UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

Commission File Number 0-28579

NOVO NETWORKS, INC.

2311 CEDAR SPRINGS ROAD, SUITE 400
DALLAS, TEXAS 75201
(Address of Principal Executive Offices)

214.777.4100
(Registrant’s Telephone Number, Including Area Code)

Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.00002 PER SHARE
(Title of Class)

     Indicate by a 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 [   ]

     Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this Form 10-K. [X]

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [   ] No [X]

     The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant based on the last reported sale price on September 24, 2004, was approximately $1,507,575.

     As of September 24, 2004, 52,323,701 shares of the registrant’s common stock, par value $0.00002, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

PART III — Incorporated by reference to the registrant’s proxy statement to be mailed or sent to securities holders on or about October 22, 2004.

TABLE OF CONTENTS

2

INTRODUCTORY STATEMENTS

NECESSARY DEFINITIONS

Novo Networks, Inc. is a holding company incorporated under the laws of the State of Delaware that is registered under the Securities Exchange Act of 1934. Throughout this annual report (this “Annual Report”), we refer to Novo Networks, Inc. as “Novo Networks,” “we,” “us” and “our.” All of our operating subsidiaries (except Internet Global Services, Inc.), which previously provided telecommunications services, have filed voluntary petitions for protection under Chapter 11 of the United States Bankruptcy Code (as hereinafter defined). Internet Global Services filed a voluntary petition for protection under Chapter 7 of the United States Bankruptcy Code (as hereinafter defined). We refer to these subsidiaries collectively as our “debtor subsidiaries” throughout this Annual Report. Currently, we own a minority interest in Paciugo Management, LLC and Ad Astra Holdings LP and related entities. These entities own and manage a gelato manufacturing, retailing and catering business operated under the brand name “Paciugo.” We refer to this interest as the “Paciugo interest” throughout this Annual Report.

We have been pursuing a “Business Opportunity” or “Strategic Combination” during fiscal 2004 that would likely be conditioned upon our completion of a “Recapitalization Event” (these terms are defined in the section entitled “Business – Plan of Operation”).

FORWARD-LOOKING STATEMENTS

“Forward-looking” statements appear throughout this Annual Report. We have based these forward-looking statements on our current expectations and projections about future events. The important factors listed in the section entitled “Business Considerations,” as well as all other cautionary language in this Annual Report, provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described in these “forward-looking” statements. Readers should be aware that the occurrence of the events described in these considerations and elsewhere in this Annual Report could have an adverse effect on the business, results of operations or financial condition of the entity affected.

Forward-looking statements in this Annual Report include, without limitation, the following:

     Statements concerning our financial condition and strategic direction:

	•		statements regarding our ability to continue as a going concern;
	•		statements regarding our future capital requirements and our ability to satisfy our capital needs;
	•		statements regarding our ability to successfully pursue causes of action against Qwest Communications Corporation (“Qwest”);
	•		statements regarding the ability of our debtor subsidiaries to successfully liquidate and distribute substantially all of their assets, pursuant to the amended plan, without causing a material adverse impact on us;
	•		statements regarding our ability to monetize our interest in Paciugo;
	•		statements regarding the potential generation of revenue resulting from the redeployment of our cash assets;
	•		statements regarding the redeployment of our remaining cash assets, if any, in furtherance of a potential Business Opportunity;
	•		statements regarding the possibility of accomplishing a Recapitalization Event or a Strategic Combination and the potential effects on us and on our stockholders, including, without limitation, the possibility of significant stockholder dilution; and
	•		statements regarding the potential liquidation of our assets, whether in a voluntary wind down or a bankruptcy proceeding.

     Statements concerning our debtor subsidiaries:

•

statements regarding the estimated liquidation value of assets and settlement amounts of liabilities; and

3

•

statements regarding the impact of the bankruptcy proceedings on our financial condition.

     Statements concerning our interest in Paciugo:

	•		statements regarding our ability to realize any benefit from our Paciugo interest;
	•		statements regarding Paciugo operations; and
	•		statements regarding our relationship with the “Equity Owners” of Paciugo (as hereinafter defined).

     Other statements:

•

statements that contain words like “believe,” “anticipate,” “expect” and similar expressions are also used to identify forward-looking statements.

Readers should be aware that all of our forward-looking statements are subject to a number of risks, assumptions and uncertainties, such as (and in no particular order):

