United States
                       Securities and Exchange Commission
                             Washington, D.C. 20549

                                  Form 10-QSB

              [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended December 31, 2003

             [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                                  EXCHANGE ACT

        For the transition period from ______________ to ________________

                        Commission File Number: 0-24857

                                ITS Networks Inc.
        (Exact name of small business issuer as specified in its charter)

             Florida                                     52-2137517
(State  or  other  jurisdiction  of         (I.R.S. Employer Identification No.)
  incorporation  or  organization)


    Edif. Marina Marbella, Severo Ochoa 28, Planta 9, 29600 Marbella, Spain
                    (Address of principal executive offices)

       Issuer's telephone number, including area code: 011-34-95-276-8600

     ______________________________N/A_____________________________________
   (Former name, former address and former fiscal year, if changed since last
                                    report)

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS

     Check whether the registrant filed all documents and reports required to be
filed  by  Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities  under  a  plan  confirmed  by  a  court.  Yes [ ]  No [ ]

APPLICABLE  ONLY  TO  CORPORATE  ISSUERS

     State  the  number of shares outstanding of each of the issuer's classes of
common  equity,  as  of the last practicable date: 32,478,280 shares at February
18, 2004.

     Transitional  Small Business Disclosure Format (check one):  Yes [ ] No [X]


<PAGE>

                                ITS NETWORKS INC.

                                      INDEX

PART  I.  FINANCIAL  INFORMATION

Item  1.  Financial  Statements:

     Condensed  Consolidated  Balance  Sheet  as  of
     December  31,  2003  (Unaudited)                                          3

     Condensed  Consolidated  Statements  of  Operations
     for  the  three months ended  December  31,  2003
     and  2002  (Unaudited)                                                    4

     Condensed Consolidated Statements of Changes in
     Stockholders' Deficit for the three months ended
     December 31, 2003 and the years ended September 30,
     2003 and 2002 (Unaudited)                                                 5

     Condensed  Consolidated  Statements  of  Cash  Flows
     for  the three months ended  December  31,  2003  and
     2002  (Unaudited)                                                         6

     Notes  to  Condensed  Consolidated  Financial  Statements                 8

Item  2.  Management's Discussion  and  Analysis  or Plan of Operations       12

Item  3.  Controls  and  Procedures                                           14

PART  II.  OTHER  INFORMATION

Item  1.  Legal  Proceedings                                                  16

Item  2.  Changes  in  Securities                                             16

Item  3.  Defaults  upon  Senior  Securities                                  16

Item  4.  Submission  of  Matters  to  a  Vote  of  Security  Holders         16

Item  5.  Other  Information                                                  16

Item  6.  Exhibits  and  Reports  on  Form  8-K                               16

Signatures                                                                    18


                                        2
<PAGE>
                          PART I FINANCIAL INFORMATION

ITEM  1.  FINANCIAL  STATEMENTS

                                ITS NETWORKS INC.
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2003
                                  (Unaudited)

                                     ASSETS
<TABLE>
<CAPTION>
CURRENT  ASSETS:
<S>                                                               <C>
  Cash  and  cash  equivalents                                    $     271,000
  Accounts  receivable  -  trade,  net  of  allowance
    for  doubtful  accounts  of  $1,035,000                             365,000
  Accounts  receivable  -  other                                        122,000
  Inventory                                                              64,000
  Prepaid  expenses                                                      30,000
                                                                  -------------
      Total  current  assets                                            852,000
                                                                  -------------

PROPERTY  AND  EQUIPMENT,  NET                                        1,074,000
                                                                  -------------

OTHER  ASSETS:
  Vendor  deposits                                                      213,000
                                                                  -------------

                                                                  $   2,139,000
                                                                  =============

                    LIABILITIES AND STOCKHOLDERS' (DEFICIT)

CURRENT  LIABILITIES:
  Accounts  payable  -  trade                                         3,669,000
  Accrued  liabilities                                                  802,000
  Current  portion  of  obligation  under  capital  lease                83,000
  Notes  payable  to  bank                                              253,000
  Current  portion  of  payment  obligation  to
    taxing  authority                                                    82,000
  Loans  from  related  parties                                       3,041,000
  Deferred  income                                                    2,818,000
                                                                  -------------

