skyway10ksb2004

10KSB 1 skyway10ksb2004.htm ANNUAL REPORT skyway10ksb2004

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-KSB

Annual Report Under Section 13 or 15(d) of the

SECURITIES EXCHANGE ACT OF 1934

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

For Fiscal Year Ended April 30, 2004

Commission File #0-32033

SKYWAY COMMUNICATIONS HOLDING CORP.
(Exact name of registrant as specified in its charter)

Florida
(State or other jurisdiction of incorporation or organization)

65-0881662
(IRS Employer Identification Number)

6021 - 142nd Avenue North
Clearwater, FL 33760
(Address of principal executive offices) (Zip Code)

727.535.8211
(Registrant's telephone no., including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)

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

Securities registered pursuant to Section 12(g) of the Exchange Act: Common
Stock, $0.0001 par value

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

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

Revenues for year ended April 30, 2004: $51,005

Aggregate market value of the voting common stock held by non-affiliates of the
registrant as of July 1, 2004, was: $84,819,000

Number of shares of the registrant's common stock outstanding as of July 28, 2004
was: 140,453,386

Transfer Agent as of July 1, 2004: Island Stock Transfer
100 First Ave. South
St. Petersburg, Florida 33701

PART I

ITEM 1. DESCRIPTION OF BUSINESS

BUSINESS DEVELOPMENT

We were incorporated under the name Mastertel, Inc. in the State of Florida on
December 16, 1998 as a wholly owned subsidiary of i-Incubator.com, Inc. (now
known as Inclusion, Inc.), a public company that formerly traded on the NASDAQ
OTC Electronic Bulletin Board. On December 2, 1999, the Company filed a
Certificate of Amendment changing the name of the Company to i-Teleco.com, Inc.
On April 17, 2003, the Company filed a Certificate of Amendment changing the
name of the Company to SkyWay Communications Holding Corp.

On June 20, 2003, SWYC Acquisition Corporation, a Florida corporation and our
wholly owned subsidiary, merged, pursuant to an Amended and Restated Agreement
and Plan of Merger, dated as of June 19, 2003, with and into Sky Way Aircraft,
Inc., a Nevada corporation. The merger closed on June 21, 2003. In connection
with the merger, we moved our headquarters to 6021 - 142nd Avenue North,
Clearwater, FL 33760.

BUSINESS

The Network

We are developing a high speed ground to ground to air in-flight aircraft
communication network. The principal components of this network are:

o Patented technology which is designed to provide high-speed data
communications from the ground to air in-flight aircraft will be
installed in each radio located on both the aircraft and at each tower
site.

We entered into a Purchase Agreement dated as of February 20, 2004, by and
between us, Sky Way Global, LLC, a Nevada Limited Liability Company, an
affiliate of which Mr. Brent Kovar and Ms. Joy Kovar are principals, and Brent
Kovar, under which we acquired all rights, title and interest to United States
patent number 6,587,887, granted July 1, 2003, and entitled "Digital data
transmission utilizing vector coordinates within a hyperbola model." This
technology is essentially a software program for data indexing, which is similar
to data compression but which mitigates data loss problems associated with
compression. This technology is designed to permit faster and less expensive
transmission of data, video, voice and audio between the ground and an airplanes
or other homeland security related ground locations than using traditional,
non-indexed data transmission mechanisms. The reason for this is because indexed
data takes up less transmission space, and thus travels faster and costs less to
transmit than non-indexed data transmission.

o A center for monitoring and controlling ground to ground to air
in-flight aircraft communication and providing secure data storage to
archive and store data transmitted over our network.

Three monitoring rooms have been completed and are currently in operation. Two
of these rooms allow the capacity to monitor up to 100 commercial or private
aircraft simultaneously as well as 50 ground locations. The third monitoring
room is used for network, tower security, tower site environmental monitoring

and control. These monitoring rooms are sufficient to support both Southeast and
Executive Charter agreements we currently have in place.

We have completed the essential infrastructure improvements for our secure data
storage room. The main center flooring, HVAC, fire suppression, power
distribution, and security systems have been installed.

We have modular backup generation systems consisting of 3 - 600 KW generators. A
new utility service was installed to double the electrical capacity of the
facility as well as a main electrical service transfer system has been
completed.

To complete the computer center, we need to install the computers and related
equipment and develop and integrate related software necessary for the services.
We anticipate this will cost approximately $3,000,000. Once we receive necessary
funding, we anticipate it will take approximately six (6) months to complete.
However, because of the limited number of aircraft in the Southeast Airlines
fleet, we believe we have the necessary equipment to support this contract. The
computer center equipment and related software can be installed and operational
in the second calendar quarter of 2005.

o A network of towers to provide ground to air in-flight aircraft
communication.

In December, 2003 we were granted a Special Temporary Authorization license by
the FCC to conduct testing and operations from 136 tower sites located
throughout the U.S., Hawaii, Alaska and the U.S. Virgin Islands within the
frequencies for air to ground communications used by the previous owners of the
network. The Special Temporary Authorization license is for the total 136
locations and extends through November 30, 2004.

The Special Temporary Authorization can be extended for three additional six
month periods. We believe that as long as we continue to make progress in
developing our tower network, the FCC will continue to extend our Special
Temporary Authorization. In order to secure a Permanent License, we need to
demonstrate a number of factors to the FCC, the primary of which we believe is
the ability of the towers to communicate with airborne aircraft. When these
Permanent License are secured, we will have regulatory approval to operate one
of only two air to ground land-based networks in the country.

Of the 136 towers granted a Special Temporary Authorization license, 33 sites
have been reactivated and are capable of broadcasting a signal. However, all
transmittal equipment will need to be replaced before we can transmit
information. The approximate cost per tower is $150,000 and a recurring cost of
approximately $3,000 - $5,000, depending upon the size of the bandwidth. We
anticipate that we will commence installing the equipment on approximately 28 of
the 33 towers necessary to support the Southeast Airlines contract in the fourth
quarter of calendar 2004 and that the installation will be completed in the
second calendar quarter of 2005. We will not commence these activities on the
remaining towers until we need the towers to support customer contracts.

SkyWay engineers have performed engineering surveys at a total of 95 sites,
including the 33 sites that have been reactivated, of the 136 towers granted the
FCC license to determine the level of repair and the ability to operate the
site. In addition, they have identified the equipment and services necessary to
reactivate the towers to the broadcast level. We need to continue to complete
our engineering studies and make any necessary repairs. We anticipate that
completing the additional surveys will take approximately three (3) additional

months and cost approximately $100,000. We will not commence repair activities
until the towers are needed to support customer contracts.

In addition to the engineering surveys it is important for us to secure leases
for these towers. We currently have 60 leases signed, including the 28 sites
necessary for the Southeast Airlines contract.

o Radios, computer servers and related equipment installed and to be
installed in aircraft to receive and transmit signals.

A critical component of our system is the radio responsible for transmitting
signals through out the system. Currently we are evaluating and testing several
radios to determine their capability and performance standards. The testing
covers areas of performance, speed, flexibility in varying environments and load
factors. We anticipate we can complete this testing in the next three to four
months at an estimated cost of $150,000 to $200,000.

The family of SkyWay servers, including the media server, the security server
and the management server, is another major component of our system. These
servers are used to distribute and manage information through out the aircraft,
as follows:

o the Media Server distributes entertainment content consisting of on
demand movies/video and audio, infomercials and sponsor supported
advertising and commercials.
o the Security Server works in conjunction with the surveillance cameras
installed on the plane. Its main function is to collect the images
from the cameras for transmission to the ground towers. Images will
ultimately be sent to the SkyWay monitoring facility in Clearwater
Florida.
o the Management Server coordinates and distributes signals from the
other servers as well as the wireless access points and cells to
connect passengers personal cell phones to the system's radio that
then transmits the information to the land based tower network.

Before we can install any of this equipment on a commercial aircraft, we need FAA
approval. We are in the process of preparing applications to the FAA. We
anticipate the application will be submitted in the fourth calendar quarter 2004
and will take at least six months to process.

o Video equipment to be installed in the aircraft.

In the event that the aircraft does not have an existing video monitor system,
SkyWay can install its FAA approved Hydra-Trac system which is an overhead
drop-down monitoring system. Depending on customer requirements and the
configuration of the aircraft, this system can be installed in the overhead
baggage bins or in the center aisle of the aircraft.

o Landline communications between the towers, our data center and
customer locations.

We have agreements with various telephony service providers to utilize their
land-based networks to maintain secure communications between the towers, our
facilities, including the data center, and customer locations.

o An FAA approved repair station, distribution facility, aircraft
engineering and document control.

We have secured a lease agreement for a 73,000 square foot facility in
Grapevine, Texas to provide these services. The leasehold improvements include a
$250,000 upgrade of the office space and repair facility. We are scheduled to
take occupancy of this facility Sept 1, 2004. To support this facility, we
recently purchased from Transdigital Communications certain equipment and
documents which are being delivered to the Grapevine, TX facility in preparation
of utilizing their server products and services in the maintenance and
engineering support of the aircraft repair facility providing services to the
major airlines located there.

Services

We believe our network will support applications providing the following
services:

o Real-time in-flight video surveillance and monitoring,

This will allow the SkyWay staff located in our Clearwater facility to monitor,
in real time, all activity on an aircraft whether the aircraft is on the ground
or in the air. The system allows up to 16 cameras to installation on or inside
the aircraft . The installation is a combination of seen and hidden locations. A
security server is also required to collect for transmitting the images to the
ground-based network. All monitored information is archived and available for
retrieval for up to 10 years depending on customer requirements. The cameras we
intend to utilize are FAA approved.

o High-speed wireless internet access,

A passenger will be able to access the internet in real time, through the use of
wireless technology while traveling in an airborne aircraft. The passenger will
need a lap-top computer equipped with a wireless card either permanently
installed or as an add-on accessory. The plane will be equipped with two small
blade antennas, a wireless access point, management server and radio to transmit
the signals to the ground based network. We will apply for FAA approval of this
equipment at the same time we submit applications for the other parts of our
network that need FAA approval.

o Use of personal cell phones,

Use of the passenger's personal cell phone is made possible through the
installation of a small transmitting unit called a PICO-cell. The PICO-cell
serves as a mini-cell tower to transmit the cell phone signal from the plane to
the ground. There are several manufactures presently engaged in the Pico-cell
technology. These manufacturers are currently applying for FAA approval and it
is expected to be approved by the FAA for in-flight use with in the next six to
twelve months.

o Advanced in-flight entertainment including audio/video on demand,

Passengers will have access to over 400 movies stored on the plane as well as a
large selection of audio content. To enable us to allow for public viewing of
the movies stored on the plane, we will need to secure licenses for this
content. At the present time, we have not commenced any action to secure the
necessary licenses. We anticipate that we will be able to secure all necessary
content licenses by the second calendar quarter of 2005 or provide this service
through a third party who has the appropriate license for public rentals.

o Flight management avionics data link for aircraft maintenance support
and archiving of aircraft data. This connection will also permit us to
capture, record and store, all information from the flight data
recorder, commonly called the "black box," in real-time. We will
archive this information at the company's monitoring center located in
Clearwater Florida if requested by customer(s). The archived
information will be made available to the airlines, FAA and other
government agencies.

We need to complete certain software development for this function to be
operational. We anticipate that we will be able to complete the required
development at minimal cost by the second calendar quarter of 2005.

o Air Filtration System monitoring consists of a series of small
monitors strategically installed throughout the air system on the
plane or other facility. The monitors are continuously monitoring the
air for biological, radiological and chemical contaminants.

We will apply for FAA approval of this equipment at the same time we submit
applications for the other parts of our services that need FAA approval. We
believe it may take approximately 12 months after submission to secure this
approval.

o In-flight medical assistance allowing real-time video and audio
communication between a land-based emergency room doctor and the
patient/passenger. Also patient/passenger vital signs can be
transmitted to the doctor.

This will be part of our in-flight camera system.

Testing

We acquired a DC9-15 aircraft in the first calendar quarter of 2004 to be used
for airborne research and development and for marketing demonstrations of the
high-speed network and applications. The retrofitted airplane, which included
final airborne testing and FAA certification of the changes, was completed on
July 27, 2004 and is scheduled to return to Clearwater/St. Petersburg Airport.
In addition to testing our own network, equipment and applications, we will also
use the aircraft to assist with the integration of equipment and applications
from other manufacturers, although we do not currently have any contracts,
agreements or commitments to do so.

Revenue Generation

We anticipate generating revenue from our network in the following ways:

o Advertising. Sales of advertising to be displayed on aircraft
monitors. This will consist of 30 and 60 second commercials, 7 to 12
minute infomercials, limited banner ads to be displayed on the screens
of passengers' lap-top computer and other electronic devices, and
advertisers "fixed logo imprint" on items associated with the system
such as headset imprinting.
o Internet access. On some airlines, we anticipate that we will be able
to generate revenues from an individual per passenger charge to access
the Internet. If the carrier chooses to give access at no cost to
their passengers, the opening webpage will be made available for
corporate sponsorship to generate the revenue.
o Flight Management Avionics. The airframe, electronic and engines are
monitored for performance during flight. This information will be made

available to the manufacturers of the respective equipment for a
charge. The charge will vary depending on the type, amount and
frequency of data requested.
o Cell Phone. In-flight telephone service or through personal cell
telephone calls.
o Movies on-demand
o Video teleconferencing
o Emergency medical assistance
o Surveillance and monitoring of cabin and cargo areas

We also anticipate generating revenues from repair and distribution at our
Grapevine, TX facility.

Customers

We currently have two customers for our network services, Southeast Airlines and
Executive Charter Services. Although we have had several discussions with other
major airlines, at this time we have no contracts, commitments or agreements
with any other airline or any other customers for our network or related
services.

We currently have one customer, Continental Airlines, for our other products, a
media server.

Southeast Airlines Contract

In September 2003, we signed an in-flight system contract with Southeast
Airlines for a wide variety of in-flight services. Under the contract, Southeast
Airlines shall receive, on a reoccurring basis, a percentage of the revenue
generated by advertising and in-flight service usage of the our services.

Terms of the contract call for the installation of the upgraded SkyWay in-flight
system on the fleet of Southeast Airlines which include eight (8) MD-80 and DC-9
aircraft. It also includes all newly purchased aircraft, as approved by
Southeast Airlines management.

Due to the FAA approval necessary to provide wireless connectivity inside an
aircraft, we will only be able to supply minimal services, such as a single
movie for the entire airplane and a map showing aircraft position and related
statistics. We believe we will be able to supply these services no later than
the second calendar quarter 2005. If, prior to the initial installation in
Southeast equipment, the FAA approves the use of wireless capabilities within an
aircraft the Company will install the equipment to allow this which would
provide a more robust service than described above.

As soon as the FAA approval for the network components is received and the
components are installed, we will be able to provide Southeast Airlines with all
the services described above.

Under the revenue sharing provisions of the contract, advertising charges are
based on the number of passengers multiplied by industry standard captive
audience ratios for internet banners, fixed monitor commercials and audio
commercials. Telephone usage will be billed per minute, on-demand video/audio
played on passenger's laptop charges are expected to range from $1.95 to $9.95.

Because of expected advertising revenue, Internet use will be free of charge to
every passenger with their own Wi-Fi 802.11B or G equipped laptop. Passengers
with their own laptop can expect broadband type speeds, will have available to
them, over 400 on-demand video selections ranging from Hollywood's newest
releases to continued education instructional videos, audio selections ranging
from books to

music. It is planned that the security cameras, both seen and unseen, will be
monitored in real time from SkyWay's monitoring center located in Clearwater
Florida.

To date, we have not commenced installation of any of our network components on
Southeast Airlines aircraft.

Executive Charter Contract

The Executive Charter contract calls for the installation of the management
server, radio, media server, pico-cell and antennas on three (3) corporate
aircraft. This system will allow for Internet access, audio/video on demand and
cell phone use. We expect to complete this installation in second calendar
quarter of 2005. The parties are negotiating the price for this service.

Other Product

The current version of the Media Server is a digital cabin communication device
that performs many passenger information services during a flight. It is a video
sever capable of storing forty-eight hours of digitally compressed visual
information, a world map database and flight information on a single hard
disk drive.

The Media Server is connected to the aircraft's Flight Management Computer. This
provides the Media Server with latitude/longitude, air speed, altitude and time
to destination information. This information, when interfaced with flight
program scripts, provides automated program sequence of visual entertainment
including aircraft positioning and time to destination during the flight.
Continental Airlines has downloaded their multi language safety announcements to
the Media Server. The correct languages presented on these safety instructions
are determined by the individual flight script. Each Continental Airline flight
has a custom program script. Continental Airlines also includes text over video
of important safety instructions for the hearing impaired.

Future Homeland Security Applications

We also intend to utilize our ground network linking the tower sites to our
Clearwater network center and other locations to provide the foundation and
solutions for select Homeland Security issues. These include the transmission
and recording of real-time video surveillance coverage, security applications
within local, regional and national airports, surveillance and monitoring
networks for seaports, dams, nuclear power plants, gas and oil facilities, and
shipping containers.

We currently have no customers for any homeland security application.

Other Services

SkyWay Wireless

We currently offer wireless service to approximately 30 customers in Pinellas
and Hillsborough counties, Florida. We are currently working to upgrade the
existing Wireless Network to provide a back-up for our future land-based
communication network in these areas.

Marketing

All of our marketing efforts are currently being conducted by our officers and
directors. We contemplate establishing an in-house sales force in the future,
but we have not developed any plans as to how we would develop this sales force.

We also have a non-exclusive Sales and Marketing Agreement with Titan
Corporation to market our products to the federal, state and local governments.
A separate commission structure shall be agreed to for each product or project.