	•		risks inherent in our ability to continue as a going concern;
	•		risks inherent in our ability to redeploy our remaining assets, including, without limitation, our remaining cash assets;
	•		risks associated with competition in the sector or industry that we may enter;
	•		risks associated with our ability to successfully prosecute the claims against Qwest;
	•		risks associated with our ability to monetize our interest in Paciugo;
	•		risks associated with Paciugo’s market position, the industry in which Paciugo competes, Paciugo’s prospects for meaningful success, Paciugo’s operations and our relationship with the Equity Owners;
	•		risks associated with having no current operations or revenue;
	•		risks that we will be unable to redeploy our remaining cash assets, or if so deployed, risks that we will not be able to generate positive cash flow or revenue after consummating such a transaction sufficient to satisfy our current obligations;
	•		risks that we will be unable to obtain any necessary approvals of our stockholders if we were to propose a Recapitalization Event or a Strategic Combination;
	•		risks that we might not be able to locate a suitable entity with which to engage in a Strategic Combination;
	•		risks that we might not be able to effect a Recapitalization Event, or a Strategic Combination on terms that were acceptable to us or would benefit our stockholders;
	•		risks that a Recapitalization Event may be entered into upon terms and conditions that would result in a significant and material dilution of our common and preferred stockholders;
	•		risks that a Strategic Combination may be entered into upon terms and conditions that would result in a significant and material dilution of our common and preferred stockholders;
	•		risks that any Strategic Combination would result in us pursuing a new and unknown business model that may or may not benefit our stockholders;
	•		risks that any wind down or liquidation would not result in our stockholders receiving any recovery on or value for their stock holdings;
	•		risks associated with preserving the net operating loss carryforwards of our debtor subsidiaries;
	•		risks associated with uncertainties in the implementation and substantial completion of the amended bankruptcy plan concerning the liquidation of substantially all of the remaining assets of our debtor subsidiaries and any resulting impact on us; and
	•		risks associated with changes in the laws and regulations that govern us.

4

This list is only an example of the risks that may affect the forward-looking statements. If any of these risks or uncertainties materialize (or if they fail to materialize), or if the underlying assumptions are incorrect, then actual results may differ materially from those projected in the forward-looking statements.

Additional factors that could cause actual results to differ materially from those reflected in the forward-looking statements include, without limitation, those discussed elsewhere in this Annual Report, particularly under the heading “Business Considerations.” Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect our analysis, judgment, belief or expectation only as of the date of this Annual Report. We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date of this Annual Report.

PART I

ITEM 1. BUSINESS

Readers of this Annual Report are cautioned that certain of the statements made in this Section are “forward-looking” and, therefore, should only be read in the context described under “Introductory Statements – Forward-Looking Statements.”

General

We are a company that, through its operating subsidiaries, previously engaged in the business of providing telecommunications services over a facilities-based network until December of 2001. For further details regarding our prior operations, see the section entitled (“Business – Bankruptcy Proceedings”). Prior to September 22, 1999, we were a publicly held company with no material operations. We were formerly known as eVentures Group, Inc., and prior to that, as Adina, Inc., which was incorporated in Delaware on June 24, 1987.

During fiscal 2002, our principal telecommunications operating subsidiaries, including AxisTel Communications, Inc. (“AxisTel”), e.Volve Technology Group, Inc. (“e.Volve”) and Novo Networks Operating Corp. (“NNOC”) filed voluntary petitions under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) as described more fully below. We will refer to the subsidiaries that have filed for bankruptcy protection as our “debtor subsidiaries” throughout this Annual Report. In December of 2002, we purchased an ownership interest in an Italian gelato company, as described more fully below.

Due to the ongoing liquidation of substantially all of our debtor subsidiaries’ assets, we currently have no operations or revenues. We are not providing any products or services of any kind (including telecommunications services) to any customers.

On December 19, 2002, we executed a purchase agreement (the “Purchase Agreement”) with Ad Astra Holdings LP, a Texas limited partnership (“Ad Astra”), Paciugo Management LLC, a Texas limited liability company and the sole general partner of Ad Astra (“PMLLC”), and the collective equity owners of both Ad Astra and PMLLC, being Ugo Ginatta, Cristiana Acerbi Ginatta and Vincent Ginatta (collectively, the “Equity Owners”). Pursuant to the Purchase Agreement, we acquired a 33% membership interest in PMLLC and a 32.67% limited partnership interest in Ad Astra, which results in our holding an aggregate interest, including the PMLLC general partnership interest, in Ad Astra equal to 33% (the “Initial Interest”), for a purchase price of $2.5 million.

In addition, we hold an option, which expires on December 19, 2004, to purchase a 17.3% membership interest in PMLLC and a 17.127% limited partnership interest in Ad Astra (the “Subsequent Interest”) for $1.5 million. Together, the Initial Interest and the Subsequent Interest would result in our holding a 50.3% membership interest in PMLLC and a 49.797% limited partnership interest in Ad Astra, for a total aggregate interest in Ad Astra, including the PMLLC general partner interest, of 50.3%.

Collectively, Ad Astra and PMLLC, through a number of wholly owned subsidiaries, own and manage a gelato manufacturing, retailing and catering business operating under the brand name “Paciugo.” Throughout this Annual Report, we refer collectively to Ad Astra, PMLLC, and their subsidiaries as “Paciugo.” Under the terms of the Purchase Agreement, we were to provide services to support the business operations of Paciugo, including administrative, accounting, financial, human resources, information technology, legal, and marketing services (the “Support Services”). The Support Services expressly exclude providing certain capital expenditures as well as services that are customarily performed by third party professionals. In exchange for our providing the Support Services, we were entitled to receive an annual amount equal to the

5

greater of $250,000 or 2% of the consolidated gross revenues of Paciugo (excluding any gross revenues shared with third parties under existing contractual arrangements). Effective January 1, 2003, we began receiving monthly payments from Paciugo in the amount of $20,833, with positive cumulative differences, if any, between 2% of such gross revenues and $20,833 per month to be paid within ten days of the end of such month. During the current fiscal year, we recorded other income of $41,666 from the provision of the Support Services to Paciugo for July and August of 2003 as agreed upon in the Purchase Agreement. In August of 2003, certain disagreements arose between us and Paciugo concerning the amount of the monthly payment for July of 2003, as well as our performance of the Support Services. As a result, Paciugo has failed to make these payments since August of 2003.

