UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   Form 10-QSB



(Mark one)

[X]       Annual Report Under Section 13 or 15(d) of The Securities Exchange Act
               of 1934

                                   For the quarterly period ending June 30, 2004

[ ]       Transition Report Under Section 13 or 15(d) of The Securities Exchange
               Act of 1934

                           For the transition period from _________ to _________




                 Safe Alternatives Corporation of America, Inc.

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

          Florida                                                06-1413994
------------------------                                ------------------------
(State of incorporation)                                (IRS Employer ID Number)
                         2614 Main St., Dallas, TX 75226
                    ----------------------------------------
                    (Address of principal executive offices)

                                 (214) 670-0005
                           ---------------------------
                           (Issuer's telephone number)



      Securities registered under Section 12 (b) of the Exchange Act: None

Securities  registered  under Section 12(g) of the Exchange Act:  Common Stock -
$0.001 par value


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

APPLICABLE  ONLY TO  ISSUERS  INVOLVED  IN  BANKRUPTCY  PROCEEDINGS  DURING  THE
PRECEDING  FIVE YEARS  Check  whether the  registrant  filed all  documents  and
reports  required  to be filed by Section  12, 13 or 15(d) of the  Exchange  Act
after the distribution of securities  under a plan confirmed by a court.
                                                                    Yes    No
                                                                       ---   ---
                      APPLICABLE ONLY TO CORPORATE ISSUERS

As of June 30, 2004,  there were  165,853,058  shares of Common Stock issued and
outstanding.

Transitional Small Business Disclosure Format : Yes      No  X
                                                     ---    ---

<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1.     Financial Statements

Item 2.     Management's Discussion and Analysis or Plan of Operation

The  Company had no business  operations  during 2003 and the second  quarter of
2004.

The Company's future  operating  results may be affected by a number of factors,
including  general  economic  conditions,  the  Company's  ability to settle its
remaining debt, future corporate  reoganization and its ability to implement the
proposed acquisition of Mortgage Assistance Corporation.  The Company's proposed
corporate  reorganization  and business  combination  will cause dilution of the
current shareholders' interest in the Company.

The report of the Company's  independent  auditor contains a paragraph as to the
Company's ability to continue as a going concern. Among the factors cited by the
auditors as raising substantial doubt as to the Company's ability to continue as
a going concern are: (i) the Company has incurred  recurring  operating  losses;
and, (ii) the Company has a working capital deficiency.

The Company has been financing its operations  through capital  contributions by
significant shareholders, which aggregated approximately $23,000 as of June
30, 2004.

It  is  the  intent  of  management  and  significant  stockholders  to  provide
sufficient  working  capital to preserve the integrity of the corporate  entity,
however,  there are no commitments to provide additional funds have been made by
management or other stockholders.  There can be no assurance that any additional
funds will be available to the Company to allow it to cover its expenses.

The Company may seek to  compensate  providers of services by issuances of stock
in lieu of cash.

Item 3.     Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures.

     Within  the 90 days  prior to the  date of this  Quarterly  Report  for the
period ended June 30, 2004, we carried out an evaluation,  under the supervision
and with the participation of our management,  including the Company's  Chairman
and  Chief  Executive   Officer  and  the  Chief  Financial   Officer,   of  the
effectiveness  of the  design  and  operation  of our  disclosure  controls  and
procedures  pursuant to Rule 13a-14 of the Securities  Exchange Act of 1934 (the

<PAGE>

"Exchange Act"), which disclosure controls and procedures are designed to insure
that  information  required to be  disclosed by a company in the reports that it
files under the  Exchange Act is recorded,  processed,  summarized  and reported
within required time periods specified by the SEC's rules and forms.  Based upon
that evaluation, the Chairman and the Chief Financial Officer concluded that our
disclosure  controls and  procedures  are  effective in timely  alerting them to
material  information  relating  to the  Company  required to be included in the
Company's period SEC filings.

(b) Changes in Internal Control.

     Subsequent  to the date of such  evaluation  as described  in  subparagraph
(a)above,  there were no significant  changes in our internal  controls or other
factors that could significantly affect these controls, including any corrective
action with regard to significant deficiencies and material weaknesses.


                           PART II - OTHER INFORMATION


Item 1.    Legal Proceedings

         None.

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

         None.

Item 3.    Defaults Upon Senior Securities

         None.

Item 4.    Submission of Matters to a Vote of Security Holders

     No matter was  submitted  to a vote of the  security  holders,  through the
solicitation  of proxies or  otherwise,  during the  quarter of the fiscal  year
covered by this report.

Item 5.  Other Information

         None.

