Filed Pursuant to Rule 424(b)(3)
                                                     Registration No. 333-120047

                                   PROSPECTUS


      The information in this Prospectus is not complete, and it may be changed.
These securities will not be publicly resold until the  registration  statement,
of which this  Prospectus is a part, is filed with the  Securities  and Exchange
Commission  and has become  effective.  This  Prospectus is not an offer to sell
these  securities and is not soliciting an offer to buy these  securities in any
state  where such offer or sale is not  permitted.

                           RCG COMPANIES INCORPORATED
                                   14,052,474
                                  COMMON STOCK

      This  Prospectus  relates to the resale of up to 14,052,474  shares of our
Common Stock, par value $.04 per share, by certain stockholders. The shares that
may be resold  pursuant  to this  Prospectus  include  690,000  shares of Common
Stock,  4,574,468  shares  of  Common  Stock  underlying  shares  of Series A 6%
Convertible  Preferred  Stock,  910,588  shares  issuable as dividends for three
years if Company  elects to, and is  permitted  to, pay such  dividends in kind;
1,186,617  shares of Common  Stock  underlying  Common Stock  Purchase  Warrants
exercisable at $1.20,  200,000 shares of Common Stock  underlying a Common Stock
Purchase Warrant  exercisable at $0.94, 50,000 shares of Common Stock underlying
Warrants to Purchase  Common Stock  exercisable  at $2.44,  3,430,851  shares of
Common Stock underlying  Additional  Investment Rights  exercisable at $1.03 per
share and 3,009,950  additional shares are being registered in order to register
130% of the total registrable  securities as required by the Registration rights
Agreement.

      Our Common Stock is traded on the American Stock Exchange under the symbol
"RCG." The closing  sales price of our Common  Stock on October  25,  2004,  was
$1.15 per share.

      INVESTING IN THE COMMON STOCK INVOLVES  CERTAIN RISKS.  SEE "RISK FACTORS"
BEGINNING ON PAGE 1 FOR INFORMATION THAT YOU SHOULD CONSIDER.

      NEITHER THE  SECURITIES AND EXCHANGE  COMMISSION NOR ANY STATE  SECURITIES
COMMISSION,  HAS APPROVED OR DISAPPROVED OF THESE  SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

                The date of this Prospectus is November 12, 2004.

                                 ______________





                                TABLE OF CONTENTS
Risk Factors..................................................................1

Forward-Looking Statements....................................................7

Offering Summary..............................................................8

About the Company.............................................................8

Use of Proceeds..............................................................13

Description of Common Stock..................................................13

Selling Stockholders.........................................................13

Plan of Distribution.........................................................30

Legal Matters................................................................32

Experts......................................................................32

Where You Can Find More Information..........................................32

Information Incorporated by Reference........................................33




                                  RISK FACTORS

      You should carefully consider the risk factors set forth below, as well as
the other information in this Prospectus, in evaluating whether to invest in our
Shares.

      WE RECEIVED A GOING CONCERN OPINION FROM OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.

      We  received  from  our independent  registered public accounting firm and
included in this report an opinion on our consolidated financial statements that
raises  substantial  doubt as to our ability to continue as a going concern as a
result of recurring  losses from  operations and a deficiency in working capital
at June 30, 2004.

      WE MAY NEED TO RAISE  ADDITIONAL FUNDS IN ORDER TO CONTINUE TO OPERATE AND
GROW  OUR  BUSINESS.

      If we are unable to grow our business or improve our operating  cash flows
as expected;  If we suffer significant  losses on our investments;  or if we are
unable to realize adequate proceeds from those investments, we will then need to
secure  alternative  equity or debt  financing  to  provide  us with  additional
working  capital.  However,  there can be no  assurance  that we will be able to
complete such financing if required.  If we raise funds through debt  financing,
then we will  incur  additional  interest  expense  going  forward.  If we raise
additional funds by issuing  additional equity  securities,  then the percentage
ownership of our current stockholders will be diluted. We cannot be certain that
additional financing will be available when and to the extent required, or that,
if  available,  it will be on  acceptable  terms.  In  addition,  our ability to
complete  future  financings  may be affected by the market  price of our Common
Stock. If adequate funds are not available on acceptable  terms, then we will be
unable to continue to fund our existing businesses or planned expansion, or take
other steps necessary to enhance our business or continue our operations.

      WE HAVE BEEN INCURRING OPERATING LOSSES AND THERE CAN BE NO ASSURANCE THAT
WE WILL ACHIEVE OR SUSTAIN PROFITABILITY.

      We  have  incurred  operating  losses  since  inception.  Certain  of  our
operating  businesses have incurred and continue to incur operating  losses.  We
expect to continue to incur  significant  operating costs in connection with our
efforts to expand our existing businesses and to grow through acquisitions. As a
result of these costs and uncertain  revenue  growth,  there can be no assurance
that we will achieve or be able to sustain profitability.

      THE PRICE OF OUR COMMON STOCK HAS BEEN VOLATILE AND IF THE MARKET PRICE OF
OUR COMMON STOCK DECREASES, STOCKHOLDERS MAY NOT BE ABLE TO SELL THEIR SHARES OF
COMMON STOCK AT A PROFIT.

      The trading  price of our Common  Stock  during our last fiscal  year,  as
reported by the American Stock  Exchange,  fluctuated  from a high of $3.16 to a
low of $0.46.  Fluctuations  in the price of our Common  Stock may occur,  among
other reasons, in response to:


                                       1


      o     operating results;
      o     regulatory changes;
      o     economic changes;
      o     market valuation of firms in related businesses; and
      o     general market conditions.

      In  addition,  the volume of shares of our Common Stock bought and sold on
any trading day has been subject to wide  fluctuations  which also contribute to
fluctuations in the trading price of our Common Stock.  The trading price of our
Common Stock could  continue to be subject to wide  fluctuations  in response to
these or other factors, many of which are beyond our control.

      WE MAY BE UNABLE TO MAINTAIN  OUR LISTING ON THE AMERICAN  STOCK  EXCHANGE
AND IF WE ARE DELISTED THE TRADING OF OUR COMMON STOCK COULD BE MORE DIFFICULT.

      Our Common  Stock is presently  listed and trading on the  American  Stock
Exchange. We believe that we meet the standards for continued listing but such a
determination  is subjective and the Exchange may not agree. If our Common Stock
is delisted from the Exchange  trading in our securities could be more difficult
and trading of our Common Stock could be subject to the "penny stock" rules. The
U.S. Securities and Exchange Commission (the "SEC") has adopted regulations that
generally define a penny stock to be any equity security that has a market price
of less than $5.00 per share,  subject to certain exceptions  (including trading
on the American Stock Exchange).  These rules require that any broker-dealer who
recommends our  securities to persons other than prior  customers and accredited
investors  must,  prior  to  the  sale,  make  a  special  written   suitability
determination for the purchaser and receive the purchaser's written agreement to
execute the  transaction.  Unless an exception  is  available,  the  regulations
require the delivery,  prior to any  transactions  involving a penny stock, of a
disclosure  schedule  explaining the penny stock market and the risks associated
with  trading  in the penny  stock  market.  In  addition,  broker-dealers  must
disclose  commissions  payable  to both  the  broker-dealer  and the  registered
representative  and  current  quotations  for the  securities  they  offer.  The
additional  burdens  imposed  upon   broker-dealers  by  such  requirements  may
discourage  broker-dealers  from  recommending  transactions  in our securities,
which could  severely  limit the liquidity of our  securities  and  consequently
adversely affect the market price for our securities.

      IF WE CANNOT INTEGRATE OUR RECENT OR FUTURE ACQUISITIONS, WE MAY BE UNABLE
TO SUCCESSFULLY EXECUTE OUR STRATEGY.

      We  anticipate  that a portion of our future  growth will be  accomplished
through  acquisitions.  The success of our plan  depends  upon our ability to:

      o     identify suitable acquisition opportunities;
      o     effectively integrate acquired personnel,  operations,  products and
            technologies into our organization;
      o     retain and motivate the personnel of acquired businesses;
      o     retain  customers  of  acquired  business;  and
      o     obtain necessary financing on acceptable terms or use our securities
            as consideration for acquisitions.


                                       2


      Turbulence in financial markets and the current U.S. economy may result in
a diminished pool of companies that meet our criteria for  acquisition.  Even if
we are  successful in acquiring  companies,  we may be unable to integrate  them
into our business model or achieve the expected synergies.

      WE FACE COMPETITION FROM OTHER ACQUIRORS AND INVESTORS,  WHICH MAY PREVENT
US FROM REALIZING STRATEGIC OPPORTUNITIES.

      We plan to acquire or invest in existing companies to fulfill our business
plan. In pursuing these  opportunities,  we face  competition from other capital
providers and  operators of  companies,  including  publicly  traded  companies,
venture capital companies and large corporations. Some of these competitors have
greater financial,  operational and human resources than we do. This competition
may limit our  opportunity  to acquire  interests in  companies  that we believe
could help us fulfill our business plan and increase our value.

      OUR  ACQUISITION  STRATEGY  HAS AND WILL  CONTINUE  TO DILUTE OUR  CURRENT
STOCKHOLDERS' OWNERSHIP.

      Our acquisition strategy  contemplates that we may issue our securities to
make  strategic  acquisitions  and  attempt  to grow our  business.  Each of the
acquisitions  that  we  complete  in  the  future,  involving  the  issuance  of
securities,  will further dilute our current stockholders' ownership interest in
the Company.

      OUR GROWTH  PLACES  STRAIN ON OUR  MANAGERIAL,  OPERATIONAL  AND FINANCIAL
RESOURCES.

      Our growth has placed, and is expected to continue to place, a significant
strain on our managerial,  operational and financial  resources.  Further growth
will  increase  this  strain  on  our  managerial,   operational  and  financial
resources,  which may inhibit our ability to successfully implement our business
plan.

      WE DEPEND ON  CERTAIN  IMPORTANT  EMPLOYEES,  AND THE LOSS OF ANY OF THOSE
EMPLOYEES MAY HARM OUR BUSINESS.

      Our  performance  is  substantially  dependent on the  performance  of our
executive  officers  and  other  key  employees.  The  familiarity  of these key
employees with their  respective  industries  makes those  employees  especially
critical to our success. In addition, our success is dependent on our ability to
attract,  train, retain and motivate high quality personnel,  especially for our
management  team.  The loss of the services of any of our executive  officers or
key employees may harm our business.  Our success also depends on our continuing
ability to attract,  train, retain and motivate other highly qualified technical
and  managerial  personnel.  Competition  for such  personnel is intense and our
limited  resources  are likely to make it more  difficult  for us to attract and
retain such personnel.


                                       3


      WE DEPEND ON CERTAIN AIRLINE CONTRACTS.

      Our travel services business  generally  contracts with three carriers for
charter tour operator contracts.  While this concentration generally reduces the
costs of the carrier  service,  if one or more of these  carriers  are unable to
perform under its contract,  our travel services business may experience service
interruptions that could reduce its revenue.  Additionally,  our travel services
business may be forced to replace  such a carrier,  which could result in higher
operating costs for the carrier services, thereby reducing profitability.

      INCREASES IN FUEL COSTS AFFECT OUR OPERATING COSTS AND COMPETITIVENESS.

      Fuel is a major  component of our  operating  expenses.  Both the cost and
availability  of fuel are influenced by many economic and political  factors and
events occurring in oil producing countries throughout the world, and fuel costs
fluctuate widely. Recently the price per barrel of oil is as at an all-time high
and has significantly impacted our results of operations.  We cannot predict our
future cost and availability of fuel, which affects our ability to compete.  The
unavailability of adequate fuel supplies could have a material adverse effect on
our  operations  and  profitability.  In  addition,  larger  airlines may have a
competitive  advantage  because  they pay lower  prices for fuel.  We  generally
follow  industry  trends by imposing a fuel surcharge in response to significant
fuel price  increases.  However,  our ability to pass on increased fuel costs is
limited by economic and competitive conditions.

      PURSUANT  TO THE TERMS OF OUR  ACQUISITION  OF  VACATION  EXPRESS  WE HAVE
INCURRED  SUBSTANTIAL  DEBT  WHICH  IS  SECURED  BY  CERTAIN  OF OUR  INVESTMENT
HOLDINGS.

      Under  the  terms of our  acquisition  of  Vacation  Express  we  issued a
$10,000,000  seven-year  promissory  note  which is  secured  by  certain of our
investment  holdings.  In addition,  under the terms of the  acquisition we have
made a commitment to purchase  $4,500,000 of travel related services.  If we are
unable to repay the note or satisfy the  commitment,  we may forfeit  certain of
our investment holdings.  In addition,  the debt may put a strain on our working
capital.  If we are unable to repay the debt,  our  financial  position  will be
negatively impacted.

      FUTURE  EVENTS  SIMILAR TO THOSE OF SEPTEMBER 11, 2001 MAY HAVE AN ADVERSE
EFFECT ON OUR BUSINESSES.