Research and Development

Research and development from inception to April 30, 2004 totaled approximately
$2,000,000.

Competition

The wireless data transmission industry is highly competitive. We believe that
the principal competitive factors affecting our business will be pricing levels,
clear pricing policies, customer service, and to a lesser extent the variety of
services offered. Our ability to compete effectively will depend upon our
continued ability to maintain high quality, market-driven services at prices
generally equal to or below those charged by our competitors. To maintain our
competitive posture, we believe that we must be in a position to reduce our
prices in order to meet reductions in rates, if any, by others. Any such
reductions could reduce our revenues. Many of our current and potential
competitors have financial, personnel and other resources, including brand name
recognition, substantially greater than ours, as well as other competitive
advantages over us.

Connexion by Boeing and Tenzing currently offer similar products and services to
the airlines but are satellite based and more expensive. Other providers such as
Verizon have started offering telephone services to the airlines. In addition,
their technology is more limited in its throughput than ours and does not
currently allow for a full range of services that can be provided by utilizing
our network. However, these competitors have long-standing relationships with
potential customers that we lack.

In the homeland security area, we will compete with other land based and
wireless transmission providers. Many large and small telecommunications and
related companies currently provide this service. However, we believe our data
indexing technology provides for less bandwidth utilization which we believe
will allow us to provide services at a lower cost than these competitors.

Government Regulation

We are subject to FCC and FAA regulation in the areas described above.

Employees

As of April 30, 2004, we employed a total of 40 full time and 3 part time
employees, as follows:

Position Total Employees Part Time Employees
Officers 3
Managers 4
Sales 3
Financial 2
Research and Development 12 1
Marketing 5
Administrative 11 2
Total Employees 40 3
== ==

Our employees are not represented by a labor union. We believe that our
relations with our employees are good.

Risk Factors

In filing specific SEC documentation, in regards to the company's current and
future progress, SkyWay is extremely limited to explain, put into specific
details, major milestone events or other items that could have the most impact
on the company's progress. The following impact statements are provided to allow
all investors and prospective investors, an accurate view of the company in a
very broad cautionary sense in order to describe the future of the company based
upon the failure to reach any of these milestones. While all of these statements
have been addressed to appropriate levels of customer and agency interest, we
believe that we are progressing in a satisfactory manner against the Company
goals for which the specific details of that progress can not be discussed at
this time due to not being complete at this time.

The following risk factors are used to provide a small window of each milestone
and while they appear to be negative in nature as they are only explaining in
that sense of the worst case scenario of what could happen. As a reader can see
by the previous articles explained in Part I Description of Business, SkyWay is
making great progress in all areas of our business plan. Our growth is certainly
tied to the influx of investments and we are pursuing all avenues to ensure
adequate funding is available. As you review the information below, we strongly
suggest that you consider the positive accomplishments with those areas that, by
law, we are required to point out to you that could effect your investment and
our path to success.

Our poor financial condition raises substantial doubt about our ability to
continue as a going concern. You will be unable to determine whether we will
ever become profitable.

From our inception on April 24, 2002 to April 30, 2004, we incurred operating
losses of approximately ($23,000,000) and at April 30, 2004 we had a net working
capital deficit of approximately $2,200,000. In addition, as of April 30, 2004,
we had only approximately $1,700,000 of current cash available. However, during
the period May 1, 2004 through July 28, 2004 we used our available cash to fund
operating items and additional equipment purchases. As a result, we do not have
sufficient cash to satisfy our cash requirements over the next month.

We will need to secure a minimum of $2,000,000 to satisfy such requirements for
the next 9 months, but we need an additional minimum of $5,000,000 to finance
our planned expansion in the next 12 months, which funds will be used for
product development, airborne and tower testing, data and monitoring center
build out and personnel costs including salaries and benefits. In order to
become profitable we may still need to secure additional debt or equity funding.

We hope to be able to raise funds from an offering of our stock. However, we may
not raise any funds from an offering. We have no source of funding identified at
this time. Our failure to raise funds in the future will impair and delay our
ability to implement our business plan.

Because our ability to continue as a going concern is in doubt and we have no
definitive plan in place that is capable of removing the threat to the
continuation of our business, we may not be able to continue operations in the
future.

Our ability to continue as a going concern is dependent on our ability to raise
funds to implement our planned development; however we may not be able to raise
sufficient funds to do so. Our independent auditors have indicated that there is
substantial doubt about our ability to continue as a going concern over the next
twelve months. We have no definitive plan in place that is capable of removing
the threat to the continuation of our business but are pursuing all avenues of
identifying investment opportunities. Our poor financial condition could inhibit
our ability to achieve our business plan, because we are currently operating at
a substantial loss with no significant operating history and revenues, an
investor cannot determine if we can remain in business or will ever become
profitable.

If we do not obtain rights to the ground stations, equipment and towers, we will
not be able to implement our business plan.

We must secure rights, which include tower licenses, facility leases, and
utility hookups, to the ground stations, towers and related equipment necessary
for the transmission of data over our network. If we do not obtain rights to the
ground stations, equipment and towers, we will not be able to implement our
business plan. Of the 136 tower sites in the system, we will have to negotiate
separate agreements with approximately 125 separate owners. We currently have
tower leases in place for 60 towers. We cannot predict, when, if ever, we will
acquire the remainder of these rights however we have contacted approximately
90% of the site owners and have found a high level of interest in their
continued participation in rebuilding of the tower network.

Because we only have a temporary FCC license for transmission of data between
the ground and airplanes, if the temporary license is not renewed or if we do
not secure a permanent license, we may not be able to implement our business
plan.

The network that previously used the tower network we anticipate using operated
in the private frequency band of 850MHz to 859MHz range. The previous users' FCC
license has expired and we are in the process of applying for this license. In
December, 2003 we were granted a Special Temporary Authorization license by the
FCC to conduct testing and operations from 136 tower sites locations throughout
the U.S., Hawaii, Alaska and the U.S. Virgin Islands within the frequencies for
air to ground communications used by the previous owners of the network. The
Special Temporary Authorization license is for the total 136 locations extend
through November 30, 2004.

The Special Temporary Authorization can be extended for three additional six
month periods. We believe that as long as we continue to make progress in
developing our tower network, the FCC will continue to extend our Special
Temporary Authorization. In order to secure a Permanent License, we need to
demonstrate a number of factors to the FCC, the primary of which we believe is
the ability of the towers to communicate with airborne aircraft. If the
temporary license is not renewed or if we do not secure a permanent license, we
may not be able to implement our business plan.

If commercial aircraft previously outfitted with signal receiving equipment is
removed or if we are unable to secure new installations in additional aircraft,
including Southeast Airlines and Executive Charter, which will also require
additional FCC approval, we may not be able to implement our business plan.

There is certain equipment related to the network installed in approximately
1,700 commercial and 800 corporate airplanes that is used to send and receive
ground signals in the aircraft. In order to implement our business plan, we need
the majority of this equipment to stay in place. This equipment is owned by the
aircraft owners and could be removed at considerable expense. In addition, in
order to implement our business plan, we will have to acquire comparable
equipment and enter into agreements with aircraft owners to have this equipment
installed. Although we believe we can acquire additional equipment to be
installed in aircraft in the future, we have not entered into any negotiations
to acquire this equipment. We have agreements with Continental, Airlines,
Southeast Airlines and Executive Charter to install our equipment. Currently we
are installing, under a Purchase Order, our equipment on Continental aircraft.
We cannot predict, when, if ever, we will acquire this equipment for Southeast
and Executive, however, we are predicting that these installations will commence
during 1st and 2nd quarter 2005.

In addition, we will require further certifications or approvals from the FAA
for new equipment to be installed on these airplanes in the future.

If we do not complete our operations center, including our planned secure data
storage facility, we will not be able to implement our business plan.

An operations center, under development and anticipated to be completed in the
second calendar quarter of 2005, pending receipt of financing, is located in
Clearwater, Florida and will be designed to provide 24 hour monitoring,
recording and network management needed for the network and will meet the
current needs of support for the Southeast and Executive Charter contract. The
operations center will provide all the facilities, fiber lines, and support
services needed to meet the surveillance, monitoring and operational
requirements for a nationwide network. We cannot implement our business plan if
we do not complete our planned operations center.

Because our wireless communication technology has not been accepted by the
public as an acceptable form of communication with aircraft, we face significant
barriers to acceptance of our services.

Our business involves the use of wireless technology to communicate with
aircraft. The use of wireless broadband technology using our indexing technology
is relatively new form of a solution which to provide these types of services.
Traditionally, these communications are done much as traditional cell phone
technology, which lacks our broadband and indexing technology. Potential
customers may perceive these traditional methods of communication as being more
reliable than our newer technology. Accordingly, while other forms of technology
may be more expensive and limited in capacity, we face significant barriers to

overcome the consumer preferences of traditional technology for the type of
services that we offer.

Because the wireless communication industry is subject to rapid technological
change, our technology could become outdated, which could reduce our revenues.

The traditional wireless communications industry is subject to rapid
technological change. The use of wireless broadband technology using our
indexing technology could become outdated. Unless continued research and
development are maintained, our licensed technology is able to be changed or
modified to keep up with developments in the industry, customers could switch to
alternative technologies and our revenues could be reduced.

We will depend on relationships with the airline industry and applicable
government agencies. If we cannot develop these relationships, we will not be
profitable and you may lose your entire investment.

Our manage has spent the previous 12 month meeting with various airlines
(regional and major) and industry trade groups and has established relationships
within the airline industry. Development and distribution of our services will
be highly dependent on establishing relationships with aviation/aerospace
product and service providers as well as airlines, air charter companies,
government agencies and corporate flight departments specific to our business
plan. The airline industry's current financial condition has caused airlines and
related service providers to postpone, and in some cases, cancel new technology
investments. The aftermath of September 11, 2001 has had a negative effect on
the airline industry's financial condition. Our operations may never become
profitable if we cannot establish and maintain the necessary relationships to
distribute our services.

Our vulnerability to security breaches, glitches and other computer failures
could harm ability to develop and retain our customer base, which could reduce
our revenues.

We are a wireless communications service provider. The secure transmission of
confidential information over public networks is a critical element of our
operations. A party who is able to circumvent security measures could
misappropriate proprietary information or cause interruptions in our operations.
If we are unable to prevent unauthorized access to our users' information and
transactions, our customer relationships will be harmed. Although we intend to
implement a private network using industry-standard security measures, these
measures may not prevent future security breaches. Heavy stress placed on our
systems could cause systems failures or operation of our systems at unacceptably
low speeds. These operational problems could reduce our revenues.

Because many of our competitors have financial, personnel and other resources,
including brand name recognition, substantially greater than ours, we may not be
able to compete effectively, which could reduce our revenues.

The wireless data transmission industry is highly competitive. Many of our
current and potential competitors have financial, personnel and other resources,
including brand name recognition, substantially greater than ours, as well as
other competitive advantages over us. This could reduce our revenues. However we
have been developing industry alliances with major industry leaders in
telephony, manufacturing, security and other segments that should strengthen our
business opportunities.

Day-to-day management decisions are made by Brent Kovar, president and James

Kent, CEO and CFO. If we lose the services of Mr. Kovar or Mr. Kent, development
of our business plan may be slower than anticipated.

The success of our business is dependent upon the expertise of Brent Kovar,
president and James Kent, CEO and CFO, who will continue to control our
day-to-day business affairs after this offering. Because Brent Kovar, president
and James Kent, CEO and CFO are essential to our operations, you must rely on
their management decisions. We have entered into any agreement with them that
would prevent them from leaving us. As a result, the loss of any of these
individual's services could reduce our revenues.

Our management has significant control over stockholder matters, which may
affect the ability of minority stockholders to influence our activities.

Collectively, our officers and directors on a fully diluted basis beneficially
will own voting rights to 65.3% of our outstanding voting stock. As such, our
officers and directors control the outcome of all matters submitted to a vote by
the holders of our voting stock, including the election of our directors,
amendments to our certificate of incorporation and approval of significant
corporate transactions. Additionally, our officers and directors could delay,
deter or prevent a change in our control that might be beneficial to our other
stockholders.

We are authorized to issue preferred stock which, if issued, may reduce the
market price of the common stock.

Our directors are authorized by our articles of incorporation to issue up to
10,000,000 shares of preferred stock without the consent of our shareholders.
There are currently 1,000,000 shares of Series A Convertible Preferred Stock -
convertible into 100,000,000 shares of common stock; 1,000,000 shares of Series
B Convertible Preferred Stock - convertible into 200,000,000 shares of common
stock; 2,812,000 shares of Class C Convertible Preferred Stock - convertible
into 28,120,000 shares of common stock; and 85,000 shares of Class D Convertible
Preferred Stock - convertible into 8,500,000 shares of common stock,
outstanding. Our preferred stock outstanding, and additional preferred stock if
issued, does and may rank senior to common stock with respect to payment of
dividends and amounts received by shareholders upon liquidation, dissolution or
winding up. Our directors will set such preferences. The issuance of such
preferred shares and the preferences given the preferred shares do not need the
approval of our shareholders. The existence of rights, which are senior to
common stock, may reduce the price of our common shares. We do not have any
plans to issue any additional shares of preferred stock at this time.

Certain Florida corporation law provisions could prevent a potential takeover of
us which could adversely affect the market price of our common stock or deprive
you of a premium over the market price.

We are incorporated in the State of Florida. Certain provisions of Florida
corporation law could adversely affect the market price of our common stock.
Because Florida corporation law requires board approval of a transaction
involving a change in our control, it would be more difficult for someone to
acquire control of us. Florida corporate law also discourages proxy contests
making it more difficult for you and other shareholders to elect directors other
than the candidates nominated by our board of directors.

FORWARD-LOOKING STATEMENTS

The statements contained in this report that are not historical fact are
forward-looking statements that which can be identified by the use of
forward-looking terminology such as "believes," "expects," "may," "will,"
"should," or "anticipates" or the negative thereof or other variations, thereon
or comparable terminology, or by discussions of strategy that involve risks and
uncertainties. We have made the forward-looking statements with management's
best estimates prepared in good faith.

Because of the number and range of the assumptions underlying our projections
and forward-looking statements, many of which are effected by significant
uncertainties and contingencies that are beyond our reasonable control, some of
the assumptions inevitably will not materialize and unanticipated events and
circumstances may occur subsequent to the date of this prospectus.

These forward-looking statements are based on current expectations, and we will
not update this information other than required by law. Therefore, the actual
experience of SkyWay, and results achieved during the period covered by any
particular projections and other forward-looking statements should not be
regarded as a representation by SkyWay, or any other person, that we will
realize these estimates and projections, and actual results may vary materially.
We cannot assure you that any of these expectations will be realized or that any
of the forward-looking statements contained herein will prove to be accurate.
Section 27A(b)(1)(C) of the Securities Act and Section 21E(b)(1)(C) provide that
the safe harbor for forward looking statements does not apply to statements made
by companies such as ours that issue penny stock.

ITEM 2. DESCRIPTION OF PROPERTY

Our principal executive and administrative offices are located at 6021 - 142nd
Avenue North, Clearwater, FL 33760. Our phone number is 727.535.8211.

In January 2003, we signed an Escrow Agreement with ECI Telecom, Inc. and Klein
& Heuchan to rent office space located at 6021 142nd Ave. North, Clearwater,
Florida for the month of February 2003 while a long-term lease was finalized.
The agreement called for us to deposit $105,000 with Klein & Heuchan and for
rent of $16,000 to accrue for February. In March 2003, we signed an Extension of
Escrow Agreement with ECI Telecom and Klein & Heuchan to provide for us to
continue to occupy the rented office space through April 30, 2003. In May 2003,
we signed a Lease Agreement with ECI Telecom to replace the escrow agreements.
The lease provides for a five-year term beginning February 1, 2003 and the lease
is renewable for one additional five-year term. The lease requires payments of;

Months Monthly Payment
1-4 $0
5-11 $46,367
12 $0
13-24 $65,020
25-36 $66,971
37-48 $68,980
49-60 $71,050

We will pay additional expenses for upkeep of the building. The lease contains a
$92,500 security deposit. We paid $15,000 required under the lease in order for

us to have the option to purchase the leased office space for $4,750,000 by
August 1, 2003 or $4,900,000 by November 1, 2003. The lease is guaranteed by Sky
Way Global, LLC, an entity under common control. This space is approximately
80,000 on 7+ acres and is sufficient for us for our current operations. We are
the only tenants in the facility at this time.

We have notified the lessor of the building of our intent to purchase the
building and deposited $200,000 under the terms of the lease agreement. We are
actively pursuing financing at this time.

We are actively upgrading our Clearwater facility to meet the expected needs of
the business in the future. During the current year, an external tower has been
installed at our facilities at the cost of approximately $168,000 and is
available for testing with our DC-9. The data center is being outfitted to
support our needs with approximately $150,000 of additional spending to be
incurred for it to be available for all of our services. We have completed our
initial monitoring centers during the fiscal year and they are available for
use. The facility is in position to support a gradual installation and support
of our existing airline contracts. Should the company obtain a contract from a
large national carrier, additional build out of the facility will be required.

In Dallas, Texas we lease approximately 1,500 square feet on a month to month
lease for $4,000 per month from Grapevine Executive Suites. The facilities
includes a Repair Station, Lab and five (5) offices and will be used until the
Grapevine facility is available, which is expected in September 2004.

In June 2004, we entered into a lease for warehouse, repair center and office
space in Grapevine, Texas with 73,000 square feet. The lease term is 90 months
commencing September 2004, with a 5-year renewal option. The lease requires
monthly base rent and operating expense payments. Base monthly rent amounts will
range as follows:

Months Monthly Payment
1-6 $0
7-18 $13,617
19-30 $16,643
31-60 $19,064
61-90 $21,182

Monthly operating expense payments are estimated to be $8,290. The lease also
requires a security deposit of $88,454 and that the base rent through month 18
will be paid in advance, in two installments, due July 2004 and August 2004 in
the amount of $81,702.