Under the terms of the Purchase Agreement, we are entitled to such representation on the governing board of PMLLC (the “Board of Managers”) as is proportionate to our ownership interests therein. Effective as of December 19, 2002, PMLLC’s Board of Managers was composed of Ugo Ginatta and Cristiana Acerbi Ginatta, as the Equity Owners’ designees, and Barrett N. Wissman, as our designee. PMLLC, as the sole general partner of Ad Astra, is empowered to make all decisions associated with Ad Astra, except for those requiring the approval of the limited partners, as set forth in the limited partnership agreement of Ad Astra or under applicable law, and those requiring our approval, as set forth in the Purchase Agreement.

We effectively maintain no ability to control the day-to-day affairs of Paciugo. On August 1, 2003, Susie C. Holliday resigned from her positions as Senior Vice President and Chief Financial Officer of Paciugo in connection with her resignation from similar positions with us. On August 15, 2003, Patrick G. Mackey was named Senior Vice President and Chief Financial Officer of Paciugo. On August 25, 2003, Barrett N. Wissman resigned from the position of President of Paciugo. In addition, during 2003, our Board of Directors became increasingly concerned about Paciugo’s market position, the industry in which Paciugo competes and Paciugo’s prospects for meaningful success therein. Accordingly, during the fourth quarter of fiscal 2003, we concluded that it was reasonably unlikely that we would exercise our option to acquire the Subsequent Interest. Therefore, effective on October 1, 2003, Steven W. Caple and Patrick G. Mackey resigned from their positions as Senior Vice President and General Counsel and Senior Vice President and Chief Financial Officer, respectively, of Paciugo.

During the quarter ended December 31, 2003, we engaged in discussions with Paciugo that resulted in our entering into a sales agreement on January 13, 2004 (the “Sales Agreement”) with Ad Astra, PMLLC, and the Equity Owners, whereby we agreed, subject to customary closing conditions, to (i) sell and transfer to Ad Astra all of our right, title and interest in Ad Astra, (ii) sell and transfer to PMLLC all of our right, title and interest in PMLLC and (iii) terminate our right to exercise the option to acquire the Subsequent Interest, all in exchange for a total proposed Sales Price of $1.25 million (the “Sales Price”), to be paid in cash at closing by Ad Astra and PMLLC. The closing of the Sales Agreement was expected to take place on or about May 12, 2004, unless extended as provided for in the Sales Agreement. The closing date was extended to July 11, 2004. Ad Astra, PMLLC and the Equity Owners breached the Sales Agreement by not closing the Sales Agreement on or before this date. Accordingly, we continue to own our 33% interest in Paciugo.

Bankruptcy Proceedings

On July 30, 2001, the debtor subsidiaries filed voluntary petitions for protection under the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the “Delaware Bankruptcy Court”) in order to stabilize their operations and protect their assets while attempting to reorganize their businesses.

We have set forth below a table summarizing the current status of our wholly owned subsidiaries.

6

As originally contemplated, the goal of the reorganization effort relating to our debtor subsidiaries that filed voluntary petitions under Chapter 11 of the Bankruptcy Code was to preserve the going concern value of our debtor subsidiaries’ core assets and to provide distributions to their creditors. However, based largely on the fact that our debtor subsidiaries ceased receiving traffic from their sole remaining customer, Qwest, a determination was made that the continued viability of the debtor subsidiaries was not realistic. Accordingly, the bankruptcy plan was amended. The amended plan and disclosure statement were filed with the Delaware Bankruptcy Court on December 31, 2001. The amended plan provides for a liquidation of substantially all of the assets of our debtor subsidiaries, pursuant to Chapter 11 of the Bankruptcy Code, instead of a reorganization, as previously planned.

On January 14, 2002, the Delaware Bankruptcy Court approved the amended disclosure statement, with certain minor modifications, and on March 1, 2002, the Delaware Bankruptcy Court confirmed the amended plan, again with minor modifications. On April 3, 2002, the amended plan became effective and a liquidating trust was formed, with funding provided by us in the amount of $200,000. Assets to be liquidated of $700,000 were transferred to the liquidating trust during the fourth quarter of fiscal 2002. The purpose of the liquidating trust is to collect, liquidate and distribute the remaining assets of the debtor subsidiaries and prosecute certain causes of action against various third parties, including, without limitation, Qwest. No assurance can be given that the liquidating trust will be successful in liquidating substantially all of the debtor subsidiaries’ assets pursuant to the amended plan. Also, it is not possible to predict the outcome of the prosecution of causes of action against third parties, including, without limitation, Qwest, as described in the amended plan and disclosure statement. We previously guaranteed certain indebtedness of one or more of the debtor subsidiaries and, depending upon the treatment of and distributions to the holders of such indebtedness under the amended plan, we may be liable for some or all of this indebtedness.

