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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-QSB



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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES AND
EXCHANGE ACT OF 1934



For the quarterly period ended:

September 30, 2004



Commission File Number: 333-106247



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Remote Knowledge, Inc.

f/k/a Varitek Industries, Inc.

(Name
of small business issuer in its charter)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Delaware                                                       |  | 74-1664837                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification number)



16360 Park Ten
Place, Suite 200, Houston, Texas 77084

(Address of Principal Executive offices) (Zip Code)



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



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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 6,471,616 shares of common stock, $.001 par value, outstanding as of September 30, 2004.



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



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PART I - FINANCIAL INFORMATION



Item 1. Financial Statements.



The unaudited condensed Financial Statements of the Company required to be filed with this 10-QSB Quarterly Report were prepared by management together with related
Notes. In the opinion of management, the condensed Financial Statements present fairly the financial condition of the Company.



REMOTE KNOWLEDGE, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONDENSED BALANCE SHEET

(UNAUDITED)



|                                                                                                           |  |                   |             |  
|---------------------------------------------------------------------------------------------------------- |  | ----------------- | ----------- | -
|                                                                                                           |  | SEPTEMBER 30,2004 |            
|ASSETS                                                                                                     |  |                   |             |  
|CURRENT ASSETS                                                                                             |  |                   |             |  
|Cash and cash equivalents                                                                                  |  | $                 | 9,293       |  
|Inventory                                                                                                  |  |                   | 170,345     |  
|Prepaid and other current assets                                                                           |  |                   | 54,980      |  
|                                                                                                           |  |                   |             |  
|Total current assets                                                                                       |  |                   | 234,618     |  
|                                                                                                           | 
|PROPERTY AND EQUIPMENT, net                                                                                |  |                   | 606,374     |  
|                                                                                                           |  |                   |             |  
|Total assets                                                                                               |  | $                 | 840,992     |  
|                                                                                                           |  |                   |             |  
|LIABILITIES AND SHAREHOLDERS DEFICIT                                                                      |  |                   |             |  
|                                                                                                           | 
|CURRENT LIABILITIES:                                                                                       |  |                   |             |  
|Accounts payable  trade                                                                                   |  | $                 | 873,175     |  
|Accrued expenses                                                                                           |  |                   | 1,000,819   |  
|Subscription Deposits                                                                                      |  |                   | 700,000     |  
|Deposit on sales                                                                                           |  |                   | 23,000      |  
|Payable to shareholder                                                                                     |  |                   | 132,150     |  
|Notes payable                                                                                              |  |                   | 715,743     |  
|                                                                                                           |  |                   |             |  
|Total current liabilities                                                                                  |  |                   | 3,444,887   |  
|                                                                                                           | 
|SHAREHOLDERS DEFICIT:                                                                                     |  |                   |             |  
|Preferred stock - series A, $.001 par value; 15,000 shares authorized; 4,877 shares issued and outstanding |  |                   | 5           |  
|Preferred stock - series B, $.001 par value; 13,500 shares authorized; 6,670 shares issued and outstanding |  |                   | 7           |  
|Common stock, $.001 par value; 100,000,000 shares authorized; 6,471,616 shares issued and outstanding      |  |                   | 6,471       |  
|Deferred compensation                                                                                      |  |                   | (476,810    | )
|Additional paid-in capital                                                                                 |  |                   | 46,601,225  |  
|Accumulated deficit                                                                                        |  |                   | (10,234,380 | )
|Deficit accumulated during development stage                                                               |  |                   | (38,500,413 | )
|                                                                                                           |  |                   |             |  
|Total shareholders deficit                                                                                |  |                   | (2,603,895  | )
|                                                                                                           |  |                   |             |  
|Total liabilities shareholders deficit                                                                    |  | $                 | 840,992     |  
|                                                                                                           |  |                   |             |  



See accompanying
notes to the condensed financial statements.



- 2 -



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REMOTE KNOWLEDGE, INC.