In Brea, California we lease approximately 2,400 square feet on a month to month
lease for $1,000 per month from Global Aviation. It is expected we will be out
of the facility by August 31, 2004.

ITEM 3. LEGAL PROCEEDINGS

A claim for monies owed in the amount of $126,501.15 for telecommunications
usage services, $44,523.58 for termination charges, plus interest, costs and
attorneys fees was filed against our subsidiary by XO Communications Inc. in the
United States District Court for the Eastern District of Virginia in 2004. The
lawsuit relates to a communications agreement with XO to provide us
telecommunications services including critical rights to specific locations for
use in our network build out. Due to XO's inability to provide the building
rights for the specified locations and other breaches, we terminated our
agreement. XO subsequently filed suit against our subsidiary. Management
believes the suit is without merit and intends to defend the action. The lawsuit
is in discovery.

A claim for monies owed in the amount of $77,207.00 plus interests, costs,
attorneys fees and related amounts was filed against us and Transdigital
Communications Corporation by The Living Earth, Inc. in the United States
District Court, District of Montana in 2004. The lawsuit relates to amounts
claimed to be owed to Plaintiff by Transdigital that Plaintiff contends were
assumed by us incident to our purchase of various assets formerly owned by
Transdigital. We are attempting to negotiate a settlement of this matter.

agreement. XO subsequently filed suit against the company. The management of the
Company believes the suit is without merit. The lawsuit is in discovery.

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

None as of April 30, 2004

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

On July 1, 2004, there were 126 shareholders of record of our common stock,
including 68,946,481 held in street name for which we have no accurate
information as to the actual number of beneficial shareholders of record. Our
common stock currently available for trading on the NASDAQ OTC Electronic
Bulletin Board under the symbol "SWYC."

High and Low Sales Prices for each quarter within the last two fiscal years.*

Low High
YEAR ENDED APRIL 30, 2004
First Quarter $ .08 $ .87
Second Quarter $ .12 $ .35
Third Quarter $ .16 $ .67
Fourth Quarter $ .57 $ 1.78

YEAR ENDED APRIL 30, 2003
First Quarter $ .01 $ .03
Second Quarter $ .01 $ .06
Third Quarter $ .01 $ .01
Fourth Quarter $ .01 $ .12

* The quotations reflect inter-dealer prices, without mark-up, mark-down or
commission and may not represent actual transactions.

Convertible Preferred Stock

There are 1,000,000 shares of Class A preferred stock outstanding. Each share of
Series A preferred stock is convertible, at the option of the Series A preferred
holder, into one hundred shares of our common stock. The Class A preferred stock
has an aggregate stated value of $15,000,000. We have the right to redeem the
Series A preferred stock within the first year of closing of the merger with Sky
Way Aircraft for the stated value plus 5%. Also, each share of Series A
preferred stock shall have that number of votes on all matters that is equal to
the number of shares of Series A preferred stock are then convertible and shall
have a liquidation preference equal to the stated value plus one percent per
annum from the date of issuance.

There are 1,000,000 shares of Class B preferred stock outstanding. The Class B
referred stock has an aggregate stated value of $15,000,000. Each share of
Series B Preferred Stock is automatically convertible into two hundred shares of
our common stock, if and only if, from the issuance date to the third year
anniversary of the issuance date one of the following events occurs:

o The Corporation shall complete a Qualified Public Offering in the
aggregate amount of $25,000,000. Qualified Public Offering shall mean
the first public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the
offering and sale of common stock for our account in which the
aggregate gross proceeds received by us equals or exceeds $35 million
before deduction of underwriters' commissions and expenses and the
public offering price equals or exceeds $7.50 per share of common
stock.
o During any period of thirty consecutive trading days, the average
closing price per share of the common stock, as reported on a national
securities exchange, the NASDAQ NMS or Small Cap Market, or the OTC
Bulletin Board, equals or exceeds $4.00, or
o The Corporation launches its product and services. Product and
services shall mean each of the following: (i) a homeland defense
security product which provides real time monitoring of (x)airplane
systems, mechanical or otherwise, (y) cockpit recordings and other
recording traditionally found on the black box, and (z) the cabin and
cockpit areas via 16 cameras; and (ii) in-flight entertainment product
which would provide, amongst others, in flight phone and Wi-Fi service
that utilizes our technology. Launch shall mean each of the following
events have occurred: (i) the execution of definitive agreements with
three nationally recognized airlines to provide its products and
services; (ii) to have an operational network capable of providing its
products and services throughout the United States; and (iii) an
operational ground base data center.

If the above requirements are not met by the end of the three year period, then
the Series B Preferred Stock shall be canceled and returned to treasury. The
Series B Preferred Stock has similar voting and redemption rights as the Series
A Preferred Stock. At this time, the holders of the Series B Preferred Stock are
not able to convert their shares into our common stock and there is no assurance
that the requirements will be met at a later date.

Our Series C Preferred Stock consists of 2,812,000 authorized shares. The
Holders shall have the right in its sole and absolute discretion to convert
2,812,000 shares of Convertible Preferred Stock - Series C issued by the
Corporation into 28,120,000 common shares on a one (1) share for ten (10) shares
basis upon the occurrence of the Corporation signing an additional contracts for
installation of its system with a second airline or general aviation company or
any combination thereof.

The Shares shall be convertible at any time, in whole or in part, at any time
for a period commencing on the date of a Conversion Event and ending on December
31, 2013. No additional consideration is payable upon conversion.

The Shares shall be forfeited to Corporation for no consideration if a
Conversion Event is not completed prior to December 31, 2013. The Shares shall
have a preference over holders of Common Stock of the Corporation upon
liquidation equal to its par value. The shares have no voting rights and pay no
dividends.

Our Series D Convertible Preferred Stock consists of 85,000 authorized shares.
The Holders shall have the right in their sole and absolute discretion to
convert 85,000 shares of Convertible Preferred Stock - Series D into 8,500,000

common shares of Corporation (the "Equity") upon a one share for one hundred
share basis upon the occurrence of the conversion of shares of Class A Preferred
Stock into common stock. The Series D stock has liquidation rights to $.001 per
share, subordinate to Classes A, B and C preferred. It has no voting or dividend
rights.

Anti-dilution provisions

In connection with the closing of the merger, we agreed that in the event from
the date of closing of the merger and for three years thereafter, we issue
common stock or preferred stock pursuant to, or in connection with, a capital
raise or financing in the aggregate amount of up to $1,000,000, our common
stockholders on the date of the closing date of the merger are entitled to the
issuance of additional shares, on a pro rata basis, equal to the number of
shares of common stock or preferred stock issued in connection with the
financing. Under these provisions, approximately 9,193,212 additional shares of
common stock would have to be issued; however, management currently does not
intend to issue these shares.

Warrants

We have the following Warrants outstanding:

Date Exercise Priced Number of Warrants Warrants Outanding Expiration
Warrant Name Issued Ranges Warrants Exercised as of 4/30/04 Date

M Farkas 07/01/03 $ .10-$1.00 6,000,000 1,666,667 4,333,333 06/30/08
B. Baker 07/01/03 $0.20 4,000,000 4,000,000 0 06/30/08
Dupont Trust 09/24/03 $.35-$1.50 10,000,000 0 10,000,000 10/31/05
F. Giffon 01/08/04 $.15-$1.15 5,000,000 2,000,000 3,000,000 01/08/08
B. Baker 01/08/04 $.15-$1.15 5,000,000 1,421,705 3,578,295 01/08/08
Merriman, Currhan Ford *** $0.60 100,000 0 100,000 06/01/05
30,100,000 9,088,372 21,011,628
========== ========= ==========

Options

There are 728,333 shares of common stock to be issued under various stock option
programs as of July 1, 2004, which are summarized below

Options
Date Exercise Number of Options Outstanding as
Option Name Granted Price Options Exercised of 7/1/04 Expiration Date
B. Kovar 06/20/03 $0.19 210,000 0 210,000 One third expiring on the following dates:
6/20/07, 6/20/08, and 6/20/09
J. Kent 06/20/03 $0.19 210,000 0 210,000 One third expiring on the following dates:
6/20/07, 6/20/08, and 6/20/09
A. Pellegrini 07/01/04 $0.68 100,000 0 100,000 07/01/05
R. Lough 11/03/03 $0.16 208,333 0 208,333 11/03/07
728,333 0 728,333
======= ===== =======

Penny Stock Considerations

Because our shares trade at less than $5.00 per share, they are "penny stocks"
as that term is generally defined in the Securities Exchange Act of 1934 to mean
equity securities with a price of less than $5.00. Our shares thus will be
subject to rules that impose sales practice and disclosure requirements on
broker-dealers who engage in certain transactions involving a penny stock.

Under the penny stock regulations, a broker-dealer selling a penny stock to
anyone other than an established customer or accredited investor must make a
special suitability determination regarding the purchaser and must receive the
purchaser's written consent to the transaction prior to the sale, unless the
broker-dealer is otherwise exempt. Generally, an individual with a net worth in
excess of $1,000,000 or annual income exceeding $100,000 individually or
$300,000 together with his or her spouse is considered an accredited investor.
In addition, under the penny stock regulations the broker-dealer is required to:

o Deliver, prior to any transaction involving a penny stock, a
disclosure schedule prepared by the Securities and Exchange
Commissions relating to the penny stock market, unless the
broker-dealer or the transaction is otherwise exempt;
o Disclose commissions payable to the broker-dealer and our registered
representatives and current bid and offer quotations for the
securities;
o Send monthly statements disclosing recent price information pertaining
to the penny stock held in a customer's account, the account's value
and information regarding the limited market in penny stocks; and
o Make a special written determination that the penny stock is a
suitable investment for the purchaser and receive the purchaser's
written agreement to the transaction, prior to conducting any penny
stock transaction in the customer's account.

Because of these regulations, broker-dealers may encounter difficulties in their
attempt to sell shares of our common stock, which may affect the ability of
selling shareholders or other holders to sell their shares in the secondary
market and have the effect of reducing the level of trading activity in the
secondary market. These additional sales practice and disclosure requirements
could impede the sale of our securities, if our securities become publicly
traded. In addition, the liquidity for our securities may be decreased, with a
corresponding decrease in the price of our securities. Our shares in all
probability will be subject to such penny stock rules and our shareholders will,
in all likelihood, find it difficult to sell their securities.

Dividends

We do not anticipate paying dividends in the foreseeable future. We plan to
retain any future earnings for use in our business. Any decisions as to future
payments of dividends will depend on our earnings and financial position and
such other facts as the Board of Directors deems relevant.

Recent Sales of Unregistered Securities

From February 1, 2004 through April 30, 2004, the Company sold 13,697,912 shares
of common stock to 19 individuals and entities at prices of $.125-$.48 per share
for cash of $4,484,628.

From November 1, 2003 through January 31, 2004, the Company sold 31,316,289
shares of common stock to 7 individuals and companies at prices of $.127-$.20

per share for cash of $4,534,900.

From August 1, 2003 through October 31, 2003, the Company sold 7,105,964 shares
of common stock to 12 individuals and companies at prices of $.04-$.25 per share
for cash of $1,147,341

From May 1, 2003 through July 31, 2003, the Company sold 3,000,000 shares of
common stock to 1 individual at a price of $.10 per share for cash of $300,000.

We relied upon Section 4(2) of the Securities Act of 1933, as amended for the
above issuances. We believed that Section 4(2) was available because:

o None of these issuances involved underwriters, underwriting discounts
or commissions;
o We placed restrictive legends on all certificates issued;
o No sales were made by general solicitation or advertising;
o Sales were made only to accredited investors or investors who were
sophisticated enough to evaluate the risks of the investment.

In connection with the above transactions, although some of the investors may
have also been accredited, we provided the following to all investors:

o Access to all our books and records.
o Access to all material contracts and documents relating to our
operations.
o The opportunity to obtain any additional information, to the extent we
possessed such information, necessary to verify the accuracy of the
information to which the investors were given access.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

Overview

The following discussion should be read in conjunction with the financial
statements for the period ended April 30, 2004 included with this Form 10-KSB.

Information prior to June 21, 2003 (the date of the reverse acquisition) related
to our predecessor entity, i-Teleco.com, has been omitted. On April 17, 2003,
the Company filed a Certificate of Amendment changing the name of the Company to
SkyWay Communications Holding Corp. ("Skyway Holding"). On June 20, 2003, SWYC
Acquisition Corporation, a Florida corporation and our wholly owned subsidiary,
merged, pursuant to an Amended and Restated Agreement and Plan of Merger, dated
as of June 19, 2003, with and into Sky Way Aircraft, Inc., a Nevada corporation.

From a legal perspective, Skyway Holding was the surviving company and thus
continues its public reporting obligations. However, from an accounting
perspective, Sky Way Aircraft is treated as though it acquired Skyway Holding.
Therefore, all financial information presented in this 10-KSB includes Sky Way
Aircraft's standalone results from the period April 24, 2002 (date of
incorporation) to June 21, 2003 and the consolidated companies' results from
June 2003 to April 30, 2004.

Certain information included herein contains statements that constitute
"forward-looking statements" containing certain risks and uncertainties. Readers
are referred to the cautionary statement at the beginning of this report, which
addresses forward-looking statements made by us.

We plan to provide security and other services for the airline industry through
applications of our licensed high-speed, broadband wireless communications
technology. We have not yet generated any significant revenues from our planned
principal operations and are considered a development stage company as defined
in Statement of Financial Accounting Standards No.7.

Critical Accounting Policies

Our critical accounting policies, including the assumptions and judgments
underlying them, are disclosed in the Notes to the Financial Statements. We have
consistently applied these policies in all material respects. At this stage of
our development, these policies primarily address matters of expense
recognition, in particular the recognition of impairment losses on certain
equipment and intellectual property and the estimate of compensation expense
related to the issuance of preferred stock, common stock and warrants to
purchase common stock. Although we anticipate that revenue recognition issues
will become critical in future years, the small amount of revenue that we have
earned at this stage minimizes the impact of any judgments regarding revenue
recognition. Management does not believe that our operations to date have
involved uncertainty of accounting treatment, subjective judgment, or estimates,
to any significant degree.

RESULTS OF OPERATIONS FOR THE YEAR ENDED APRIL 30, 2004 VS. THE YEAR ENDED APRIL
30, 2003

We generated our first revenues in December 2003, generating only $51,000 for
the year ended April 30, 2004.

During the year ended April 30, 2004 we incurred selling, general and
administrative expenses approximating $19,100,000 of which $12,900,000 were
non-cash compensation from the value of stock and warrants issued to employees
and consultants. These expenses consisted of advertising, consulting fees,
payroll, rent and legal fees that allowed us to begin developing our
infrastructure and industry contacts. During the year ended April 2003, selling,
general and administrative expenses approximated $830,000. The increase of
approximately $18,300,000 or 2,200% was the result of significant funding that
we raised through the issuance of common stock that allowed us to dedicate
resources to our development plans.

We also recorded impairment losses during the fourth quarter 2004 approximating
$1,250,000 as a result of our review of property, equipment and intellectual
property. Because we are in the development stage and have incurred significant
losses we reviewed our long lived assets and intangibles to determine their
recoverability and determined that certain assets were not recoverable. We had
no such expenses in 2003.

Our research and development costs related to the development of our networks
approximated $1,500,000 during the year ended April 30, 2004. During the year
ended April 30, 2003 we incurred approximately $500,000 in research and
development costs. The increase of approximately $1,000,000 or 200% was the
result of significant funding that we raised through the issuance of common
stock that allowed us to dedicate resources to our development plans.

As a result of the above our net loss for the year ended April 30, 2004 was
approximately $21,800,000, an increase of approximately $20,500,000 or 1,600%
from our loss in 2003 of approximately $1,300,000.

LIQUIDITY AND CAPITAL RESOURCES

From our inception on April 24, 2002 to April 30, 2004, we incurred operating
losses of approximately $23,100,000 (approximately $13,200,000 of this loss was
from non-cash stock based compensation expense) and at April 30, 2004 we had a
net working capital deficit of approximately $2,200,000. Net cash used in
operating activities for the period from April 24, 2002 to April 30, 2004 was
approximately $6,900,000. Net cash used from investing activities for equipment
and an aircraft upgrades, not including borrowings of $1,500,000 secured by the
aircraft, was approximately $4,600,000. We funded these needs primarily through
the sale of common stock and advances from related parties that were converted
to common stock which have provided us approximately $13,200,000.

As a result of the above, as of April 30, 2004, we had a cash position of
approximately $1,700,000.

In May 2004, the Company issued a note receivable in the amount of $325,000 to
Bruce Baker for prepayment of services to the company. The note bears 6%
interest and is due December 31, 2004.

In June 2004, the Company received a loan in the amount of $1,247,000 from Brent
Kovar, President. The loan bears no interest and will be repaid when funds are
available.

After paying other operating items and funding additional equipment purchases
from May 1, 2004 through July 28, 2004 we currently have no cash on hand.

We do not have any cash available to satisfy our cash requirements over the next
month based upon our current rate of expenses. We will need to secure a minimum
of $2,000,000 to satisfy requirements for the next 12 months of operations, but
we also will need an additional minimum of $5,000,000 to finance our planned
expansion, which funds will be used for product development, capital procurement
and personnel. In order to become profitable we may still need to secure
additional debt or equity funding. We have no source of funding identified. Our
failure to secure additional funds would impair and delay our ability to
implement our business plan.