      The  terrorist  attack  against the United  States on  September  11, 2001
produced  great  uncertainty  in the  economy  in  general  and in the  aviation
industry in particular.  These events are still having a negative  impact on the
air travel industry. These events may drastically alter the long-term demand for
charter  services.  In  addition,  these  events may lead the  Federal  Aviation
Administration  to place  additional  restrictions on charter flight  operators,
which may increase the cost of private charter services. The long-term impact of
these events on the aviation industry and the chartered services segment of that
industry are not known. These events could have a material adverse effect on our
aviation travel services business.


                                       4


      GOVERNMENT  REGULATION  OF THE TRAVEL  INDUSTRY  COULD IMPACT OUR AVIATION
TRAVEL SERVICES' BUSINESS OPERATIONS.

      Certain segments of the travel industry are regulated by the United States
Government and, while we are not currently  required to be certified or licensed
under such regulation,  certain services offered by our aviation travel services
business are affected by such regulation.  Charter flights operators, upon which
our  aviation  travel  services  business  depends,  are subject to vigorous and
continuous  certification  requirements by the Federal Aviation  Administration.
Changes in the regulatory  framework for charter aviation travel could adversely
affect  our  aviation  travel  services   business'   operations  and  financial
condition.

      OUR AVIATION  TRAVEL  SERVICES  BUSINESS  FACES INTENSE  COMPETITION  FROM
COMMERCIAL AIRLINERS AND OTHER TOUR OPERATORS FOR CUSTOMERS.

      We provide  leisure  charter jet travel and tour services and face intense
competition from commercial  airlines and other tour operators for the potential
customers who travel to these locations and other locations that we may serve in
the future. These commercial airlines have greater resources,  marketing efforts
and  brand  equity  than we do and they also  offer a  potential  customer  more
flights to these  locations.  Furthermore,  travelers  have numerous  choices of
location when choosing travel  destinations.  Since we offer only limited travel
destinations,  we  face  intense  competition  from  travel  agents,  commercial
airlines,  hotels,  resorts,  casinos  and  other  organizations  in the  travel
industry that offer alternative travel destinations to those offered by us. Many
competitors  possess far greater capital and human resources,  marketing efforts
and brand equity than we do. If we are unable to compete  effectively with these
various  competitors in the travel  industry,  we may not be able to achieve and
maintain profitability.

      OUR  TECHNOLOGY  SOLUTIONS  BUSINESS  MAY NOT BE ABLE TO KEEP UP WITH  THE
CONTINUOUS TECHNOLOGICAL CHANGE IN ITS MARKET.

      The success of our technology  solutions business will depend, in part, on
its  ability to respond to  technological  advances.  This  business  may not be
successful in responding  quickly,  cost-effectively  and  sufficiently to these
developments.  Many of the competitors of our technology  solutions business are
larger than we are and have significantly more financial  resources to invest in
advances in technology, products and other areas central to providing technology
and Internet  solutions.  Our technology  solutions business will not be able to
compete  effectively  or  meet  its  growth  objectives  if  it is  unable,  for
technical,  financial or other reasons,  to adapt in a timely manner in response
to technological advances. In addition, employee time allocated to responding to
technological advances will not be available for client engagements.

                                       5


      THE SUCCESS OF OUR TECHNOLOGY SOLUTIONS BUSINESS IS LARGELY DEPENDENT UPON
ITS  ABILITY TO RETAIN  ITS  MANUFACTURER  AUTHORIZATIONS  THAT ALLOW IT TO SELL
SOFTWARE TO EDUCATIONAL CUSTOMERS AT DISCOUNTED PRICING AND ITS LINES OF CREDIT.

      Our technology  solutions  business has been  accumulating  authorizations
from key software  manufacturers  that allow it to sell products to  educational
facilities at deep discounts.  If our technology solutions business were to lose
any  of  these  authorizations,   its  ability  to  sell  computer  products  to
educational  customers would be adversely  impacted,  which could have a similar
impact on its sales,  profitability  and ability to expand  within this business
line. In addition,  this business uses credit lines extended by banks,  software
and hardware  manufacturers  and  distributors.  The loss of any of these credit
lines  would  limit the  ability of our  technology  solutions  business to meet
customer demand, thereby reducing sales and profits.

      THE EXERCISE OF OUTSTANDING  OPTIONS,  WARRANTS AND CONVERTIBLE  PREFERRED
STOCK COULD SUBSTANTIALLY DILUTE EXISTING STOCKHOLDERS AND COULD HAVE A NEGATIVE
EFFECT ON OUR STOCK PRICE.

      We have  adopted the RCG  Companies  Incorporated  Stock  Option Plan (the
"Plan") and our stockholders  have authorized the issuance of options to acquire
up to 20,000,000  shares of Common Stock under the Plan. As of June 30, 2004, we
have  outstanding  options for 2,261,657  shares,  under the Plan that have been
granted to our officers,  directors,  employees  and other service  providers of
which  options for  1,820,229  shares are vested.  There have been zero  options
exercised  for fiscal year 2004 of Common Stock that were issued under the Plan.
In addition to options  issued  under the Plan,  we currently  have  outstanding
warrants as of June 30, 2004 for  6,421,963  shares,  including  6,000 that were
exercised  during this fiscal year.  Our  outstanding  options and warrants have
exercise  prices  ranging  from  $0.28 to  $28.00.  As of the  filing  date,  we
currently have  outstanding  convertible  preferred  shares for 4,574,468 common
shares  at a  conversion  price  of $.94 per  share,  none of  which  have  been
converted as of the filing  date.  The  exercise of these  options,  warrants or
preferred   shares  will  dilute  the   percentage   ownership  of  our  current
stockholders  and the potential sale of shares issued upon the exercise of these
warrants, options or preferred shares could have a negative impact on the market
price of our Common Stock.

      THE FUTURE SALES OF RESTRICTED  SECURITIES COULD HAVE A NEGATIVE EFFECT ON
OUR STOCK PRICE.

      The market price of our Common Stock could be  negatively  affected by the
future sale of shares of restricted Common Stock, including shares of restricted
Common Stock underlying options and warrants that have been or will be issued by
us.  As of June  30,  2004 and June 30,  2003,  approximately  4,800,000  of our
21,289,004,   and  2,100,000  of  our  13,948,160,   respectively,   issued  and
outstanding  shares of Common Stock are believed to be restricted  securities as
defined in Rule 144  promulgated  under the  Securities  Act of 1933, as amended
(the  "Securities  Act") or otherwise  not  available for trading by the public.
Rule  144  provides  generally  that  restricted  securities  must be held for a
one-year period prior to resale and provides certain  additional  limitations on
the sale of such shares, including limitations on the volume of such shares that
a beneficial  owner may sell in any three-month  period  thereafter.  Generally,
non-affiliated  stockholders may sell restricted  shares that have been held for
at least two years without any  limitations.  In addition,  Rule 145 permits the
sale by  non-affiliates  of  restricted  securities  issued in  connection  with
certain  business  combinations  one year  after  such  shares  are  issued.  As
restricted  shares become  eligible for resale pursuant to Rule 144 or Rule 145,
the number of sellers of our Common Stock could increase significantly and, as a
result, the market price of our Common Stock could decrease.


                                       6


      IF WE ARE NOT  ABLE TO  PROTECT  OUR  INTELLECTUAL  PROPERTY,  PROPRIETARY
RIGHTS AND TECHNOLOGY,  WE COULD LOSE THOSE RIGHTS AND INCUR  SUBSTANTIAL  COSTS
POLICING AND DEFENDING THOSE RIGHTS.

      We rely  primarily on a  combination  of  intellectual  property  laws and
contractual provisions to protect our proprietary rights and technologies, brand
and marks. These laws and contractual provisions provide only limited protection
of proprietary  rights and technology.  Our means of protecting our intellectual
property, proprietary rights and technology may not be adequate.

      IF THE SELLING  STOCKHOLDERS  SELL A  SUBSTANTIAL  AMOUNT OF THEIR SHARES,
THESE SALES COULD HAVE AN ADVERSE IMPACT ON OUR STOCK PRICE.

      If some or all of the Selling  Stockholders  sell a substantial  amount of
their Common Stock under this  Prospectus,  such sales could have a  significant
negative impact on the market price of our Common Stock.  This Prospectus  could
result in a large  number of shares of our Common Stock being sold in the market
which,  in turn,  could  result in a reduction in the market price of our Common
Stock.

                           FORWARD-LOOKING STATEMENTS

      THIS PROSPECTUS CONTAINS FORWARD-LOOKING  STATEMENTS THAT MAY PROVE NOT TO
BE ACCURATE.  This Prospectus (including information included or incorporated by
reference  herein)  contains  certain  "forward-looking  statements"  within the
meaning of Section 27A of the  Securities  Act and Section 21E of the Securities
Exchange Act of 1934,  as amended (the  "Exchange  Act"),  which  represent  our
expectations  or  beliefs  concerning  future  events  that  involve  risks  and
uncertainties. All statements other than statements of historical facts included
in this Prospectus  (including,  without  limitation,  the statements  under the
section of this document titled "About the Company" and elsewhere herein) and in
our  filings  that are  incorporated  by  reference  herein are  forward-looking
statements.  Although  we  believe  that  the  expectations  reflected  in  such
forward-looking  statements are  reasonable,  we can give no assurance that such
expectations  will prove to be  correct.  Such  forward-looking  statements  are
subject to risks,  uncertainties  and other  factors  which could  cause  actual
future  results or trends to differ  materially  from  future  results or trends
expressed or implied by such forward-looking statements. The most significant of
such risks,  uncertainties  and other factors are discussed under the section of
this document  titled "Risk  Factors,"  beginning on page 1 of this  Prospectus.
Prospective investors are urged to consider carefully such factors.

                                       7


                                OFFERING SUMMARY

      We entered into a Securities  Purchase Agreement effective as of September
13, 2004 (the "Securities Purchase Agreement") with institutional and accredited
investors  (collectively  the  "Investors").   Pursuant  to  the  terms  of  the
Securities  Purchase  Agreement,   we  are  to  initially  issue  the  following
securities to the Investors in consideration for the Investors making payment to
us in the  aggregate  amount  of  $4,300,000:  (i)  4,300  shares of Series A 6%
Convertible Preferred Stock, (ii) Warrants to purchase  approximately  1,143,617
shares of  Common  Stock at an  exercise  price of $1.20  per  share,  and (iii)
Additional  Investment  Rights to  purchase  approximately  3,430,851  shares of
Common Stock at an exercise price of $1.03 per share.

      We  have  agreed  to  file a  registration  statement  (the  "Registration
Statement")  with the SEC  registering  for resale  130% of all shares of Common
Stock underlying the Series A Preferred Stock, the Warrants,  and the Additional
Investment Rights, and shares issuable as dividends for 3 years.

      The transaction was approved by our Board of Directors on August 24, 2004,
and closed on September 14, 2004.  The shares of Series A Preferred  Stock,  the
Warrants,  and the  Additional  Investment  Rights,  the shares of Common  Stock
underlying  such  securities,  and shares  issuable as dividends  will be issued
pursuant to the  exemption  from  registration  provided by Section  4(2) of the
Securities Act.

                                ABOUT THE COMPANY

      WHO WE ARE

      RCG  Companies  Incorporated  and  its  subsidiaries  ("RCG",  "We" or the
"Company")  is a network of travel and  technology  services  companies  brought
together under one operating  company to benefit from synergistic  relationships
and the infusion of intellectual  and capital  resources.  We are engaged in the
operation of travel services and technology solutions  businesses.  Incorporated
in  1982,  RCG is a  Delaware  corporation  headquartered  in  Charlotte,  North
Carolina. Our fiscal year ends on June 30.

      On November 14, 2003, we changed our name from  eResource  Capital  Group,
Inc. to RCG Companies Incorporated to better reflect the nature and evolution of
our  business  strategy.  In fiscal  year  2001,  we  brought  in new  executive
management  and modified our business  plan to focus on acquiring  and enhancing
travel and technology services  companies.  We also brought in new management to
our aviation  business and completed  the  acquisition  of an aviation  services
company that,  together,  have expanded that business into a highly  specialized
travel  organization  that  delivers  a  unique  turnkey  air  service.  We have
increased our focus on the travel and entertainment  sector and plan to continue
to operate,  enhance and acquire substantial interests in the value of expansion
phase companies operating in the travel and entertainment sector.

      Through our wholly owned subsidiary,  Flightserv, Inc. ("Flightserv"),  we
concluded the acquisition of substantially  all of the assets and liabilities of
VE Holdings,  Inc.  ("Vacation  Express") and SunTrips,  Inc.  ("SunTrips") (the
"Acquired Companies"), effective October 31, 2003. These acquired companies were
integrated into Flightserv,  our existing travel services business,  to form our
largest operating segment.  We had previously  provided services to the Acquired
Companies.


                                       8


      The Acquired Companies provide specialized  distribution of leisure travel
products and services.  Vacation Express,  based in Atlanta,  Georgia, sells air
and hotel packages to Mexican and Caribbean destinations. SunTrips, based in San
Jose,  California,  sells air and  hotel  packages  for  Mexico,  the  Dominican
Republic,  Costa Rica, Hawaii and the Azores.  The flights originate in Oakland,
California and/or Denver, Colorado.