Item 6.  Exhibits and Reports on Form 8-K

a) Exhibits

      Exhibit No.                Exhibit Name

       31                     Chief Executive and Financial  Officer-Section 302
                              Certification pursuant to Sarbane-Oxley Act.
       32                     Chief Executive  and Financial Officer-Section 906
                              Certification pursuant to Sarbanes-Oxley Act.

<PAGE>


(b)      Reports on Form 8-K.  During the  quarter  covered by this  report,  we
filed three Current  Report on Form 8-K as follows:  (1) May 19, 2004  reporting
under Item 5, Other Events and Regulation FD Disclosure,  (2) May 20, 2004 8-K/A
reporting under Items 5 and 7, and (3) July 30, 2004 reporting under Items 4 and
7.


                                   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.

                                  Safe Alternatives Corporation of America, Inc.



Dated: August 12, 2004                              /s/ Dale Hensel
                                                     --------------------------
                                                     By: Dale Hensel
                                                     Title: President, CEO, CFO





<PAGE>




                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.



                              FINANCIAL STATEMENTS



                                       AND



                       INDEPENDENT AUDITOR'S REVIEW REPORT



                                  JUNE 30, 2004












<PAGE>


                       SUTTON ROBINSON FREEMAN & CO., P.C.


                 Safe Alternatives Corporation of America, Inc.
                              Financial Statements
                                  June 30, 2004




                                Table of Contents




Independent Auditor's Review Report ...........................................3

Balance Sheets ................................................................4

Statements of Operations and Comprehensive Loss ...............................5

Statements of Cash Flows ......................................................6

Notes to Financial Statements .................................................7








<PAGE>



                           Independent Review Report


Board of Directors and Stockholders
Safe Alternatives Corporation of America, Inc.

We have reviewed the accompanying balance sheet of Safe Alternatives Corporation
of  America,  Inc.  (a  Florida  corporation)  as of  June  30,  2004,  and  the
accompanying  statements of operations  and  comprehensive  loss for the six and
three  months ended June 30, 2004 and the  accompanying  statement of cash flows
for the six months ended June 30, 2004. These financial  statements are prepared
in  accordance  with the  instructions  for Form  10-QSB,  as issued by the U.S.
Securities  and  Exchange  Commission,  and are the sole  responsibility  of the
Company's management.

We conducted our review in accordance with standards established by the American
Institute of Certified  Public  Accountants.  A review of the interim  financial
information consists principally of applying analytical  procedures to financial
data and making  inquiries of persons  responsible  for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with  generally  accepted  auditing  standards,  the  objective  of which is the
expression of an opinion  regarding the financial  statements  taken as a whole.
Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material  modifications that should
be made to the  accompanying  financial  statements for them to be in conformity
with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 3 to the
financial statements, the Company has no viable operations or significant assets
and is dependent upon  significant  shareholders to provide  sufficient  working
capital to maintain the integrity of the corporate entity.  These  circumstances
create  substantial  doubt  about the  Company's  ability to continue as a going
concern and are discussed in Note 3. The financial statements do not contain any
adjustments that might result from the outcome of these uncertainties.

The June 30, 2003  financial  statements  of Safe  Alternatives  Corporation  of
America,  Inc.  were reviewed by other  accountants  whose report dated July 24,
2003, stated that they were not aware of any material  modifications that should
be made to those statements in order for them to be in conformity with generally
accepted accounting principles.

Sutton Robinson Freeman & Co., P.C.
Certified Public Accountants

Tulsa, Oklahoma
August 12, 2004


                                       3
<PAGE>
<TABLE>
<CAPTION>



                 Safe Alternatives Corporation of America, Inc.
                                 Balance Sheets
                             June 30, 2004 and 2003
                                   (Unaudited)

              ASSETS
                                                              June 30,        June 30,
                                                                2004            2003
                                                            ------------    ------------
<S>                                                         <C>             <C>
Current Assets
      Cash on hand and in bank                              $       --      $       --
                                                            ------------    ------------
          Total current assets                                      --              --
                                                            ------------    ------------

Total Assets                                                $       --      $       --
                                                            ============    ============

                     LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
      Accounts payable-trade                                $        451    $      5,756
      Advances from affiliate                                     23,074            --
      Accrued interest payable                                      --              --
                                                            ------------    ------------

          Total current liabilities                               23,525           5,756
                                                            ------------    ------------

Commitments and contingencies

Stockholders' Equity (Deficit)
      Common stock - $0.0001 par value
          175,000,000 shares authorized
          165,853,058 shares issued and outstanding               16,585           8,113
      Additional paid in capital                              23,711,311      22,857,223
      Accumulated deficit                                    (23,753,580)    (22,873,251)
                                                            ------------    ------------
                                                                 (25,684)         (7,915)
      Subscriptions issuable                                       2,160           2,160
      Treasury stock - at cost (11,682 shares)                        (1)             (1)
                                                            ------------    ------------

          Total stockholders' equity (deficit)                   (23,525)         (5,756)
                                                            ------------    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                  $       --      $       --
                                                            ============    ============
</TABLE>




                                        4
               The financial information presented herein has been
               prepared by management without audit by independent
                          certified public accountants.
              The accompanying notes are an integral part of these
                             financial statements.