We entered into a Purchase Agreement dated as of February 20, 2004, by and
between us, Sky Way Global, LLC, a Nevada Limited Liability Company, an
affiliate of which Mr. Brent Kovar and Ms. Joy Kovar are principals, and Brent
Kovar, under which we acquired all right, title and interest to United States
patent number 6587887, granted July 1, 2003, and entitled "Digital data
transmission utilizing vector coordinates within a hyperbola model." We paid to
Global the sum of $1,000,000 cash, subject to reclassification. The Parties
agreed to work in good faith to secure as soon as practical a written valuation
of the U.S. Patent from a mutually agreeable, third party, independent,
recognized expert with expertise in areas relating to the U.S. Patent and its
value. The valuation need only state the value to be in excess of $1,000,000 or
not in excess of $1,000,000; provided, however if not in excess of $1,000,000,
the expert shall state a specific dollar valuation. The expert must state all
reasons for the valuation in detail. If the valuation is less than $1,000,000,
the difference shall be reclassified on our books and reported to the IRS and
SEC as compensation to Global and thus Global's affiliates.

In January 2004, we signed a loan agreement for $1,500,000 for the procurement
of a DC-9 to use to for research and development. Of this amount, $1,500,000 was
funded with a six month promissory note from the United Bank and Trust Company
with interest based upon the Bank Prime Rate plus 0.5%. The loan is guaranteed
by the President of the Company, two other shareholders of the Company and a
company controlled by one of the shareholders. In connection with the guarantee
of the loan by one of our shareholders, a company related to this
guarantor-shareholder is listed as the co-owner of the asset. This co-ownership
is only effective for the period of the guarantee. We have voting control of all
matters related to the aircraft. Through April 30, 2004 we have incurred
approximately $1,000,000 for equipment and installation of the equipment for the
upgrade of the cabin facilities. We estimate we will spend an additional
$100,000 to complete the desired upgrades.

We may experience problems, delays, expenses, and difficulties sometimes
encountered by an enterprise in our stage of development, many of which are
beyond our control. These include, but are not limited to, unanticipated
problems relating to the development of the system, production and marketing
problems, additional costs and expenses that may exceed current estimates, and
competition.

Contractual Cash Obligations

Our contractual cash obligations are outlined in the table below including our
equipment leases, luxury seat lease and office rental obligations. These cash
obligations are expected to amount to approximately $69,700 per month for fiscal
ended April 30, 2005.

Payments Due by Period
(in thousands)
Less than 1
Contractual Obligations Total year 1-3 years 4-5 years After 5 years
Facilities Obligation $ 3,834.4 $ 609.1 $ 2,284.8 $ 474.5 $ 466.0

Other Obligations 963.6 227.8 320.5 175.3 240.0
Total Contractual Cash
Obligations $ 4,798.0 $ 836.9 $ 2,605.3 $ 649.8 $ 706.0
========= ======== ========= ========= ========

During the year ended April 30, 2004, the Company has not engaged in:

o Material off-balance sheet activities, including the use of structured
finance or special purpose entities;
o Trading activities in non-exchange traded contracts; or
o Transactions with persons or entities that benefit from their
non-independent relationship with the Company.

Future Plans

We plan to accomplish the following in the future. We need additional funds
to finance our business development in the next 12 months, as set forth below,
but we are not committed to make any of these expenditures. We have no source of
these funds identified. We hope to be able to raise additional funds from an
offering of our stock or other investment options available to us in the future.

However, this stock offering may not occur, or if it occurs, may not raise the
desired funding. If we fail to secure adequate funds to accomplish the
objectives outlined below, we will be able to conduct only limited operations.
However, we believe that if we secure the required funding on a timely basis, we
can accomplish these objectives within the projected time frames.

EVENT OR MILESTONE TIME FRAME FOR IMPLEMENTATION METHOD OF ACHIEVEMENT ESTIMATED COST
[Low/High]
___________________________________ ____________________________ __________________________ _________________
Lease, activate and upgrade tower May 1, 2004 - April 30, 2005 Contact owners and complete $600,000-$850,000
network negotiations; conduct site
survey
___________________________________ ____________________________ __________________________ _________________
Identify, test and upgrade equipment May 1, 2004 - April 30, 2005 Identify airlines, execute $500,000-$650,000
in aircraft agreement, secure
installation service
___________________________________ ____________________________ __________________________ _________________
Build out and equip operations center May 1, 2004 - October 31, 2004 Construct and test all $300,000-$550,000
operations
___________________________________ ____________________________ __________________________ _________________
Complete research and testing of May 1, 2004 - October 31, 2004 Continue research and testing $250,000-$500,000
aircraft network
___________________________________ ____________________________ __________________________ _________________
Hire additional employees to operate May 1, 2004 - April 30, 2005 Interview and hire $500,000-$650,000
network
___________________________________ ____________________________ __________________________ _________________

We have no sources of financing identified. Even if we identify sources for such
financing:

o Additional financing may not be available on commercially reasonable
terms or available at all;
o Additional financing may result in dilution to existing and future
equity holders; and
o If we issue debt instruments, we will be subject to increased debt
obligations that will impose a greater financial strain upon our
operations.

If we do not secure the required funding, the major expansion planned milestones
may not be achieved within the anticipated time period, if at all. We believe
that future plans will be achieved if we receive the necessary funding.
Furthermore, in the event that the level of funding is less that we have
anticipated, this may also result in a delay in our ability to generate revenues
or a reduced amount of revenues being generated.

ITEM 7. FINANCIAL STATEMENTS

The financial statements of the Company, together with the reports of
independent auditors, are included in this report after the signature pages.

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

We engaged PRITCHETT, SILER & HARDY, P.C. ("PSH") as our principal accountant to
replace its former principal accountant, Seligson & Giannattasio, LLP ("S&G").
The former accountant was dismissed on September 3, 2003. PSH was appointed on
September 3, 2003. The audit reports issued by PSH only related to the
pre-acquisition financial statements of our subsidiary.

On December 2, 2003, we engaged Kingery, Crouse & Hohl, P.A. as our principal
accountant to replace our former principal accountant, PSH. The former
accountant was dismissed on December 2, 2003.

On July 19, 2004, we engaged Stark Winter Schenkein & Co., LLP ("SWS") as our
independent auditors. On July 19, 2004, our former independent auditors, Kingery
Crouse & Hohl, P.A. ("KCH") resigned when, as a result of the resignation of the
our then CFO, Richard Lough, its independence became impaired due to the fact
that a former employee of KCH, hired by us, is now in an increased financial
reporting role with us. Mr. Lough will continue to serve us as a consultant in a
transition role. KCH did not provide an audit opinion on the Company's financial
statements for either of the last two fiscal years.

All decisions to change accountants were approved by our Board of Directors.

There have been no disagreements between the Company and S&G, PSH or KCH in
connection with any services provided to us by each of them for the periods of
their engagement on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure.

No accountant's report on the financial statements for the past two years
contained an adverse opinion or a disclaimer of opinion or was qualified or
modified as to uncertainty, audit scope or accounting principles, except such
reports did contain a going concern qualification; such financial statements did
not contain any adjustments for uncertainties stated therein. In addition, S&G,
PSH and KCH did not advise the Company with regard to any of the following:

1. That internal controls necessary to develop reliable financial
statements did not exist; or

2. That information has come to their attention, which made them
unwilling to rely on management's representations, or unwilling to be
associated with the financial statements prepared by management; or

3. That the scope of the audit should be expanded significantly, or
information has come to the accountant's attention that the accountant
has concluded will, or if further investigated might, materially
impact the fairness or reliability of a previously issued audit report
or the underlying financial statements, or the financial statements
issued or to be issued covering the fiscal periods subsequent to the
date of the most recent audited financial statements, and the issue
was not resolved to the accountant's satisfaction prior to its
resignation or dismissal.

S&G furnished us with a letter addressed to the United States Securities and
Exchange Commission stating that it agrees with the above statements, which
letter was attached as Exhibit 16.1 on Form 8-K filed September 5, 2003.

PCH furnished us with a letter addressed to the United States Securities and
Exchange Commission stating that it agrees with the above statements, which
letter was attached as Exhibit 16.1 on Form 8-K filed December 8, 2003.

KCH furnished us with a letter addressed to the United States Securities and
Exchange Commission stating that it agrees with the above statements, which
letter was attached as Exhibit 16.1 on Form 8-K filed July 28, 2004.

During the most recent two fiscal years and during any subsequent interim
periods preceding the date of each engagement, we have not consulted S&G, PSH of
KCH regarding any matter requiring disclosure under Regulation S-K, Item
304(a)(2).

Item 8A. Controls and Procedures

The Corporation maintains and is currently undertaking actions to improve
disclosure controls and procedures designed to ensure that information required
to be disclosed in reports filed under the Securities Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported within the specified
time periods. As of the end of the period covered by this report, the
Corporation's Chief Executive Officer and Chief Financial Officer evaluated the
effectiveness of the Corporation's disclosure controls and procedures. Based on
the evaluation, which disclosed no significant deficiencies or material
weaknesses that are not being addressed in the actions currently being taken to
improve our disclosure controls and procedures, particularly in areas such as
contract, securities sales, expense and press release review and authorization,
the Corporation's Chief Executive Officer and Chief Financial Officer concluded
that the Corporation's disclosure controls and procedures are effective as of
the end of the period covered by this report in that information required to be
disclosed in reports filed under the Securities Exchange Act of 1934, as
amended, has been recorded, processed, summarized and reported within the
current fiscal year. There were no changes in the Corporation's internal control
over financial reporting that occurred during the Corporation's most recent
fiscal quarter that have materially affected, or are reasonably likely to
materially affect, the Corporation's internal control over financial reporting.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS:
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The directors and officers of the Company and its subsidiaries, as of July 28,
2004, are set forth below. The directors hold office for their respective term
and until their successors are duly elected and qualified. Vacancies in the
existing Board are filled by a majority vote of the remaining directors. The
officers serve at the will of the Board of Directors.

WITH COMPANY
NAME AGE SINCE DIRECTOR/POSITION

James Kent 66 10/2000 Chief Executive Officer,
Chief Financial Officer
Member of Board

Brent Kovar 38 1/1/2001 President, Board Member

Joy Kovar 69 1/1/2001 VP Corporate Services,
Board Member

Fuad Talib 63 2/1/2004 Board Member

Alan Pellegrini 41 7/1/2004 Board Member

James S. Kent - Commencing in 2000, Mr. Kent was director of business operations
for Sky Way Aircraft, Inc., which merged with our wholly-owned subsidiary in

June 2003, at which time he became CEO and Director. He was CFO from June 2003
to October 2003 and became CFO again in July 2004. From 1998 to 1999, Mr. Kent
served as director of operations for Satellite Access Systems, Inc., a satellite
services corporation. From 1997 to 1998 he served as a senior management
consultant with Booz, Allen & Hamilton, a major government contractor and
national/ international business consulting firm. From 1980 to 1997, Mr. Kent
served in various government contract management positions supporting projects
of the Department of Defense, National Security Agency, and Department of the
Navy.

Brent C. Kovar - As president and director of research and development and
engineering, Mr. Kovar founded Sky Way Aircraft in 2000, a high speed broadband
wireless service company, and has continued as our president and director since
our merger in June 2003. From 1996 to 2000, Mr. Kovar served as the executive
vice president and director of research and development for Satellite Access
Systems. From 1990 to 1996, Mr. Kovar served in various consulting, management
and research and development positions. In 1990, Mr. Kovar founded PC, Ltd., a
company that produced specialty-designed remote controlled arm and RF products.
From 1987 to 1989, he was associated with Jacobs Engineering, an engineering
company in Pasadena, California. From 1986 to 1987, Mr. Kovar worked with Falcon
Communications as a wireless communications engineer. Mr. Kovar earned a
Bachelor of Science degree from DeVry Institute.

Joy Carson Kovar - VP Corporate Services - Mrs. Kovar started working for Sky
Way Aircraft in 2000 as vice president of corporate services responsible for
administrative support, human relations and accounting services, and continued
in that position and became a director upon our merger in June 2003. Her early
experience in personnel work was gained during 1957 to 1960 for the Department
of Agriculture and later with the Air Force in 1963 and 1964. In 1960, Mrs.
Kovar started Communication Skills Laboratory, in Pasadena, California. She
conducted classes for hundreds of business people. From 1964 to 1993, Mrs. Kovar
worked in the field of education. In addition to classroom experience she worked
in school administration, including Federal programs for improvement and State
of California team for school inspection. From 1993 to 1997 she was a substitute
teacher in California. From 1997 to 2000, she was human resources for Satellite
Access Systems, a satellite communications provider. She completed a Bachelor of
Arts at Arizona State University in 1957 and a Masters of Arts in 1978 at
Redlands University, California with post graduate work at UCLA.

Fuad Talib - Mr. Talib was a Professor at Arkansas University for 20 years until
his retirement in May of 2002 where he taught Insurance, Personal Finance and
International Marketing . Since that time he has been a Retired Emirates
Associate Professor of Insurance.

Alan Pellegrini - Mr. Pellegrini joined us as director in July 2004. From 2001
to date he has been with Matsushita Avionics Systems Corp., Irvine CA,, a
subsidiary of Panasonic Corporation, as Senior Vice President and Board Member.
From 2003 to date, he has been with Panasonic Transportation Systems Company,
New York, a subsidiary of MAS, as President. From 2001 to 2002, he was with
Tenzing Communications, Inc., Seattle WA, as President and COO. From 1998 to
2001, he was with Rockwell Collins, Cedar Rapids Iowa/Pomona CA as Vice
President, Marketing and Sales. From 1992 to 1998, he was with Hughes
Electronics, California, serving with a subsidiary Hughes Avicom Pomona CA from
1996 -1998 as Vice President, Marketing and Sales. He received a Master of
Business Administration 1992, University of Southern California, with Honors; a
Master of Science, Engineering 1987, California State University, Northridge,
with Honors; and a Bachelor of Science, Applied Mathematics 1985, University of
California, Los Angeles.

Our bylaws currently provide for a board of directors comprised of such number
as is determined by the Board.

On July 19, 2004 Mr. Richard Lough, who had served as our CFO from November 3,
2003 to July 19, 2004 resigned and Mr. Kent assumed the CFO position.

Family Relationships

Joy Kovar is the mother of Brent Kovar and Brent Kovar is the son of Joy Kovar.

Board Committees

We currently have no compensation committee or other board committee performing
equivalent functions. Currently, all members of our board of directors
participate in discussions concerning executive officer compensation.

Legal Proceedings

No officer, director, or persons nominated for such positions, promoter or
significant employee has been involved in legal proceedings that would be
material to an evaluation of our management.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our
directors and executive officers, and persons who beneficially own more than 10%
of a registered class of our equity securities, to file reports of beneficial
ownership and changes in beneficial ownership of our securities with the SEC on
Forms 3 (Initial Statement of Beneficial Ownership), 4 (Statement of Changes of
Beneficial Ownership of Securities) and 5 (Annual Statement of Beneficial
Ownership of Securities). Directors, executive officers and beneficial owners of
more than 10% of our Common Stock are required by SEC regulations to furnish us
with copies of all Section 16(a) forms that they file. Except as otherwise set
forth herein, based solely on review of the copies of such forms furnished to
us, or written representations that no reports were required, we believe that
for the fiscal year ended April 30, 2004 all required forms have been filed as
of the date of filing of this Form 10K-SB.

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth compensation paid to the most highly
compensated executive officers for the fiscal years ended April 30, 2003 and
2004.

Name/ Restricted
Position Year Salary Bonus Stock Other Total

James Kent 2004 $ 175,000 $ - $ 371,976 $ 9,488 $ 556,464
CEO 2003 $ 12,500 $ - $ - $ 750 $ 13,250

Brent Kovar 2004 $ 150,000 $ - $1,301,916 $16,482 $1,468,398

President (1) 2003 $ 150,000 $ - $ - $10,656 $ 160,656

Joy Kovar (1) 2004 $ 80,000 $ - $ 619,960 $ 4,143 $ 704,103
VP Corp 2003 $ 80,000 $ - $ - $ - $ 80,000
Services
__________
Pursuant to the closing of the merger on June 22, 2003 an Employment
Agreement was signed with Mr. Kent and Mr. Kovar. Terms are as follows:

o Employment Term: 3 years

o Compensation: Base Salary of $150,000 for Mr. Kovar and $150,000 for
Mr. Kent, per annum, increased by a minimum ten (10%) percent on the
first anniversary of the appointment date and on each anniversary date
thereafter during the employment term. The agreement for Mr. Kent was
subsequently amended increasing his base salary to $175,000 per annum,
effective July 1, 2003.

o A grant of stock options to purchase 210,000 shares of common stock of
that vest as follows: 70,000 on the 1st anniversary of the appointment
date; 70,000 on the 2nd anniversary of the appointment date; and
70,000 on the 3rd anniversary of the appointment date. The option
exercise price shall be the closing market price for the common stock
on the appointment date which was $.19, and the exercise period will
be three years from the vesting date.

o Termination: The agreement may be terminated upon death, disability,
cause and without cause as set forth in the agreement.

o Confidentiality and Assignment of Inventions: The agreement contains
confidentiality provisions and also requires an assignment of all
inventions without further compensation than already stated in the
agreements.

o Mr. Kent was also provided a monthly auto allowance of $750 while Mr.
Kovar was provided the use of a company vehicle, including insurance,
with a fair market value proving the IRS Annual Lease Value method of
$16,482.