(A DEVELOPMENT STAGE ENTERPRISE)



CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)



|                                                                                  |  |                    |            |   |                    |   |            |                                                                                  |  |   |                   |   |  |   |            |   |  |   |             |  
|--------------------------------------------------------------------------------- |  | ------------------ | ---------- | - | ------------------ | - | ---------- | -------------------------------------------------------------------------------- |  | - | ----------------- | - |  | - | ---------- | - |  | - | ----------- | -
|                                                                                  |  | THREE-MONTHS ENDED |            |   | NINE-MONTH S ENDED |   |            | PERIOD FROM JANUARY 1,2001 (INCEPTION
OFDEVELOPMENT STAGE) TO SEPTEMBER 30, 2004 | 
|                                                                                  |  | September 30,2004  |            |   | September 30,2003  |   |            | September 30, 2004                                                               |  |   | September 30,2003 |   | 
|OPERATING COSTS AND EXPENSES:                                                     |  |                    |            |   |                    |   |            |                                                                                  |  |   |                   |   |  |   |            |   |  |   |             |  
|Advisory services                                                                 |  | $                  |           |   |                    | $ |           |                                                                                  |  | $ |                  |   |  | $ |           |   |  | $ | 4,169,146   |  
|Research and development                                                          |  |                    | 4,691      |   |                    |   | 9,454      |                                                                                  |  |   | 118,366           |   |  |   | 106,809    |   |  |   | 4,157,491   |  
|Loss on impairment of assets                                                      |  |                    |           |   |                    |   |           |                                                                                  |  |   |                  |   |  |   |           |   |  |   | 1,525,246   |  
|Professional fees                                                                 |  |                    | 81,087     |   |                    |   | 123,189    |                                                                                  |  |   | 246,340           |   |  |   | 536,729    |   |  |   | 1,890,719   |  
|Advertising and promotion fees                                                    |  |                    | 62,890     |   |                    |   | 28,892     |                                                                                  |  |   | 107,481           |   |  |   | 256,641    |   |  |   | 1,270,178   |  
|General and administrative expenses                                               |  |                    | 891,581    |   |                    |   | 819,146    |                                                                                  |  |   | 2,411,938         |   |  |   | 2,079,443  |   |  |   | 9,587,905   |  
|                                                                                  |  |                    |            |   |                    |   |            |                                                                                  |  |   |                   |   |  |   |            |   |  |   |             |  
|Total operating costs and expenses                                                |  |                    | 1,040,249  |   |                    |   | 980,681    |                                                                                  |  |   | 2,884,125         |   |  |   | 2,979,622  |   |  |   | 22,600,685  |  
|                                                                                  |  |                    |            |   |                    |   |            |                                                                                  |  |   |                   |   |  |   |            |   |  |   |             |  
|OTHER EXPENSE (INCOME):                                                           |  |                    |            |   |                    |   |            |                                                                                  |  |   |                   |   |  |   |            |   |  |   |             |  
|Interest expense                                                                  |  |                    | 45,481     |   |                    |   | 481,423    |                                                                                  |  |   | 436,709           |   |  |   | 1,272,174  |   |  |   | 2,654,357   |  
|Amortization of deferred financing costs                                          |  |                    |           |   |                    |   | 297,108    |                                                                                  |  |   |                  |   |  |   | 891,324    |   |  |   | 1,188,432   |  
|Interest income                                                                   |  |                    |           |   |                    |   | (8,170     | )                                                                                |  |   | (364              | ) |  |   | (25,440    | ) |  |   | (26,988     | )
|Debt forgiveness                                                                  |  |                    |           |   |                    |   | 800        |                                                                                  |  |   |                  |   |  |   | (97,766    | ) |  |   | (1,384,978  | )
|                                                                                  |  |                    |            |   |                    |   |            |                                                                                  |  |   |                   |   |  |   |            |   |  |   |             |  
|Total other expense (income)                                                      |  |                    | 45,481     |   |                    |   | 771,161    |                                                                                  |  |   | 436,345           |   |  |   | 2,040,292  |   |  |   | 2,430,823   |  
|                                                                                  |  |                    |            |   |                    |   |            |                                                                                  |  |   |                   |   |  |   |            |   |  |   |             |  
|Net Loss                                                                          |  |                    | (1,085,730 | ) |                    |   | (1,751,842 | )                                                                                |  |   | (3,320,470        | ) |  |   | (5,019,914 | ) |  |   | (25,031,508 | )
|                                                                                  |  |                    |            |   |                   
|Effective Dividend Related to Beneficial Conversion of Series B Preferred Stock   |  |                    |           |   |                    |   |           |                                                                                  |  |   | (6,622,993        | ) |  |   |           |   |  |   | (6,622,993  | )
|                                                                                  |  |                    |            |   |                   
|Effective Dividend Related to Beneficial Conversion of Series A Preferred Stock   |  |                    |           |   |                    |   |           |                                                                                  |  |   |                  |   |  |   | (1,898,148 | ) |  |   | (5,554,000  | )
|Warrants issued for release of redemption provision on preferred stock  series A |  |                    |           |   |                    |   |           |                                                                                  |  |   | (1,291,912        | ) |  |   |            |   |  |   | (1,291,912  | )
|                                                                                  |  |                    |            |   |                    |   |            |                                                                                  |  |   |                   |   |  |   |            |   |  |   |             |  
|Net Loss Attributable to Common Shares                                            |  | $                  | (1,085,730 | ) |                    | $ | (1,751,842 | )                                                                                |  | $ | (11,235,375       | ) |  | $ | (6,918,062 | ) |  | $ | (38,500,413 | )
|                                                                                  |  |                    |            |   |                    |   |            |                                                                                  |  |   |                   |   |  |   |            |   |  |   |             |  
|Net Loss Per Share:                                                               |  |                    |            |   |                    |   |            |                                                                                  |  |   |                   |   |  |   |            |   |  |   |             |  
|BASIC AND DILUTED                                                                 |  | $                  | (.17       | ) |                    | $ | (.32       | )                                                                                |  | $ | (1.86             | ) |  | $ | (1.30      | ) |  | $ | (7.65       | )
|                                                                                  |  |                    |            |   |                    |   |            |                                                                                  |  |   |                   |   |  |   |            |   |  |   |             |  
|Weighted Average Number of Shares Used in Calculating Net Loss Per Share:         |  |                    |            |   |                    |   |            |                                                                                  |  |   |                   |   |  |   |            |   |  |   |             |  
|BASIC AND DILUTED                                                                 |  |                    | 6,480,480  |   |                    |   | 5,414,754  |                                                                                  |  |   | 6,056,057         |   |  |   | 5,330,239  |   |  |   | 5,033,281   |  
|                                                                                  |  |                    |            |   |                    |   |            |                                                                                  |  |   |                   |   |  |   |            |   |  |   |             |  