In connection with the bankruptcy proceedings, we initially provided our debtor subsidiaries with approximately $1.9 million in secured debtor-in-possession financing to fund their reorganization efforts. The credit facility made funds available to permit the debtor subsidiaries to pay employees, vendors, suppliers, customers and professionals consistent with the requirements of the Bankruptcy Code. In connection with the amended plan being confirmed by the Delaware Bankruptcy Court and becoming effective on April 3, 2002, the credit facility was converted into a new secured note. During fiscal 2003, we provided additional funding of $500,000 to the liquidating trust. The current balance on the new secured note is approximately $3.3 million, which has been fully reserved due to the uncertainty surrounding the collection of this note. For further details regarding the funding provided to the debtor subsidiaries, see Item 2 entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.”

Plan of Operation

Prior Plan of Operation. We expended considerable time and resources in fiscal 2004 pursuing a plan of operation focused on locating, negotiating and, if possible, consummating a potential transaction for the redeployment of our remaining cash

7

assets (a “Business Opportunity”). Unfortunately, our efforts, with the exception of Paciugo, did not result in such an outcome, with negotiations ceasing prior to the actual consummation of any of the various transactions that we have pursued to date.

Revised Plan of Operation. Considering our current cash on hand and the funding needed to satisfy our obligations for the next six months, it remains highly unlikely that we will be able to consummate a Business Opportunity with our remaining free cash assets and current capital structure, particularly when such a transaction must be capable of producing positive cash flow for us in the immediate future. We shifted our focus during our third fiscal quarter and began to pursue a revised plan of operations because of our liquidity position, our lack of a viable Business Opportunity, and our belief that under any liquidation scenario our stockholders would not receive any recovery on or value for their holdings. Given our current situation, we believe that the most beneficial transaction for our stockholders would involve the exchange a certain amount of our common stock for the equity of a privately held company that values our assets and our status as a reporting company under the Securities Exchange Act of 1934, as amended (a “Strategic Combination”). In pursuing the best Strategic Combination possible, we believe that it will be necessary to effect a Recapitalization Event. It should be noted, however, that the pursuit of a Strategic Combination is not guaranteed to benefit us or any specific holder of our equity securities. With our limited cash, the most likely form of Strategic Combination would involve a substantial portion of the consideration being paid in the form of common stock. Furthermore, a Strategic Combination may require the approval of the holders of our common stock and perhaps our outstanding preferred stock. We can offer no assurances that we could obtain such stockholder approval even if we were able to locate a suitable Strategic Combination.

During the three months ended March 31, 2004, we contemplated a possible plan of recapitalization that would have resulted in all of the holders of our preferred stock electing to convert their shares into common stock, at a negotiated and substantially reduced conversion price (a “Recapitalization Event”). Our belief is that we would be in a better position to consummate a Business Opportunity or a Strategic Combination if we were able to achieve such a Recapitalization Event. Despite significant efforts, we cannot report that we have a reasonable likelihood of completing a Business Opportunity, a Strategic Combination or a Recapitalization Event as of the date of this Annual Report.

Even if we entered into a Strategic Combination, the consummation of such a transaction would likely cause significant dilution in the holdings of our existing common and possibly our preferred stockholders. If accomplishing a Recapitalization Event is a condition to the completion of a Strategic Combination, then the holders of our existing common stock would likely experience significant material dilution of their holdings both at the time of such a Recapitalization Event as well as upon the consummation of the Strategic Combination. Similarly, our preferred stockholders, if converted as part of a Recapitalization Event, would also experience significant material dilution of their holdings as a result of the Strategic Combination.

On June 7, 2004, we engaged Oasis Capital Partners, LLC (“Oasis”) to serve as our financial consultant and advisor in the identification and implementation of a comprehensive merger or acquisition based upon the long-term strategic objectives as outlined above. Oasis is advising and assisting us in (i) identifying a suitable merger or acquisition candidate, (ii) completing due diligence, (iii) structuring and negotiating acceptable terms and (iv) closing the transaction.

While we continue to explore potential Strategic Combinations, including ongoing discussions with entities that might be likely candidates for such a transaction, we have not entered into any agreement or letter of intent that involves a Strategic Combination and a possible Recapitalization Event as of the date of this Annual Report. Unless we can achieve these objectives on or before December 31, 2004, we will likely be required to cease operations altogether and pursue other alternatives, such as liquidating or filing a voluntary petition for relief under the Bankruptcy Code.

Business Considerations

Implementation of our plan of operation involves a number of distinct risks and uncertainties, including, without limitation, the following:

Risks Related to Our Business

We may not continue as a going concern. For the year ended June 30, 2004, we incurred a net loss of approximately $3.6 million. Further, we have no continuing operations. These factors, among others, raise substantial doubt about our ability to continue as a going concern, and our auditor’s opinion is modified for this uncertainty. Our financial statements do not include any adjustments that might result should we be unable to continue as a going concern. In fact, it is unlikely that we

8

will be able to continue as a going concern past December 31, 2004, unless we receive the Sales Price from Paciugo or successfully realize a cash settlement or obtain an award in connection with the Qwest arbitration or complete a Strategic Combination.

