   |  |  | 
|Date: May 12, 2005 |  |  |  | By:                    |  | /s/ D. Henry Houston
|                   |  |  |  |                        |  |                      |  | D. Henry Houston                      
|                   |  |  |  |                        |  |                      |  | Chief Financial and Accounting Officer



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