      Logisoft Corp. ("Logisoft"),  our technology solutions business,  provides
integrated  products and services to assist customers in meeting their strategic
technology  initiatives.  Our  products  and services  include  distribution  of
third-party-published  software titles for the educational  market and corporate
customers,  full-service  Internet  development,  Internet  Web site hosting and
co-location,   and   Internet   business   development   services   encompassing
partner-site  management and marketing. In our Internet business development and
marketing  services  business,  we generally  participate in the development and
implementation  of the  business  plan in exchange  for revenue  sharing  and/or
equity-based arrangements.

      On November 5, 2003,  Logisoft  completed the  acquisition  of SchoolWorld
Software, a Pittsburgh, Pennsylvania-based educational software company.

      During the third  quarter of 2004,  our Board of Directors  (the  "Board")
authorized  the  disposition of our  investment in Lifestyle  Innovations,  Inc.
("LFSI"), a full-service home technology integration company.  Accordingly,  the
operations  of LFSI  were  reclassified  to  "discontinued  operations"  for all
periods  presented.  During the fourth quarter,  we contributed  approximately 4
million  shares to the  treasury of LFSI,  a  substantial  portion of which were
reissued to certain LFSI investors to settle  certain  contingent  claims.  LFSI
also issued other shares,  which  resulted in our interest in LFSI being reduced
to  an  effective  45.5%  beneficial  ownership.   Considering  the  substantial
reduction in ownership and the lack of control over LFSI, the investment in LFSI
is now  recorded  using  the  equity  method  and is no  longer  a  consolidated
subsidiary.  The change  resulted in RCG restoring its negative  carrying  value
during the forth quarter.

      OUR ADDRESS AND PHONE NUMBER

      Our principal  executive  offices are located at 6836 Morrison  Boulevard,
Suite 200,  Charlotte,  North  Carolina  28211.  Our  telephone  number is (704)
366-5054.

                                 OUR BUSINESSES

      GENERAL

      In fiscal 2001,  we brought in new executive  management  and modified our
business plan to focus on acquiring and enhancing travel and  entertainment  and
technology  services  companies  and,  as a result,  acquired  companies  in the
telecommunications   call  center,  home  technology  and  technology  solutions
business  segments.  We also brought in new management to our aviation  business
and completed the acquisition of an aviation  services  company that,  together,
have expanded that business into a highly specialized  travel  organization that

                                       9


delivers a unique turnkey air service.  This aviation travel  services  business
generated $165 million and $62 million in revenue in fiscal years 2004 and 2003,
respectively.  As a result of this growth,  we have  increased  our focus on the
travel and  entertainment  sector and plan to  continue  to acquire  substantial
interests in, operate and enhance the value of companies operating in the travel
and entertainment  sectors.  We are in the early phases of our expanded strategy
and continue to focus on existing operations as well as our efforts to implement
this strategy.

      At different times prior to fiscal 2000, we operated businesses in several
industries  including drug  screening,  computer  software and  residential  and
commercial  real estate  development,  all of which have now been  discontinued.
During fiscal 2000, our Company, under the name flightserv.com, Inc. was engaged
in the development of an Internet  website to provide access to private aviation
travel services. In March 2000, we launched our private aviation program, called
Private SeatsTM. We were able to generate only minimal customer bookings through
the Private  SeatsTM  program and did not book any  flights  under this  program
after June 2000.

      AVIATION TRAVEL SERVICES

      We acquired  Internet  Aviation  Services,  Ltd.  ("IASL"),  a leisure and
business travel services company which provided charter  aviation  services,  in
August 2000.  IASL was integrated  into our aviation  travel  services  business
through our Flightserv subsidiary.

      Flightserv,  headquartered  in  Atlanta,  GA, is a  nationally  recognized
airline  and  travel  program   management  company  providing  tour  operators,
corporate travel  departments,  sports teams and casinos with cost effective and
reliable charter air transportation on a scheduled and ad-hoc basis.  Flightserv
acts as a program  manager  by  providing  turnkey  charter  services  including
aircraft  and related  services  such as ground  support and  aircraft  fueling,
passenger  service  and  support,  and  real-time  flight  tracking.  Flightserv
differentiates itself in the charter travel industry by focusing on full program
management services, which combines the functions of aircraft brokerage,  flight
operations,  airport  operations,  contract  negotiation between clients and air
service  providers,   airport  subsidy   negotiations  and  consumer  marketing.
Flightserv does not own or operate any aircraft.

      Flightserv  had an  agreement  with  Vacation  Express,  a  member  of the
MyTravel  Group,  ending in December 2004, to operate a passenger hub at Atlanta
Hartsfield Airport.  Pursuant to the terms of the agreement,  six commercial jet
aircraft originate in six eastern and mid-western cities and serve six Caribbean
destinations. Also, in July 2002, Flightserv entered into a three-year agreement
with SunTrips, Inc., a sister company of Vacation Express in the MyTravel Group,
to operate  scheduled  weekly  flights  between  three west coast cities and two
Mexican destinations. The majority of the revenue of Flightserv was historically
generated pursuant to these contracts.

      On  October  31,  2003,  VE  Holdings,   Inc.  and  SunTrips,   Inc.  both
wholly-owned  subsidiaries  of MyTravel  USA  Holdings,  Inc.,  entered  into an
amended  and  restated  asset  purchase  agreement  with FS Tours,  Inc.  and FS
SunTours, Inc., which are wholly-owned direct subsidiaries of Flightserv.


                                       10


      Under the terms of the asset purchase agreement,  FS Tours and FS SunTours
acquired  substantially  all of the assets and certain  liabilities  of Vacation
Express and SunTrips,  except for certain  excluded items,  for $12 million,  of
which $10 million is in the form of a seven-year non interest bearing promissory
note from Flightserv secured by certain of our investment holdings.

      In  conjunction  with the asset  purchase,  we entered  into a  three-year
agreement with MyTravel Canada Holidays,  Inc., for certain services,  including
the purchasing of hotel  accommodations  for our company on an exclusive  basis.
Under the asset  purchase  agreement  we are  required  to pay  MyTravel  Canada
approximately $4.5 million over three years.

      Additionally,  we were required to obtain replacement letters of credit in
the aggregate principal amount of $3 million.

      With the closing of these acquisitions, SunTrips and Vacation Express will
continue to operate from their current locations,  with FS Tours and FS SunTours
assuming  operational  control. Air and hotel vacation packages will continue to
be marketed and sold under the SunTrips and Vacation Express brands.

      SunTrips,  based in San Jose,  California,  sells  air and hotel  vacation
packages to Mexico, Dominican Republic, Costa Rica, Hawaii and the Azores out of
Oakland, California and/or Denver, Colorado. Vacation Express, based in Atlanta,
Georgia,  sells air and hotel  packages  to Mexico and  Caribbean  destinations,
including Aruba,  Bahamas,  Costa Rica,  Dominican  Republic,  Jamaica,  and St.
Martin.   SunTrips  and  Vacation   Express  together   generated   revenues  of
approximately  $200 million for the twelve months ended September 30, 2003. Both
companies were air charter customers of Flightserv.

      In fiscal 2002 and 2003,  Flightserv  developed  and  implemented  a trial
scheduled  charter flight  operation d/b/a Interstate Jet. Initial service began
between  Allentown  PA/  Newburgh  NY and Las Vegas NV and Los  Angeles  CA. The
origination  cities  were  chosen  as a result  of  direct  cash  subsidies  and
marketing support from the respective airport  authorities.  The trials of these
cities did not yield adequate  passenger loads and yields to break even and were
discontinued.

      TECHNOLOGY SOLUTIONS

      Our  technology  solutions  business is the result of our  acquisition  of
Logisoft Corp. (f/k/a Logisoft  Computer  Products Corp.),  and its wholly-owned
subsidiary eStorefronts.net Corp. in June 2001.

      Our  technology   solutions  business  provides  integrated  products  and
services to assist customers in meeting their strategic technology  initiatives.
Our products and services include distribution of third-party published software
titles to the educational market and corporate customers,  full service Internet
development,  Internet  site  hosting  and  co-location  and  Internet  business
development services encompassing partner site management and marketing.  In our
Internet  business  development and marketing  services  business,  we generally
participate  in the  development  and  implementation  of the  business  plan in
exchange for revenue sharing and/or equity-based arrangements.


                                       11


      On June 6, 2001,  we acquired  Logisoft  in exchange of 785,714  shares of
Common Stock  pursuant to that certain  agreement and plan of merger.  The total
purchase price aggregated  $5,504,879 and the transaction was recorded using the
purchase  method of accounting.  The excess value of the purchase price over the
fair  value  of  Logisoft's  net  assets  on the  acquisition  date  aggregating
$4,146,000 was allocated to goodwill.  The aggregate purchase price and goodwill
were both adjusted in fiscal 2002 by $42,000 to reflect the issuance of earn-out
shares to certain members of Logisoft's management.

      On June 10, 2003  eStorefronts.net  Corporation,  100% owned by  Logisoft,
purchased a 75% interest in Premier Shoe Group, LLC for $187,000. A one-year 10%
note of $147,000 was signed at closing and $40,000  cash was paid.  Premier Shoe
Group operates a website named  123Shoes.com  which sells brand name shoes.  The
results  of  Premier  Shoe  Group  are  consolidated  on  Logisoft's   financial
statements  and the  portion  of income  or loss  attributable  to the  minority
interest as an increase or decrease to the minority interest recorded.

      On October 31, 2003, Logisoft acquired  substantially all of the assets of
Computer  Inventory  Control,  Inc. ("CIC"),  a Pittsburgh,  Pennsylvania  based
educational  software  company,  in consideration of up to 225,000 shares of the
Company's  Common Stock valued at  $380,000.  On October 31, 2003,  the purchase
price was 174,312 shares of the Company's Common Stock,  which was determined by
dividing  $380,000 by the average closing price of the Company's Common Stock on
the American  Stock Exchange for the previous  three  consecutive  business days
ending on the day prior to the closing of the acquisition  agreement.  Since the
gross sales price from the sale of the 174,312  shares of the  Company's  Common
Stock was less than $380,000, the Company issued to CIC 50,000 additional shares
of Company  Common Stock which equaled the difference  between  $380,000 and the
aggregate sales price. Pursuant to the acquisition agreement,  Logisoft acquired
the "SchoolWorld  Software"  trademark,  software licenses as well as all of the
accounts,  databases and related  inventory of CIC. CIC is a full service source
for educational software.

      TELECOMMUNICATIONS CALL CENTER

      We   operated   our   telecommunications   call  center   which   provided
telemarketing,  help desk and other services to companies through our subsidiary
DM Marketing,  Inc.  ("DMM").  In December  2002, our aviation  travel  services
business  assumed  operational  responsibility  of the  call  center  operations
located in Pensacola  FL. The call center  provided  support to aviation  travel
services as a reservations and customer care center for airlines, tour operators
and  for  internal  programs  for  which  the  Company  took  reservations  from
travelers.  On  September  1, 2003,  we closed  our  Pensacola,  FL call  center
facility.

      In January 2003,  DMM was operated and managed by Flightserv  and provided
in-bound   reservations   call  center   services  to  Southeast   Airlines  and
Flightserv's   Interstate  Jet.  From  January  through  June  2003  DMM  booked
approximately  65,000 passenger segment  reservations for Southeast Airlines and
Interstate Jet.


                                       12


                                 USE OF PROCEEDS

      All of the shares of our Common Stock offered hereby are being sold by the
Selling  Stockholders.  We will not receive any of the proceeds from the sale of
the shares.  However,  this Prospectus includes 1,186,617 shares of Common Stock
underlying  Common  Stock  Purchase  Warrants  exercisable  at $1.20 per  share,
200,000  shares of Common  Stock  underlying  a Common  Stock  Purchase  Warrant
exercisable  at $0.94,  50,000  shares of Common  Stock  underlying  Warrants to
Purchase Common Stock  exercisable at $2.44 per shares,  and 3,430,851 shares of
common stock underlying  Additional  Investment Rights  exercisable at $1.03 per
share.  If any of the Common Stock  Purchase  Warrants or Additional  Investment
Rights are exercised and no cashless exercise is available, we would receive the
gross  proceeds  from  payment  of the  exercise  price.  We intend to use these
proceeds for working capital.

                           DESCRIPTION OF COMMON STOCK

      We are authorized to issue  200,000,000  shares of Common Stock, par value
$.04.  As of the date of this  Prospectus,  21,169,038  shares  are  issued  and
outstanding.  The  outstanding  shares  of  Common  Stock  are  fully  paid  and
non-assessable.  The  holders of our Common  Stock are  entitled to one vote per
share for the  election  of  directors  and with  respect  to all other  matters
submitted  to a vote of  shareholders.  Shares of our  Common  Stock do not have
cumulative voting rights,  which means that the holders of more than 50% of such
shares  voting for the election of directors  can elect 100% of the directors if
they choose to do so and, in such event,  the holders of the remaining shares so
voting will not be able to elect any directors.