The bankruptcies of our debtor subsidiaries could negatively affect us, perhaps materially. All of our operating subsidiaries are in the process of liquidating their assets for the benefit of their respective creditors. We have previously guaranteed certain indebtedness of one or more of these debtor subsidiaries and, depending upon the treatment of and distribution to holders of such indebtedness under the amended plan, we may be liable for some or all of this indebtedness. Furthermore, the administration of our debtor subsidiaries’ amended plan could negatively affect our relationship with our current creditors, vendors and employees. We cannot provide any assurances that we will not be negatively affected by the bankruptcy of our debtor subsidiaries, including, without limitation, as it relates to the segregation and protection of our remaining cash assets.

We will be functioning as an early stage company. As previously indicated, we have been searching for opportunities in which to deploy our remaining cash assets. As of the date of this Annual Report, we consider it highly unlikely that we will be able to locate, consummate and fund such a Business Opportunity with our remaining cash resources. However, should we be able to accomplish such a transaction, we would find ourselves in a situation where we would not have any history upon which to base an evaluation of our business and prospects on a going-forward basis. In this scenario, our prospects would need to be considered in light of the many risks, uncertainties, expenses, delays and difficulties encountered by companies adopting a new or dramatically changed business model after the failure (for whatever reason) of a prior business model. Some of the risks and difficulties we would expect to encounter if we enter into a new line of business would include, without limitation, our ability to:

	•		create and successfully execute a revised business plan;
	•		locate, invest in and otherwise manage a commercially viable base of suitable opportunities;
	•		manage and adapt to changing operations;
	•		respond effectively to competitive developments;
	•		attract, retain and motivate qualified personnel, including, without limitation, those with appropriate industry experience; and
	•		overcome the impact of the failure of our previous business model upon our current and future reputation.

We have severely limited resources with which to fund a modified business plan. Even if we are successful in identifying a suitable alternative Business Opportunity, significant doubt exists as to whether we would possess sufficient funds to capitalize on it. No assurances can be made that adequate levels of financing to fund any new business venture will be available at all or on acceptable terms. Any financing could involve the issuance of securities with rights superior to those of our common stockholders. The issuance of additional securities could also result in significant dilution to our existing stockholders.

We may not be able to redeploy our remaining cash assets. The time, effort and expense associated with implementing an appropriate strategy for our remaining cash assets cannot be predicted with any degree of accuracy. If we do not devote adequate time to the investigation, due diligence and negotiation of appropriate Business Opportunities or if we are precluded from doing so before our cash assets are further depleted, we may be unable to successfully redeploy our remaining cash assets. We can make no assurances that we will be successful in redeploying our remaining cash assets. Further, to the extent we are able to redeploy our remaining cash assets, we can make no assurances that our efforts will ultimately prove successful.

We will likely be unable to diversify our business risk. As of June 30, 2004, we maintained cash and cash equivalents of approximately $1.8 million. We currently anticipate that after paying current operating expenses for the six months ended December 31, 2004, we will have approximately $700,000 of remaining cash available to redeploy and to support our monthly cash requirements. We do not believe that additional funding sources will be available to us in the near term. Accordingly, the cash assets available for redeployment will be severely limited. We will likely have the ability to participate in only one Business Opportunity. A lack of diversification may subject us to a variety of economic, competitive and regulatory risks, any or all of which may have a substantial adverse impact on our continued viability.

9

Our stockholders will not be afforded an opportunity to approve any possible transaction. We do not intend to provide information to our stockholders regarding potential Business Opportunities that we are considering. Our Board of Directors will have the executive and voting power to unilaterally approve all corporate actions related to the redeployment of our cash assets. As a result, our stockholders will have no effective voice in decisions made by our Board of Directors, except to the extent that they are asked to approve a Strategic Combination or Recapitalization Event, and will be entirely dependent on their judgment in the selection of an appropriate Business Opportunity and the negotiation of the specific terms thereof.

We may not realize any benefit from our interest in Paciugo. As indicated above, we have become increasingly concerned about Paciugo’s market position, the industry in which it competes and its prospects for meaningful success therein. Depending on a variety of factors, most of which are beyond our control, we may determine it necessary to record additional impairment charges against our Paciugo interest in our fiscal 2005 year. It is possible that we may need to completely write-off our interest in Paciugo. To the extent an impairment of our Paciugo interest is necessary:

	•		our reputation is likely to be negatively affected;
	•		we may become entangled in additional disputes or litigation, which may demand management, financial and other resources not available to us; and
	•		no assurances can be given that we will be able to benefit from the Paciugo interest as originally contemplated.

Equity Investments

Previously, we acquired minority positions in Internet and communications companies. As of June 30, 2004, we maintained investments in the following companies:

* The percentage ownership reflects our ownership percentage at June 30, 2004.

Currently, we have minority equity interests in Paciugo and certain development stage Internet and communications companies. During the second quarter of fiscal 2003, we purchased the Initial Interest in Paciugo. For further details regarding this transaction, see the section entitled “Business - General.” The Initial Interest is accounted for under the equity method. At such time, if any, as our aggregate ownership interest in Paciugo is increased to greater than 50% (such as the acquisition of the Subsequent Interest), we will use the consolidation method of accounting. Companies in which we directly or indirectly own more than 50% of the outstanding voting securities are generally accounted for in such a way. Under consolidation, Paciugo’s accounts will be reflected within our financial statements. As previously discussed, we do not currently anticipate exercising our option to acquire the Subsequent Interest.