      Total  current  liabilities                                    10,748,000
                                                                  -------------

LONG-TERM  DEBT
  Payment  obligation  to  tax authority,  net
    of current portion shown above                                      291,000
                                                                  -------------

STOCKHOLDERS'  DEFICIT:
  Preferred  stock;  par  value  of  $0.001,
    5,000,000  shares authorized,  no  shares  outstanding                    -
  Common  stock;  par  value  of  $0.001,
    100,000,000  shares authorized,  23,570,278
    shares  outstanding                                                  24,000
  Additional  paid-in  capital                                        8,678,000
  Less:  Prepaid  syndication  fees                                    (418,000)
  Accumulated  (deficit)                                            (14,891,000)
  Effect  of  cumulative  translation  adjustment                    (2,293,000)
                                                                  -------------

      Total  stockholders'  (deficit)                                (8,900,000)
                                                                  -------------

                                                                  $   2,139,000
                                                                  =============
</TABLE>


   See accompanying summary of accounting policies and notes to the financial
                                  statements.

                                        3

<PAGE>
                                ITS NETWORKS INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                      Three  months  ended
                                                          December  31,
                                            -------------------------------------
                                                   2003                  2002
                                            ----------------     ----------------
<S>                                         <C>                    <C>
SALES                                       $   1,472,000          $    927,000

COST  OF  GOODS  SOLD  (exclusive  of
  depreciation shown  separately  below)        1,571,000               667,000
                                            -------------          ------------

GROSS  PROFIT (LOSS)                              (99,000)              260,000
                                            -------------          ------------

OPERATING  EXPENSES:
  Selling, general and administrative
    expenses                                      592,000               733,000
  Depreciation                                     79,000                52,000
  Bad  debt  expense                                    -                13,000
  Impairment  on  goodwill                              -             3,254,000
                                            -------------          ------------

           Total  operating  expenses             671,000             4,052,000
                                            -------------          ------------

(LOSS)  FROM  OPERATIONS                         (770,000)           (3,792,000)
                                            -------------          ------------

OTHER  INCOME  (EXPENSES):
  Interest  expense                               (27,000)               (6,000)
                                            -------------          ------------

(LOSS)  BEFORE  INCOME  TAXES                    (797,000)           (3,798,000)

PROVISION  FOR  INCOME  TAXES                           -                     -
                                            -------------          ------------

NET (LOSS)                                  $    (797,000)         $ (3,798,000)
                                            =============          ============

BASIC  EARNINGS  (LOSS)  PER SHARE          $       (0.04)         $      (0.30)
                                            =============          ============

AVERAGE  COMMON  AND  COMMON
  EQUIVALENT  SHARES  OUTSTANDING              22,420,297            12,506,935
                                            =============          ============

THE COMPONENTS OF COMPREHENSIVE LOSS:
  Net  (loss)                               $    (797,000)         $ (3,798,000)
  Foreign currency translation adjustment        (722,000)             (819,000)
                                            -------------          ------------

COMPREHENSIVE  (LOSS)                       $  (1,519,000)         $ (4,617,000)
                                            =============          ============
</TABLE>


   See accompanying summary of accounting policies and notes to the financial
                                  statements.


                                        4
<PAGE>
                                ITS NETWORKS INC.
      CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
                                  (Unaudited)


<TABLE>
<CAPTION>
                                    Common Stock                                              Accumulated
                                 ------------------
                                  Number    $0.001   Additional     Prepaid                      Other          Total
                                    of        par     Paid-In     Syndication  Accumulated    Comprehensive  Stockholders'
                                  Shares     Value    Capital         Fees       Deficit          Loss          Deficit
                                 ---------  -------  -----------  ----------   -------------  -------------  --------------
<S>                             <C>         <C>      <C>          <C>          <C>            <C>            <C>
Recapitalization as a result of
  Merger TSYN December 22, 2000  8,433,334  $ 8,000  $1,323,000   $       -    $ (1,721,000)  $         -    $   (390,000)
Equity  of  shell  in  stock
  acquisition  of  Technology
  Systems International, Inc.
  (TSYN")                        2,225,000    2,000       4,000           -               -             -           6,000
Foreign currency translation
  adjustment, September 30, 2001         -        -           -           -               -         9,000           9,000
Net loss for the year ended
  September  30,  2001                   -        -           -           -      (1,058,000)            -      (1,058,000)
                                ----------  -------  ----------   ---------   -------------   -----------    ------------