      Upon any  liquidation,  dissolution or winding-up,  our assets,  after the
payment of our debts and  liabilities  and any  liquidation  preferences of, and
unpaid  dividends  on, any class of preferred  stock then  outstanding,  will be
distributed  pro-rata  to the  holders of our Common  Stock.  The holders of our
Common Stock do not have preemptive or conversion rights to subscribe for any of
our  securities  and have no right to  require  us to redeem or  purchase  their
shares.  The  holders  of our  Common  Stock are  entitled  to share  equally in
dividends  if,  as and when  declared  by our board of  directors,  out of funds
legally  available  therefore,  subject to the priorities  accorded any class of
preferred  stock  which may be issued.  A  consolidation  or merger,  or a sale,
transfer  or lease of all or  substantially  all of our  assets,  which does not
involve  distribution  by us of cash or other  property  to the  holders  of our
Common  Stock,  will not be a  liquidation,  dissolution  or  winding  up of our
Company.

                              SELLING STOCKHOLDERS

DESCRIPTION OF FINANCING TRANSACTION

      On September  13, 2004,  we entered into a Securities  Purchase  Agreement
with the Investors.  Pursuant to the terms of the Securities Purchase Agreement,
we  are to  initially  issue  the  following  securities  to  the  Investors  in
consideration  for the Investors making payment to us in the aggregate amount of
$4,300,000:  (i) 4,300 shares of Series A 6% Convertible  Preferred Stock,  (ii)
Warrants to purchase  approximately  1,143,617  shares of our Common Stock at an
exercise price of $1.20 per share,  and (iii)  Additional  Investment  Rights to
purchase approximately 3,430,851 shares of our Common Stock at an exercise price
of $1.03 per share.


                                       13


      The  Securities  Purchase  Agreement  provides the Investors  with certain
rights to participate in our future financings,  and contains negative covenants
limiting our rights to engage in certain types of future financings.

      The Company  has agreed to file the  Registration  Statement  with the SEC
registering  for resale 130% of all shares of our Common  Stock  underlying  the
Series A Preferred Stock, the Warrants,  and the Additional  Investment  Rights,
and shares issuable as dividends for 3 years.

      The transaction was approved by our Board of Directors on August 24, 2004,
and closed on September 14, 2004.  The shares of Series A Preferred  Stock,  the
Warrants,  and the Additional  Investment Rights, the shares of our Common Stock
underlying  such  securities,  and shares  issuable as dividends  will be issued
pursuant to the  exemption  from  registration  provided by Section  4(2) of the
Securities Act.

DESCRIPTION OF SERIES A PREFERRED STOCK

      The following is a summary of the material terms of the Series A Preferred
Stock and is qualified  by its entirety by the  Certificate  of  Designation  of
Preferences,  Rights and Limitations of Series A 6% Convertible  Preferred Stock
(the  "Certificate")  filed as an exhibit to Form 8-K filed by the Company  with
the U.S. Securities and Exchange Commission on September 16, 2004.

      AMOUNT, STATED VALUE, AND DEFINITIONS

      The number of shares of Series A  Preferred  Stock  designated  was 6,000.
Each share of Series A Preferred Stock shall have a stated value equal to $1,000
(the  "Stated  Value").   Capitalized   terms  not  otherwise  defined  in  this
Description  of Series A Preferred  Stock  section  shall have the meaning given
such terms in the Certificate.

      DIVIDENDS

      Holders shall be entitled to receive and the Company shall pay, cumulative
dividends at the rate per share (as a percentage  of the Stated Value per share)
of 6% per annum from the date of issuance, payable quarterly on March 1, June 1,
September  1 and  December  1,  beginning  with  December  1,  2004  and  on any
Conversion  Date  pursuant to the terms of the  Certificate  ("Dividend  Payment
Date").  The  form of  dividend  payments  to each  Holder  shall be made in the
following order: (i) if funds are legally available for the payment of dividends
and the Equity Conditions (which Equity  Conditions  include the following:  (a)
all  conversions  have been  honored or cured;  (b) the  registration  statement
covering  the  shares  is  effective;  (c) the  Common  Stock is  listed  on the
Company's  trading  market;  (d) all liquidated  damages and other amounts owing
including  dividends in respect of the  preferred  stock shall have been paid or
will be paid; (e) there is a sufficient number of authorized and unissued shares
to  cover  all  conversions;  (f)  no  Triggering  Event  has  occurred  and  is
continuing;  (g) the issuable  conversion  shares won't  violate the  applicable
ownership  limitations;  and (h) no public announcement of a pending Fundamental


                                       14


Transaction  or Change of Control  Transaction  has  occurred  that  hasn't been
consummated)  have  not been  met,  in cash  only,  (ii) if  funds  are  legally
available for the payment of dividends and the Equity  Conditions have been met,
at the sole  election of the  Company,  in cash or shares of Common  Stock which
shall be valued  solely for such  purpose  at 90% of the  average of the 5 VWAPs
immediately  prior to the Dividend  Payment Date; (iii) if funds are not legally
available for the payment of dividends and the Equity  Conditions have been met,
in shares of Common  Stock  which shall be valued at 90% of the average of the 5
VWAPs  immediately  prior to the Dividend  Payment  Date;  (iv) if funds are not
legally  available  for the  payment  of  dividends  and the  Equity  Conditions
relating  to  registration  have been waived by such  Holder,  as to such Holder
only, in unregistered shares of Common Stock which shall be valued at 90% of the
average of the 5 VWAPs  immediately  prior to the Dividend Payment Date; and (v)
if funds are not legally  available  for the payment of dividends and the Equity
Conditions  have not been  met,  then,  at the  election  of such  Holder,  such
dividends shall accrue to the next Dividend Payment Date or shall be accreted to
the outstanding  Stated Value. As of the Closing Date, the Company shall pay the
dividends in shares of Common Stock.  Dividends on the Series A Preferred  Stock
shall  be  calculated  on the  basis  of a  360-day  year,  shall  accrue  daily
commencing on the Original  Issue Date,  and shall be deemed to accrue from such
date  whether or not earned or declared  and  whether or not there are  profits,
surplus or other  funds of the  Company  legally  available  for the  payment of
dividends.

      So long as any Series A Preferred Stock shall remain outstanding,  neither
the Company nor any  subsidiary  thereof  shall  redeem,  purchase or  otherwise
acquire  directly or indirectly any Junior  Securities.  So long as any Series A
Preferred Stock shall remain outstanding, neither the Company nor any subsidiary
thereof  shall  directly or  indirectly  pay or declare any dividend or make any
distribution  (other than a dividend or  distribution  described  in the Section
titled  "Conversion"  below or dividends due and paid in the ordinary  course on
Series A  Preferred  Stock of the  Company at such times when the  Company is in
compliance  with  its  payment  and  other  obligations)  upon,  nor  shall  any
distribution  be  made in  respect  of,  any  Junior  Securities  so long as any
dividends currently due on the Series A Preferred Stock remain unpaid, nor shall
any monies be set aside for or applied to the purchase or redemption  (through a
sinking fund or  otherwise)  of any Junior  Securities or shares pari passu with
the Series A Preferred Stock.

      VOTING RIGHTS

      Except as otherwise  provided in the Certificate and as otherwise required
by law, the Series A Preferred  Stock shall have no voting rights.  However,  so
long as any shares of Series A  Preferred  Stock are  outstanding,  the  Company
shall not,  without  the  affirmative  vote of the  Holders of the shares of the
Series A Preferred  Stock then  outstanding,  (a) alter or change  adversely the
powers,  preferences or rights given to the Series A Preferred Stock or alter or
amend this  Certificate  of  Designation,  (b)  authorize or create any class of
stock  ranking as to  dividends,  redemption  or  distribution  of assets upon a
Liquidation senior to the Series A Preferred Stock, (c) amend its certificate of
incorporation or other charter documents so as to affect adversely any rights of
the Holders,  (d) increase the authorized number of shares of Series A Preferred
Stock, or (e) enter into any agreement with respect to the foregoing.


                                       15


      LIQUIDATION

      Upon any  liquidation,  dissolution or winding-up of the Company,  whether
voluntary or  involuntary  (a  "Liquidation"),  the Holders shall be entitled to
receive  out of the assets of the  Company,  whether  such assets are capital or
surplus,  for each  share of Series A  Preferred  Stock an  amount  equal to the
Stated  Value per share plus any  accrued and unpaid  dividends  thereon and any
other fees or  liquidated  damages  owing  thereon  before any  distribution  or
payment shall be made to the holders of any Junior Securities, and if the assets
of the  Company  shall be  insufficient  to pay in full such  amounts,  then the
entire assets to be distributed  to the Holders shall be  distributed  among the
Holders ratably in accordance with the respective  amounts that would be payable
on such shares if all amounts payable thereon were paid in full.

      CONVERSION

      Conversions  at Option of Holder.  Each share of Series A Preferred  Stock
shall be convertible  into that number of shares of Common Stock (subject to the
limitations  set forth  below)  determined  by dividing the Stated Value of such
share of Series A Preferred Stock by the Set Price.

      Beneficial  Ownership  Limitation.   The  Company  shall  not  effect  any
conversion  of the Series A Preferred  Stock,  and the Holder shall not have the
right to convert any portion of the Series A Preferred  Stock to the extent that
after giving effect to such  conversion,  the Holder (together with the Holder's
affiliates),   as  set  forth  on  the  applicable   Conversion  Notice,   would
beneficially  own in excess of 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to such conversion.

      Limitation on Number of Shares Issuable.  Notwithstanding  anything herein
to the contrary,  the Company shall not issue to any Holder any shares of Common
Stock, including pursuant to any rights herein,  including,  without limitation,
any  conversion  rights or right to issue  shares of Common  Stock in payment of
dividends,  to the  extent  such  shares,  when added to the number of shares of
Common  Stock  previously  issued  upon  conversion  of any  shares  of Series A
Preferred  Stock would exceed  3,875,188,  or such  greater or lesser  number of
shares of Common Stock permitted  pursuant to the corporate  governance rules of
the Trading Market that is at the time the principal  trading exchange or market
for the Common Stock (the "Maximum Aggregate Share Amount"),  unless the Company
first obtains shareholder  approval permitting such issuances in accordance with
the Trading Market rules ("Shareholder Approval").

      Forced Conversion. If after the date that the registration statement which
registers  for resale  all of the  Conversion  Shares  (the  "Conversion  Shares
Registration  Statement") is declared  effective (the "Effective Date") the VWAP
for each of any 10  consecutive  Trading  Days  ("Threshold  Period"),  which 10
consecutive  Trading Day period shall have  commenced  only after the  Effective
Date,  exceeds 200% of the then effective Set Price (defined below), the Company
may, within 2 Trading Days after any such Threshold Period,  deliver a notice to
all Holders (a "Forced  Conversion  Notice" and the date such notice is received
by the Holders,  the "Forced  Conversion  Notice  Date") to cause the Holders to
immediately  convert  all or part of the then  outstanding  shares  of  Series A
Preferred  Stock pursuant to Section 5 of the  Certificate and the Holders shall
surrender (if all Series A Preferred Stock is converted) their respective shares
of Series A Preferred Stock to the Company for conversion  within 5 Trading Days
of the Forced  Conversion  Notice  Date.  The  Company  may only effect a Forced
Conversion  Notice if all of the  Equity  Conditions  have been met  during  the
Threshold Period through the Forced Conversion Notice Date.


                                       16


      The conversion  price shall equal $0.94 (the "Set Price"),  subject to the
following adjustments.

            * if the Company,  at any time while the Series A Preferred Stock is
outstanding:  (A) shall pay a stock dividend or otherwise make a distribution or
distributions  on  shares  of its  Common  Stock or any  other  equity or equity
equivalent   securities  payable  in  shares  of  Common  Stock,  (B)  subdivide
outstanding  shares of Common Stock into a larger number of shares,  (C) combine
(including  by way of reverse  stock split)  outstanding  shares of Common Stock
into a smaller number of shares, or (D) issue by  reclassification  of shares of
the Common Stock any shares of capital stock of the Company,  then the Set Price
shall be multiplied by a fraction of which the numerator  shall be the number of
shares  of  Common  Stock  Outstanding  before  such  event  and  of  which  the
denominator shall be the number of shares of Common Stock Outstanding after such
event.  Any  adjustment  made pursuant to the section of the  Certificate  shall
become  effective  immediately  after the record date for the  determination  of
stockholders  entitled to receive such dividend or distribution and shall become
effective  immediately  after the effective  date in the case of a  subdivision,
combination or reclassification.

            * if the Company,  at any time while the Series A Preferred Stock is
outstanding,  shall issue  rights,  options or warrants to all holders of Common
Stock (and not to Holders) entitling them to subscribe for or purchase shares of
Common  Stock  at a price  per  share  less  than the  VWAP at the  record  date
mentioned below, then the Set Price shall be multiplied by a fraction,  of which
the denominator shall be the number of shares of the Common Stock Outstanding on
the date of issuance of such  rights or warrants  plus the number of  additional
shares of Common Stock offered for  subscription  or purchase,  and of which the
numerator  shall be the number of shares of the Common Stock  Outstanding on the
date of issuance of such rights or warrants  plus the number of shares which the
aggregate  offering  price of the total  number of shares so  offered  (assuming
receipt by the Company in full of all  consideration  payable  upon  exercise of
such rights,  options or warrants)  would purchase at such VWAP. Such adjustment
shall be made  whenever  such rights or warrants  are issued,  and shall  become
effective   immediately   after  the  record  date  for  the   determination  of
stockholders entitled to receive such rights, options or warrants.