<PAGE>
<TABLE>
<CAPTION>


               Safe Alternatives Corporation of America, Inc.
                 Statements of Operations and Comprehensive Loss
                Six and Three months ended June 30, 2004 and 2003
                                   (Unaudited)


                                              Six months       Six months      Three months      Three months
                                                ended             ended            ended            ended
                                               June 30,          June 30,         June 30,         June 30,
                                                 2004              2003             2004             2003
                                             -------------    -------------    -------------    -------------
<S>                                          <C>              <C>              <C>              <C>
Revenues                                     $        --      $        --      $        --      $        --
                                             -------------    -------------    -------------    -------------

Operating Expenses
    General and administrative expenses             30,070            4,771           10,010            2,284
    Interest expense                                  --              3,162             --              2,787
    Compensation expense related to
        common stock issuances at less
        than "fair value"                          838,736             --            838,736             --
    Depreciation and amortization                     --               --               --               --
                                             -------------    -------------    -------------    -------------
        Total operating expenses                   868,806            7,933          848,746            5,071
                                             -------------    -------------    -------------    -------------

Loss before provision for income taxes            (868,806)          (7,933)        (848,746)          (5,071)

Income tax benefit (expense)                          --               --               --               --
                                             -------------    -------------    -------------    -------------

Net Loss                                          (868,806)          (7,933)        (848,746)          (5,071)

Other comprehensive income                            --               --               --               --
                                             -------------    -------------    -------------    -------------

Comprehensive Loss                           $    (868,806)   $      (7,933)   $    (848,746)   $      (5,071)
                                             =============    =============    =============    =============
Net loss per weighted-average share
    of common stock outstanding, calcuated
    on Net Loss - basic and fully diluted    $       (0.01)   $       (0.00)   $       (0.01)   $       (0.00)
                                             =============    =============    =============    =============

Weighted-average number of shares of
    common stock outstanding                   165,853,058      165,853,058      165,853,058      165,853,058
                                             =============    =============    =============    =============
</TABLE>


               The financial information presented herein has been
               prepared by management without audit by independent
                          certified public accountants.
              The accompanying notes are an integral part of these
                              financial statements.

                                        5


<PAGE>


               Safe Alternatives Corporation of America, Inc.
                 Statements of Operations and Comprehensive Loss
                Six and Three months ended June 30, 2004 and 2003
                                   (Unaudited)



                                                        Six months   Six months
                                                          ended         ended
                                                         June 30,     June 30,
                                                           2004         2003
                                                         ---------    ---------

Cash Flows from Operating Activities
      Net loss for the period                            $(868,806)   $  (7,933)
      Adjustments to reconcile net loss to net cash
         provided by operating expenses
          Depreciation                                        --           --
          Professional fees paid with common stock           8,472         --
          Compensation expense related to common
             stock issuances at less than "fair value"     838,736         --
          Increase (Decrease) in
             Accounts payable - trade                       (1,476)     (15,183)
             Accrued interest payable                         --         (7,216)
                                                         ---------    ---------

Net cash used in operating activities                      (23,074)     (30,332)
                                                         ---------    ---------

Cash Flows from Investing Activities                          --           --
                                                         ---------    ---------

Cash Flows from Financing Activities
      Cash advanced by affiliate to support operations      23,074         --
      Cash contributed to support operations                  --         55,332
      Cash used to pay convertible debt                       --        (25,000)
                                                         ---------    ---------

Net cash provided by financing activities                   23,074       30,332
                                                         ---------    ---------

Increase (Decrease) in Cash                                   --           --

Cash at beginning of period                                   --           --
                                                         ---------    ---------

Cash at end of period                                    $    --      $    --
                                                         =========    =========

Supplemental Disclosure of
      Interest and Income Taxes Paid
         Interest paid for the period                    $    --      $  10,378
                                                         =========    =========
         Income taxes paid for the period                $    --      $    --
                                                         =========    =========


               The financial information presented herein has been
               prepared by management without audit by independent
                          certified public accountants.
              The accompanying notes are an integral part of these
                             financial statements.