In August of 2003, Gemini Voice obtained the approval of its stockholders to begin the process of winding up its affairs. During fiscal 2002, an impairment loss of $2.4 million was recorded related to our investment in ORB. On February 14, 2003, ORB filed a voluntary petition under Chapter 7 of the bankruptcy code. Impairment in our investments resulted from declining market conditions, negative operating results of the investment companies, lack of investor liquidity and other uncertainties surrounding the recoverability of these investments.

Competition

We expect to encounter intense competition from other organizations that have similar business objectives, namely the acquisition of, or participation in, new business opportunities. In this regard, many of our potential competitors have significant cash resources that will be available for use following the acquisition of an initial interest. In addition, many of our potential competitors possess more experienced management teams, business evaluation personnel and greater technical, human and other resources than we do. Further, some of our competitors may possess more attractive business or industry relationships than we have. Lastly, we may encounter some resistance from potential business partners due to our prior

10

business model or operating history. The inherent limitations on our competitive position may give others an advantage in pursuing attractive Business Opportunities.

We do not have any agreements or understandings with respect to any Business Opportunity that we currently intend to pursue. During our last fiscal year, we discussed and conducted due diligence on a variety of Business Opportunities. However, we later determined that these specific opportunities were not in our best interest, and we elected not to pursue them. We can provide no assurance that any future transaction will be completed or that, if completed, any such transaction will prove profitable or otherwise successful. Transactions of the type proposed involve a number of risks, including, without limitation, the following:

	•		the potential distraction of company management;
	•		the need for additional working capital;
	•		our ability to manage a potentially distinct different Business Opportunity, particularly in light of our possible lack of industry experience;
	•		the obligations associated with our debtor subsidiaries’ amended plan including, without limitation, the funding of the liquidating trust and the prosecution of claims against Qwest;
	•		the potential impairment of our reputation and relationships; and
	•		the ability to locate, consummate, fund and integrate suitable business opportunities while we maintain cash assets available for redeployment and numerous other risks and uncertainties.

For further details regarding the risks associated with the types of transactions proposed, see the section entitled “Business Considerations.”

Employees

As of June 30, 2004, we had three full-time employees. We also employ a limited number of independent contractors and temporary employees on a periodic basis. None of the employees are represented by a labor union.

Contractual Obligations and Other Commitments

As of June 30, 2004, we had the contractual obligations of $66,000 due in fiscal 2005 for our corporate office space.

ITEM 2. PROPERTIES

Our corporate offices are located at 2311 Cedar Springs Road, Suite 400, Dallas, Texas, occupying approximately 3,300 square feet. Our lease expires on April 30, 2005.

ITEM 3. LEGAL PROCEEDINGS

As previously reported, Eos Partners, LP, Eos Partners SBIC, LP, Eos Partners (Offshore), LP, Kuwait Fund for Arab Economic Development and TBV Holdings Ltd. (collectively, the “Plaintiffs”) filed a lawsuit against us, Fred Vierra, Barrett N. Wissman, Clark K. Hunt, Mark R. Graham, Olaf Guerrand-Hermes, Stuart Subotnick, Jan Robert Horsfall, Stuart Chasanoff, John Stevens Robling, Jr., Samuel Litwin, Mitchell Arthur, BDO Seidman, LLP, Hunt Asset Management, LLC, HW Partners, LP, HW Finance, LLC, HW Capital, LP and HW Group, LLC (collectively, the “Defendants”) in the 190th Judicial District Court of Harris County, Texas, on December 19, 2002. The lawsuit alleged breach of contract, fraud and conspiracy in connection with the Plaintiffs’ purchase of certain of our Series C Convertible Preferred Stock in December of 1999 and January of 2000. The Defendants denied the allegations and vigorously defended against the Plaintiffs’ claims and sought all other appropriate relief. The Plaintiffs claimed actual damages of approximately $17.4 million and requested additional exemplary damages, costs of court and attorneys’ fees. The Defendants submitted the claims to their insurance carriers. The district judge denied the Plaintiffs’ motion to transfer the case to Dallas County and ruled that it should instead proceed in Harris County. However, it was reassigned to the 280^th Judicial District Court. The Plaintiffs and the Defendants mediated the case on February 9, 2004, and the claims were settled at that time on terms in which we did not expend any cash or assets. As part of the settlement, we received all of the outstanding Series C Convertible Preferred Stock from the holders thereof, including the Plaintiffs, without any additional consideration, and the shares were subsequently retired.