(1) We entered into a Purchase Agreement dated as of February 20, 2004, by and
between us, Sky Way Global, LLC, a Nevada Limited Liability Company, an
affiliate of which Mr. Brent Kovar and Ms. Joy Kovar are principals, and Brent
Kovar, under which we acquired all right, title and interest to United States
patent number 6587887, granted July 1, 2003, and entitled "Digital data
transmission utilizing vector coordinates within a hyperbola model." We paid to
Global the sum of $1,000,000 cash, subject to reclassification. The Parties
agreed to work in good faith to secure as soon as practical a written valuation
of the U.S. Patent from a mutually agreeable, third party, independent,
recognized expert with expertise in areas relating to the U.S. Patent and its
value. The valuation need only state the value to be in excess of $1,000,000 or
not in excess of $1,000,000; provided, however if not in excess of $1,000,000,
the expert shall state a specific dollar valuation. The expert must state all
reasons for the valuation in detail. If the valuation is less than $1,000,000,
the difference shall be reclassified on our books and reported to the IRS and
SEC as compensation to Global and thus Global's affiliates.

No other annual compensation, including a bonus or other form of compensation;
and no long-term compensation, including restricted stock awards, securities
underlying options, LTIP payouts, or other form of compensation, were paid to
these individuals during this period.

Board Compensation

Members of our Board of Directors do not receive cash compensation for their
services as Directors, although some Directors are reimbursed for reasonable
expenses incurred in attending Board or committee meetings, except as follows:

Mr. Alan Pellegrini entered into a consulting agreement with a minimum of 1 year
term starting July 1, 2004 following which either party can terminate agreement
with 30 days notification. Mr. Pellegrini shall receive a monthly retainer for
services performed in the amount of $8,334 per month, which will be paid within
14 days of receipt of invoice provided he dedicates an average of 2 to 15 hours
per week supporting Skyway.

In addition to performing board responsibilities, Mr. Pellegrini shall serve as
a consultant with the following areas of focus:

a. Business Development focused on pursuing and closing business
opportunities with airlines, OEMs and others as directed.
b. Strategy formulation, guidance, and implementation as directed.
c. Strategic alliance development for product and service delivery.

To compensate Mr. Pellegrini for services rendered, in addition to the monthly
retainer above, he shall be awarded a total of 100,000 stock options at $ .68
per share which will vest as of July 1, 2005. The options will expire July 1,
2009.

Mr. Pellegrini will be reimbursed for reasonable expenses incurred on behalf of
the company including travel and travel related expenses such as customer
entertainment in accordance with company policy.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth as of July 1, 2004, information with respect to
the beneficial ownership of the Company's Common Stock by (i) each person known
by the Company to own beneficially 5% or more of such stock, (ii) each Director
of the Company who owns any Common Stock, and (iii) all Directors and Officers
as a group, together with their percentage of beneficial holdings of the
outstanding shares.

The information presented below regarding beneficial ownership of our voting
securities has been presented in accordance with the rules of the Securities and
Exchange Commission and is not necessarily indicative of ownership for any other
purpose. Under these rules, a person is deemed to be a "beneficial owner" of a
security if that person has or shares the power to vote or direct the voting of
the security or the power to dispose or direct the disposition of the security.
A person is deemed to own beneficially any security as to which such person has
the right to acquire sole or shared voting or investment power within 60 days
through the conversion or exercise of any convertible security, warrant, option
or other right. More than one person may be deemed to be a beneficial owner of

the same securities. The percentage of beneficial ownership by any person as of
a particular date is calculated by dividing the number of shares beneficially
owned by such person, which includes the number of shares as to which such
person has the right to acquire voting or investment power within 60 days, by
the sum of the number of shares outstanding as of such date plus the number of
shares as to which such person has the right to acquire voting or investment
power within 60 days. Consequently, the denominator used for calculating such
percentage may be different for each beneficial owner. Except as otherwise
indicated below and under applicable community property laws, we believe that
the beneficial owners of our common stock listed below have sole voting and
investment power with respect to the shares shown.

Security Ownership of Beneficial Owners (1):

TITLE OF CLASS NAME & ADDRESS SHARES PERCENT

Common Stock Michael D. Farkas (2) 13,786,773 9.9%
294 South Coconut Lane
Miami, Florida 33131

Security Ownership of Management:

TITLE OF CLASS NAME & ADDRESS SHARES PERCENT

Series A
Preferred Stock Sky Way Global, LLC (3) 1,000,000 (4) 100%
121 6th Street East
Tierra Verde, FL 33715

Series B
Preferred Stock KH-01, Inc. (5) 1,000,000 (6) 100%
121 6th Street East
Tierra Verde, FL 33715

Series C
Preferred Stock (7) Brent Kovar 840,000 29.9%
Joy Kovar 400,000 14.2%
James Kent 250,000 8.9%

Series D
Preferred Stock Sky Way Global, LLC (3) 85,000 (8) 100%
121 6th Street East
Tierra Verde, FL 33715

Common Stock (9)

James Kent 70,000 *
Brent Kovar 70,000 *

Fuad Talib 50,000 *

Common and Series A,
B, C and D
Preferred Stock All directors and named
executive officers as a group 190,000 Common *
1,000,000 A Preferred 100%
(5 persons) (3)(4)(5)(6)(7)(8)(9)
(10) 1,000,000 B Preferred 100%
1,000,000 C Preferred 100%
1,000,000 D Preferred 100%

* Less than 1% of the outstanding shares.

(1) This table is based upon information derived from our stock records. Unless
otherwise indicated in the footnotes to this table and subject to community
property laws where applicable, it believes that each of the shareholders named
in this table has sole or shared voting and investment power with respect to the
shares indicated as beneficially owned.

(2) Includes 1,130,493 shares held by Atlas Capital Services LLC, 8,565,557
shares held by Atlas Equity Group, Inc., 6000,000 shares held by Atlas Group of
Companies, 6000,000 shares held by The Atlas Group of Companies LLC, and
1,253,000 shares held by The Farkas Family Foundation. Michael D. Farkas is the
principal of these entities. This amount also includes Warrants to acquire
4,333,333 shares of common stock exercisable in the next 60 days.

(3) Sky Way Global LLC is controlled by Brent Kovar, president and manager, and
Joy Kovar, secretary, who are beneficial owners of these shares. Joy Kovar is
the mother of Brent Kovar. Brent Kovar is the son of Joy Kovar.

(4) Each share of Series A Preferred Stock converts into 100 shares of common
stock upon certain conditions and has 100 votes per share. Assuming conversion
of the Series A and Series D Preferred Stock and no conversion of any other
Series of Preferred Stock or exercise of options or warrants, the owners of the
Series A Preferred Stock would own 44.6% of our voting securities. The Series A
shares are currently convertible.

(5) KH-01, Inc. is controlled by Brent Kovar, president and director, and Joy
Kovar, secretary and director, who are beneficial owners of these shares. Joy
Kovar is the mother of Brent Kovar. Brent Kovar is the son of Joy Kovar.

(6) Each share of Series B Preferred stock converts into 200 shares of common
stock upon certain conditions and has 200 votes per share, whether or not
converted. The Series B shares are not currently and may never be eligible for
conversion.

(7) Each share of Series C Preferred Stock converts into 10 shares of common
stock automatically and for no additional consideration on September 23, 2004.
The percentage is based solely upon the shares of common stock to be issued upon
conversion of Series C Preferred Stock and does not take into account shares of
common stock issued and outstanding and assumes no conversion of any other
Series of Preferred Stock or exercise of options or warrants. Until conversion,

the Series C Preferred Stock is non-voting. The business address of these
individuals is 6021 - 142nd Avenue North. Clearwater, FL 33760.

(8) Each share of Series D Preferred Stock converts into 100 shares of common
stock upon certain conditions and has no votes per share.

(9) This represents shares of common stock issuable under options that are
exercisable in the next 60 days by these individuals.

(10) Assuming conversion of the Series A, B, C and D Preferred Stock and
exercise of all options and warrants, the officers and directors as a group
would own 323,860,000 or 65.3% of our voting securities.

Except as set forth above, applicable percentages are based upon 138,571,105
shares of common stock outstanding as of July 15, 2004.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Our management is involved in other business activities and may, in the future
become involved in other business opportunities. If a specific business
opportunity becomes available, such persons may face a conflict in selecting
between our business and their other business interests. We have not and do not
intend in the future to formulate a policy for the resolution of such conflicts.

We entered into a Purchase Agreement dated as of February 20, 2004, by and
between us, Sky Way Global, LLC, a Nevada Limited Liability Company, an
affiliate of which Mr. Brent Kovar and Ms. Joy Kovar are principals, and Brent
Kovar, under which we acquired all right, title and interest to United States
patent number 6587887, granted July 1, 2003, and entitled "Digital data
transmission utilizing vector coordinates within a hyperbola model." We paid to
Global the sum of $1,000,000 cash, subject to reclassification. The Parties
agreed to work in good faith to secure as soon as practical a written valuation
of the U.S. Patent from a mutually agreeable, third party, independent,
recognized expert with expertise in areas relating to the U.S. Patent and its
value. The valuation need only state the value to be in excess of $1,000,000 or
not in excess of $1,000,000; provided, however if not in excess of $1,000,000,
the expert shall state a specific dollar valuation. The expert must state all
reasons for the valuation in detail. If the valuation is less than $1,000,000,
the difference shall be reclassified on our books and reported to the IRS and
SEC as compensation to Global and thus Global's affiliates.

As of April 30, 2004 and through the current day, the Company provides office
space, utilities and administrative support to Glen Kovar, father of the
president at no charge. We have valued this at less than $5,000 during fiscal
year 2004, based upon the estimated amount of space and time Mr. Kover utilizes.

The Company shares office space with SkyWay Global ("SWG"). In May 2003, due to
the reduced operations of SWG, the Company stopped charging rent to SWG but
still provides an office, equipment and administrative support for SWG at no
cost. During the years ended April 30, 2004 and 2003, respectively, the Company
billed SWG $0 and $0 in rent. We have valued this at less than $5,000 during
fiscal year 2004, based upon the estimated amount of space and time the
principles of SWG utilize.

In January, the Company entered into a six-month financing agreement with a
financial institution for the purchase of an airplane. This loan is guaranteed
by three share-holders of the company. In July, the financing arrangement has
been extended for an additional six-month period under the same terms.

During the third quarter of 2004, the Company borrowed funds from its President
to meet their short-term cash needs. These amounts were advanced without
interest and are due on demand. At April 30, 2004 the Company owed the President
$5,078.

On June 2, 2003, the Company entered into an Investment Banking/Advisory
Agreement with Atlas Capital Services for non-exclusive financing services and
merger and acquisition services. The company is owned by Michael D Farkas. Upon
closing of an acquisition Atlas was to be paid 2,330,493 shares of the Company's
common stock for services rendered in connection with the acquisition. Upon
completion of a financing, Atlas is to be paid a fee totaling 10% of the
financing secured.

In July 2003, the Company issued five-year warrants to Mr. Farkas to purchase
6,000,000 shares of common stock for services valued at $1,050,000 using the
Black-Scholes option pricing model. The warrants were issued to purchase shares
of common stock at the following exercise prices: 1,000,000 at $.10 per share,
2,000,000 at $.15, 1,000,000 at $.30 per share, 1,000,000 at $.55 per share,
1,000,000 at $1.00 per share.

Prior to June 19, 2003, SkyWay Global ("SWG") made payments on behalf of the
Company and made cash advances to the Company totaling $1,564,015. The advances
bore no interest and were due on demand. On June 19, 2003, the Company converted
the amounts owed to SWG into a promissory note. The note bore no interest and
was due on demand. On June 21, 2003, the Company issued 1,000,000 shares of its
preferred stock to SWG as repayment of the note and advances.

For the period July 2003 through April 30, 2004, the Company received cash and
non cash advances totaling $424,895 from SkyWay Global, LLC ("SWG"). Relative to
these advances, the Company made cash and non cash repayments totaling $166,026.
The net advance due to SWG at April 30, 2004 is $258,869. The advance bears no
interest and is due on demand.

On May 30, 2003, the Company entered into an agreement with its then president,
Jamie Kamlee. Pursuant to the agreement, the Company agreed to issue 500,000
shares of the Company's common stock as a bonus. The shares will be valued at
$.17 per share, the value of the shares on the date of the agreement.

Until the closing of the merger in June of 2003, we shared office space in a
building located at 1680 Michigan Avenue, Miami Beach, Florida. The facility was
leased pursuant to a month to month lease. The primary tenant is Atlas Equity
Group, Inc. Michael D. Farkas, our principal shareholder is the President and
sole shareholder of Atlas Equity Group, Inc. The ultimate landlord is not
affiliated with us. No rent is being charged to us.

In connection with the merger, we entered into additional transactions with our
management and our beneficial owners. We are not a subsidiary of any parent
company. After the merger, we have one wholly-owned subsidiary, Sky Way
Aircraft, Inc.

On April 17, 2003, the Company issued 4,079,148 shares of common stock to
Michael Farkas in exchange for the $20,396 in loans advances and accrued
interest outstanding at the time. On the same date, the Company issued 142,170
shares of common stock to Atlas Equity Group in exchange for $711 in promissory
notes.

During 2002, the Company obtained notes from a stockholder totaling $6,000. The
note incurs interest at the rate of 10% per annum and was due August 13, 2002.
These notes were converted to common stock on April 17, 2003.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

1. Financial statements; see index to financial statement and schedules under
Item 7 herein.

2. Financial statement schedules; see index to financial statements and
schedules under Item 7 herein.

3. Exhibits:

The following exhibits are filed with this Form 10-KSB and are identified by the
numbers indicated: see index to exhibits immediately following financial
statements and schedules of this report.

(4) Instruments defining the rights of holders, including indentures

Articles of Amendment, Preferred Stock Series C and D

(10) Contracts

10.1 Promissory Note with Bruce Baker
10.2 Patent sale agreement

31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Chief
Financial Officer, James Kent

32.1 Section 1350 Certification, James Kent

We filed reports on Form 8K on the following dates in the last quarter of our
fiscal year:

Form Description Filing Date
8-K Current report, items 5 and 7 2004-03-26

8-K Current report, items 5 and 7 2004-03-26

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth fees billed to us by our auditors during the
fiscal years ended April 30, 2004 and April 30, 2003 for: (i) services rendered
for the audit of our annual financial statements and the review of our quarterly
financial statements, (ii) services by our auditor that are reasonably related
to the performance of the audit or review of our financial statements and that
are not reported as Audit Fees, (iii) services rendered in connection with tax
compliance, tax advice and tax planning, and (iv) all other fees for services
rendered.

(i) Audit Fees

2003 2004

Kingery, Crouse & Hohl $0 $34,039

Pritchett, Siler & Hardy $22,758 $0

Stark, Winter, Schenkein & Co $0 $15,000

(ii) Audit Related Fees

None

(iii) Tax Fees

None

(iv) All Other Fees

None

TOTAL FEES

2003 2004

Kingery, Crouse & Hohl $0 $34,039

Pritchett, Siler & Hardy $22,758 $0

Stark, Winter, Schenkein & Co $0 $15,000

AUDIT FEES. Consists of fees billed for professional services rendered for the
audit of our consolidated financial statements and review of the interim
consolidated financial statements included in quarterly reports and services
that are normally provided in connection with statutory and regulatory filings
or engagements.

AUDIT-RELATED FEES. Consists of fees billed for assurance and related services
that are reasonably related to the performance of the audit or review of our
consolidated financial statements and are not reported under "Audit Fees." There
were no Audit-Related services provided in fiscal 2004 or 2003.

TAX FEES. Consists of fees billed for professional services for tax compliance,
tax advice and tax planning.

ALL OTHER FEES. Consists of fees for products and services other than the
services reported above.

POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT
SERVICES OF INDEPENDENT AUDITORS

The Company currently does not have a designated Audit Committee, and
accordingly, the Company's Board of Directors' policy is to pre-approve all
audit and permissible non-audit services provided by the independent auditors.
These services may include audit services, audit-related services, and tax
services and other services. Pre-approval is generally provided for up to one
year and any pre-approval is detailed as to the particular service or category
of services and is generally subject to a specific budget. The independent
auditors and management are required to periodically report to the Company's
Board of Directors regarding the extent of services provided by the independent
auditors in accordance with this pre-approval, and the fees for the services
performed to date. The Board of Directors may also pre-approve particular
services on a case-by-case basis.

SIGNATURES

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

SKYWAY COMMUNICATIONS HOLDING CORP.

Title Name Date Signature

Principal Executive,
Accounting
And Financial James Kent 7-29-2004 /s/James Kent
Officer

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.

SIGNATURE NAME TITLE DATE

/s/Brent C. Kovar Brent C. Kovar Director 7-29-2004
/s/Joy Kovar Joy Kovar Director 7-29-2004
/s/Fuad Talib Fuad Talib Director 7-29-2004
/s/Alan Pellegrini Alan Pellegrini Director 7-29-2004
/s/James Kent James Kent Director 7-29-2004

SKYWAY COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
(A Development Stage Company)

Consolidated Financial Statements as of and for
various periods ended
April 30, 2004 and 2003,
and Independent Auditors' Report

TABLE OF CONTENTS

Page

Independent Auditors' Report 41-42

Consolidated Financial Statements:

Balance Sheet as of April 30, 2004. 43-44

Statements of Operations for the years ended April 30, 2004 45
and 2003 and for the period April 24, 2002 (date of
inception) through April 30, 2004.

Statements of Stockholders' Equity (Deficit) for the 46
years ended April 30, 2004 and 2003 and for the period
April 24, 2002 (date of inception) through April 30, 2004.

Statements of Cash Flows for the year ended April 30, 2004 48
and 2003 and for the period April 24, 2002 (date of
inception) through April 30,2004.