See accompanying
notes to the condensed financial statements.



- 3 -



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REMOTE KNOWLEDGE, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)



|                                                                               |  |                   |            |   |                                                                           |   |            |   |  |   |             |  
|------------------------------------------------------------------------------ |  | ----------------- | ---------- | - | ------------------------------------------------------------------------- | - | ---------- | - |  | - | ----------- | -
|                                                                               |  | NINE-MONTHS ENDED |            |   | PERIOD
FROMJANUARY 1, 2001(INCEPTION OFDEVELOPMENTSTAGE) TO SEPT 30,
2004 |  
|                                                                               |  | SEPT 30,2004      |            |   | SEPT 30,2003                                                              |   |           
|CASH FLOWS FROM OPERATING
ACTIVITIES:                                          |  |                   |            |   |                                                                           |   |            |   |  |   |             |  
|Net loss                                                                       |  | $                 | (3,320,470 | ) |                                                                           | $ | (5,019,914 | ) |  | $ | (25,031,508 | )
|Adjustments to reconcile net loss to net cash used in operating activities:    |  |                   |            |   |                                                                           |   |            |   |  |   |             |  
|Accretion of debt discount                                                     |  |                   | 209,906    |   |                                                                           |   | 1,213,990  |   |  |   | 2,011,019   |  
|Depreciation                                                                   |  |                   | 136,954    |   |                                                                           |   | 24,630     |   |  |   | 414,958     |  
|Amortization of deferred financing costs                                       |  |                   |           |   |                                                                           |   | 891,324    |   |  |   | 1,188,432   |  
|Common stock issued for services                                               |  |                   |           |   |                                                                           |   | 271,784    |   |  |   | 5,280,720   |  
|Stock based compensation                                                       |  |                   | 42,109     |   |                                                                           |   | 218,530    |   |  |   | 572,943     |  
|Common stock warrants issued for services                                      |  |                   | 19,060     |   |                                                                           |   |           |   |  |   | 42,355      |  
|Common stock options issued for services                                       |  |                   | 463,196    |   |                                                                           |   |           |   |  |   | 978,914     |  
|Debt forgiveness                                                               |  |                   |           |   |                                                                           |   | (97,766    | ) |  |   | (1,384,978  | )
|Impairment of long-lived assets                                                |  |                   | 77,819     |   |                                                                           |   |           |   |  |   | 1,603,065   |  
|Bad debt charge-offs                                                          |  |                   |           |   |                                                                           |   | 174,016    |   |  |   | 173,028     |  
|Expense offset against related party receivable                                |  |                   |           |   |                                                                           |   |           |   |  |   | 126,973     |  
|Charge off of receivable from sale of stock                                    |  |                   |           |   |                                                                           |   |           |   |  |   | 146,413     |  
|Changes in assets and liabilities:                                             |  |                   |            |   |                                                                           |   |            |   |  |   |             |  
|Prepaid and other current assets                                               |  |                   | (44,199    | ) |                                                                           |   | 20,057     |   |  |   | (22,483     | )
|Inventory                                                                      |  |                   | (127,557   | ) |                                                                           |   |           |   |  |   | (170,345    | )
|Accounts payable  trade                                                       |  |                   | (312,479   | ) |                                                                           |   | 481,442    |   |  |   | 1,431,298   |  
|Accrued expenses                                                               |  |                   | 17,928     |   |                                                                           |   | (16,136    | ) |  |   | 233,664     |  
|Deposit on sales                                                               |  |                   | 23,000     |   |                                                                           |   |           |   |  |   | 23,000      |  
|Related party payable                                                          |  |                   |           |   |                                                                           |   |           |   |  |   | 399,259     |  
|                                                                               |  |                   |            |   |                                                                           |   |            |   |  |   |             |  
|Net cash used in operating activities                                          |  |                   | (2,814,733 | ) |                                                                           |   | (1,838,043 | ) |  |   | (11,983,273 | )
|                                                                               |  |                   |           
|CASH FLOWS FROM INVESTING
ACTIVITIES:                                          |  |                   |            |   |                                                                           |   |            |   |  |   |             |  
|Additions of fixed assets                                                      |  |                   | (112,771   | ) |                                                                           |   | (618,163   | ) |  |   | (830,344    | )
|Deposit on property purchase                                                   |  |                   |           |   |                                                                           |   |           |   |  |   |            |  
|Related party receivable                                                       |  |                   |           |   |                                                                           |   | 31,376     |   |  |   | (300,000    | )