11

As previously reported, we, along with the liquidating trust, filed a lawsuit on June 17, 2002, against Qwest, a former customer and vendor, and John L. Higgins, a former employee and consultant, in the Eighth Judicial District Court of Clark County, Nevada. The amended plan called for certain causes of action to be pursued by the liquidating trust against various third parties, including Qwest, in an attempt to marshal sufficient assets to make distributions to creditors. We were a co-proponent of the amended plan and suffered independent damages as a result of Qwest’s actions. Accordingly, we and the liquidating trust asserted, among other things, the following claims against Qwest: (i) breach of contract, (ii) conversion, (iii) misappropriation of trade secrets, (iv) breach of a confidential relationship, (v) fraud, (vi) breach of the covenant of good faith and fair dealing, (vii) tortious interference with existing and prospective business relations, (viii) aiding and abetting Mr. Higgins’s misconduct, (ix) civil conspiracy and (x) unjust enrichment. The following claims also have been asserted against Mr. Higgins: (i) breach of contract, (ii) breach of fiduciary duties, (iii) breach of a confidential relationship, (iv) fraud, (v) aiding and abetting Qwest’s misconduct, (vi) civil conspiracy and (vii) unjust enrichment. In addition to an award of attorneys’ fees, we and the liquidating trust are seeking such actual, consequential and punitive damages as may be awarded by a jury or other trier of fact. Qwest filed a motion to stay the litigation and compel arbitration on August 14, 2002. On March 13, 2003, a hearing was held to determine the proper forum for the various claims. After listening to oral arguments, the district judge granted Qwest’s motion. On April 2, 2003, we, along with the liquidating trust, filed a petition with the Supreme Court of Nevada, asking it to direct the district judge to reconsider her order. On August 13, 2003, our petition was denied. Accordingly, an arbitrator was appointed on December 30, 2003. He presided over a preliminary hearing on February 4, 2004, and he originally set the matter for a final hearing on July 7, 2004. On April 22, 2004, the arbitrator granted Qwest’s request to postpone the final hearing until September 27, 2004. On September 16, 2004, the arbitrator granted Qwest an additional continuance of the final hearing until November 1, 2004.

We have previously disclosed in other reports filed with the SEC certain other legal proceedings pending against us and our subsidiaries. Consistent with the rules promulgated by the SEC, descriptions of these matters have not been included in this Annual Report because they have neither been terminated nor has there been any material developments during the fiscal year ended June 30, 2004. Readers are encouraged to refer to our prior reports for further information concerning other legal proceedings affecting us and our subsidiaries.

We and our subsidiaries are involved in other legal proceedings from time to time, none of which we believe, if decided adversely to us or our subsidiaries, would have a material adverse effect on our business, financial condition or results of operations.

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

None.

12

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock is currently quoted on the National Association of Securities Dealers-Over the Counter Bulletin Board (“OTCBB”). Our common stock has been previously listed on the National Association of Securities Dealers Automated Quotation System (“NASDAQ”) and the OTCBB as follows:

*

Trading was halted by NASDAQ from July 30, 2001, until December 31, 2001.

The following table sets forth the high and low bid prices of our common stock on the applicable market for the quarterly periods indicated. Such prices reflect inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions:

Our stock has experienced periods, including, without limitation, certain extended periods, of limited or sporadic quotations.

As of June 30, 2004, there were 1,212 record holders of our common stock, 18 record holders of our Series B convertible preferred stock and 2 record holders of our Series D convertible preferred stock.

Recent Sales of Unregistered Securities

There were no sales of unregistered securities during our last fiscal year.

Dividend Policy

The holders of our common stock are entitled to receive dividends at such time and in such amounts as may be determined by our Board of Directors. However, we have not paid any dividends in the past and do not intend to pay cash dividends on our common stock for the foreseeable future. The quarterly dividends due and payable to the holders of our Series D Preferred Stock take precedence over any declarations or payments of any dividends or distributions to holders of any of our other series of preferred stock or our common stock and are accrued, in the form of additional preferred stock, on a quarterly basis in arrears.

13

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and Notes thereto included elsewhere in this Annual Report.

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

The following discussion should be read in conjunction with the consolidated financial statements and the notes found on pages F-1 to F-33 of this Annual Report.

Operations Summary

For the year ended June 30, 2004, we effectively had no operations, no sources of revenue and no profits, and we do not anticipate being in a position to resume operations until such time, if any, as we consummate a Business Opportunity or Strategic Combination. We cannot predict when or if we will be successful in such a new business venture or other potential Business Opportunities that we may consider, if any.

14

During fiscal 2004, we received $41,666 from Paciugo for the provision of Support Services. For further details regarding the Support Services, see Item 1 entitled “Business – General”, above. During fiscal 2002, revenues were generated from operations of two of our debtor subsidiaries: AxisTel and e.Volve. e.Volve’s only significant customer was Qwest, which accounted for approximately 70% of consolidated revenues for the year ended June 30, 2002. Subsequent to December 31, 2001, AxisTel and e.Volve ceased all operations, and as part of our debtor subsidiaries’ amended plan, substantially all of the assets associated with such services were liquidated.

We currently anticipate that we will not have any revenue from telecommunications or any other services unless or until we are able to redeploy our remaining cash assets in a Business Opportunity or Strategic Combination.

Basis of Presentation

The accompanying consolidated financial statements for the year ended June 30, 2004, include our accounts and the accounts of our subsidiaries not in liquidation. The debtor subsidiaries assets and liabilities were deconsolidated effective June 30, 2002.

For us and our subsidiaries not involved in the bankruptcy plan administration process, the financial statements, consisting primarily of cash, investments and office equipment, have been prepared in accordance with generally accepted accounting principles. The assets and liabilities of our debtor subsidiaries have been deconsolidated, as the liquidating trust controls the assets of these entities. During the year ended June 30, 2002, all of the revenues and direct costs reflected in our consolidated financial statements resulted from the operations of e.Volve and AxisTel.