                                       6


<PAGE>


                 Safe Alternatives Corporation of America, Inc.
                        Notes to the Financial Statements
                                  June 30, 2004


Note 1 -  Organization and Description of Business
          ----------------------------------------

          Safe Alternatives Corporation of America, Inc. (Company) was organized
          in 1976,  under  the name  Knight  Airlines,  Inc.,  to  engage in the
          commuter airline  business.  In October 1978, the Company completed an
          initial public offering of its common stock in Florida, pursuant to an
          exemption from  registration  under Regulation A promulgated under the
          Securities Act of 1933, as amended. The Company operated as a commuter
          airline  from  its  inception  through  April  1983,  when  it  ceased
          operations,  and all of the assets of the Company were sold to satisfy
          all outstanding indebtedness. From April 1983, through September 1995,
          the  Company  was  dormant.  In May 1994,  the name of the Company was
          changed to Portsmouth Corporation.

          On  September  15,  1995,  pursuant to the terms of an Asset  Purchase
          Agreement and Plan of Reorganization  dated as of August 21, 1995 (the
          "Agreement") between Safe Alternatives Corporation of America, Inc., a
          Delaware  corporation  ("SAC-Delaware")  and the Company,  the Company
          purchased   the  business   (the   "Business"),   including,   without
          limitation, all of the assets of SAC-Delaware,  and assumed all of the
          liabilities  of  SAC-Delaware  (the  "Reorganization"),  and commenced
          operations. Prior to the Reorganization, the Company had no meaningful
          operations.  On March 4, 1996,  the  Company  changed its name to Safe
          Alternatives Corporation of America, Inc. (a Florida corporation).

          On September 17, 2002, the Board of Directors of the Company agreed to
          sell,  as  of  June  30,  2002,   all  of  the  Company's   assets  to
          Environmental  Alternatives,  Inc.  ("EAI"),  a privately held Vermont
          corporation,  in exchange  for EAI's  assumption  of and  agreement to
          indemnify  and hold  the  Company  harmless  from  paying  any and all
          claims,  causes of action,  or other  liabilities,  including  but not
          limited to interest,  costs,  expenses,  disbursements  and attorneys'
          fees,  that  could,  may or does  attach to the Company as of June 30,
          2002 as a result of, or is in any way related to any of the  Company's
          obligations to its creditors and all adverse judgments entered against
          the Company except any obligations to the following:

               (A)  Continental Stock Transfer and Trust Company,  the Company's
                    independent stock transfer agent;

               (B)  Green Holman, Frenia & Company, L.L.P., the Company's former
                    independent auditors;

               (C)  Arab Commerce Bank, a holder of a 6% Convertible Note; and

               (D)  any  settlement  amounts due upon the completion of a merger
                    or  other  combination   between  the  Company  and  another
                    company.


                                       7
<PAGE>

                 Safe Alternatives Corporation of America, Inc.
                        Notes to the Financial Statements
                                  June 30, 2004



Note 1 -  Organization and Description of Business (Continued)
          ---------------------------------------------------

          Except as  provided  above,  the  agreement  to assume  the  Company's
          liabilities and to indemnify and hold the Company harmless from paying
          the  same is  unlimited  as to  amount  or as to  time.  A copy of the
          Agreement  was filed by the Company as an exhibit in a Current  Report
          on Form 8-K as of September 17, 2002.  Since July 1, 2002, the Company
          has had no assets or operating activities.


Note 2 -  Preparation of Financial Statements
          -----------------------------------

          The Company follows the accrual basis of accounting in accordance with
          accounting  principles  generally  accepted  in the  United  States of
          America and has a year-end of December 31.

          The preparation of financial  statements in conformity with accounting
          principles generally accepted in the United States of America requires
          management to make estimates and assumptions  that affect the reported
          amounts of assets and liabilities and disclosure of contingent  assets
          and  liabilities  at the  date  of the  financial  statements  and the
          reported amounts of revenues and expenses during the reporting period.
          Actual results could differ from those estimates.

          Management  further  acknowledges  that it is solely  responsible  for
          adopting sound  accounting  practices,  establishing and maintaining a
          system of internal  accounting  control and  preventing  and detecting
          fraud. The Company's system of internal accounting control is designed
          to assure, among other items, that 1) recorded transactions are valid;
          2) valid  transactions are recorded;  and 3) transactions are recorded
          in  the  proper  period  in  a  timely  manner  to  produce  financial
          statements  which present fairly the financial  condition,  results of
          operations  and cash flows of the Company for the  respective  periods
          being presented.

          During interim  periods,  the Company follows the accounting  policies
          set forth in its annual audited financial statements filed with the U.
          S.  Securities  and Exchange  Commission  on its Annual Report on Form
          10-KSB for the year ended December 31, 2003. The information presented
          within  these  interim  financial   statements  may  not  include  all
          disclosures required by generally accepted accounting principles,  and
          the users of financial information provided for interim periods should
          refer to the annual financial information and footnotes when reviewing
          the interim financial results presented herein.