Balance, September 30, 2001     10,658,334   10,000   1,327,000           -      (2,779,000)        9,000      (1,433,000)
Common shares issued upon
  exercise of warrants              10,000        -      16,000           -               -             -          16,000
Common stock issued for
  conversion of debt to
  equity                         1,186,040    1,000   1,464,000           -               -             -       1,465,000
Common shares issued for
  cash, April  2002                  9,750        -      11,000           -               -             -          11,000
Common shares issued for
  services                         241,500        -     195,000           -               -             -         195,000
Common stock options issued
  for advertising,
  September 2002                         -        -      84,000           -               -             -          84,000
Common shares issued for
  syndication costs,
  September 2002                   526,311    1,000     417,000    (418,000)              -             -               -
Common shares repurchased
  and  retired                    (125,000)       -      (5,000)          -               -             -          (5,000)
Foreign currency translation
  adjustment,
  September  30,  2002                   -        -           -           -               -      (131,000)       (131,000)
Net (loss) for the year
  ended September 30, 2002               -        -           -           -      (1,284,000)            -      (1,284,000)
                                ----------  -------  ----------   ---------   -------------   -----------    ------------

Balance, September 30, 2002     12,506,935   12,000   3,509,000    (418,000)     (4,063,000)     (122,000)     (1,082,000)

Common stock issued for
  conversion of debt to equity   9,767,093   10,000   4,976,000           -               -             -       4,986,000
Common stock bonus for
  consulting services  in
  lieu  of  cash  payment          150,000        -      86,000           -               -             -          86,000
Common shares repurchased
  and  retired                      (3,750)              (6,000)          -                                        (6,000)
Foreign currency translation
  adjustment, September 30,
  2003                                   -        -           -           -               -    (1,449,000)     (1,449,000)
Net (loss) for the year ended
  September  30,  2003                   -        -           -           -     (10,031,000)            -     (10,031,000)
                                ----------  -------  ----------   ---------   -------------   -----------    ------------

Balance, September 30, 2003     22,420,278   22,000   8,565,000    (418,000)    (14,094,000)   (1,571,000)     (7,496,000)


Common  stock  issued  for
  cash 12/23/2003                1,150,000    2,000     113,000                                                   115,000
Foreign currency translation
  adjustment, December 31, 2003          -        -           -           -               -      (722,000)       (722,000)
Net (loss) for the three
  months ended December  31,
  2003                                   -        -           -           -        (797,000)            -        (797,000)
                                ----------  -------  ----------   ---------   -------------   -----------    ------------

                                23,570,278  $24,000  $8,678,000   $(418,000)  $ (14,891,000)  $(2,293,000)   $ (8,900,000)
                                ==========  =======  ==========   =========   =============   ===========    ============
</TABLE>


   See accompanying summary of accounting policies and notes to the financial
                                  statements.


                                        5
<PAGE>

                                ITS NETWORKS INC.
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                             Three  months  ended  December  31,
                                            ------------------------------------
                                                   2003                 2002
                                            ----------------    ----------------
CASH  FLOWS  FROM  OPERATING  ACTIVITIES:
<S>                                         <C>                  <C>
  Net  (loss)                               $      (797,000)     $   (3,798,000)
  Adjustments to reconcile net (loss) to
  net cash used in operating activities:
    Depreciation                                     79,000              52,000
    Bad  debt  expense                                    -              13,000
    Loss on write down  and  disposition
      of  assets                                     24,000              13,000
    Loss  on  impairment on goodwill                      -           3,254,000
  Decrease (increase) in operating
  assets:
    Accounts  receivable  -  trade                 (166,000)            229,000
    Accounts  receivable  -  other                   97,000                   -
    Inventory                                        (5,000)             45,000
    Prepaid  expenses                               (20,000)             55,000
    Vendor  and  other  deposits                     (4,000)              30,00
  Increase (decrease)  in
  operating  liabilities:
    Accounts payable and accrued liabilities       (375,000)         (1,668,000)
    Deferred  Income                              1,168,000                   -
                                            ---------------      --------------
      Net  cash  provided  by  (used  in)
        operating  activities                         1,000          (1,775,000)
                                            ---------------      --------------