            * if the Company or any subsidiary  thereof at any time while any of
the Series A Preferred  Stock is  outstanding,  shall sell,  grant any option or
warrant to  purchase or sell or grant any right to reprice  its  securities,  or
otherwise  dispose  of or  issue  any  Common  Stock  or any  equity  or  equity
equivalent securities (including any equity, debt or other instrument that is at
any time over the life  thereof  convertible  into or  exchangeable  for  Common


                                       17


Stock)  (collectively,  "Common  Stock  Equivalents")  entitling  any  Person to
acquire  shares of Common Stock,  at an effective  price per share less than the
Set Price (a  "Dilutive  Issuance"),  as  adjusted  (if the holder of the Common
Stock or Common  Stock  Equivalent  so  issued  shall at any  time,  whether  by
operation of purchase price adjustments, reset provisions,  floating conversion,
exercise or exchange prices or otherwise, or due to warrants,  options or rights
per share  which are issued in  connection  with such  issuance,  be entitled to
receive  shares of Common  Stock at a price per share which is less than the Set
Price,  such  issuance  shall be deemed to have  occurred  for less than the Set
Price),  then the Set Price shall be reduced to equal the effective  conversion,
exchange or purchase  price for such Common  Stock or Common  Stock  Equivalents
(including any reset provisions thereof) at issue. Such adjustment shall be made
whenever such Common Stock or Common Stock  Equivalents are issued.  The Company
shall  notify  the Holder in  writing,  no later  than the  second  Trading  Day
following  the  issuance  of  any  Common  Stock  or  Common  Stock  Equivalent,
indicating therein the applicable  issuance price, or of applicable reset price,
exchange price,  conversion  price and other pricing terms. For purposes of this
subsection,  a Dilutive  Issuance  shall be deemed to have occurred when binding
agreements have been closed by the Company and any purchaser therein.

            * if the Company,  at any time while the Series A Preferred Stock is
outstanding,  shall  distribute  to all  holders  of  Common  Stock  (and not to
Holders)  evidences  of its  indebtedness  or assets or  rights or  warrants  to
subscribe for or purchase any security  other than the Common Stock (which shall
be subject to Section 5(c)(iii) of the Certificate),  then in each such case the
Set Price shall be adjusted by multiplying  the Set Price in effect  immediately
prior to the record date fixed for  determination  of  stockholders  entitled to
receive such  distribution by a fraction of which the  denominator  shall be the
VWAP  determined  as of the  record  date  mentioned  above,  and of  which  the
numerator  shall be such VWAP on such  record  date less the then per share fair
market  value at such  record  date of the portion of such assets or evidence of
indebtedness so distributed  applicable to one  outstanding  share of the Common
Stock as determined by the Board of Directors in good faith.  In either case the
adjustments  shall be  described  in a statement  provided to the Holders of the
portion  of  assets  or  evidences  of   indebtedness  so  distributed  or  such
subscription  rights  applicable to one share of Common Stock.  Such  adjustment
shall be made whenever any such  distribution is made and shall become effective
immediately after the record date mentioned above.

      No adjustment shall be made in connection with an Exempt Issuance.

      REDEMPTION UPON TRIGGERING EVENTS

      Upon the  occurrence  of a  Triggering  Event,  each Holder shall have the
right to require the Company to redeem all of the Series A Preferred  Stock then
held by such Holder for a redemption  price,  in cash,  equal to the  Triggering
Redemption  Amount.  The Triggering  Redemption  Amount shall be due and payable
within 5 Trading  Days of the date on which the notice for the payment  therefor
is provided by a Holder  (the  "Triggering  Redemption  Payment  Date").  If the
Company fails to pay the Triggering  Redemption  Amount in full the Company will
pay interest  thereon at a rate of 18% per annum,  accruing daily from such date
until the Triggering  Redemption Amount, plus all such interest thereon, is paid
in full.


                                       18


      "Triggering Event" means any one or more of the following events:

            * the failure of a Conversion  Shares  Registration  Statement to be
declared  effective  by the  Commission  on or prior to the  180th day after the
Original Issue Date;

            * if, during the  Effectiveness  Period,  the  effectiveness  of the
Conversion Shares Registration  Statement lapses for any reason for more than an
aggregate of 60 calendar days (which need not be consecutive days) during any 12
month  period,  or the  Holder  shall not be  permitted  to  resell  Registrable
Securities under the Conversion  Shares  Registration  Statement other than as a
result of any action or  inaction of a Holder for more than an  aggregate  of 60
calendar  days (which need not be  consecutive  days) during any 12 month period
(the Effectiveness  Period is that period commencing with the Effectiveness Date
and  continuing   until  all  securities   covered  by  the  Conversion   Shares
Registration Statement have been sold or may be sold without volume restrictions
pursuant to Rule 144(k));

            * the  Company  shall  fail  to  deliver  certificates  representing
Conversion Shares issuable upon a conversion prior to the 10th Trading Day after
such shares are required to be delivered,  or the Company shall provide  written
notice to any Holder,  including by way of public announcement,  at any time, of
its intention not to comply with requests for conversion of any shares of Series
A Preferred Stock in accordance with the terms hereof;

            * if either of the following events shall not have been cured to the
satisfaction  of the Holders  prior to the  expiration of 15 days from the Event
Date (as defined in the Registration  Rights Agreement)  relating thereto (other
than an Event  resulting  from a failure  of a  Conversion  Shares  Registration
Statement to be declared  effective by the  Commission  on or prior to the 180th
day after the Original Issue Date,  which is covered above):  (i) a Registration
Statement  is not  filed on or  prior to its  Filing  Date  (as  defined  in the
Registration  Rights  Agreement),  or (ii) the  Company  fails to file  with the
Commission a request for  acceleration  in accordance  with Rule 461 promulgated
under the Securities  Act, within five Trading Days of the date that the Company
is notified (orally or in writing,  whichever is earlier) by the Commission that
a  Registration  Statement  will not be  "reviewed,"  or not  subject to further
review;

            * the Company shall fail for any reason to pay in full the amount of
cash due pursuant to a Buy-In  within 5 Trading  Days after  notice  therefor is
delivered  or shall fail to pay all amounts  owed on account of an Event  within
five days of the date due (for purposes  hereof an Event  includes the following
events: (i) a registration statement is not timely filed, (ii) the Company fails
to timely  file with the  Commission  a request  for  acceleration  after  being
notified that a Registration Statement will not be "reviewed," or is not subject
to further review,  (iii) prior to its Effectiveness  Date, the Company fails to
file a pre-effective amendment and otherwise respond in writing to comments made
by the Commission in respect of such  Registration  Statement  within 20 Trading
Days after the receipt of comments by or notice from the SEC that such amendment
is required in order for a Registration Statement to be declared effective, (iv)
a registration statement filed or required to be filed is not declared effective
by the  Commission by its  Effectiveness  Date,  or (v) after the  Effectiveness
Date,  a  registration  statement  ceases for any reason to remain  continuously
effective  as to all  registrable  securities  for  which it is  required  to be
effective, or the Holders are not permitted to utilize the prospectus therein to
resell such registrable securities for 15 consecutive days or an aggregate of 25
days during any 12-month period, which need not be consecutive days);


                                       19


            * the Company  shall fail to have  available a sufficient  number of
authorized and unreserved  shares of Common Stock to issue to such Holder upon a
conversion  unless the Company has complied with Section 4.10(b) of the Purchase
Agreement  (which  section  provides  the  Company an  opportunity  to amend the
Company's  certificate  of  incorporation  to increase  the number of shares the
Company is authorized to issue);

            * the Company  shall fail to observe or perform  any other  material
covenant,  agreement or warranty contained in, or otherwise commit any breach of
the  Transaction  Documents,  and such material  failure or breach shall not, if
subject to the  possibility of a cure by the Company,  have been remedied within
30  calendar  days  after the date on which  written  notice of such  failure or
breach shall have been given;

            * the Company shall be a party to any Change of Control  Transaction
or the Company shall redeem more than a deminimis number of Junior Securities;

            * there shall have occurred a Bankruptcy Event;

            * any breach of the officer's/director's  voting agreement delivered
to the initial Holders at the Closing; or

            * the Common  Stock shall fail to be listed or quoted for trading on
a Trading Market for more than 5 consecutive Trading Days.

      FUNDAMENTAL TRANSACTIONS

      If a Fundamental  Transaction occurs, then upon any subsequent  conversion
of  shares of Series A  Preferred  Stock,  the  Holder  shall  have the right to
receive,  for each  Conversion  Share that would  have been  issuable  upon such
conversion absent such Fundamental Transaction, the Alternate Consideration. For
purposes of any such  conversion,  the  determination  of the Set Price shall be
appropriately  adjusted to apply to such  Alternate  Consideration  based on the
amount of  Alternate  Consideration  issuable  in respect of one share of Common
Stock in such Fundamental  Transaction,  and the Company shall apportion the Set


                                       20


Price among the Alternate  Consideration in a reasonable  manner  reflecting the
relative value of any different  components of the Alternate  Consideration.  If
holders  of Common  Stock are given  any  choice as to the  securities,  cash or
property to be received in a Fundamental  Transaction,  then the Holder shall be
given the same choice as to the  Alternate  Consideration  it receives  upon any
conversion  of shares of Series A Preferred  Stock  following  such  Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any
successor to the Company or  surviving  entity in such  Fundamental  Transaction
shall  issue to the Holder  new Series A  Preferred  Stock  consistent  with the
foregoing  provisions and evidencing the Holder's right to convert such Series A
Preferred  Stock  into  Alternate  Consideration.  The  terms  of any  agreement
pursuant to which a  Fundamental  Transaction  is effected  shall  include terms
requiring any such  successor or surviving  entity to comply with the provisions
of this  provision and insuring  that the Series A Preferred  Stock (or any such
replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction.

DESCRIPTION OF WARRANTS

      The  following is a summary of the  material  terms of the Warrants and is
qualified by its entirety by the form of Warrant filed as an exhibit to Form 8-K
filed by the  Company  with the  U.S.  Securities  and  Exchange  Commission  on
September 16, 2004.

      NUMBER, TERM, AND DEFINITIONS

      The Warrants  entitle the holders  thereof to  initially  purchase up to a
total of approximately 1,186,617 shares of the Common Stock of the Company.

      The Warrants are exercisable at any time on or after the Initial  Exercise
Date and on or prior to the close of business on the  three-year  anniversary of
the Initial  Exercise Date. The Exercise Period shall be extended for the number
of Trading  Days during such period in which (x) trading in the Common  Stock is
suspended by any Trading  Market,  or (y)  following  the  Effective  Date,  the
Registration  Statement  is not  effective  or the  prospectus  included  in the
Registration  Statement may not be used by the  Purchasers for the resale of the
Warrant Shares.

      Capitalized  terms used and not otherwise  defined in this  Description of
Warrants Section shall have the meanings set forth in Section 1 of the Warrant.

      EXERCISE

      t 6 0 Exercise of Warrant.  Exercise  of the  Warrants  may be made at any
time or  times on or after  the  Initial  Exercise  Date  and on or  before  the
Termination Date by delivery to the Company of a duly executed facsimile copy of
the Notice of Exercise Form annexed to the Warrant.

      Exercise Price. The exercise price of each share of Common Stock under the
Warrants shall be $1.20, subject to adjustment (the "Warrant Exercise Price").

      Cashless Exercise. If at any time after one year from the date of issuance
of the Warrants there is no effective  Registration  Statement  registering  the
resale  of the  Warrant  Shares by the  Holder,  then the  Warrants  may also be
exercised at such time by means of a "cashless exercise."

      Holder's  Restrictions.  Each Holder  shall not have the right to exercise
any  portion of their  Warrant,  pursuant  to Section  2(c) of the  Warrants  or
otherwise,  to the  extent  that  after  giving  effect to such  issuance  after
exercise,  the Holder (together with the Holder's  affiliates),  as set forth on
the applicable Notice of Exercise,  would beneficially own in excess of 4.99% of
the number of shares of the Common Stock  outstanding  immediately  after giving
effect to such issuance.


                                       21


      Call Provision. Subject to the provisions of Section 2(f) of the Warrants,
if after the  Effective  Date the  Measurement  Price  exceeds  200% of the then
Warrant  Exercise  Price  (subject  to  adjustment  as set  forth  herein)  (the
"Threshold Price), then the Company may, within ten Trading Days of such period,
call for  cancellation  of all or any portion of the Warrants for which a Notice
of Exercise has not yet been delivered (such right, a "Call").  To exercise this
right,  the Company must deliver to the Holder an irrevocable  written notice (a
"Call  Notice"),  indicating  therein the portion of unexercised  portion of the
Warrants to which such notice  applies.  If the  conditions  set forth below for
such Call are satisfied from the period from the date of the Call Notice through
and including the Call Date (as defined below),  then any portion of the Warrant
subject to such Call Notice for which a Notice of  Exercise  shall not have been
received  from and after the date of the Call Notice will be  cancelled  at 6:30
p.m.  (New York  City  time) on the  tenth  Trading  Day after the date the Call
Notice is received by the Holder (such date, the "Call Date").  Any  unexercised
portion  of the  Warrant  to which  the Call  Notice  does not  pertain  will be
unaffected  by such Call  Notice.  Notwithstanding  anything to the contrary set
forth in the  Warrant,  the Company may not deliver a Call Notice or require the
cancellation of the Warrant (and any Call Notice will be void), unless, from the
beginning  of the 20  consecutive  Trading  Days used to  determine  whether the
Common Stock has achieved the Threshold  Price through the Call Date, the Equity
Conditions  (as defined in the  Certificate of  Designation)  have been met. The
Company's  right to Call  the  Warrant  shall be  exercised  ratably  among  the
Purchasers based on each  Purchaser's  initial purchase of Common Stock pursuant
to the Purchase Agreement.