|Notes receivable                                                               |  |                   |           |   |                                                                           |   |           |   |  |   |            |  
|                                                                               |  |                   |            |   |                                                                           |   |            |   |  |   |             |  
|Net cash used in investing activities                                          |  |                   | (112,771   | ) |                                                                           |   | (586,787   | ) |  |   | (1,130,344  | )
|                                                                               |  |                   |           
|CASH FLOWS FROM FINANCING
ACTIVITIES:                                          |  |                   |            |   |                                                                           |   |            |   |  |   |             |  
|Payments of notes payable                                                      |  |                   | (309,000   | ) |                                                                           |   | (126,000   | ) |  |   | (485,000    | )
|Proceeds from subscription deposits                                            |  |                   | 700,000    |   |                                                                           |   |           |   |  |   | 700,000     |  
|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                                              |  |                   | 249,000    |   |                                                                           |   | 2,030,000  |   |  |   | 3,125,000   |  
|Net proceeds from sale of mandatorily redeemable preferred stock               |  |                   |           |   |                                                                           |   |           |   |  |   | 5,040,033   |  
|Net proceeds from sale of series B preferred stock                             |  |                   | 2,278,069  |   |                                                                           |   |           |   |  |   | 2,278,069   |  
|                                                                               |  |                   |            |   |                                                                           |   |            |   |  |   |             |  
|Net cash provided by financing activities                                      |  |                   | 2,918,069  |   |                                                                           |   | 1,904,000  |   |  |   | 13,089,802  |  
|                                                                               |  |                   |           
|Net Change in Cash and Cash Equivalents                                        |  |                   | (9,435     | ) |                                                                           |   | (520,830   | ) |  |   | (23,815     | )
|                                                                               |  |                   |            |   |                                                                           |   |            |   |  |   |             |  
|CASH AND CASH EQUIVALENTS, beginning of
period                                 |  |                   | 18,728     |   |                                                                           |   | 528,120    |   |  |   | 33,108      |  
|                                                                               |  |                   |            |   |                                                                           |   |            |   |  |   |             |  
|CASH AND CASH EQUIVALENTS, end of period                                       |  | $                 | 9,293      |   |                                                                           | $ | 7,290      |   |  | $ | 9,293       |  
|                                                                               |  |                   |            |   |                                                                           |   |            |   |  |   |             |  
|NON-CASH TRANSACTIONS:                                                         |  |                   |            |   |                                                                           |   |            |   |  |   |             |  
|Issuance of warrants for loans                                                 |  | $                 |           |   |                                                                           | $ | 828,922    |   |  | $ | 2,011,019   |  
|Issuance of common stock for related party debt                                |  |                   |           |   |                                                                           |   |           |   |  |   | 888,832     |  
|Issuance of common stock for debt                                              |  |                   |           |   |                                                                           |   | 454,939    |   |  |   | 1,154,939   |  
|Issuance of common stock for assets                                            |  |                   |           |   |                                                                           |   |           |   |  |   | 8,000       |  
|Conversion of accounts payable to notes payable                                |  |                   |           |   |                                                                           |   |           |   |  |   | 766,484     |  
|Conversion of accrued expenses to notes payable                                |  |                   | 35,259     |   |                                                                           |   |           |   |  |   | 35,259      |  
|Contribution of capital by shareholders for financing costs                    |  |                   |           |   |                                                                           |   |           |   |  |   | 1,188,432   |  
|Issuance of common stock upon conversion of Preferred                          |  |                   | 235,000    |   |                                                                           |   | 20,000     |   |  |   | 255,000     |  
|Conversion of notes payable to equity                                          |  |                   | (4,226,000 | ) |                                                                           |   |           |   |  |   | (4,226,000  | )
|Effective Dividend Related to Beneficial Conversion of Series BPreferred Stock |  |                   | 6,622,993  |   |                                                                           |   |           |   |  |   | 6,622,993   |  
|Warrants Issued for Release of Redemption Provision on Series APreferred Stock |  |                   | 1,291,912  |   |                                                                           |   |           |   |  |   | 1,291,912   |  
|Supplemental Disclosure of Cash Flow Information                               |  |                   |            |   |                                                                           |   |            |   |  |   |             |  
|Cash paid for interest                                                         |  |                   | 70,608     |   |                                                                           |   | 569        |   |  |   | 80,375      |  