CASH  FLOWS  FROM  INVESTING  ACTIVITIES:
  Purchase  of  property  and  equipment             (7,000)            (17,000)
                                            ---------------      --------------

      Net  cash  (used  in)  investing
        activities                                   (7,000)            (17,000)
                                            ---------------      --------------

CASH  FLOWS  FROM  FINANCING  ACTIVITIES:
  Loan  proceeds  from  related  parties            812,000           2,642,000
  Loan  proceeds  from  bank                         20,000                   -
  Loan  principal  payments                        (107,000)                  -
  Proceeds  from  sale  of  common  stock           115,000                   -
                                            ---------------      --------------

      Net  cash  provided  by  financing
        activities                                  840,000           2,642,000
                                            ---------------      --------------

EFFECT  OF  EXCHANGE  RATE                         (722,000)           (819,000)
                                            ---------------      --------------

NET  INCREASE  IN  CASH  AND
  CASH  EQUIVALENTS                                 112,000              31,000

CASH  AND  CASH  EQUIVALENTS,
  BEGINNING  OF  YEAR                               159,000             202,000
                                            ---------------      --------------

CASH  AND  CASH  EQUIVALENTS,
  END  OF  YEAR                             $       271,000      $      233,000
                                            ===============      ==============
</TABLE>


   See accompanying summary of accounting policies and notes to the financial
                                  statements.

                                        6
<PAGE>

                               ITS NETWORKS, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)


<TABLE>
<CAPTION>
                                             Three  months  ended  December  31,
                                            ------------------------------------
                                                   2003                 2002
                                            ----------------    ----------------
SUPPLEMENTAL  DISCLOSURES  OF  CASH  FLOW
  INFORMATION:
<S>                                         <C>                  <C>
  Cash  paid  during  the  year  for:
    Interest                                $        27,000      $       (6,000)
                                            ===============      ==============

SUPPLEMENTAL  DISCLOSURE  OF  NONCASH
  TRANSACTIONS:
    Long-term debt converted to
      common stock                          $             -      $   (1,379,000)
                                            ===============      ==============
</TABLE>


































     See accompanying summary of accounting policies and notes to financial
                                  statements.

                                        7


<PAGE>
                       ITS NETWORKS INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2003
                                  (Unaudited)


1.  THE  COMPANY

     ITS Networks Inc. (the  "Company") was incorporated in the State of Florida
on  November 23, 1998.  On December 22, 2000, the Company issued 8,443,334 (post
split)  shares  of  common  stock in exchange for 100% of the outstanding common
stock of ITS Europe, S.L.  ("ITS Europe"), a Spanish telecommunications company.
For accounting purposes, the acquisition has been recorded as a recapitalization
of  ITS  Europe,  with  ITS  Europe as the acquirer.  The 8,433,334 (post split)
shares  issued  are  treated  as  issued  by  ITS  Europe  for  cash.

     In  December  2002  the  Company  acquired Teleconnect Comunicaciones, S.A.
("Teleconnect")  for  up  to 1,500,000 (post split shares of the Common Stock of
the  Company  and  the  assumption of approximately 2,200,000 Euros of net debt.
This  agreement   was  subsequently   amended   giving  the  former  Teleconnect
shareholders a  total  of  2,500,000 (post split) shares of the Company's common
stock.

     This  resulted  in  the  creation of $6,637,000 in goodwill associated with
this  acquisition.  There  is  substantial  doubt about the Company's ability to
realize  all  of  the goodwill associated with this acquisition and the goodwill
was  considered  fully  impaired and charged to operations during the year ended
September  30,  2003.