Notes to Financial Statements 50-66

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders and Board of Directors
Skyway Communications Holding Corp. and Subsidiary

We have audited the accompanying consolidated balance sheet of Skyway
Communications Holding Corp. as of April 30, 2004, and the related consolidated
statements of operations, stockholders' equity and cash flows for the year
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Skyway Communications Holding
Corp. as of April 30, 2004, and results of its operations and its cash flows for
the year then ended, in conformity with accounting principles generally accepted
in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered a loss from operations and has a
working capital deficit. These factors raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to this matter are also discussed in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

Stark Winter Schenkein & Co., LLP

Denver, Colorado
July 29, 2004

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of Skyway Communications Holding Corp. and Subsidiary:

We have audited the accompanying statements of operations, stockholders'
(deficit) and cash flows of Sky Way Aircraft, Inc. for the year ended April 30,
2003 and for the period from inception on April 24, 2002 through April 30, 2003.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Sky Way
Aircraft Inc. [a development stage company] for the year ended April 30, 2003
and for the period from inception on April 24, 2002 through April 30, 2003, in
conformity with generally accepted accounting principles in the United States of
America.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company is in the development stage, has current liabilities in
excess of current assets, has suffered recurring net losses and has a
stockholders' deficit as of April 30, 2003. These factors raise substantial
doubt about the ability of the Company to continue as a going concern.
Management's plans in regards to these matters are also described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.

Pritchett, Siler & Hardy, P.C.

July 18, 2003
Salt Lake City, Utah

SKYWAY COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
(A Development Stage Company)

CONSOLIDATED BALANCE SHEET AS OF APRIL 30, 2004
________________________________________________________________________________

ASSETS

Cash $ 1,698,427
Accounts receivable, net 8,979
Employee advance 27,524
Prepaid expense 112,527
Receivable due from related party 10,833
Other receivable 11,906
Total Current Assets 1,870,196

PROPERTY AND EQUIPMENT, net 906,543

OTHER ASSETS:
Property and equipment in progress 3,776,249
Deposits and other 419,660
Total Other Assets 4,195,909

TOTAL $ 6,972,648
==============

Continued

SKYWAY COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
(A Development Stage Company)

CONSOLIDATED BALANCE SHEET AS OF APRIL 30, 2004 (Continued)

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable $ 862,335
Accrued payroll 119,378
Accrued interest 14,279
Due to SkyWay Global 258,869
Due to related party 5,078
Sales tax payable 116,827
Notes payable 1,528,600
Deferred rent 173,880
Other accrued expenses 991,984
Total Current Liabilities 4,071,230
Total Liabilities 4,071,230

STOCKHOLDERS' EQUITY:
Preferred stock, $.0001 par value, 10,000,000
shares authorized:
Series A convertible preferred stock,
1,000,000 shares issued and outstanding 100
Series B convertible preferred stock,
1,000,000 shares issued and outstanding 100
Series C convertible preferred stock,
2,812,000 shares issued and outstanding 281
Series D convertible preferred stock,
85,000 shares issued and outstanding 9

Common stock, $.0001 par value, 2,500,000,000
shares authorized, 135,408,537 shares issued
and outstanding 13,541
Subscription Receivable (1,040,000)
Warrant Receivable (10,923)
Deferred Stock Compensation (1,411,942)
Capital in excess of par value 28,450,265
Deficit accumulated during the development stage (23,100,013)
Total Stockholders' Equity 2,901,418

TOTAL $ 6,972,648
==============

________________________________________________________________________________

See notes to consolidated financial statements.

SKYWAY COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS
____________________________________________________________________________________

For the period
April 24, 2002
For the year For the year (date of
ended April ended April inception) to
30, 2004 30, 2003 April 30, 2004

REVENUES $ 51,004 $ - $ 51,004

EXPENSES:
Selling 319,170 8,022 327,192
Selling- stock based compensation 5,033,992 - 5,033,992
General and administrative 5,859,808 821,843 6,681,651
General and administrative - stock
based compensation 7,875,241 - 7,800,641
Impairment of technology rights 1,023,800 - 1,023,800
Impairment of property and equipment 235,750 - 235,750
Research and development 1,494,263 473,355 1,967,618
Total expenses 21,842,024 1,303,220 23,150,644

LOSS BEFORE OTHER INCOME (EXPENSE) (21,791,020) (1,303,220) (23,099,640)

OTHER INCOME (EXPENSE):
Rental Income - Related Party - 26,927 26,927
Interest Expense (27,300) - (27,300)
Total Other Income (Expense) (27,300) 26,927 (373)

LOSS BEFORE INCOME TAXES (21,818,320) (1,276,293) (23,100,013)

INCOME TAX EXPENSE (BENEFIT) - - -

NET LOSS $(21,818,320) $(1,276,293) $(23,100,013)
============= ============ =============

NET LOSS PER SHARE - Basic and diluted $ (.26) $ (.10)
============= ============

Weighted average number of shares
outstanding 84,829,400 13,354,534
============= ============

____________________________________________________________________________________

See notes to consolidated financial statements.

SKYWAY COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
(A Development Stage Company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
__________________________________________________________________________________________________________________________________________________________________

Deficit Deferred Stock
Accumulated Compensation,
Preferred Additional During the Warrant and
Stock Common Stock Paid-in Development Subscription
Shares Par Value Shares Par Value Capital Stage Receivable Total
Balances, April 24, 2002 (date of
incorporation) - $ - - $ - $ - $ - $ - $ -

Proceeds from issuance of stock
at $0.00054 per share - - 13,887,000 13,887 (6,387) - - 7,500
Net loss - - - - - (5,400) - (5,400)

Balances, April 30, 2002 - - 13,887,000 13,887 (6,387) (5,400) - 2,100

Cancellation of common stock - - (3,888,360) (3,888) 3,888 - - -
Issuance of common stock - - 1,360 1 23,799 - - 23,800
Net loss - - - - - (1,276,293) - (1,276,293)

Balances, April 30, 2003 - - - 10,000,000 10,000 21,300 (1,281,693) - (1,250,393)

Issuance of common stock in exchange for
net liabilities in a recapitalization - 46,819,507 4,682 (165,977) - - (161,295)
Issuance of Class A preferred stock for
cancellation of debt 1,000,000 100 - - 1,563,915 - - 1,564,015
Issuance of Class B preferred stock for
cancellation of common shares 1,000,000 100 (10,000,000) (10,000) 9,900 - - -
Issuance of common stock for cash
At $0.04 - $0.10 per share - - 6,105,964 611 446,731 - - 447,342
At $0.13 - $0.18 per share - - 33,946,289 3,395 4,806,480 - - 4,809,875
At $0.25 per share - - 4,000,000 400 999,600 - - 1,000,000
At $0.38 per share - - 11,025,895 1,103 4,188,550 - - 4,189,653
At $0.48 per share - - 42,017 4 19,996 - - 20,000

Continued

SKYWAY COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
(A Development Stage Company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - Continued

Issuance of common stock for services:
At $0.09 per share on May 30, 2003 500,000 50 44,950 45,000
At $0.09 per share on June 20, 2003 2,000,000 200 379,800 380,000
At $0.19 per share on June 21, 2003 2,680,493 268 442,526 442,794
At $0.19 per share on January 8, 2004 5,000,000 500 949,500 950,000
At $0.26 per share on September 8, 2003 12,000,000 1,200 3,118,800 (3,120,000) -
At $0.28 per share on July 1, 2003 2,150,000 215 629,785 630,000
At $0.36 per share on July 3, 2003 50,000 5 17,995 18,000
Issuance of warrants for services
exercisable into 30,100,000 shares of
common stock 3,548,000 3,548,000
Issuance of common stock upon exercise
of warrants:
At $0.10 per share cash 1,000,000 100 99,900 100,000
At $0.15 per share cash 666,667 67 99,933 100,000
At $0.15 per share cash 1,000,000 100 149,900 150,000
At $0.15 per share cash 1,000,000 100 149,900 150,000
At $0.30 per share cash 1,000,000 100 299,900 300,000
At $0.30 per share cash 421,705 42 126,470 126,512
At $0.20 per share cash 1,323,980 132 264,664 264,796
At $0.20 per share services 2,676,020 267 534,937 (10,923) 524,281
Issuance of Class C preferred stock for
Services 2,812,000 281 4,385,319 (4,385,600) -
Issuance of Class D preferred stock
For services 85,000 9 1,317,491 (1,317,500) -
Amortization of deferred stock
compensation/subscription receivable 6,371,158 6,371,158
Net loss (21,818,320) (21,818,320)
========= ========= ============ ========= ============ ============ =========== =============
Balances, April 30, 2004 4,897,000 $ 490 $135,408,537 $ 13,541 $28,450,265 $(23,100,013) $(2,462,865) 2,901,418
========= ========= ============ ========= ============ ============ =========== =============

__________________________________________________________________________________________________________________________________________________________________

See notes to consolidated financial statements.

SKYWAY COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS
________________________________________________________________________________________________

For the period
April 24, 2002
For the For the (date of
year ended year ended incorporation)
April 30, April 30, to April 30,
2004 2003 2004

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (21,818,320) $ (1,276,293) $ (23,100,013)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 104,626 20,876 125,502
Impairment of technology rights 1,023,800 - 1,023,800
Impairment of property and equipment 235,750 - 235,750
Loss on sale of property and equipment 23,602 - 23,602
Provision for bad debts 500 - 500
Non-cash services rendered for stock and
warrants 12,909,233 - 12,914,633
Non-cash other - 296,303 296,303
Changes in assets and liabilities:
(Increase)/Decrease in:
Accounts Receivable (9,479) - (9,479)
Employee Advances, net (25,574) (2,000) (27,574)
Prepaid Expenses (104,214) (8,313) (112,527)
Receivable Due From Related Party, net (10,833) - (10,833)
Other Receivable (11,906) - (11,906)
Deposit and Other (303,360) (92,500) (395,860)
Increase/(Decrease) in:
Accounts Payable 616,923 91,069 707,992
Accrued Payroll 74,685 44,693 119,378
Accrued Interest 14,279 - 14,279
Sales Tax Payable 116,827 - 116,827
Deferred Rent 173,880 - 173,880
Other Accrued Expenses 991,984 - 991,984
NET CASH USED IN OPERATING ACTIVITIES (5,997,597) (926,165) (6,923,762)

CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for technology rights (1,000,000) - (1,000,000)
Payments for property and equipment in
progress (2,276,249) - (2,276,249)
Proceeds from sale of property and
equipment 36,000 - 36,000
Payments for property and equipment (981,562) (345,837) (1,327,399)
NET CASH USED IN INVESTING ACTIVITIES (4,221,811) (345,837) (4,567,648)

CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from related party converted to
preferred stock 247,069 1,290,221 1,564,015
Advances from related parties, net 263,947 - 263,947
Proceeds from issuance of common stock 10,466,870 - 10,466,870
Proceeds from exercise of stock warrants 1,191,308 - 1,191,308
Payments on installment note (250,000) - (250,000)
Payments of stock offering costs (2,100) (17,478) (46,303)
NET CASH PROVIDED BY FINANCING ACTIVITIES 11,917,094 1,272,743 13,189,837

NET INCREASE IN CASH 1,697,686 741 1,698,427
CASH AT BEGINNING OF PERIOD 741 - -
CASH AT END OF PERIOD $ 1,698,427 $ 741 $ 1,698,427
============== ============== =============

See notes to consolidated financial statements. Continued

SKYWAY COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

For the period
April 24, 2002
For the For the (date of
year ended year ended incorporation)
April 30, April 30, to April 30,
2004 2003 2004

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - Interest paid $ 13,021 $ - $ 13,021
=========== ============ ===========

Supplemental Schedule of Non-cash Investing and Financing Activities:

For the period from inception on April 24, 2002 through April 30, 2004:

On January 16, 2004, the Company signed a promissory note in the amount of
$1,500,000 with United Bank and Trust for a used Boeing DC-9, which is currently
classified as "property and equipment in progress" in the accompanying balance
sheet.

In June 2003, Parent acquired Subsidiary pursuant to an Amended and Restated
Agreement and Plan of Merger which has been accounted for as a recapitalization
of Subsidiary in a manner similar to a reverse purchase [See Note 1].
Immediately prior to the recapitalization of Subsidiary, Parent had no assets
and $161,295 of liabilities ($132,695 in accounts payable and $28,600 in notes
payable) and 46,819,507 shares of common stock outstanding. An additional
2,680,493 shares of common stock were issued as finder's fees in the
transaction.

In June 2003, the Company issued 1,000,000 shares of preferred stock for payment
of $1,564,015 in debt.

In March 2003, the Company issued 1,360 shares of common stock for an amended
license agreement valued at $23,800.

In January 2003, the Company recorded an installment payable of $250,000 for the
remaining purchase price under an Asset Purchase Agreement. The Company also
expensed $250,000 of the purchase price which was for ground-site lease contact
information and a temporary restriction on the transfer of certain patent
rights.

See notes to consolidated financial statements.

SKYWAY COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
(Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

SkyWay Communications Holding Corp. ("Parent"), formerly known as
i-TeleCo.com Inc. and Mastertel Communications Corp., was organized under the
laws of the State of Florida on December 16, 1998. In April 2003, Parent changed
its name to SkyWay Communications Holding Corp.

On May 30, 2003, Parent and Sky Way Aircraft Inc. ("Subsidiary") entered
into an Agreement and Plan of Merger. On June 19, 2003, Parent and Subsidiary
entered into an Amended and Restated Agreement and Plan of Merger (which closed
on June 21, 2003) whereby Parent agreed to acquire 100% of Subsidiary in a stock
for stock exchange. The agreement called for Parent to issue 1,000,000 shares of
Series B convertible preferred stock to the former shareholders of Subsidiary
for 100% of the outstanding shares of Subsidiary's common stock and for Parent
to issue 1,000,000 shares of Series A convertible preferred stock to the holder
of $1,564,015 in debt of the Subsidiary. Voting control of the Company passed to
the former shareholders of Subsidiary. The Company has accounted for the
acquisition as a recapitalization of Subsidiary in a manner similar to a reverse
purchase. Accordingly, the equity transactions have been restated to reflect the
recapitalization of Subsidiary and the operations of Parent prior to the date of
acquisition have been eliminated. At the date of acquisition the Parent had no
assets and $161,295 in liabilities. The financial statements reflect the
operations of Subsidiary from its inception. Prior to the recapitalization of
Subsidiary, Parent had 46,819,507 shares of common stock previously outstanding.
An additional 2,680,493 shares of common stock were issued as finder's fees in
the transaction.

All references to the number of shares and par value in the accompanying
consolidated financial statements have been adjusted for all periods presented
to reflect the recapitalization of Subsidiary and to reflect a 1.8516-for-1
forward stock split that Subsidiary affected on March 11, 2003 (See Note 6).

SkyWay Communications Holding Corp. and Subsidiary ("the Company") plan to
provide security and other services for the airline industry through
applications of their licensed high-speed, broadband wireless communications
technology. The Company has not yet generated any significant revenues from
their planned principal operations and is considered a development stage company
as defined in Statement of Financial Accounting Standards No.7. The Company has,
at the present time, not paid any dividends and any dividends that may be paid
in the future will depend upon the financial requirements of the Company and
other relevant factors.

Reclassification

The financial statements for periods prior to April 30, 2004 have been
reclassified to conform to the headings and classifications used in the April
30, 2004 financial statements.

Consolidation

The consolidated financial statements include the accounts of Parent and
Parent's wholly owned Subsidiary. All significant intercompany transactions have
been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets and liabilities
at the date of the consolidated financial statements. The reported amounts of
revenues and expenses during the reporting period may be affected by the
estimates and assumptions we are required to make. Actual results could differ
significantly from our estimates.

Financial Instruments

We believe the book value of our cash, receivables, accounts payable and
accrued and other liabilities approximates their fair values due to their
short-term nature. In addition, we believe the book values of our notes payable
approximates their fair values as the interest rates on such obligations
approximates rates at which similar types of arrangements could be currently
negotiated by us.

Concentrations of Credit Risk

Financial instruments that potentially subject us to significant
concentrations of credit risk consist principally of cash and receivables. With
respect to cash, during the year ended April 30, 2004, we maintained our cash in
deposit accounts with two financial institutions, which deposit accounts at
times have exceeded federally insured limits. We have not experienced any
losses in such accounts.

Cash and Cash Equivalents

For purposes of reporting cash flows, the Company considers all highly
liquid investments purchased with an original maturity of three months or less
to be cash equivalents.

Revenue Recognition

The Company's primary source of operating revenue at this time is earned
from wireless connection services which are recorded at the completion of the
services. For contracts which exceed one month, revenue is recognized on a
straight-line basis over the term of the contract as services are provided.
Revenues applicable to future periods are classified as deferred revenue until
earned.

Accounts Receivable

Accounts receivable represent amounts billed for services provided that
have not yet been collected.

Allowance for Doubtful Accounts

The Company evaluates the allowance for doubtful accounts on a regular
basis through periodic reviews of the collectibility of the receivables in light
of historical experience, adverse situations that may affect the customer's
ability to repay, and prevailing economic conditions. This evaluation is
inherently subjective as it requires estimates that are susceptible to
significant revision as more information becomes available.

Property and Equipment

Property and equipment are stated at cost. Expenditures for major renewals
and betterments that extend the useful lives of property and equipment are
capitalized upon being placed in service. Expenditures for maintenance and
repairs are charged to expense as incurred. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets of three to
seven years. In accordance with Statement of Financial Accounting Standards No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets", the
Company periodically reviews their property and equipment for impairment.