          In the  opinion of  management,  the  accompanying  interim  financial
          statements,  prepared  in  accordance  with the U. S.  Securities  and
          Exchange Commission's  instructions for Form 10-QSB, are unaudited and
          contain all material adjustments,  consisting only of normal recurring
          adjustments  necessary  to  present  fairly the  financial  condition,
          results of


                                       8
<PAGE>

                 Safe Alternatives Corporation of America, Inc.
                        Notes to the Financial Statements
                                  June 30, 2004


Note 2 -  Preparation of Financial Statements (Continued)
          ----------------------------------------------

          operations  and cash flows of the Company for the  respective  interim
          periods  presented.  The current  period results of operations are not
          necessarily  indicative of results which  ultimately  will be reported
          for the full fiscal year ending December 31, 2004.

Note 3 -  Going Concern Uncertainty
          -------------------------

          Since July 1, 2002,  the Company has had no assets or  operations  and
          intends to seek a suitable business  combination  transaction  through
          either a purchase or merger.  The  Company's  continued  existence  is
          dependent  upon its  ability to  generate  sufficient  cash flows from
          operations  to  support  its  daily  operations  as  well  as  provide
          sufficient resources to retire existing liabilities and obligations on
          a timely basis. Additionally, as a result of having no assets, several
          liabilities and no operations,  the Company's  auditors have issued an
          audit opinion on the accompanying  financial statements which includes
          a statement describing the Company's going concern status. This means,
          in the  auditors'  opinion,  substantial  doubt  about  the  Company's
          ability to  continue as a going  concern  existed at the date of their
          opinion.

          On May 14, 2004,  the  Company's  President,  Dale Hensel,  executed a
          Letter  of  Intent  with  Mortgage  Assistance  Corporation,  a  Texas
          corporation  controlled by Mr. Hensel, whereby subject to the approval
          of the Company's shareholders, Mortgage Assistance Corporation offered
          to be acquired by the Company on the following  terms and  conditions:
          SACA  board  will  call a  special  shareholder  meeting  or  obtain a
          majority shareholder consent in lieu of a special meeting according to
          the Florida  Business  Corporation  Statutes and recommend and approve
          the following actions:

               1.   Effect a reverse split of the  Company's  common shares on a
                    One for  Two  Hundred  Fifty  (1:250)  basis;
               2.   Effect  a  corporate  name  change  from  Safe  Alternatives
                    Corporation   of  America,   Inc.  to  Mortgage   Assistance
                    Corporation;
               3.   Change the  authorized  number of common  stock shares to be
                    issued from 175,000,000 to 50,000,000 shares;
               4.   Authorize a business  combination  whereby the Company  will
                    exchange 12,000,000 post reverse split common shares for all
                    of the  issued  and  outstanding  common  stock of  Mortgage
                    Assistance Corporation; and
               5.   Any  such  further  recommendations  as  may  be  considered
                    reasonable and in the best interest of the shareholders.

          While the Company is of the opinion  that good faith  estimates of the
          Company's ability to secure additional  capital in the future to reach
          our goals have been made,  there is no guarantee that the Company will
          receive  sufficient  funding to sustain  operations  or implement  any
          future business plan steps.


                                       9
<PAGE>


                 Safe Alternatives Corporation of America, Inc.
                        Notes to the Financial Statements
                                  June 30, 2004


Note 3 -  Going Concern Uncertainty (Continued)
          ------------------------------------

          If no additional  operating capital is received during the next twelve
          months,  the Company  will be forced to rely on  existing  cash in the
          bank and upon additional funds loaned by management and/or significant
          stockholders to preserve the integrity of the corporate  entity during
          this time. In the event the Company is unable to acquire advances from
          management  and/or  significant  stockholders,  the Company's  ongoing
          operations would be negatively impacted.

          It is the intent of management and significant stockholders to provide
          sufficient  working  capital  necessary  to support and  preserve  the
          integrity of the corporate entity.  However,  no formal commitments or
          arrangements to advance or loan funds to the Company or repay any such
          advances  or loans  exist.  There is no legal  obligation  for  either
          management or significant  stockholders to provide  additional  future
          funding.


Note 4 -  Summary of Significant Accounting Policies
          ------------------------------------------

          Cash and cash equivalents:

          For Statement of Cash Flows purposes,  the Company  considers all cash
          on hand and in banks,  including accounts in book overdraft positions,
          certificates  of  deposit  and other  highly-liquid  investments  with
          maturities  of three months or less,  when  purchased,  to be cash and
          cash equivalents.