      CERTAIN ADJUSTMENTS.

      Stock Dividends and Splits. If the Company, at any time while the Warrants
are  outstanding:  (A) pays a stock dividend or otherwise make a distribution or
distributions  on  shares  of its  Common  Stock or any  other  equity or equity
equivalent securities payable in shares of Common Stock (which, for avoidance of
doubt,  shall not  include  any  shares of Common  Stock  issued by the  Company
pursuant to the  Warrants),  (B) subdivides  outstanding  shares of Common Stock
into a larger number of shares, (C) combines  (including by way of reverse stock
split)  outstanding  shares of Common Stock into a smaller number of shares,  or
(D)  issues by  reclassification  of shares of the  Common  Stock any  shares of
capital stock of the Company, then in each case the Warrant Exercise Price shall
be multiplied by a fraction of which the numerator shall be the number of shares
of Common Stock  (excluding  treasury shares,  if any)  outstanding  before such
event and of which the denominator shall be the number of shares of Common Stock
outstanding  after such event and the number of  Warrant  Shares  issuable  upon
exercise of the Warrants shall be proportionately  adjusted. Any adjustment made
pursuant to Section 3(a) of the  Warrants  shall  become  effective  immediately
after the record date for the determination of stockholders  entitled to receive
such dividend or distribution and shall become effective  immediately  after the
effective date in the case of a subdivision, combination or re-classification.


                                       22


      Subsequent  Equity Sales.  If the Company or any  Subsidiary  thereof,  as
applicable,  at any time while the Warrants are  outstanding,  shall sell, grant
any option to purchase,  sell or grant any right to reprice its  securities,  or
otherwise  dispose  of or issue any  Common  Stock or Common  Stock  Equivalents
entitling any Person to acquire  shares of Common Stock,  at an effective  price
per share less than the then Warrant Exercise Price (such lower price, the "Base
Share  Price"  and such  issuances  collectively,  a  "Dilutive  Issuance"),  as
adjusted  (if the  holder of the Common  Stock or Common  Stock  Equivalents  so
issued shall at any time,  whether by operation of purchase  price  adjustments,
reset provisions, floating conversion, exercise or exchange prices or otherwise,
or due to  warrants,  options or rights per share which is issued in  connection
with such  issuance,  be  entitled  to  receive  shares  of  Common  Stock at an
effective price per share which is less than the Warrant  Exercise  Price,  such
issuance  shall be deemed to have  occurred  for less than the Warrant  Exercise
Price),  then,  the  Warrant  Exercise  Price shall be reduced to equal the Base
Share Price; provided,  however, in no event shall the Warrant Exercise Price be
less than $1.00,  subject to  adjustment  for reverse and forward  stock splits,
stock dividends, stock combinations and other similar transactions of the Common
Stock that  occur  after the date of the  Securities  Purchase  Agreement.  Such
adjustment shall be made whenever such Common Stock or Common Stock  Equivalents
are issued.  The Company  shall notify the Holder in writing,  no later than the
second  Trading Day  following  the issuance of any Common Stock or Common Stock
Equivalents,  indicating therein the applicable issuance price, or of applicable
reset price, exchange price, conversion price and other pricing terms.

      Pro  Rata  Distributions.  If  the  Company,  at  any  time  prior  to the
Termination  Date,  shall  distribute to all holders of Common Stock (and not to
Holders of the Warrants)  evidences of its  indebtedness  or assets or rights or
warrants to subscribe  for or purchase any security  other than the Common Stock
(which shall be subject to Section 3(b) of the Warrants), then in each such case
the Warrant Exercise Price shall be adjusted by multiplying the Warrant Exercise
Price in effect  immediately prior to the record date fixed for determination of
stockholders  entitled to receive such  distribution  by a fraction of which the
denominator  shall be the VWAP determined as of the record date mentioned above,
and of which the numerator  shall be such VWAP on such record date less the then
per share fair market value at such record date of the portion of such assets or
evidence of indebtedness so distributed  applicable to one outstanding  share of
the Common  Stock as  determined  by the Board of  Directors  in good faith.  In
either case the  adjustments  shall be described in a statement  provided to the
Holders of the portion of assets or evidences of  indebtedness so distributed or
such  subscription  rights  applicable  to  one  share  of  Common  Stock.  Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.

      Fundamental   Transaction.   If,  at  any  time  while  the  Warrants  are
outstanding,  (A) the Company effects any merger or consolidation of the Company
with or into another Person,  in which the Company is not the surviving  entity,
or the  Company's  then  existing  shareholders  will own  less  than 51% of the
surviving  entity,  (B) the Company effects any sale of all or substantially all
of its assets in one or a series of related  transactions,  (C) any tender offer
or  exchange  offer  (whether  by the  Company or another  Person) is  completed
pursuant to which  holders of Common  Stock are  permitted to tender or exchange
their  shares  for other  securities,  cash or  property,  or (D) a  Fundamental
Transaction,  then,  upon any subsequent  conversion of the Warrant,  the Holder
shall have the right to  receive,  for each  Warrant  Share that would have been
issuable upon such exercise absent such Fundamental  Transaction,  at the option
of the Holder, (a) upon exercise of the Warrants, the number of shares of Common
Stock of the successor or acquiring  corporation or of the Company, if it is the
surviving  corporation,  and  Alternate  Consideration  receivable  upon or as a


                                       23


result  of  such  reorganization,  reclassification,  merger,  consolidation  or
disposition  of assets by a Holder of the  number of shares of Common  Stock for
which the Warrants are exercisable  immediately  prior to such event or (b) only
in the event the Company is acquired in an all cash  acquisition,  cash equal to
the value of the Warrants as  determined in  accordance  with the  Black-Scholes
option pricing formula. For purposes of any such exercise,  the determination of
the  Warrant  Exercise  Price shall be  appropriately  adjusted to apply to such
Alternate  Consideration based on the amount of Alternate Consideration issuable
in respect of one share of Common Stock in such Fundamental Transaction, and the
Company  shall  apportion  the  Warrant   Exercise  Price  among  the  Alternate
Consideration  in a  reasonable  manner  reflecting  the  relative  value of any
different components of the Alternate Consideration.  If holders of Common Stock
are given any choice as to the securities,  cash or property to be received in a
Fundamental  Transaction,  then the Holder  shall be given the same choice as to
the  Alternate  Consideration  it  receives  upon any  exercise  of the  Warrant
following such  Fundamental  Transaction.  To the extent necessary to effectuate
the foregoing  provisions,  any successor to the Company or surviving  entity in
such Fundamental  Transaction shall issue to the Holder a new warrant consistent
with the foregoing provisions and evidencing the Holder's right to exercise such
warrant into Alternate  Consideration upon the payment thereof. The terms of any
agreement pursuant to which a Fundamental  Transaction is effected shall include
terms  requiring  any such  successor  or  surviving  entity to comply  with the
provisions  of this  paragraph  and  insuring  that  the  Warrant  (or any  such
replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction.

DESCRIPTION OF ADDITIONAL INVESTMENT RIGHTS

      The  following  is a  summary  of the  material  terms  of the  Additional
Investment  Rights and is qualified  by its  entirety by the form of  Additional
Investment Rights Agreement filed as an exhibit to Form 8-K filed by the Company
with the U.S. Securities and Exchange Commission on September 16, 2004.

      NUMBER, TERM, AND DEFINITIONS

      The Additional  Investment Rights entitle the holders thereof to initially
purchase up to a total of approximately  3,430,851 shares of the Common Stock of
the Company.

      The Additional  Investment  Rights are exercisable at any time on or after
the  Initial  Exercise  Date  and on or prior to the  close of  business  on the
earlier of (a) the later of (i) the 181st day after the Effective  Date and (ii)
the 181st day after the Initial  Exercise Date and (b) the 2nd year  anniversary
of the date of the Purchase  Agreement  (the  "Termination  Date" and the period
from the Initial Exercise Date until the Termination Date

      Capitalized  terms used and not otherwise  defined in this  Description of
Additional  Investment  Rights  Section  shall  have the  meanings  set forth in
Section 1 of the Additional Investment Rights.


                                       24


      EXERCISE.

      Exercise of Additional  Investment Right.  Exercise of the purchase rights
represented by the Additional Investment Rights may be made at any time or times
on or after the Initial  Exercise Date and on or before the Termination  Date by
delivery  to the  Company  of a duly  executed  facsimile  copy of the Notice of
Exercise Form annexed to the Additional Investment Rights agreement.

      Exercise Price. The exercise price of each share of Common Stock under the
Additional  Investment  Rights shall be $1.03,  subject to adjustment  (the "AIR
Exercise Price").

      Holder's Restrictions. The Holder shall not have the right to exercise any
portion of the  Additional  Investment  Rights,  pursuant to Section 2(c) of the
Additional  Investment  Rights  thereof or  otherwise,  to the extent that after
giving effect to such issuance  after  exercise,  the Holder  (together with the
Holder's affiliates),  as set forth on the applicable Notice of Exercise,  would
beneficially  own in excess of 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to such issuance.

      Call  Provision.  Subject  to  the  provisions  of  Section  2(f)  of  the
Additional  Investment Rights, if after the Effective Date the Measurement Price
is greater than or equal to the  Threshold  Price,  then the Company may, in its
sole  discretion,  within ten Trading  Days of such  period,  exercise  its Call
right.  To  exercise  this  right,  the  Company  must  deliver to the Holder an
irrevocable Call Notice,  indicating therein the portion of unexercised  portion
of the  Additional  Investment  Rights  to which  such  notice  applies.  If the
conditions  set forth below for such Call are satisfied from the period from the
date of the Call Notice through and including the Call Date (as defined  below),
then any portion of the Additional Investment Rights subject to such Call Notice
for which a Notice of Exercise  shall not have been  received from and after the
date of the Call Notice will be cancelled  at 6:30 p.m.  (New York City time) on
the Call Date. Any unexercised  portion of the Additional  Investment  Rights to
which the Call Notice does not pertain will be  unaffected  by such Call Notice.
Notwithstanding  anything to the contrary set forth in the Additional Investment
Rights, the Company may not deliver a Call Notice or require the cancellation of
the  Additional  Investment  Rights (and any Call Notice will be void),  unless,
from the beginning of the 20 consecutive  Trading Days used to determine whether
the Common Stock has achieved the  Threshold  Price  through the Call Date,  the
Equity  Conditions  have been met. The  Company's  right to Call the  Additional
Investment  Right shall be exercised  ratably among the Purchasers based on each
Purchaser's initial purchase of Common Stock pursuant to the Securities Purchase
Agreement.

      CERTAIN ADJUSTMENTS.

      Stock  Dividends  and  Splits.  If the  Company,  at any  time  while  the
Additional  Investment  Rights are  outstanding:  (A) pays a stock  dividend  or
otherwise make a distribution or  distributions on shares of its Common Stock or
any other  equity or equity  equivalent  securities  payable in shares of Common
Stock  (which,  for  avoidance of doubt,  shall not include any shares of Common
Stock issued by the Company pursuant to the Additional  Investment Rights),  (B)
subdivides  outstanding  shares of Common Stock into a larger  number of shares,
(C) combines  (including  by way of reverse stock split)  outstanding  shares of
Common Stock into a smaller number of shares, or (D) issues by  reclassification
of shares of the Common Stock any shares of capital  stock of the Company,  then
in each case the AIR Exercise  Price shall be  multiplied by a fraction of which
the numerator shall be the number of shares of Common Stock (excluding  treasury
shares, if any) outstanding before such event and of which the denominator shall


                                       25


be the  number of shares of Common  Stock  outstanding  after such event and the
number of  Additional  Investment  Right Shares  issuable  upon  exercise of the
Additional Investment Rights shall be proportionately  adjusted.  Any adjustment
made pursuant to Section 3(a) of the Additional  Investment  Rights shall become
effective   immediately   after  the  record  date  for  the   determination  of
stockholders  entitled to receive such dividend or distribution and shall become
effective  immediately  after the effective  date in the case of a  subdivision,
combination or re-classification.