- 4 -



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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 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, 2003, which
was filed with the SEC on May 19, 2004. In the opinion of the Company, all adjustments, including normal recurring adjustments necessary to present fairly the financial position of Remote Knowledge, Inc. as of September 30, 2004 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 has adopted the disclosure provisions of Statement of Financial Accounting Standards (SFAS) No. 123, amended by SFAS No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure  an amendment
of FASB Statement No. 123. This Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in the summary of significant accounting policies in the financial statements. There was no impact on the
Companys basic financial statements resulting from its adoption.



Had the
Company used the fair-value-based method of accounting for the stock option plan prescribed by SFAS No. 123 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-MONTHS ENDED |            |   | NINE-MONTHS ENDED |  
|                                                                                                         |  | September 30,2004  |            |   | September 30,2003 |   |            | September 30,2004 |  |   | September 30,2003 |  
|Net loss attributable to common shareholders as reported                                                 |  | $                  | (1,085,730 | ) |                   | $ | (1,751,842 | )                 |  | $ | (11,235,375       | ) |  | $ | (6,918,062 | )
|Stock based employee compensation included in reported net loss                                          |  |                    | 42,109     |   |                   |   | 79,124     |                   |  |   | 42,109            |   |  |   | 218,530    |  
|Total stock-based employee compensation expense determined under fair value based method for all options |  |                    | (98,354    | ) |                   |   | (322,477   | )                 |  |   | (264,178          | ) |  |   | (722,735   | )
|                                                                                                         |  |                    |            |   |                   |   |            |                   |  |   |                   |   |  |   |            |  
|Pro forma net loss                                                                                       |  | $                  | (1,141,975 | ) |                   | $ | (1,995,195 | )                 |  | $ | (11,457,444       | ) |  | $ | (7,422,267 | )
|                                                                                                         |  |                    |            |   |                   |   |            |                   |  |   |                   |   |  |   |            |  
|Basic and diluted loss per share                                                                         |  |                    |            |   |                   |   |            |                   |  |   |                   |   |  |   |            |  
|As reported                                                                                              |  | $                  | (0.17      | ) |                   | $ | (.32       | )                 |  | $ | (1.86             | ) |  | $ | (1.30      | )
|Pro forma                                                                                                |  | $                  | (0.18      | ) |                   | $ | (.37       | )                 |  | $ | (1.89             | ) |  | $ | (1.39      | )