          Income Taxes:

          The Company  uses the asset and  liability  method of  accounting  for
          income taxes.  At June 30, 2004 and 2003,  respectively,  the deferred
          tax asset and  deferred  tax  liability  accounts,  as  recorded  when
          material  to the  financial  statements,  are  entirely  the result of
          temporary differences.  Temporary differences represent differences in
          the  recognition  of  assets  and  liabilities  for tax and  financial
          reporting   purposes,    primarily   accumulated    depreciation   and
          amortization, allowance for doubtful accounts and vacation accruals.

          As of June 30, 2004 and 2003,  the deferred  tax asset  related to the
          Company's net operating loss  carryforward was fully reserved.  Due to
          the  provisions of Internal  Revenue Code Section 338, the Company may
          have  limited net  operating  loss  carryforwards  available to offset
          financial  statement or tax return taxable income in future periods as
          a result of a Fiscal 2000 change in control  involving  50  percentage
          points  or  more  of the  issued  and  outstanding  securities  of the
          Company.


                                       10
<PAGE>

                 Safe Alternatives Corporation of America, Inc.
                        Notes to the Financial Statements
                                  June 30, 2004


Note 4 -  Summary of Significant Accounting Policies ( Continued)
          ------------------------------------------------------

          Income (Loss) per share:

          Basic earnings (loss) per share is computed by dividing the net income
          (loss) by the  weighted-average  number  of  shares  of  common  stock
          outstanding.  The  calculation  of fully diluted  earnings  (loss) per
          share  assumes the  dilutive  effect of the  exercise  of  outstanding
          options and warrants,  using the treasury stock method,  at either the
          beginning of the respective  period presented or the date of issuance,
          whichever is later.  As of June 30, 2004 and 2003,  respectively,  the
          Company had no  outstanding  stock  warrants,  options or  convertible
          securities  which could be  considered as dilutive for purposes of the
          loss per share calculation.


Note 5 -  Fair Value of Financial Instruments
          -----------------------------------

          The carrying amounts of cash,  accounts  receivable,  accounts payable
          and notes payable,  as applicable,  approximate  fair value due to the
          short term nature of these items  and/or the  current  interest  rates
          payable in relation to current market conditions.

          Interest rate risk is the risk that the Company's earnings are subject
          to fluctuations in interest rates on either investments or on debt and
          is fully  dependent  upon the  volatility of these rates.  The Company
          does not use  derivative  instruments  to  moderate  its  exposure  to
          interest rate risk, if any.

          Financial risk is the risk that the Company's  earnings are subject to
          fluctuations in interest rates or foreign exchange rates and are fully
          dependent upon the volatility of these rates. The company does not use
          derivative  instruments to moderate its exposure to financial risk, if
          any.

Note 6 -  Convertible Notes Payable
          -------------------------

          On March 10, 1998, the Company  entered into an Agency  Agreement with
          Alexander  Wescott  & Co.,  Inc.  (AWC)  for the  offer and sale of 6%
          Convertible   Notes,   with  maximum  gross  proceeds  not  to  exceed
          $1,000,000.

          In March and April 1998, the Company  issued its 6% Convertible  Notes
          (the  "Notes")  in the  aggregate  principal  amount of  $726,500 in a
          private  placement  under  Rule 505 of  Regulation  D. The Notes  bore


                                       11
<PAGE>

                 Safe Alternatives Corporation of America, Inc.
                        Notes to the Financial Statements
                                  June 30, 2004


Note 6 -  Convertible Notes Payable  ( Continued)
          --------------------------------------

          interest at 6.0% per annum, payable semi-annually  inarrears,  in cash
          or, at the Company's option, in shares of common stock of the Company.
          The notes matured on the earlier of (i) the first  anniversary  of the
          initial  closing of the proposed  offer (April 10,  1999),  and (ii) a
          sale of all or substantially  all of the Company's assets or a merger,
          acquisition  or  consolidation  in  which  the  Company  was  not  the
          surviving   corporation.   The  notes  ranked   senior  to  all  other
          indebtedness  of the Company  now or  hereafter  existing,  other than
          indebtedness to banks, in terms of priority and security.