     Results  for  the three months ended December 31, 2003, are not necessarily
indicative of the results that may be expected for the year ending September 30,
2004.  For  further  information,  refer to the Company's consolidated financial
statements  and  footnotes  thereto included in its annual report on Form 10-KSB
for  its  fiscal  year  ended  September  30,  2003.

     The  Company  is  a  provider   of  pre-paid   telephone  cards  and  other
telecommunication  services  and  products  primarily  within Spain. Significant
inter-company  balances  and transactions have been eliminated in consolidation.

2.  GOING  CONCERN

     The  accompanying financial statements have been prepared assuming that the
Company  will  continue  as  a  going  concern.

     As  shown  in  the  accompanying  financial statement, the Company incurred
losses  of  $(797,000)  and $(3,798,000) for the three months ended December 31,
2003  and  2002, respectively. In addition, the Company has incurred substantial

                                        8
<PAGE>

losses since its inception.  As of December 31, 2003, current liabilities exceed
current  assets  by  $9,896,000  and  total  liabilities  exceed total assets by
$8,900,000.  These  factors raise substantial doubts about the Company's ability
to  continue  as  a  going  concern.

     These  financial  statements do not include any adjustments relating to the
recoverability  and  classification  of  recorded  assets,  or  the  amounts and
classification  of  liabilities that might be necessary in the event the Company
cannot  continue  as  a  going  concern.

     Management  anticipates that it will be able to convert certain outstanding
debt  into  equity  and that it will be able to raise additional working capital
through  the  issuance  of  stock  and  through additional loans from investors.

     The ability of the Company to continue as a going concern is dependent upon
the Company's ability to attain a satisfactory level of profitability and obtain
suitable  and  adequate  financing.  There can be no assurance that management's
plan  will  be  successful.

3.  SIGNIFICANT  ACCOUNTING  POLICIES

     Cash  and  cash  equivalents.  The  Company  considers  all  highly  liquid
investments  with  maturities  of three months or less when purchased to be cash
equivalents.  There  are  no  cash  equivalents  at  December  31,  2003.

     Property  and  equipment.  Property  and  equipment  are  stated  at  cost.
Depreciation  is  provided  primarily  by  the  straight-line  method  over  the
estimated  useful  lives  of  the  assets.

     Impairment  of  long-lived  assets.  The  Company  evaluates its long-lived
assets  to  determine  whether  later  events  and circumstances warrant revised
estimates  of  useful  lives  or  reduction in carrying value due to impairment.

     Income  taxes.  The  Company  accounts  for income taxes in accordance with
Statement  of  Financial  Accounting  Standards  No. 109, "Accounting for Income
Taxes", which requires an asset and liability approach to determine deferred tax
assets  and  liabilities.  Deferred  tax  assets  and liabilities are determined
based  upon  the differences between financial reporting and tax basis of assets
and  liabilities  and are measured using the enacted tax rates and laws that are
expected  to  be  in  effect  when  the  differences  are  assumed  to  reverse.

     Revenue  recognition.  Revenue  from  the  sale of prepaid calling cards is
recognized as the cards are used.  Deferred revenues are recorded to reflect the
unused  portion  of  calling  cards  that  have  been  issued  to  customers.

     Loss  per  share.  Loss  per common and common equivalent share is computed
based  on  the  weighted  average  number of shares of Common Stock outstanding.

                                        9
<PAGE>

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

     Foreign  Currency Translation/Transactions.  The current assets and current
liabilities of ITS Europe, S.L. and Teleconnect, whose functional currencies are
the  Euro  (formerly  the Peseta), are generally translated into U.S. dollars at
the  June  30,  2003  exchange  rate.  Long-term  assets  are  translated at the
exchange  rate  in effect on the date of acquisition.  The revenues and expenses
are  translated at average exchange rates for the period.  Resulting translation
adjustments   are   accumulated  and   reflected  as  a  separate  component  of
stockholders'  equity.