      Pro  Rata  Distributions.  If  the  Company,  at  any  time  prior  to the
Termination  Date,  shall  distribute to all holders of Common Stock (and not to
Holders of the Additional  Investment  Rights)  evidences of its indebtedness or
assets or rights or  Additional  Investment  Rights to subscribe for or purchase
any security other than the Common Stock (which shall be subject to Section 3(b)
of the Additional  Investment  Rights),  then in each such case the AIR Exercise
Price  shall be  adjusted  by  multiplying  the AIR  Exercise  Price  in  effect
immediately  prior to the record date fixed for  determination  of  stockholders
entitled to receive  such  distribution  by a fraction of which the  denominator
shall be the VWAP determined as of the record date mentioned above, and of which
the  numerator  shall be such VWAP on such  record  date less the then per share
fair market  value at such record date of the portion of such assets or evidence
of indebtedness so distributed applicable to one outstanding share of the Common
Stock as determined by the Board of Directors in good faith.  In either case the
adjustments  shall be  described  in a statement  provided to the Holders of the
portion  of  assets  or  evidences  of   indebtedness  so  distributed  or  such
subscription  rights  applicable to one share of Common Stock.  Such  adjustment
shall be made whenever any such  distribution is made and shall become effective
immediately after the record date mentioned above.

      Fundamental  Transaction.  If, at any time while the Additional Investment
Rights are  outstanding,  (A) the Company effects any merger or consolidation of
the  Company  with or into  another  Person,  in which  the  Company  is not the
surviving entity, or the Company's then existing shareholders will own less than
51% of the  surviving  entity,  (B)  the  Company  effects  any  sale  of all or
substantially all of its assets in one or a series of related transactions,  (C)
any tender offer or exchange offer (whether by the Company or another Person) is
completed  pursuant to which  holders of Common Stock are permitted to tender or
exchange  their  shares  for  other  securities,  cash  or  property,  or  (D) a
Fundamental Transaction,  then, upon any subsequent conversion of the Additional
Investment  Rights,  the  Holder  shall  have  the  right to  receive,  for each
Additional  Investment  Right  Share  that would  have been  issuable  upon such
exercise absent such Fundamental  Transaction,  at the option of the Holder, (a)
upon  exercise  of the  Additional  Investment  Rights,  the number of shares of
Common Stock of the successor or acquiring  corporation or of the Company, if it
is the surviving corporation,  and Alternate Consideration receivable upon or as
a result of such  reorganization,  reclassification,  merger,  consolidation  or
disposition  of assets by a Holder of the  number of shares of Common  Stock for
which the Additional Investment Rights are exercisable immediately prior to such
event  or (b)  only  in  the  event  the  Company  is  acquired  in an all  cash
acquisition,  cash  equal to the value of the  Additional  Investment  Rights as
determined in accordance  with the  Black-Scholes  option pricing  formula.  For
purposes of any such exercise, the determination of the AIR Exercise Price shall
be appropriately adjusted to apply to such Alternate  Consideration based on the
amount of  Alternate  Consideration  issuable  in respect of one share of Common
Stock in such Fundamental  Transaction,  and the Company shall apportion the AIR
Exercise  Price  among  the  Alternate  Consideration  in  a  reasonable  manner


                                       26


reflecting  the relative  value of any  different  components  of the  Alternate
Consideration.  If  holders  of Common  Stock  are  given  any  choice as to the
securities,  cash or property to be received in a Fundamental Transaction,  then
the Holder shall be given the same choice as to the Alternate  Consideration  it
receives upon any exercise of the Additional  Investment  Rights  following such
Fundamental  Transaction.  To the extent  necessary to effectuate  the foregoing
provisions, any successor to the Company or surviving entity in such Fundamental
Transaction  shall  issue  to  the  Holder  a new  Additional  Investment  Right
consistent  with the foregoing  provisions  and evidencing the Holder's right to
exercise such Additional Investment Right into Alternate  Consideration upon the
payment  thereof.  The terms of any  agreement  pursuant to which a  Fundamental
Transaction  is effected  shall  include terms  requiring any such  successor or
surviving  entity to comply with the  provisions  of paragraph and insuring that
the  Additional  Investment  Rights (or any such  replacement  security) will be
similarly  adjusted upon any subsequent  transaction  analogous to a Fundamental
Transaction.

DESCRIPTION OF ADDITIONAL ISSUANCES

      In  addition  we are  registering  690,000  shares  of our  Common  Stock,
including  200,000  shares of Common Stock  underlying  a Common Stock  Purchase
Warrant  exercisable at $0.94, 50,000 shares of Common Stock underlying Warrants
to Purchase  Common  Stock  exercisable  at $2.44 per share,  400,000  shares of
Common Stock issued pursuant to an Independent  Consulting Agrement with The Del
Mar Consulting  Group, and 125,000 shares of Common Stock issued to the Jonathan
Chase Gordon  Educatinal  Trust and 125,000 shares of Common Stock issued to the
David  Christopher   Gordon  Educatinal  Trust  in  connection  with  a  private
placement.  The terms of the agreements with respect to the Common Stock and the
Warrants provided the investors with piggy-back registration rights.

      The  table  below  identifies  each  Selling  Stockholder  and sets  forth
information, to the best of our knowledge,  regarding each Selling Stockholders'
beneficial  ownership of shares of our Common Stock.  This  information is based
upon  information  provided by each  respective  Selling  Stockholder and public
accounts filed with the SEC.

      The shares offered by this Prospectus may be offered for sale from time to
time by the Selling  Stockholders.  Because the Selling  Stockholders  may offer
all, some or none of the shares pursuant to this  Prospectus,  and because there
are currently no agreements,  arrangements or understandings with respect to the
sale of any  Shares,  no  estimate  can be given as to the  number  of shares of
Common Stock that will be held by the Selling  Stockholders after the completion
of this offering,  unless it is assumed that all the Shares offered  pursuant to
this and any other effective Prospectus are sold.

      The number of shares of Common  Stock  beneficially  owned by the  Selling
Stockholders  includes  the  shares of Common  Stock  beneficially  owned by the
Selling  Stockholders  as of the date of this  Prospectus  and  shares of Common
Stock  underlying  warrants  or options  held by Selling  Stockholders  that are
exercisable  within  sixty (60) days of the date of this  Prospectus.  Except as
otherwise indicated, to our knowledge, the Selling Stockholders have sole voting
and  investment  power with respect to all shares of Common  Stock  beneficially
owned by them,  or with  respect to the shares  underlying  options or warrants,
will have sole voting and investment power at the time such shares are sold. The
percentages  shown in the table  below are based upon  21,289,004  shares of our
Common Stock outstanding as of June 30, 2004.



                                       27





                                                                  NUMBER OF SHARES       NUMBER OF SHARES      PERCENTAGE OF
                                          NUMBER OF SHARES           THAT MAY BE           BENEFICIALLY           SHARES
                                         BENEFICIALLY OWNED       OFFERED PURSUANT          OWNED AFTER        BENEFICIALLY
        SELLING STOCKHOLDERS               BEFORE OFFERING       TO THIS PROSPECTUS          OFFERING           OWNED AFTER
                                                                                                                 OFFERING
- -------------------------------------------------------------------------------------------------------------------------------
                                                                                                    
Alpha Capital AG
Pradafat 7, Furstentums 9490
Vaduz, Liechtenstein                         250,000           1,520,626(1)            250,000                     1.17%
- -------------------------------------------------------------------------------------------------------------------------------
Bristol Investment Fund, Ltd.
c/o Bristol Capital Advisors, LLC
10990 Wilshire Blvd., Suite 1410
Los Angeles, CA  90024                       312,500           3,041,252(2)            312,500                     1.47%
- -------------------------------------------------------------------------------------------------------------------------------
Crescent International Ltd.
c/o GreenLight (Switzerland) SA
84 Avenue Louis-Casai
CH 1216 Cointrin, Geneva
Switzerland                                  468,750           2,280,938(3)            468,750                     2.20%
- -------------------------------------------------------------------------------------------------------------------------------
Palisades Master Fund, L.P.
C/o Beacon Fund Advisors, Ltd.
Harbour House, Waterfront Drive
Road Town, Tortola,  British Virgin                                                                                2.14%
Islands                                      456,250           5,322,190(4)            456,250
- -------------------------------------------------------------------------------------------------------------------------------
Perfect Timing, LLC
4390 River Bottom Drive
Norcross, GA  30092                          300,000           904,468(5)              300,000                     1.41%
- -------------------------------------------------------------------------------------------------------------------------------
The Del Mar Consulting Group, Inc.
2455 El Amigo Rd
Del Mar, CA  92014                           501,000           400,000(6)              101,000                     .47%
- -------------------------------------------------------------------------------------------------------------------------------
PEF Advisors Ltd.
C/o Beacon Fund Advisors, Ltd.
Harbour House, Waterfront Drive
Road Town, Tortola,  British Virgin
Islands                                       40,000           40,000(7)               0                             *
- -------------------------------------------------------------------------------------------------------------------------------
Jonathan Chase Gordon Educational
Trust
7633 E 63rd Place, Suite 220
Tulsa, OK 74133                              325,000           125,000(8)              200,000                     .94%
- -------------------------------------------------------------------------------------------------------------------------------
David Christopher Gordon
Educational Trust
7633 E 63rd Place Suite 220
Tulsa, OK 74133                              325,000           125,000(9)              200,000                     .94%
- -------------------------------------------------------------------------------------------------------------------------------
K. Wesley M. Jones Sr.
6945 N Baltusrol Lane
Charlotte, NC  28210                         241,072           12,500(10)              203,572                     .96%
- -------------------------------------------------------------------------------------------------------------------------------
Aubrey John Elam Jr.
c/o Five Oaks Capital Partners,
LLC 4201 Congress Street, Suite
145 Charlotte, North Carolina
28209                                         13,450           12,500(10)              0                             *
- -------------------------------------------------------------------------------------------------------------------------------
Stefano Piraino
c/o Five Oaks Capital Partners,
LLC 4201 Congress Street, Suite
145 Charlotte, North Carolina
28209                                         12,500           12,500(10)              0                             *
- -------------------------------------------------------------------------------------------------------------------------------
Greg Currie
c/o Five Oaks Capital Partners,
LLC 4201 Congress Street, Suite
145 Charlotte, North Carolina
28209                                         12,500           12,500(10)              0                             *
- -------------------------------------------------------------------------------------------------------------------------------
HPC Capital Management
200 Mansell Court East, Suite 550
Roswell, GA 30076                            200,000          243,000(11)              0                             *
- -------------------------------------------------------------------------------------------------------------------------------
           TOTAL:                                          14,052,474


*     Indicates no remaining  beneficial  ownership of the outstanding shares of
      Common Stock.

(1)   Konrad Ackerman has investment and voting control over the securities held
      by Alpha Capital AG.  Includes  531,915 shares issuable upon conversion of
      shares of 6%  Convertible  Preferred  Stock;  105,882  shares  issuable as
      dividends  for three years if Company  elects to, and is permitted to, pay
      such dividends in kind;  132,979  shares  issuable upon exercise of Common
      Stock Purchase  Warrants  exercisable  at $1.20 per share;  398,936 shares
      issuable upon  exercise of Additional  Investment  Rights  exercisable  at
      $1.03 per share;  and 350,914  additional  shares are being  registered in
      order to register 130% of the total registrable  securities as required by
      the Registration Rights Agreement.


                                       28


(2)   Paul Kessler has investment and voting control over the securities held by
      Bristol  Investment  Fund, Ltd.  Includes  1,063,830  shares issuable upon
      conversion of shares of 6%  Convertible  Preferred  Stock;  211,765 shares
      issuable  as  dividends  for three  years if  Company  elects  to,  and is
      permitted to, pay such  dividends in kind;  265,957  shares  issuable upon
      exercise of Common Stock Purchase Warrants exercisable at $1.20 per share;
      797,872  shares  issuable upon exercise of  Additional  Investment  Rights
      exercisable at $1.03 per share;  and 701,827  additional  shares are being
      registered in order to register 130% of the total  registrable  securities
      as required by the Registration rights Agreement.

(3)   Maxi Brezzi and Mel Craw,  in their  capacity  as  managers of  GreenLight
      (Switzerland) SA, the investment advisor to Crescent  International  Ltd.,
      have  investment and voting  control over the securities  held by Crescent
      International  Ltd.  Includes  797,872 shares  issuable upon conversion of
      shares of 6%  Convertible  Preferred  Stock;  158,824  shares  issuable as
      dividends  for three years if Company  elects to, and is permitted to, pay
      such dividends in kind;  199,468  shares  issuable upon exercise of Common
      Stock Purchase  Warrants  exercisable  at $1.20 per share;  598,404 shares
      issuable upon  exercise of Additional  Investment  Rights  exercisable  at
      $1.03 per share;  and 526,370  additional  shares are being  registered in
      order to register 130% of the total registrable  securities as required by
      the Registration Rights Agreement.

(4)   Murray Todd has investment and voting control over the securities  held by
      Palisades  Master Fund,  L.P.  Includes  1,861,702  shares  issuable  upon
      conversion of shares of 6%  Convertible  Preferred  Stock;  370,588 shares
      issuable  as  dividends  for three  years if  Company  elects  to,  and is
      permitted to, pay such  dividends in kind;  465,426  shares  issuable upon
      exercise of Common Stock Purchase Warrants exercisable at $1.20 per share;
      1,396,276  shares issuable upon exercise of Additional  Investment  Rights
      exercisable at $1.03 per share; and 1,228,198  additional shares are being
      registered in order to register 130% of the total  registrable  securities
      as required by the Registration Rights Agreement.