Intangible Assets

The Company accounts for their intangible assets in accordance with
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets". SFAS No. 142 establishes three classifications for
intangible assets including definite-life intangible assets, indefinite-life
intangible assets and goodwill and requires different accounting treatment and
disclosures for each classification. In accordance with SFAS No. 142, the
Company periodically reviews their intangible assets for impairment. During the
year ended April 30, 2004, impairment was recorded for $1,000,000 paid in 2004
and the $23,800, originally recorded, for the acquisition of certain
intellectual property rights.

Long-Lived Assets

Statement of Financial Accounting Standards 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" requires that long-lived assets,
including certain identifiable intangibles, be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying value of the
assets in question may not be recoverable. At April 30, 2004 we evaluated our
long-lived assets and determined that $235,750 of our assets were impaired and
were written off.

Advertising Costs

Advertising costs, except for costs associated with direct-response
advertising, are charged to operations when incurred. The costs of
direct-response advertising are capitalized and amortized over the period during
which future benefits are expected to be received. Advertising costs for the
twelve months ended April 30, 2004 and 2003 amounted to $50,790 and $0,
respectively.

Research and Development

Research and development costs are expensed as incurred. The Company
expensed $1,494,263 and $473,355 in research and development costs during the
years ended April 30, 2004 and 2003, respectively.

Debt Extinguishment

The Company accounts for extinguishment of debt in accordance with
Statement of Financial Accounting Standards No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". SFAS No. 145 rescinds the requirement that gains and losses from
extinguishment of debt be classified as an extraordinary item.

Income Taxes

The Company computes income taxes in accordance with Financial Accounting
Standards Statement No. 109 "Accounting for Income Taxes". Under SFAS 109,
deferred taxes are recognized for the tax consequences of temporary differences
by applying enacted statutory rates applicable to future years to differences
between the tax bases of assets and liabilities and their financial statement
carrying amounts. Also, the effect on deferred taxes of a change in tax rates is
recognized in income in the period that included the enactment date. Temporary
differences between financial and taxable reporting arise primarily from certain
stock based compensation arising from the grant of certain options, and
differences in providing for bad debts and depreciation.

Stock-Based Compensation

The Company has adopted Statement of Financial Accounting Standards No. 148
"Accounting for Stock-Based Compensation - Transition and Disclosure". This
statement amends FASB statement No. 123, "Accounting for Stock Based
Compensation". It provides alternative methods of transition for an entity that
voluntarily changes to the fair value based method of accounting for employee
stock based compensation. It also amends the disclosure provision of FASB
statement No. 123 to require prominent disclosure about the effects on reported
net income of an entity's accounting policy decisions with respect to
stock-based employee compensation. As permitted by SFAS No. 123 and amended by
SFAS No. 148, we continue to apply the intrinsic value method under Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees," to account for our stock-based employee compensation arrangements.

Net Loss per Share

The Company has adopted SFAS No. 128 "Earnings per Share". Basic loss per
share is computed by dividing the loss available to common shareholders by the
weighted-average number of common shares outstanding. Diluted loss per share is
computed in a manner similar to the basic loss per share, except that the
weighted-average number of shares outstanding is increased to include all common
shares, including those with the potential to be issued by virtue of warrants,
options, convertible debt and other such convertible instruments. Diluted
earnings per share contemplate a complete conversion to common shares of all
convertible instruments only if they are dilutive in nature with regards to
earnings per share. Since the Company has incurred net losses for all periods,
basic loss per share and diluted loss per share are the same.

Recent Pronouncements

We have reviewed all new accounting pronouncements issued through the date
of our independent auditor's report and have determined that none of them would
have a material impact on our consolidated financial condition or results of
operations other than as previously described.

NOTE 2 - GOING CONCERN

Our consolidated financial statements were prepared using accounting
principles generally accepted in the United States of America applicable to a
going concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. We have incurred significant
losses since our inception, have negative working capital and have experienced
and continue to experience negative operating margins and negative cash flows
from operations. In addition, we expect to have ongoing requirements for
additional capital investment to implement our business plan. These factors
raise substantial doubt about the ability of the Company to continue as a going
concern. In this regard, management is proposing to raise any necessary
additional funds not provided by operations through loans or through additional
sales of the Company's common stock. There is no assurance that the Company will be
successful in raising this additional capital or in achieving profitable
operations. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at:

April 30, 2004

Machinery and equipment $ 545,514
Furniture and fixtures 21,692
Aircraft 36,607
Vehicles 394,306
998,119
Less: accumulated depreciation (91,576)

Net property and equipment $ 906,543
==================

Depreciation expense for the years ended April 30, 2004 and 2003 amounted
to $104,626 and $20,876, respectively.

NOTE 4 - OTHER ASSETS

Intangible Assets

On March 11, 2003, the Company signed an Amended and Restated Software
License and Services Agreement with SkyWay Global ("SWG"), an entity under
common control, to replace the Company's Licensing Agreement entered into during
2002. Under this new agreement, the Company issued 1,360 shares of common stock
valued at $23,800 to obtain the rights for indefinite use of certain high-speed,
broadband wireless technology for the aircraft industry and other related uses.
This agreement was replaced by a License Agreement signed June 23, 2003. This
new

agreement exclusively and irrevocably assigns virtually all of SWG's rights to
certain patented technology in exchange for a royalty of 3% of the Company's net
revenues.

In February 2004, the Company agreed, and made a deposit of $1,000,000, to
purchase the Intellectual Property from SWG. This acquisition provides the
Company with all rights to certain patented technology previously under SWG
ownership. The license agreements with SWG will be cancelled upon completion of
purchase. At April 30, 2004 management determined that this intellectual
property was impaired. The $1,000,000 and $23,800, originally recorded,
were written off.

Property and Equipment in Progress

Given the development stage of the Company's operations, certain costs
relative to property and equipment that have not yet been completed or put into
service have been accumulated and included in other assets. At April 30, 2004
these accumulated costs are summarized as follows:

DC-9 Aircraft $ 2,556,101
Telephone System 109,822
Data Center 986,283
Clearwater Tower 124,043
$ 3,776,249
============

On January 16, 2004, the Company signed a promissory note in the amount of
$1,500,000 with United Bank and Trust for a used Boeing DC-9. The note was
initially for a six month term with an initial rate of 5.49% which will vary
based upon the Bank Prime Rate plus 0.5%. The loan is guaranteed by the
President of the Company, two other shareholders of the Company and a company
controlled by one of the shareholders. In connection with the guarantee of the
loan by one of our shareholders, a company related to this guarantor-shareholder
is listed as the co-owner of the asset. This co-ownership is only effective for
the period of the guarantee. The Company has voting control of all matters
related to the aircraft. In July, the Company received a six month extension
until January 2005.

NOTE 5 - NOTES PAYABLE

Notes payable consist of the following at April 30, 2004:

Amounts

18% unsecured demand note payable to ECI
Communications, Inc. $ 25,000

United States Bank Prime Rate plus 0.5% secured
note payable to a United Bank and Trust 1,500,000

11% unsecured demand note payable to Romano Ltd. 3,600

$ 1,528,600
============

For the years ended April 30, 2004 and 2003, interest expense amounted to
$27,300 and $0, respectively.

NOTE 6 - EQUITY

Preferred Stock

The Company has authorized 10,000,000 shares of preferred stock, $.0001 par
value, with such rights, preferences and designations and to be issued in such
series as determined by the Company's Board of Directors. In June 2003, the
Board of Directors designated 1,000,000 shares as Series A and 1,000,000 shares
as Series B. In October 2003, the Board of Directors designated 2,812,000 shares
as Series C and 85,000 shares as Series D.

Series A Convertible Preferred Stock

Each share of Series A convertible preferred stock has a stated value of
$15, has the voting rights of 100 shares of common stock and is convertible at
the shareholder's option into 100 shares of common stock. Series A convertible
preferred shareholders must approve any dividend payments and are entitled to
share in common stock dividends as if their preferred stock had been converted
into common stock. Upon liquidation of the Company, Series A convertible
preferred shareholders are entitled to receive an amount equal to the stated
value plus one percent per annum from the date of issuance. The Company may
redeem all or part of the Series A convertible preferred stock within one year
of the date of issuance by paying an amount equal to the stated value plus five
percent.

In June 2003, in connection with an Amended and Restated Agreement and Plan
of Merger, the Company issued 1,000,000 shares of their previously authorized
but unissued Series A convertible preferred stock for all 1,000,000 shares of
Subsidiary's preferred stock which had been issued to SWG for debt relief of
$1,564,015 or approximately $1.564 per share.

Series B Convertible Preferred Stock

Each share of Series B convertible preferred stock has a stated value of
$15, and has no voting, liquidation or dividend rights. Within three years of
the date of issuance, each share of Series B convertible preferred stock will be
converted, upon the occurrence of certain events, automatically into 200 shares
of the Company's common stock if certain conditions are met. The Company may
redeem all or part of the Series B convertible preferred stock within one year
of the date of issuance by paying an amount equal to the stated value plus five
percent. Any shares of Series B convertible preferred stock which remain
outstanding three years following the date of issuance will be automatically
cancelled.

In June 2003, in connection with an Amended and Restated Agreement and Plan
of Merger, the Company issued 1,000,000 shares of their previously authorized
but unissued Series B convertible preferred stock for all 10,000,000 shares of
Subsidiary's common stock.

Series C Convertible Preferred Stock

Each share of Series C convertible preferred stock has a $.0001 stated
value and no voting rights. Through December 31, 2013 each share is convertible,
upon the occurrence of certain events, into 10 shares of common stock. Upon
liquidation of the Company, Series C convertible preferred shareholders are
entitled to receive an amount equal to the stated value per share.

In October 2003, the Company issued 2,812,000 shares of Series C
Convertible Preferred Stock to 42 employees and consultants. The Holders shall,
upon the occurrence of certain events, have the right in their sole and absolute
discretion to convert the shares of Convertible Preferred Stock - Series C

issued by the Corporation into 28,120,000 common shares of the Corporation on a
one share for ten share basis. The value of these shares has been estimated at
$4,385,600 and has been recoded as deferred stock compensation is being
amortized to expense over the estimated period the services are to be provided
of one year.

Series D Convertible Preferred Stock

Each share of Series D convertible preferred stock has a $.0001 stated
value and no voting rights. Each share is convertible, upon the occurrence of
certain events, into 100 shares of common stock. Upon liquidation of the
Company, Series D convertible preferred shareholders are entitled to receive an
amount equal to the stated value per share.

In October 2003, the Company issued 85,000 shares of Series D Convertible
Preferred Stock to one entity providing consulting services. The Holders shall
have the right in their sole and absolute discretion to convert the shares of
Convertible Preferred Stock - Series D issued by the Corporation into 8,500,000
common shares of the Corporation on a one share for one hundred share basis. The
value of these shares has been estimated at $1,317,500 and has been recoded as
deferred stock compensation which will be amortized to expense over the
estimated period the services are to be provided of one year.

Common Stock

The Company has authorized 2,500,000,000 shares of common stock with a par
value of $.0001.

During the periods covered by these financial statements the Company issued
shares of common stock without registration under the Securities Act of 1933.
Although the Company believes that the sales did not involve a public offering
of its securities and that the Company did comply with the "safe harbor"
exemptions from registration, it could be liable for rescission of the sales if
such exemptions were found not to apply and this could have a material negative
impact on the Company's financial position and results of operations.

The Company has filed the following S-8 registration statements for the
issuance common stock and warrants to various consultants for services. The
issuances and agreements are described in various sections below.

Common Shares Warrants
Date filed Registered Registered
June 20, 2003 4,700,000 -
July 3, 2003 2,300,000 10,000,000
September 8, 2003 12,000,000 -
January 9, 2004 5,000,000 10,000,000

In connection with the closing of the Agreement and Plan of Merger (Note
1), the Company agreed to certain anti-dilution provisions in connection with a
capital raise or financing in the aggregate amount of up to $1,000,000, to our
common stockholders on the date of the closing date of the merger. Those
stockholders would be entitled to the issuance of additional shares, on a pro
rata basis, equal to the number of shares of common stock or preferred stock
issued in connection with the financing. Under these provisions, approximately
9,193,212 additional shares of common stock would have to be issued; however, we
currently do not intend to issue these shares due to issues associated with the
merger transaction.

In the fourth quarter of 2004, the Company issued 17,119,617 shares of
common stock (including the exercise of warrants) at prices of $.13-$.48 per
share for cash of $5,211,140.

In the third quarter of 2004, the Company issued 35,316,289 shares of
common stock (including the exercise of warrants) at prices of $.13-$.20 per
share for cash of $4,799,696 and services (for the exercise of warrants) of
$524,281 including a warrant receivable of $10,923.

In the second quarter of 2004, the Company issued 7,772,631 shares of
common stock (including the exercise of warrants) at prices of $.04-$.25 per
share for cash of $1,247,341

In the first quarter of 2004, the Company issued 4,000,000 shares of common
stock (including the exercise of warrants) at prices of $.10 per share for cash
of $400,000.

In January 2004, the Company entered into six-month Consulting Agreements
with Aran Strategic Finance, Bruce Baker and Fred Geffon to provide consulting
services and issued 5,000,000 shares of common stock for services pursuant to
consulting agreements valued at $950,000 (based on the market price of the
shares at the date of issuance), which has been expensed. In connection with
these services, the Company also issued options to purchase 10,000,000 shares of
common stock (see "Stock warrants" below").

In September 2003, the Company entered into one-year Consulting Agreements
with Doug Dahms and William Craig to provide consulting services in exchange for
a total of 12,000,000 shares (6,000,000 shares each) of the Company's common
stock. The Company has recorded $3,120,000 of the services (based on the market
price of the shares at the date of issuance) as deferred compensation. At
April 30, 2004, the Company has expensed $2,080,000 of the services for the
current year.

In March 2003, the Company issued 1,360 shares of common stock at $17.50
per share for an amended license agreement valued at $23,800.

In July 2003, the Company entered into a nine-month Consultant Services
Plan with Beadros Asare to provide consulting services valued at $18,000 (based
on the market price of the shares at the date of issuance) in exchange for
50,000 shares of common stock. As of April 30, 2004, the Company has expensed
the entire amount of the services.

In July 2003, the Company entered into a six-month Consulting Agreement
with Bruce Baker to provide consulting services in exchange for 1,000,000 shares
of common stock valued at $308,000 (based on the market price of the shares at
the date of issuance). In connection with these services, the Company also
issued options to purchase 4,000,000 shares of common stock (see "Stock
warrants" below"). As of April 30, 2004, the Company has expensed the entire
amount of the services.

In July 2003, the Company entered into a six-month Consulting Agreement, as
amended in August 2003, with Michael Farkas, a shareholder of the Company, to
provide consulting services in exchange for 1,150,000 shares of common stock
valued at $322,000 (based on the market price of the shares at the date of
issuance). In connection with these services, the Company also issued options to
purchase 6,000,000 shares of common stock (see "Stock warrants" below"). As of
April 30, 2004, the Company has expensed the entire amount of the services.

In June 2003, the Company entered into an Engagement Agreement with Michael
Williams to provide legal services through December 31, 2003 valued at $380,000
(based on the market price of the shares at the date of issuance) in exchange
for 2,000,000 shares of common stock. As of April 30, 2004, the Company has
expensed the entire amount of the services.

In June 2003, the Company entered into an Investment Banking/Advisory
Agreement with Atlas Capital Services, LLC ("Atlas"), an entity controlled by a
shareholder of the Company. The agreement provided for Atlas to assist the
Company in finding an acquisition candidate and the Company was to issue
2,680,493 shares of common stock upon consummation of an acquisition. In June
2003, Parent acquired Subsidiary and issued 2,680,493 shares of common stock to
Atlas for services rendered valued at $442,794 (based on the market price of the
shares at the date of issuance). The agreement also provides for Atlas to assist
the Company in obtaining financing and the Company will pay 10% of the proceeds
received from any such financing.

In May 2003, the Company issued 500,000 shares of common stock for services
valued at $45,000 (based on the market price of the shares at the date of
issuance).

In the fourth quarter of 2002, in connection with their organization, the
Company issued 13,887,000 shares of their previously authorized but unissued
common stock at approximately $.00054 per share for payment of organization
costs of $1,870 and non-cash services valued at $5,630 including $2,100 which
was classified as stock offering costs and $3,530 which was classified as
general and administrative expense.

Stock Cancellation and Contingency

In March 2003, Subsidiary's Board of Directors approved the cancellation of
3,888,360 shares of Subsidiary's common stock that had been accounted for as
issued to consultants in April 2002. Management claims that consideration was
not received for the stock. Although the certificates representing these shares
were not delivered, the possibility exists that the consultants may demand
delivery of the shares pursuant to agreements with the Company.

Stock Split

On March 11, 2003, Subsidiary affected a 1.8516-for-1 forward stock split.
The financial statements for all periods presented have been restated to reflect
the stock split.

Abandoned Proposed Stock Offering

The Company was proposing to make a public offering of 5,000,000 shares of
their previously authorized but unissued common stock which was to be registered
with the Securities and Exchange Commission on Form SB-2. An offering price of
$17.50 per share was arbitrarily determined by the Company and offering costs
were estimated to be approximately $73,000. In April 2003, the Company abandoned
their proposed stock offering and wrote off the deferred stock offering costs of
$46,303 directly to general and administrative expense.

Stock Warrants

In July 2003, the Company issued five-year warrants to purchase 10,000,000
shares of common stock for services valued at $1,810,000 using the Black-Scholes
option pricing model. The warrants were issued to purchase shares of common
stock at the following exercise prices: 1,000,000 at $.10 per share, 2,000,000
at $.15 per share, 1,000,000 at $.30 per share, 1,000,000 at $.55 per share,
1,000,000 at $1.00 per share, 2,000,000 at 80% of market value with a $.20 per
share minimum, 1,000,000 at 85% of market value with a $.20 per share minimum
and 1,000,000 at 90% of market value with a $.20 per share minimum. In July
2003, warrants to purchase 1,000,000 shares of common stock at $.10 per share,
were exercised. In August 2003, warrants to purchase 666,667 shares of common
stock at $.15, were exercised. In December 2003, warrants to purchase 4,000,000
shares of common stock at $.20, were exercised. At April 30, 2004, warrants to
purchase 4,333,333 shares of common stock under this issuance were still
outstanding.