4.  INCOME  TAXES

     The  Company's  wholly-owned subsidiaries, ITS Europe, S.L. and Teleconnect
file  their  income taxes on a calendar year basis.  Statutory tax laws of Spain
allow  net  losses  from  operations  to  be carried forward for a period of ten
years.  For the year ended September 30, 2002, the available tax loss ITS Europe
has  accumulated  is  $3,771,000,  which  may  be  used to offset future taxable
income.  Teleconnect,  which  was  acquired  in December 2002, has available tax
losses  of approximately $9,777,000 as of December 31, 2002.  The utilization of
the  loss expires in years from 2005 to 2017.  The Company cannot use any of the
tax  losses  of  ITS  Europe  or  Teleconnect  to offset any future U.S. taxable
income.  The  U.S. parent Company has net operating loss carry forwards totaling
approximately  $739,000,  which is available to offset any future parent Company
taxable  income  in  the  United  States  in  years  2021  to  2022.

     The  Company has a deferred tax asset principally due to net operating loss
carry  forwards.  This deferred tax asset has been offset in full by a valuation
allowance,  as  the  Company  can  not  be assured at this time that it will  be
able  to  utilize  these  loss  carryforwards.

5.  LITIGATION

     In the normal course of its operations, the Company has, from time to time,
been  named  in  legal  actions  seeking monetary damages.  While the outcome of
these  matters  cannot  be estimated with certainty, management does not expect,
based  upon  consultation  with  legal  counsel,  that they will have a material
effect  on  the  Company's  business  or   financial  condition  or  results  of
operations,  except that as of December 31, 2003, the Company has accrued 96,000
Euros  for  the  settlement  of  pending  litigation.

                                       10
<PAGE>

6.  LOANS  PAYABLE

     At  December  31,  2003,  the  Company has loans payable to related parties
totaling  $3,041,000,  all  of  which  is  due  within  the  next twelve months.

7.  REVERSE  STOCK  SPLIT

     On  December  29,  2003,  the Company underwent a two for one reverse stock
split.  The  effects  of  this  reverse  split are  shown retroactively in these
financial  statements  and  the  notes  thereto.

8.  SALE  OF  POST  PAID  BUSINESS

     Effective  November  1,  2003,  the  Company  sold  its  post paid business
accounts  to a third party. This sale was not recognized for financial reporting
purposes as the sale price is not determinable at the current time. Terms of the
sale  call  for  the  purchase price to be 550,000 euro subject to the following
adjustment,  if revenues generated from this business are less than 137,000 euro
for the month of April 2004, the sales price will be reduced to four times April
2004  revenues,  likewise  if  revenues  for April 2004 exceed 137,000 euro, the
purchase  price  will  be  adjusted  upwards  to  four  times April revenues. On
November  20,  2003,  the  Company  received a 400,000 euro payment towards this
sale,  the  proceeds  of which went directly to one of the Company's carriers in
partial  payment  of  past  due  charges.

For  financial reporting purposes, the Company did not recognize the sale during
the period ended December 31, 2003 but recorded deferred income in the amount of
505,000  euro representing the estimated sales price of 550,000 euro less 45,000
euro  in  related  costs.  The  sale  will be recognized for financial reporting
purposes  at  such  time  as  the  sales  price  is  determinable.

9.  AGREEMENT  TO  SELL  ADDITIONAL  SHARES  OF  COMMON  STOCK

     On November 28, 2003 the Company entered into an agreement with an investor
whereby  the  investor  agreed to acquire sufficient shares to give the investor
60%  of  the  issued  and  outstanding  shares  of the Company's common stock at
closing  in  consideration  for  a  purchase  price  of  2,900,000  euros.  This
transaction  had  not  been  finalized  as  of  the  date  of  this  report.