(5)   Lisa E. Mannion has investment and voting control over the securities held
      by Perfect Timing,  LLC.  Includes 319,149 shares issuable upon conversion
      of shares of 6% Convertible  Preferred  Stock;  63,529 shares  issuable as
      dividends  for three years if Company  elects to, and is permitted to, pay
      such  dividends in kind;  79,787  shares  issuable upon exercise of Common
      Stock Purchase  Warrants  exercisable  at $1.20 per share;  239,362 shares
      issuable upon  exercise of Additional  Investment  Rights  exercisable  at
      $1.03 per share;  and 202,641  additional  shares are being  registered in
      order to register 130% of the total registrable  securities as required by
      the Registration Rights Agreement.

(6)   Robert B. Prag has investment and voting control over the securities  held
      by The Del Mar Consulting  Group.  Includes 400,000 shares of Common Stock
      issued pursuant to an Independent Consulting Agreement.

(7)   Paul Mannion or Andy Reckles have  investment  and voting control over the
      securities  which were issued as a finders' fee in connection with The Del
      Mar Consulting Group Independent Consulting Agreement referenced above.

(8)   James R. Ross has investment and voting control over the securities  which
      were issued pursuant to a private placement.

(9)   Susan Willis has investment  and voting control over the securities  which
      were issued pursuant to a private placement.

(10)  Shares  issuable  upon  exercise  of Warrants  to  purchase  Common  Stock
      exercisable  at $2.44 per  share  issued  in  connection  with a Letter of
      Credit  transaction  entered  into on March 1, 2004  whereby  4  investors
      provided  Flightserv,  Inc. with two letters of credit to replace existing
      letters of credit.

(11)  Vince  Sbarra has  investment  and  voting  control  over the  securities,
      200,000 of which were  issued as  placement  fees in  connection  with the
      October  2003  private  placement  and  43,000  of which  were  issued  as
      placement fees in connection with the September 2004 private placement.


                                       29


      None of the selling  security  holders has, or within the past three years
has had, any position,  office or other material  relationship with us or any of
our predecessors or affiliates other than as set forth above. Paul Mannion,  Jr.
is a principal of PEF Advisors Ltd. and of HPC Capital Management,  which serves
as our  investment  bank and acted as  placement  agent in  connection  with our
recent  financings.  HPC Capital Management is a registered  broker-dealer.  Mr.
Mannion's  wife is the principal of Perfect  Timing,  LLC,  which  purchased the
securities being registered under this Prospectus as disclosed under footnote 5.
To our  knowledge,  neither  Mr.  Mannion,  nor HPC Capital  Management  has any
arrangement  with  any  person  to  participate  in  the  distribution  of  such
securities.   The  Del  Mar   Consulting   Group  is  the   Company's   investor
communications  and  public  relations  consultant.  K.  Wesley M. Jones Sr. was
appointed  a Director  of the Company on April 15,  2004.  Mr.  Jones was 1 of 4
investors  in a March 1, 2004  Letter of Credit  transaction  which  benefited a
subsidiary of the Company. Mr. Jones received 12,500 Warrants in connection with
this transaction.

      We have agreed to pay the full costs and expenses in  connection  with the
issuance,  offer,  sale  and  delivery  of the  shares,  including  all fees and
expenses in  preparing,  filing and  printing  the  registration  statement  and
Prospectus and related exhibits,  amendments and supplements thereto and mailing
of those items. We will not pay selling commissions and expenses associated with
any sale by the Selling Stockholders.

                              PLAN OF DISTRIBUTION

      Each Selling Stockholder (the "Selling  Stockholders") of our Common Stock
and any of their pledgees,  assignees and successors-in-interest  may, from time
to time,  sell any or all of their shares of Common Stock on the Trading  Market
or any other stock exchange,  market or trading facility on which the shares are
traded or in private  transactions.  These  sales may be at fixed or  negotiated
prices. A Selling  Stockholder may use any one or more of the following  methods
when selling shares:

      o     ordinary  brokerage  transactions  and  transactions  in  which  the
            broker-dealer solicits purchasers;

      o     block  trades in which the  broker-dealer  will  attempt to sell the
            shares as agent but may  position  and resell a portion of the block
            as principal to facilitate the transaction;

      o     purchases  by  a  broker-dealer  as  principal  and  resale  by  the
            broker-dealer for its account;

      o     an  exchange  distribution  in  accordance  with  the  rules  of the
            applicable exchange;

      o     privately negotiated transactions;

      o     settlement  of  short  sales  entered  into  after  the date of this
            prospectus;

      o     broker-dealers  may agree with the  Selling  Stockholders  to sell a
            specified number of such shares at a stipulated price per share;


                                       30


      o     a combination of any such methods of sale;

      o     through  the  writing or  settlement  of  options  or other  hedging
            transactions, whether through an options exchange or otherwise; or

      o     any other method permitted pursuant to applicable law.

      The Selling  Stockholders  may also sell  shares  under Rule 144 under the
Securities Act, if available, rather than under this prospectus.

      Broker-dealers  engaged by the Selling  Stockholders may arrange for other
brokers-dealers to participate in sales.  Broker-dealers may receive commissions
or discounts from the Selling  Stockholders  (or, if any  broker-dealer  acts as
agent  for the  purchaser  of  shares,  from the  purchaser)  in  amounts  to be
negotiated.  Each  Selling  Stockholder  does not expect these  commissions  and
discounts  relating  to its sales of shares to exceed what is  customary  in the
types of transactions involved.

      In connection with the sale of our Common Stock or interests therein,  the
Selling  Stockholders may enter into hedging transactions with broker-dealers or
other  financial  institutions,  which may in turn  engage in short sales of the
Common Stock in the course of hedging the  positions  they  assume.  The Selling
Stockholders  may also sell shares of our Common  Stock short and deliver  these
securities  to close out their  short  positions,  or loan or pledge  the Common
Stock to  broker-dealers  that in turn may sell these  securities.  The  Selling
Stockholders   may  also  enter   into   option  or  other   transactions   with
broker-dealers  or other  financial  institutions or the creation of one or more
derivative  securities which require the delivery to such broker-dealer or other
financial  institution of shares offered by this  prospectus,  which shares such
broker-dealer  or  other  financial  institution  may  resell  pursuant  to this
prospectus (as supplemented or amended to reflect such transaction).

      The  Selling  Stockholders  and any  broker-dealers  or  agents  that  are
involved  in selling  the shares may be deemed to be  "underwriters"  within the
meaning of the Securities Act in connection with such sales. In such event,  any
commissions  received  by such  broker-dealers  or agents  and any profit on the
resale  of the  shares  purchased  by  them  may be  deemed  to be  underwriting
commissions or discounts under the Securities Act. Each Selling  Stockholder has
informed  the  Company  that it does not have any  agreement  or  understanding,
directly or indirectly, with any person to distribute the Common Stock.

      The Company is required to pay certain  fees and  expenses  incurred by it
incident to the registration of the shares.  The Company has agreed to indemnify
the  Selling   Stockholders   against  certain  losses,   claims,   damages  and
liabilities, including liabilities under the Securities Act.

      Because Selling Stockholders may be deemed to be "underwriters" within the
meaning of the Securities  Act, they will be subject to the prospectus  delivery
requirements of the Securities Act. In addition,  any securities covered by this
prospectus  which qualify for sale pursuant to Rule 144 under the Securities Act
may be sold under Rule 144 rather  than  under  this  prospectus.  Each  Selling
Stockholder  has  advised  us that they have not  entered  into any  agreements,
understandings or arrangements  with any underwriter or broker-dealer  regarding
the sale of the resale shares.  There is no underwriter or  coordinating  broker
acting in connection  with the proposed sale of the resale shares by the Selling
Stockholders.


                                       31


      We  agreed  to use  our  commercially  reasonable  efforts  to  keep  this
prospectus  effective  until the earlier of (i) the date on which the shares may
be resold by the Selling Stockholders without registration and without regard to
any volume  limitations by reason of Rule 144(k) under the Securities Act or any
other rule of similar  effect or (ii) all of the shares have been sold  pursuant
to the  prospectus  or Rule 144 under the  Securities  Act or any other  rule of
similar  effect.  The resale  shares  will be sold only  through  registered  or
licensed  brokers or dealers if required under applicable state securities laws.
In addition,  in certain  states,  the resale shares may not be sold unless they
have  been  registered  or  qualified  for  sale in the  applicable  state or an
exemption from the registration or qualification requirement is available and is
complied with.

      Under applicable rules and regulations  under the Exchange Act, any person
engaged in the distribution of the resale shares may not  simultaneously  engage
in market making activities with respect to our Common Stock for a period of two
business days prior to the commencement of the  distribution.  In addition,  the
Selling  Stockholders  will be subject to applicable  provisions of the Exchange
Act and the rules and regulations thereunder,  including Regulation M, which may
limit the timing of  purchases  and sales of shares of our  Common  Stock by the
Selling Stockholders or any other person. We will make copies of this prospectus
available  to the Selling  Stockholders  and have  informed  them of the need to
deliver a copy of this  prospectus to each  purchaser at or prior to the time of
the sale.

                                  LEGAL MATTERS

      The validity of the Common Stock offered hereby will be passed upon for us
by the law firm of Adorno & Yoss, P.A, Fort Lauderdale, Florida.

                                     EXPERTS

      BDO Seidman LLP, our independent  registered  public accounting firm, have
audited our consolidated  financial  statements included in our Annual Report on
Form 10-K for the years ended June 30,  2004,  2003,  and 2002,  as set forth in
their  report,  which is  incorporated  by  reference  in this  Prospectus.  Our
financial  statements are  incorporated  by reference in reliance on BDO Seidman
LLP's report, given on their authority as experts in accounting and auditing.

                       WHERE YOU CAN FIND MORE INFORMATION

      We file annual,  quarterly and special reports, proxy statements and other
information with the SEC. You can inspect and copy the registration statement of
which this Prospectus is a part, as well as such reports,  proxy  statements and
other  information,  at the  public  reference  room  maintained  by the  SEC at
Judiciary  Plaza,  450 Fifth Street,  N.W., Room 1024,  Washington,  D.C. 20549.
Copies of such  material can be obtained from the public  reference  room of the
SEC at Judiciary  Plaza,  450 Fifth Street,  N.W.,  Washington,  D.C.  20549, at
prescribed  rates.  You may obtain  information  on the  operation of the public
reference  room by calling the SEC at  1-800-SEC-0330.  We are also  required to
file electronic  versions of these documents with the SEC, which may be accessed
through the SEC's Web site at http://www.sec.gov.  You may also inspect reports,
proxy and information  statements and other information about us at the American
Stock Exchange at 86 Trinity Place, New York, New York 10006.


                                       32


                      INFORMATION INCORPORATED BY REFERENCE

      The SEC allows us to  "incorporate  by reference" the  information we file
with it,  which  means  that we can  disclose  important  information  to you by
referring you to those documents.  The information  incorporated by reference is
considered to be part of this  Prospectus,  and later  information  that we file
with the SEC will  automatically  update  and  supercede  this  information.  We
incorporate by reference the documents  listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act until
the  earlier of the date the  Selling  Stockholders  sell all the Shares or such
other date as the offering is terminated and any unsold Shares are  deregistered
by the filing of a  post-effective  amendment:

      o     Our Annual Report on Form 10-K for the year ended June 30, 2004;

      o     Our Current Reports and Amendments thereto on Form 8-K and Form
            8-K/A, respectively, filed with the SEC on:
            August 18, 2004;
            September 3, 2004;
            September 16, 2004; and
            September 27, 2004

      o     Our   Definitive   Proxy   Statement  for  our  Annual   Meeting  of
            Stockholders  held on  November  14,  2003,  filed  with  the SEC on
            October 20, 2003; and

      o     The  description of our Common Stock  contained in our  Registration
            Statement on Form 8-A filed with the SEC on July 19, 1996.

      You may  request  a copy of these  filings,  at no  cost,  by  writing  or
telephoning us at the following address and telephone number:

                           RCG Companies Incorporated
                             6836 Morrison Boulevard
                                    Suite 200
                               Charlotte, NC 28211

                              Attention: Controller

                            Telephone: (704) 366-5054


                                       33


      This Prospectus  provides you with a general description of the securities
that may be offered for sale, but does not contain all of the  information  that
is in the  registration  statement  that  we  filed  with  the  SEC.  Statements
contained herein  concerning the provisions of certain  documents filed with, or
incorporated  by reference in, the  registration  statement are not  necessarily
complete and each such  statement is qualified in its entirety by  references to
the applicable document filed with the SEC.

      You should  rely only on the  information  incorporated  by  reference  or
provided in this  Prospectus or any  supplement.  We have not authorized  anyone
else to provide you with different  information.  The Selling  Stockholders will
not make an offer of these Shares in any state where the offer is not permitted.
You should not assume that the  information in this Prospectus or any supplement
is  accurate  as of any date other than the date on the front of the  respective
document.

                                       34