The Company used the Black-Scholes
option pricing model to value stock options for all proceeds: with assumption of no expected dividend yield; expected volatility ranging from 94.5% to 301%; risk-free interest rates ranging from 3.39% to 5.0%; and expected lives of 3-7 years.



- 5 -



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NOTE 3-CLOSE OF EQUITY



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. 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. Additionally, holders of $4,226,000 of the Companys short-term notes converted these notes into the same $1,000 units. The proceeds were allocated to
the preferred shares and warrants and beneficial conversion based on the respective fair values of each.



The holders of the Companys Series A Preferred Stock simultaneously voted to change the terms of the Series A Preferred and received seven year warrants to purchase 667 shares of common stock at $0.75 per share
for each share of Series A Preferred outstanding. The primary changes were the elimination of the potential requirement that the Company repurchase the Series A Preferred and granting the Series B Preferred a $1,000 liquidating preference. Both the
Series A and Series B shares vote on an as if converted basis.



The net effect
of these transactions increased cash $2,282,147, increased equity $12,042,147 (including the conversion of the Mandatorily Redeemable Preferred Stock of $5,534,000 to permanent equity), and reduced current liabilities by $4,226,000.



NOTE 4- NET LOSS PER
SHARE



Earnings per share (EPS) are
computed by dividing the net loss for the period by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted-average number of shares of common stock outstanding for the period and common stock
equivalents outstanding at the end of the period. Common stock equivalents of 6,326,400 for three months ended September 30, 2003 and nine months ended September 30, 2003; and 35,220,508 for three months ended September 30, 2004 and for the nine
months ended September 30, 2004 have been excluded from the calculation of weighted-average shares for purposes of calculating diluted net loss per share, as such inclusion is anti-dilutive.



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



Forward-Looking Statements



This report contains forward-looking statements that relate to our
business.



Such 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 Twelve Month Plan of Operation, and elsewhere in this report. All statements, other than
statements of historical facts, included in this prospectus 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,
| | - | --------------------------------------------



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| |  | 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,
| | - | -------------------------------------------------



| |  | 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. We undertake no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.



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FINANCIAL POSITION



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. 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. Additionally, holders of $4,226,000 of the Companys short-term notes converted these notes into the same $1,000 units. The proceeds were allocated to the preferred shares and warrants and beneficial
conversion based on the respective fair values of each.



The holders of the
Companys Series A Preferred Stock simultaneously voted to change the terms of the Series A Preferred and received seven year warrants to purchase 667 shares of common stock at $0.75 per share for each share of Series A Preferred outstanding.
The primary changes were the elimination of the potential requirement that the Company repurchase the Series A Preferred and granting the Series B Preferred a $1,000 liquidating preference. Both the Series A and Series B shares vote on an as if
converted basis.



The net effect of these transactions increased cash
$2,282,147, increased equity $12,042,147 (including the movement of the Mandatorily Redeemable Preferred Stock of $5,534,000 to permanent equity), and reduced current liabilities by $4,226,000.



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.