                                       11

<PAGE>

ITEM  2.  MANAGEMENT'S DISCUSSION  AND  ANALYSIS  OR  RESULTS  OF  OPERATIONS

IN  ADDITION  TO HISTORICAL INFORMATION, MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN  OF  OPERATIONS  MAY INCLUDE CERTAIN FORWARD-LOOKING STATEMENTS, INCLUDING,
BUT NOT LIMITED TO, THOSE RELATED TO THE GROWTH AND STRATEGIES, FUTURE OPERATING
RESULTS  AND FINANCIAL POSITION AS WELL AS ECONOMIC AND MARKET EVENTS AND TRENDS
OF  THE  COMPANY.  ALL FORWARD-LOOKING STATEMENTS MADE BY THE COMPANY, INCLUDING
SUCH STATEMENTS HEREIN, INCLUDE MATERIAL RISKS AND UNCERTAINTIES AND ARE SUBJECT
TO  CHANGE  BASED ON FACTORS BEYOND THE CONTROL OF THE COMPANY. ACCORDINGLY, THE
COMPANY'S  ACTUAL  RESULTS  AND  FINANCIAL POSITION COULD DIFFER MATERIALLY FROM
THOSE  EXPRESSED  OR  IMPLIED  IN  ANY  FORWARD-LOOKING STATEMENT AS A RESULT OF
VARIOUS FACTORS, INCLUDING WITHOUT LIMITATION FACTORS DESCRIBED IN THE COMPANY'S
PREVIOUS  FILINGS  WITH  THE  SECURITIES AND EXCHANGE COMMISSION REGARDING RISKS
AFFECTING  THE  COMPANY'S  FINANCIAL  CONDITION  AND  RESULTS  OF  OPERATIONS.

     The  following discussion of the Company's consolidated financial condition
and  results  of  operations  should  be  read  in connection with the Company's
condensed  consolidated   financial  statements  and   notes  thereto  appearing
elsewhere herein. Factors that could cause or contribute to differences from the
condensed  consolidated  financial  statements  include, but are not limited to,
risks  and uncertainties related to the need for additional funds, the growth of
its  operations  and  the  ability  of  the  Company  to  operate  profitably.

Significant  Accounting  Estimates  and  Policies
-------------------------------------------------

     The  discussion  and  analysis  of  our  financial condition and results of
operations  is  based upon our consolidated financial statements which have been
prepared  in  accordance  with  accounting  principles generally accepted in the
United  States.  The  preparation  of  these financial statements requires us to
make  estimates  and  judgments  that  affect  the  reported  amounts of assets,
liabilities,  revenue  and expenses, and related disclosure of contingent assets
and liabilities.   On an on-going basis, we evaluate our estimates including the
allowance  for  doubtful  accounts,   the  saleability  and   recoverability  of
inventory,  income taxes and contingencies.  We base our estimates on historical
experience  and  on  various  other assumptions that we believe to be reasonable
under  the  circumstances,  the  results  of  which  form  our  basis for making
judgments  about  the  carrying  values  of  assets and liabilities that are not
readily  apparent  from  other  sources.  Actual  results  may differ from these
estimates  under  different  assumptions  or  conditions.

     We  must  make  estimates of the collectability of accounts receivable.  We
analyze  historical  write-offs,  changes  in  our  internal credit policies and
customer  concentrations  when  evaluating  the  adequacy  of  our allowance for
doubtful  accounts.  Differences may result in the amount and timing of expenses
for  any  period  if  we  make  different judgments or use difference estimates.

     Property  and equipment are evaluated for impairment whenever indicators of
impairment  exist.  Accounting standards require that if an impairment indicator
is  present, the Company must assess whether the carrying amount of the asset is
unrecoverable  by estimating the sum of the future cash flows expected to result
form  the  asset,  undiscounted  and  without interest charges.  If the carrying
amount  is  less  than  the  recoverable  amount,  an  impairment charge must be
recognized,  based  on  the  fair  value  of  the asset.  Management assumed the
Company  was  a going concern for purposes of evaluating the possible impairment
of  its property and equipment.  Should the Company not be able to continue as a
going concern, there may be significant impairment in the value of the Company's
property  and  equipment.

     Goodwill  is  reviewed at least annually for impairment, or more frequently
if indicators of impairment exist Goodwill is tested by comparing net book value
of  the  reporting  entity  to fair  value.  Management's assumptions about fair
values  require  significant  judgment  because broad economic factors, industry
factors  and  technology considerations can result in variable and volatile fair
values.