          The Notes were  convertible  into shares of common stock at the option
          of the holder at any time  following  the earlier of (i) 90 days after
          the filing of a registration  statement with the U. S.  Securities and
          Exchange  Commission  (SEC)  covering  the shares to be received  upon
          conversion  or (ii)  the  date  the  SEC  declared  such  registration
          statement effective.  The conversion price per share was the lesser of
          (i) 70% of the average closing bid price per share of common stock for
          the five trading days prior to the conversion date or (ii) $0.25. Upon
          conversion,  any accrued and unpaid interest was waived by the holder.
          The  Company  had the option to  repurchase  the Notes from the holder
          prior to  registration  of the  underlying  shares at a premium of 10%
          over the  purchase  price of the Notes.  The Company  agreed to file a
          registration  statement  with the SEC not later than June 3, 1998, and
          use its best  efforts  to have  the  registration  statement  declared
          effective  not later than July 3, 1998.  Through  June 30,  2002,  the
          Company made no payments on these notes;  had not  repurchased  any of
          these  Notes,  and was in  default  with  regard  to its  registration
          obligation

          AWC  received  a  commission  of 10% plus 3%  non-accountable  expense
          reimbursement  on the gross  proceeds  raised.  In  addition,  AWC was
          issued  warrants  exercisable for 400,000 shares of common stock at an
          exercise  price  of $0.30  per  share,  expiring  June  28,  2003.  On
          September 30, 2002, the Company and AWC reached a settlement agreement
          whereby AWC agreed to cancel the  outstanding  warrant in exchange for
          800,000  shares of  restricted,  unregistered  shares of the Company's
          common stock.

          As of December 31, 2001 two note holders with notes  totaling  $50,000
          notified the Company  that they had written off the  balances  owed to
          them by the Company and therefore had  discharged the Company from any
          further  liability.  As a result  the  Company  recognized  a  $56,000
          forgiveness  of debt income as of December  31, 2001,  which  included
          $6,000 of accrued interest.

          During  2002,  all  but  one of the  Holders  of the  Notes,  totaling
          approximately  $651,500,  agreed to release all obligations  under the
          Notes,  including  accrued  interest  of  approximately  $157,273,  in
          exchange  for the issuance of an  aggregate  of  21,303,264  shares of
          restricted, unregistered shares of the Company's common stock.


                                       12
<PAGE>


                 Safe Alternatives Corporation of America, Inc.
                        Notes to the Financial Statements
                                  June 30, 2004


Note 6 -  Convertible Notes Payable  (Continued)
          -------------------------------------

          During the quarter  ended June 30, 2003,  the Company  exercised  it's
          option  to  repurchase  the  remaining   outstanding   Note  from  the
          Noteholder  with a cash  payment  aggregating  approximately  $35,389,
          which included $25,000 in principal, the stated 10% repurchase premium
          and all accrued, but unpaid, interest.

Note 7 -  Advances from Affiliates
          ------------------------

          During 2003,  an affiliate of the Company made  unsecured  advances of
          approximately  $70,700  to  support  operations  and  provide  working
          capital.  At  December  31,  2003,  the  affiliate  contributed  these
          advances as additional paid-in capital.

          During the six months  ended June 30,  2004,  in  anticipation  of the
          reverse  acquisition  transaction  discussed  in  previous  footnotes,
          Mortgage Assistance Corporation advanced to or paid expenses on behalf
          of the Company of approximately  $23,000. These advances are unsecured
          and are repayable upon demand.



                                       13
<PAGE>


                 Safe Alternatives Corporation of America, Inc.
                        Notes to the Financial Statements
                                  June 30, 2004


Note 8 -  Income Taxes
          ------------


          The  components  of  income  tax  (benefit)  expense,   on  continuing
          operations,  for  the  six  months  ended  June  30,  2004  and  2003,
          respectively, are as follows:

                                       Six months                Six months
                                         ended                     ended
                                        June 30,                  June 30,
                                          2004                      2003
                                    -----------------         -----------------
               Federal:
                   Current          $           --            $            --
                   Deferred                     --                         --
                                    -----------------         -----------------
                                                --                         --
                                    -----------------         -----------------
               State:
                   Current                      --                         --
                   Deferred                     --                         --
                                    -----------------         -----------------

                   Total            $           --            $            --
                                    =================         =================



          As of June 30, 2004, the Company had a net operating loss carryforward
          of  approximately  $9,500,000 to offset future taxable income.  If the
          reverse acquisition transaction discussed previously occurs, the usage
          of the  Company's  net operating  loss  carryforward  will be severely
          limited.  The  amount  and  availability  of the  net  operating  loss
          carryforwards  may be subject to limitations  set forth by Section 338
          of the  Internal  Revenue  Code.  Factors such as the number of shares
          ultimately issued within a three year look-back period;  whether there
          is a deemed  more than 50 percent  change in control;  the  applicable
          long-term tax exempt bond rate; continuity of historical business; and
          subsequent income of the Company all enter into the annual computation
          of allowable annual utilization of the carryforwards.