On August 30, 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 6000 units are 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. Subscription payments of $700,000 were received prior to September 30, 2004 and recorded as a deposit in the liability section since all of the funds
for the first tranche have not yet been received and no additional shares were issued. In October, an additional $325,000 was received on these subscriptions along with another 100 unit subscription and $100,000 payment. A stock certificate and
warrant were issued for this latter subscription. Also during October new subscriptions and payments were received for the purchase of 367.5 additional new units, which cancelled agreements to purchase 367.5 of the 961 units noted above. These
agreements were fully funded as no tranches were utilized and the stock and warrants were issued. The subscriptions for the remaining 353 units of the original 961 units have terminated under their terms and it is unknown if those subscribers will
agree to any additional funding.



In addition, a line of credit for $200,000
has been secured from a bank guaranteed by a shareholder.



Our Results of
Operations



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



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not had any revenues to date, and our expenses have consisted of research and development, sales and marketing and
general and administrative expenses, resulting in a net loss since January of 2001 as a development stage company through September 30, 2004 of $25,031,533.



The decline in professional fees in the first nine months of 2004 as compared to the same period in 2003 reflects that audits for two years ended December 2001 and 2002
were undertaken in early 2003 while the audit for only one year ended 2003 was undertaken in 2004. Also, additional extensive legal work was undertaken during 2003 to file the Companys SB-2 registration statement originally filed in June 2003
and which was declared effective in early 2004.



Advertising and promotional
fees declined in the first nine months of 2004 as compared with that same period in 2003 because in the early part of 2003 extensive work was done regarding brand, corporate logo, and name change, leading to extensive redevelopment work of the
companys website. No such extensive work was undertaken in 2004. However, the increase in such expenses in the three months ended September 30, 2004 as compared with 2003 reflects trade show expenses for shows in July and October of 2004.



The increase in general and administrative expense in the third quarter and
the first nine months of 2004 compared with those same periods in 2003 reflect the increased staff and their support costs, e.g. payroll taxes, insurance, rent, phones, all related to the launch of the Companys product that began in the second
quarter of 2004 after the additional equity was raised. These cost increases were partly offset in the third quarter of 2003 by the $173,000 write off of the note receivable from Z-Link.



The decline in interest expense in the third quarter and the first nine months of 2004 compared to the same periods in 2003 primarily
reflects the amortization of debt discount beginning in February 2003 and ending in March 2004 related to notes sold as of January 31, 2003 and April 15, 2003.



There was no expense for deferred financing costs in 2004, since these costs had been completely amortized prior to December 31, 2003.



Our Revenue Goals



Initially, our marketing efforts will be directed towards the marine recreational commercial
maritime, oil and gas and recreational vehicle (RV) markets. 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.



Our first revenue from the sale of the device will be recorded in October 2004, reflecting the sale of 10 units in Brazil.



Based on our current pricing models, gross profit should average about $300 per device, the
exact amount depending on the mix of units sold. Assuming a monthly fee of $32 to $89, the gross profit per unit on the recurring revenue should range between $10 and $44 per month, and the average per month is expected to increase as the number of
units in use increases. This monthly service will also be sold at a discount under prepaid multiple year contracts which may offer us a source of additional funds in the short term.



Twelve Month Plan of Operation



We concluded a sale of approximately $2.4 million of equity on March 30, 2004 with a second tranch of approximately $900,000 due after 2,300
RK3000 units had been sold. These initial proceeds permitted us



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to continue product and system testing, to reduce outstanding debt and other obligations by approximately $900,000 and
provide sufficient additional working capital for several months of operations. In addition a line of credit for $200,000 was secured from a bank guaranteed by a shareholder.



On August 30, 2004 the Company received subscription agreements for $6,000,000 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 earlier subscriptions for 5,153 units for $5,153,000. The 6,000 units are 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. Proceeds of $700,000 from these subscriptions were received prior to September 30, 2004, and during October an additional $325,000 was received on
these subscriptions plus another 100 unit subscription along with its $100,000 payment. During October new subscriptions and payments were received for $367,500 for the purchase of 367.5 additional new units, which cancelled earlier subscriptions to
purchase 367.5 units for $367,500. These agreements were fully funded and no tranches were utilized Funds from both of these sources will provide working capital through November 2004, permit some additional paydowns on outstanding liabilities
allowing us to begin updating our satellite communication system to ready it for market, and commence manufacture and sale of our products. At this time sales should have commenced and additional funds from the second and third tranches of the
subscriptions will be available.