In September 2003, the Company issued five-year warrants, at various prices
per share ranging from $0.35 to $1.50, to purchase 10,000,000 shares of
restricted common stock for services valued at $860,000 using the Black-Scholes
option pricing model. The warrants were issued to purchase shares of restricted
common stock at the following exercise prices: 2,000,000 at $.35 per share,
2,000,000 at $ .50 per share, 2,000,000 at $.70 per share, 2,000,000 at $1.25
per share, and 2,000,000 at $1.50 per share. At April 30, 2004, warrants to
purchase 10,000,000 shares of restricted common stock under this issuance were
still outstanding.

In January 2004, the Company issued five-year warrants, at various prices
per share ranging from $0.15 to $1.15, to purchase 10,000,000 shares of common
stock for services valued at $840,000 using the Black-Scholes option pricing
model. The warrants were issued to purchase shares of common stock at the
following exercise prices: 2,000,000 at $.15 per share, 2,000,000 at $ .30 per
share, 2,000,000 at $.55 per share, 2,000,000 at $1.00 per share, 1,000,000 at
$1.10 per share, and 1,000,000 at $1.15 per share. In March 2004, warrants to
purchase 3,119,945 shares of common stock at $.15 - $.30, were exercised. In
April 2004, warrants to purchase 301,760 shares of common stock at prices from
$.15-$.30, were exercised. At April 30, 2004, warrants to purchase 6,578,295
shares of common stock under this issuance were still outstanding.

In April 2004, the Company issued one year warrants at $.60 to purchase
100,000 shares of common stock for services valued at $38,000 using the
Black-Scholes option pricing model. As of April 30, 2004 all the warrants
remained outstanding.

Stock Options

In November 2003, Company granted options to purchase 625,000 shares of
common stock at $.16 per share as additional compensation to an officer of the
Company. The options vest over three years with 208,333 vesting on November 1,
2004, 208,333 vesting on November 1, 2005 and 208,334 vesting on November 1,
2006. The options are exercisable for five years following vesting. As of July
19, 2004, both the 208,333 options that vest on November 1, 2005 and November 1,
2006 were cancelled. Since the exercise price of the options was the same as the
market price of the Company's common stock on the grant date, the Company has
recorded no compensation cost for the options in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees".

In June 2003, Company granted options to purchase 420,000 shares of common
stock at $.19 per share as additional compensation to two officers of the
Company. The options vest over three years with 140,000 vesting on June 20,
2004, 140,000 vesting on June 20, 2005 and 140,000 vesting on June 20, 2006. The
options are exercisable for three years following vesting. Since the exercise
price of the options was the same as the market price of the Company's common
stock on the grant date, the Company has recorded no compensation cost for the
options in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees".

A summary of the status of the options granted under the Company's
stock-based employee compensation plan is presented below.

For the Years For the period
Ended April 30, April 24, 2002
_______________________________ date of inception)
2004 2003 to April 20, 2004
__________________ _________________ __________________
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price

Outstanding at beginning of period 420,000 $ .19 - $ - - $ -
Granted 625,000 .16 - - - -
Exercised - - - - - -
Forfeited 416,666 .16 - - - -
Expired - - - - - -
======= ======= ====== ======= ======= =======
Outstanding at end of period 628,334 .19 - - - -
======= ======= ====== ======= ======= =======

Options Outstanding Options Exercisable
_____________________________________________________________ _______________________________
Range of Weighted-Average Weighted-Average Weighted-Average
Exercise Number Remaining Exercise Number Exercise
Price Outstanding Contractual Life Price Exercisable Price

$.16 -.19 628,334 4.0 years $.18 - $ -
========= ========= =========== ========== ====== ============

Under the Company's stock option plan each of the options expires on the
earlier of the date specified in the option agreement, or the tenth anniversary
of the date of grant. Any incentive option not subject to this provision is
designated as being a non-statutory option. Whenever an outstanding option is
terminated (other than by exercise), the shares of common stock relating to such
option are to be restored to the Plan and be available for the grant of other
options under the Plan.

We account for our stock-based compensation using the intrinsic value
method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees". Had our compensation expense for stock-based
compensation plans been determined based upon fair values at the grant dates for
awards under this plan in accordance with SFAS No. 123, "Accounting for
Stock-Based Compensation," our net loss and pro forma net loss per share amounts
would have increased as follows:

2004 2003
Net loss:
As reported $ (21,818,320) $ (1,276,293)
Deduct: total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax effects (60,722) -

Pro forma net loss $ (21,879,042) $ (1,276,293)
============== =============

Loss per share, basic and diluted:
As reported $ (.26) $ (.10)
============== =============

Pro forma $ (.26) $ (.10)
============== =============

The weighted average minimum value of options granted during 2004 (none
were granted during 2003), estimated on the date of grant using the
Black-Scholes option-pricing model, ranged from approximately $.16 - $.65 per
option. The minimum value of options granted was estimated on the dates of the
grants using the following approximate assumptions: dividend yield of 0 %,
expected volatility of 176.1%, risk-free interest rate of 3.5%, and expected
lives of 4-6 years.

Estimated Fully Diluted Equity Information

As of April 30, 2004, the company has the following number of potentially
convertible shares of common stock related to convertible preferred stock,
warrants, and stock options:

For conversion of series A preferred stock 100,000,000

For conversion of series B preferred stock 200,000,000
For conversion of series C preferred stock 28,120,000
For conversion of series D preferred stock 8,500,000
Outstanding Warrants 21,011,628
Outstanding Options 628,334
Common shares issuable upon conversions and exercises 358,259,962

Shares outstanding as of April 30, 2004 135,408,537

Estimated common shares after conversions and exercises 493,668,499
==============

NOTE 7 - INCOME TAXES

We recognized losses for both financial and tax reporting purposes during
each of the periods in the accompanying consolidated statements of operations.
Accordingly, no provisions for income taxes and/or deferred income taxes payable
have been provided for in the accompanying consolidated financial statements.

Since our incorporation, we have incurred net operating losses for income
tax purposes of approximately $17,018,000 (the significant difference between
this amount, and our deficit of approximately $6,000,000, arises primarily from
certain stock based compensation that is considered to be a permanent
difference). Because the transaction discussed at Note 1 triggered certain
"change in control" provisions of the Internal Revenue Code, a portion of these
net operating loss carry forwards will be limited as they expire in various
years through the year ended April 30, 2024. However, we have established a
valuation allowance to fully reserve the related deferred income tax asset as
such asset did not meet the required asset recognition standard established by
SFAS 109.

At April 30, 2004 we had no deferred tax liabilities and our non-current
deferred income tax asset (assuming an effective, combined federal and state,
income tax rate of approximately 20%) consisted of the following:

Non-current deferred income tax asset: Amounts

Net operating loss carry forwards $ 3,228,000
Depreciation, amortization and impairments 89,000
Stock compensation 99,000
Less valuation allowance (3,416,000)

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

The income tax benefit consists of the following for the years ended April 30,
2004 and 2003:

2004 2003

Current $ - $ -
Deferred 3,165,000 251,000
Change in valuation allowance (3,165,000) (251,000)
$ - $ -
============ ============

NOTE 8- OTHER COMMITMENTS AND CONTINGENCIES

Escrow and Lease Agreements

In January 2003, the Company signed an Escrow Agreement with ECI Telecom,
Inc. ("ECI") and Klein & Heuchan ("KH") to rent office space for the month
of February 2003 while a long-term lease was finalized. The agreement called for
the Company to deposit $105,000 with KH and for rent of $16,000 to accrue for
February. In March 2003, the Company signed an Extension of Escrow Agreement
with ECI and KH to provide for the Company to continue to occupy the rented
office space through April 30, 2003. In May 2003, the Company signed a Lease
Agreement with ECI to replace the escrow agreements. The lease provides for a
five-year term beginning February 1, 2003 and the lease is renewable for one
additional five-year term. The lease requires payments of approximately $63,127
(including taxes) per month beginning June 2003 and skipping January 2004. The
lease payments will increase 3% each February 1 and the Company will pay
additional expenses for upkeep of the building. The lease continues the $92,500
security deposit of the escrow agreement. The Company paid $15,000 required
under the lease in order for the Company to have the option to purchase the
leased office space for $4,750,000 by August 1, 2003, $4,900,000 by November 1,
2003 or $5,000,000 by May 1, 2004. The lease is guaranteed by Sky Way Global,
LLC, an entity under common control. For the years ended April 30, 2004 and
2003, total rent expense amounted to $753,583 and $0, respectively.

The company has notified the lessor of the building of their intent to
purchase the building and deposited $200,000 under the terms of the lease
agreement. The company is actively pursuing financing at this time.

Minimum future rental payments under the lease agreement for the
twelve-month periods ended and in aggregate are:

April 30, Amount

2005 $ 581,834
2006 598,982
2007 613,337
2008 469,678
$ 2,263,831
===========

Services Agreement

In February 2003, the Company entered into a three-year Services Agreement
with XO Communications, Inc. ["XO"]. The agreement calls for XO to provide
internet services to the Company and the term of the agreement does not begin
until XO has completed installation of the internet connection. The agreement
requires the Company to purchase a minimum of $4,600 of services per month with
annual minimum purchases of $55,200 for the first year, $110,400 for the second
year and $165,600 for the third year. At July 31, 2003, XO had not yet complete
installation of the internet connection and no amount has been accrued in the
accompanying financial statements for the payments required under this
agreement. Company has subsequently cancelled the agreement but is subject to
litigation and a claim for approximately $170,000.

Lease Agreements

The Company has various lease agreements related to its tower and wireless
sites utilized for its network. The lease terms for these agreements range from
month-to-month to 60 months, have renewal terms ranging from annual renewals to
four five-year terms, and require monthly payments of $100 to $900, excluding
utilities.

Minimum future rental payments under the lease agreements for the twelve-
month periods ended and in aggregate are:

April 30, Amount

2005 $ 36,360
2006 33,030
2007 29,430
2008 18,063
2009 15,300
$ 132,183
=============

Employment Agreements and Management Compensation>

In June 2003, the Company entered into a three-year Employment Agreement
with the Company's President to pay a salary of $150,000 per year increased
annually by 10%. The agreement also required the Company to grant options to
purchase 210,000 shares of common stock and to pay $750 per month as a
non-accountable automobile allowance. The June 2003 Employment Agreement
replaced an April 2003 five-year Employment Agreement which required a salary of
$150,000 per year increased annually by 10%. During the years ended April 30,
2004 and 2003, respectively, the Company expensed $150,000 and $150,000 as
compensation to the Company's President. At April 30, 2004, the Company owed
$6,923 in accrued salary to the Company's President.

In June 2003, the Company entered into a three-year Employment Agreement
with the Company's Chief Executive Officer to pay a salary of $150,000 per year
increased annually by 10%. This agreement was subsequently amended to reflect an
annual salary of $175,000, beginning July 1, 2003. The agreement also required
the Company to grant options to purchase 210,000 shares of common stock and to
pay $750 per month as a non-accountable automobile allowance. The June 2003
Employment Agreement replaced an April 2003 five-year Employment Agreement which
required a salary of $175,000 per year increased annually by 10%. During the
years ended April 30, 2004 and 2003, respectively, the Company expensed $150,000
and $12,500 as compensation to the Company's Chief Executive Officer. At April
30, 2004, the Company owed $8,077 in accrued salary to the Company's Chief
Executive Officer.

Luxury Suite License Agreement

In March 2004, the Company entered into a 10 year lease on a Sky Box at the
Raymond James Stadium for a fee of $80,000 per year. In addition, the agreement
required a security deposit of $80,000. The license allows the company to have
up to 16 people to attend the Tampa Bay Buccaneers football games. The costs
listed above only includes the license fee for the Suite and does not include
other costs associated such as food, beverages or other forms of entertainment.

Automobile Commitment

In April 2004, the Company committed to purchase four (4) vehicles for
$222,800. In July 2004 the Company traded in two Company owned vehicles and took
delivery of two of these vehicles. As of July 28, 2004 the Company owes $111,400
for the two remaining vehicles for which is hasn't received.

NOTE 9 - OTHER RELATED PARTY TRANSACTIONS

Advances from SkyWay Global and Note Payable

Prior to June 19, 2003, SkyWay Global, LLC ("SWG") made payments on behalf
of the Company and made cash advances to the Company totaling $1,564,015. The
advances bore no interest and were due on demand. On June 19, 2003, the Company
converted the amounts owed to SWG into a promissory note. The note bore no
interest and was due on demand. On June 21, 2003, the Company issued 1,000,000
shares of its preferred stock to SWG as repayment of the note and advances.

Advance from SkyWay Global

For the period July 2003 through April 30, 2004, the Company received cash
and non cash advances totaling $424,895 from SWG. Relative to these advances,
the Company made cash and non cash repayments totaling $166,026. The net advance
due to SWG at April 30, 2004 is $258,869. The advance bears no interest and is
due on demand.

Advances from Related Party

During the third quarter of 2004, the Company borrowed funds from its
President to meet their short-term cash needs. These amounts were advanced
without interest and are due on demand. At April 30, 2004 the Company owed the
President $5,078.

Receivable due from Related Party

In connection with the acquisition of the aircraft discussed in Note 4, the
Company overpaid, by $10,833, a guarantor-shareholder for the deposit associated
with the purchase. This amount was still outstanding as of April 30, 2004.

Office Space

The Company shares office space with SWG. In May 2003, due to the reduced
operations of SWG, the Company stopped charging rent to SWG but still provides
an office, equipment and administrative support for SWG at no cost. During the
years ended April 30, 2004 and 2003, respectively, the Company billed SWG $0 and
$0 in rent.

Guarantee

In January, the Company entered into a six-month financing agreement with a
financial institution for the purchase of an airplane. This loan is guaranteed
by three shareholders of the company. The financing on the airplane has been
extended by the Company paying a $650 extension fee on July 28, 2004 for an
additional six months through January 16, 2005, by United Bank and Trust. All
existing terms and conditions remained the same.

NOTE 10 - SUBSEQUENT EVENTS

Stock Issuances

From May 1, 2004 through July 17, 2004, the Company issued 268,182 shares
of common stock at $.55 per share, for aggregate consideration of $147,500, from
warrants previously provided through an S-8 filing.

In June 2004, the Company issued 3,626,667 shares of common stock as
payment of $991,984 of accrued expenses.

Option Issuance

In July 2004 the Company entered consulting agreement with a newly
appointed board member with a minimum of 1 year term starting July 1, 2004
following which either party can terminate agreement with 30 days notification.
The consultant shall receive a monthly retainer for services performed in the
amount of $8,334 per month, which will be paid within 14 days of receipt of
invoice provided he dedicates an average of 2 to 15 hours per week supporting
the Company. In addition to the monthly retainer above, he shall be awarded a
total of 100,000 stock options at $ .68 per share which will vest as of July 1,
2005. The options will expire July 1, 2009.

Acquisition of Assets

On May 21, 2004 the Company purchased selected intellectual assets and
rights to service contracts with one airline for use in an in-flight
entertainment system. The cost of this transaction was 1,150,000 shares of the
Company's common stock valued at $1,044,000 (based on the market price of shares
at the date of acquisition) $100,000 for three parties to the transaction and
550,000 warrants, at a price of $.93 per share, exercisable within two (2) years
of closing date. The total cost of the transaction is $1,144,000 and has been
expensed in the first quarter as "in process research and development."

In May 2004, the Company entered into a month to month lease for office
space in Grapevine, Texas. The monthly rental is $4,000. The Company expects to
vacate this facility in August 2004.

In June 2004, the Company entered into a lease for warehouse, repair center
and office space in Grapevine, Texas for 73,000 square feet. The lease term is
7.5 years, commencing September 2004, with a 5-year renewal option. The lease
requires monthly base rent and operating expense payments. Base monthly rent
amounts will range as follows: Months 1-6 $0, months 7-18 $13,617, months 19-30
$16,643, months 31-60 $19,064, and months 61-90 $21,182. Monthly operating
expense payments are estimated to be $8,291. The lease also requires a security
deposit of $88,454 and that the base rent through month 18 will be paid in
advance, in two installments, due July 2004 and August 2004 in the amount of
$81,702.

Loans

In June 2004, the Company received a loan in the amount of $1,247,000 from Brent
Kovar, President. The loan bears no interest and will be repaid when funds are
available.

Note Receivable

In May 2004, the Company issued a note in the amount of $325,000 to
Bruce Baker for prepayment of services to the company. The note bears 6%
interest and is due December 31, 2004.

Airplane Commitment

In May 2004, the Company deposited $100,000 for a 747 aircraft. Terms are
currently being negotiated but the estimated final price of the plane will be in
the range of $10-$12 million. The plane is to be used for developing and
providing a flying operations center for a Mideast customer, if the company can
procure an agreement. At this time, no formal proposal exists.

Skyway Media Server

Through July 29, 2004 the Company has sold 11 SkyWay Media Servers and
spares to Continential Airline for $244,145. The Company has 8 remaining
shipments on order for the customer.

Advertising Contracts

The Advertising Contracts previously announced by the corporation
representing approximately $806,400 of advertising revenue and 8 customers has
expired as of May 17, 2004. The Company is actively pursing options to resign these
customers to new agreements.