                                       14
<PAGE>


                 Safe Alternatives Corporation of America, Inc.
                        Notes to the Financial Statements
                                  June 30, 2004



Note 8 -  Income Taxes  (Continued)
          ------------------------

          The  Company's  income tax expense  for the six months  ended June 30,
          2004 and 2003,  respectively,  differed from the statutory tax rate of
          34.0% as follows:

                                                        Six months   Six months
                                                           ended        ended
                                                          June 30,     June 30,
                                                            2004         2003
                                                         ---------    ---------
Statutory rate applied to income
   before income taxes                                   $(295,390)   $  (2,700)
Increase (decrease) in income taxes
  resulting from:
     State income taxes                                       --           --
     Non-deductible compensation expense related
        to common stock issued at less than "fair value"   285,170
     Other, including reserve for deferred tax asset and
        application of net operating loss carryforward      10,220        2,700
                                                         ---------    ---------
Income tax expense                                       $    --      $    --
                                                         =========    =========



          Temporary differences,  consisting primarily of statutory deferrals of
          expenses for  organizational  costs and statutory  differences  in the
          depreciable  lives for property and  equipment,  between the financial
          statement  carrying  amounts  and tax bases of assets and  liabilities
          give rise to the following  deferred tax assets and  liabilities as of
          June 30, 2004 and 2003,

                                                       June 30,       June 30,
                                                          2004           2003
                                                     -----------    -----------

Deferred tax assets
     Net operating loss carryforwards                $ 3,246,420    $ 3,230,000
     Less valuation allowance                         (3,246,420)    (3,230,000)
                                                     -----------    -----------


Net Deferred Tax Asset                               $      --      $      --
                                                     ===========    ===========



         During the years ended December 31, 2003 and 2002, respectively, the
         reserve for the deferred tax asset did not significantly change.


                                       15
<PAGE>

                 Safe Alternatives Corporation of America, Inc.
                        Notes to the Financial Statements
                                  June 30, 2004

Note 9 -  Common Stock Transactions
          -------------------------

          During  the year  ended  December  31,  2002,  the  Company  issued an
          aggregate 21,303,264 shares of restricted,  unregistered shares of the
          Company's common stock in settlement of approximately $651,000 in face
          amount of 6.0% Convertible Notes and accrued interest of approximately
          $157,273.

          During the year ended  December 31, 2002,  the Company  issued 448,101
          shares of restricted,  unregistered  common stock to various unsecured
          creditors in exchange for their release of any further  claims related
          to  trade  accounts  payable.   These   transactions  were  valued  at
          approximately  $448,100,   including  a  "fair  value"  adjustment  of
          approximately $410,597 for shares issued at less than the "fair value"
          of  the  shares  based  on the  valuation  established  by  equivalent
          transactions on equivalent dates.

          Effective  September 30, 2002,  the Company  issued  800,000 shares of
          restricted,  unregistered  common stock in exchange for the retirement
          of an  outstanding  warrant to  purchase  up to 400,000  shares of the
          Company's  common stock at a price of $0.30 per share,  expiring  June
          28, 2003.  This  transaction  was valued at  approximately  $80, which
          approximates  the "fair  value" of the  Company's  common stock on the
          date of the transaction.

          During July 2002, in order to facilitate the Company's merger or other
          business  combination  transaction with another  company,  the Company
          issued a total of  84,720,733  shares of the  Company's  unregistered,
          restricted  common  stock to be held in escrow for the  benefit of the
          Company's merger or combination partner. No value had been assigned to
          this  issuance  pending  the  consummation  of a business  combination
          transaction.  On March  9,  2004,  the  Company's  Board of  Directors
          authorized  the  issuance  of  these  shares  held  in  escrow  to the
          Company's legal counsel,  Loper & Seymour, P.A. of St. Paul, Minnesota
          for legal  services.  The  transaction  was  valued  at  approximately
          $8,470,  which  equaled  the  common  stock's  par value of $.0001 per
          share,  and these  shares were deemed  fully paid and  non-assessable.
          Pursuant to  Statement  of  Financial  Accounting  Standards  No. 123,
          "Accounting for Stock-Based  Compensation",  the imputed fair value of
          this  transaction was calculated  using the discounted  closing quoted
          stock  price on March 9, 2004.  The  differential  between the imputed
          fair  value  and  the  agreed-upon  value  of the  services  provided,
          approximately  $838,700, was recorded as "compensation expense related
          to common stock  issuances at less than "fair value" upon  exercise of
          outstanding stock options in the accompanying statement of operations.


                                       16
<PAGE>


                 Safe Alternatives Corporation of America, Inc.
                        Notes to the Financial Statements
                                  June 30, 2004



Note 10 -  Treasury Stock
           --------------

          Treasury stock represents  11,682 shares (recorded at cost) being held
          in trust to be used for future issuance to employees,  investors,  and
          other potential funding sources. As the Company directly benefits from
          the sales of the shares in the trust,  these shares have been recorded
          as treasury stock.