Revenues. Historically, we derived substantially all of our consolidated revenues from the sale of telecommunications services of AxisTel and e.Volve. We do not expect to generate any revenues from operations until such time, if any, we successfully redeploy some or all of our remaining cash assets in a Business Opportunity or Strategic Combination, if at all.

Direct Costs. Historically, direct costs included per minute termination charges, lease payments and fees for fiber optic cable.

Selling, General and Administrative Expenses. These expenses include general corporate expenses, management salaries, professional fees, travel expenses, benefits, rent and administrative expenses. Currently, we maintain our corporate headquarters in Dallas, Texas. We provided administrative services to our debtor subsidiaries on an hourly basis pursuant to an administrative services agreement with the liquidating trust approved by the Delaware Bankruptcy Court. As of June 30, 2004, we had an outstanding receivable from the debtor subsidiaries relating to the provision of such administrative services of approximately $653,000 that is fully reserved in our financial statements due to the uncertainty surrounding the collection of the receivable. Under the terms of the administrative services agreement, any payments to us are deferred until such time that the trustee receives any funds from the positive outcome of the Qwest arbitration.

Depreciation and Amortization. Depreciation and amortization represents the depreciation of property and equipment and amortization of leasehold improvements. Due to significant impairment losses recorded during fiscal years 2002 and 2001, and the deconsolidation of our debtor subsidiaries, our depreciation and amortization costs have decreased significantly, and we do not expect these costs to increase in the near term.

Loss in equity investments. Loss in equity investments results from our minority ownership interests in various subsidiaries that are accounted for under the equity method of accounting. Under the equity method, our proportionate share of each subsidiary’s operating loss is included in equity in loss of investments. In December of 2002, we purchased the Initial Interest in Paciugo. For further details regarding Paciugo, see Item 1 entitled “Business - General,” above. The value of our outstanding equity interests, other than Paciugo, have been reduced to zero either by recording our proportionate share of prior period losses incurred by each subsidiary to the cost of that interest or from impairment losses. As mentioned previously, our minority interests, other than Paciugo, are either winding up their affairs or liquidating. We do not expect to record future charges related to those losses, as the interests have no carrying value. We expect Paciugo to continue in the near future to incur operating losses and will continue to record our proportionate share of those operating losses. On February 14, 2003, ORB filed for protection under Chapter 7 of the Bankruptcy Code, and in August of 2003, Gemini Voice obtained the approval of its stockholders to begin the process of winding up its affairs.

Net Gain on Liquidation of Debtor Subsidiaries. Net gain on liquidation of debtor subsidiaries results from liquidation accounting for our debtor subsidiaries, which are involved in the bankruptcy plan administration process. All debtor

15

subsidiary assets were stated at estimated realizable values. Similarly, liabilities were reflected at estimated settlement amounts, subject to the approval of the Delaware Bankruptcy Court, with those liabilities secured by specific assets being offset against such assets, as allowed. The estimated realizable values and settlement amounts may be different from the proceeds ultimately received or payments ultimately made.

Other Income. Other income results from the Support Services we provided to Paciugo, pursuant to the Purchase Agreement. There can be no assurances as to the continuation of these payments, as Paciugo has not made the payment due since September of 2003 due to disagreements between us and Paciugo regarding the Support Services. For further details regarding the payments, see Item 1 entitled “Business – General”, above. Other income also results from the administrative services we provided to our debtor subsidiaries pursuant to an administrative services agreement approved by the Delaware Bankruptcy Court. The administrative services agreement with our debtor subsidiaries initially dictated that our debtor subsidiaries pay us $30,000 per week for legal, accounting, human resources and other services. The original agreement expired on April 2, 2002, and an interim agreement was reached whereby, the liquidating trust, as successor-in-interest to our debtor subsidiaries, paid us $40,000 per month for some of the same services. The interim agreement expired on August 15, 2002. During the fourth quarter of fiscal 2003, we negotiated an on-going agreement with the liquidating trust, whereby we provide administrative services to our debtor subsidiaries on a per hour basis. Due to the uncertainty surrounding the collection of this receivable, it has been fully reserved in our financial statements.

FISCAL YEAR ENDED JUNE 30, 2004 COMPARED TO FISCAL YEAR ENDED JUNE 30, 2003

Revenues. No revenues were generated during fiscal 2004 and 2003.

We do not expect to generate any revenues from operations until such time, if any, we successfully redeploy some or all of our remaining cash assets in a Business Opportunity or Strategic Combination, if at all. No assurances can be given that we will generate revenues from operations in the future.

Direct Costs. No direct costs were incurred during fiscal 2004 and 2003, as we currently have no operations.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased approximately 31% or $1.0 million during fiscal 2004 to $2.2 million from $3.2 million in fiscal 2003. The decrease in selling, general and administrative expenses during fiscal 2004 resulted primarily from (i) downsizing of the workforce, (ii) the termination of operations as a result of the various bankruptcy proceedings, (iii) the reduction in professional fees relating to the bankruptcy plan administrative process and (iv) an overall reduction of overhead related to office rent, telephone, office expenses and travel and entertainment.

Selling, general and administrative expenses for the fiscal year ended June 3