Proceeds from the second and third tranch
will provide additional working capital, permit us to continue to manufacture, to pay the remaining outstanding debt and other obligations, continue development and marketing of our satellite communication technology, as well as permit us to
accelerate development of enhancements to our RK3000 unit and expand the marketing of those units beyond the marine pleasure craft industry.



To help insure that the Companys expenditures do not exceed its available funds, an expenditures budget has been developed through year end and through 2005, and is
being monitored monthly.



We began full implementation of our marketing program
at the Marine Aftermarket Association Trade Show (MAATS) held July 9-11, 2004 in Las Vegas, Nevada.



We received what we believe was an excellent response to our product and its pricing from the show participants. As a result, we have negotiated a contract with a major manufacturers representative organization to
represent us primarily to OEMs. A distribution agreement has been signed with a sales organization in the Houston area and they have agreed to order a minimum of 150 units during the next 12 months. In addition we have signed a confidentiality
agreement and have begun a pilot program with a large marine electronic manufacturer to demonstrate our product to them.



A pilot program has also been initiated to demonstrate the product to several governmental agencies and commercial interest in Brazil. Eleven RK3000 devices were shipped
to Brazil in October to begin the program. This program, if successful, has the potential to lead to substantial orders during 2005.



We continued our marketing launch by exhibiting at the IBEX show in Miami, Florida on October 25 thru 27. IBEX is a venue for OEMs to see new products and order
their accessories for the coming year. Again we received an excellent response to our product and are in the process of working with two manufacturers for product orders. In addition a meeting is scheduled the second week of November with a major
boat manufacturer to discuss the steps necessary to place the RK3000s on their products.



The Company is also continuing its discussion to establish a relationship with a firm which would involve use of the Companys satellite communication technology in the recreational vehicle industry and these
discussions have been expanded to potential sale of the RK3000 product in Brazil to the retail market in addition to the separate pilot program discussed above.



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The Companys verbal understanding with Stallion Oil Field Services as to an undertaking to sell communication
services in the oil and gas industry using our satellite communication technology continues to progress. The terms have been put in a draft 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 required updating of both the hardware and software has been
undertaken and will likely require several months to complete.



The timing of
additional activities and the penetration of other markets beyond those described immediately above depends primarily on the availability of funds from the second and third tranches described above. We believe we can achieve cash flow break even at
approximately 1,000 units per month. We anticipate reaching that level of sales during the second half of 2005.



Additional activities, which will only begin after our product launch and receipt of the additional funds, include enhancing the capabilities of our RK3000 units by
making it interact with additional equipment on the vessel, making it WiFi capable and able to communicate with fixed high altitude satellites which we anticipate will help us control our costs and to update the hardware and software of our
satellite communication technology.



Liquidity and Future Capital Requirements



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 September 30, 2004, we had approximately $9,000 of cash and cash equivalents and a
working capital deficit of $3,210,000.



Our auditors included an explanatory
paragraph in their opinion on our financial statements for the year ended December 31, 2003 to state that our losses, working capital deficit and shareholders deficit at December 31, 2003 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 above under Twelve Month Plan of Operation and achieving profitable operations through the manufacture and
sale of our RK3000 product. We cannot assure you that our business plans will be successful in addressing this issue.



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
Officers as appropriate to allow timely decisions regarding required disclosure.



Randy S. Bayne, who serves as the Companys Chief Executive Officer, and Henry Houston, who serves as our Chief Financial Officer, after evaluating the effectiveness of the Companys disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14(c) as of September 30, 2004, (the Evaluation Date) concluded that as of the Evaluation Date, the Companys disclosure controls and procedures were adequate and effective to ensure that material
information relating to the Company and its consolidated subsidiaries would be made known to them by individuals within those entities, particularly during the period in which this annual report was being prepared. There were not significant changes
in the



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Companys internal controls or in other factors that could significantly affect the Companys disclosure
controls and procedures subsequent to the Evaluation Date, nor any significant deficiencies or material weaknesses in such disclosure controls and procedures requiring corrective actions. As a result, no corrective actions were taken.



PART II - OTHER INFORMATION



Item 6. Exhibits.



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



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



SIGNATURES



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



Date: November 15, 2004



Remote Knowledge, Inc.By:

/s/    RANDY S. BAYNERandy S. BayneChief Executive Officer




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