     As  part of the process of preparing our consolidated financial statements,
we  are required to estimate our income taxes.  This process involves estimating
our current tax exposure together with assessing temporary differences resulting

                                       12
<PAGE>

from  differing  treatment  of  items  for  tax  and accounting purposes.  These
differences  result in deferred tax assets and liabilities.  We must then assess
the  likelihood  that  our  deferred  tax  assets  will be recovered from future
taxable  income,  and,  to the extent we believe that recovery is not likely, we
must  establish  a  valuation  allowance.  To  the  extent  that  we establish a
valuation  allowance  or  increase this allowance in a period, we must include a
tax provision or reduce our tax benefit in the statements of operations.  We use
our  judgment  to  determine our provision or benefit for income taxes, deferred
tax  assets and liabilities and any valuation allowance recorded against our net
deferred  tax  assets.  We  believe,  based  on  a  number  of factors including
historical  operating  losses, that we will not realize the future benefits of a
significant  portion  of  our  net  deferred  tax assets and we have accordingly
provided  a  full valuation allowance against our deferred tax assets.  However,
various  factors  may  cause  those  assumptions  to  change  in  the near term.

     We  cannot  predict  what  future laws and regulations might be passed that
could have a material effect on our results of operations.  We assess the impact
of significant changes in laws and regulations on a regular basis and update the
assumptions  and estimates used to prepare our financial statements when we deem
it  necessary.

     We  have  determined  the  significant principles by considering accounting
policies  that  involve the most complex or subjective decisions or assessments.
Our  most   significant  accounting   policies  are  those  related  to  revenue
recognition  and  accounting  for  stock-based  compensation.

     Revenue  Recognition.  Our  revenue  recognition  policies are based on the
requirements  of  SEC  Staff Accounting Bulletin No. 101, Revenue Recognition in
Financial  Statements.

     Revenue  from  sales  of telecommunication services is generally recognized
during  the  period when the services are rendered.  Prepaid services which have
not  yet  been  rendered are reflected in deferred income until such time as the
services  are  rendered.

     Accounting  for  Stock-Based  Compensation.  We  have  elected to apply the
disclosure-only  provisions   of  SFAS  No.  123,  Accounting  for   Stock-Based
Compensation.  In  accordance  with  the  provisions  of   SFAS  123,  we  apply
Accounting  Principles  Board  Opinion  No.  25,  Accounting for Stock Issued to
Employees,  and  will use related interpretations in accounting for stock option
plans.  We  account  for  stock  issued  to non-employees in accordance with the
provisions of SFAS 123 and the Emerging Issues Task Force consensus in Issue No.
96-18, Accounting for Equity Instruments That are Issued to Other Than Employees
for  Acquiring  or  in  Conjunction with Selling, Goods or Services.  Generally,
under  APB  25, if the option exercise price for a fixed award to an employee is
equal  to  the  fair  value  of the common stock at the date of the grant of the
stock  option,  no  compensation  expense  is recorded.  Under SFAS 123 and EITF
96-18, the amount of compensation expense that is recorded is based on an option
pricing  model  which  incorporates  such  factors as the expected volatility of
future movements in the price of the underlying stock, risk-free interest rates,
the  term  of  the  options and any dividends expected to be paid.  As a result,
under  SFAS  123  and  EITF 96-18, we would generally expect to record a greater
amount  of  compensation  expense  than  under  APB  25.

     Segment  Reporting.  We  have  adopted  SFAS  No.  131,  Disclosures  About
Segments  of an Enterprise and Related Information.  SFAS 131 requires companies
to  disclose  certain  information  about  reportable  segments.  Based  on  the
criteria  within  SFAS  131,  we have determined that we currently have only one
reportable  segment,  telecommunications  systems  and  related  services.

     Going  Concern.  These financial statements have been prepared assuming the
Company  is  a  going concern.  As of December 31, 2003 the Company has negative
working  capital  of  $(9,896,000)  and a deficit net worth of $8,900,000.  This
gives  rise  to substantial  doubts about the Company's ability to continue as a
going  concern.  The  financial  statements do not reflect any adjustments which
might  be  required  should  the  Company  discontinue  as  a  going  concern.


COMPARISON  OF  THE  THREE  MONTHS  ENDED  DECEMBER  31,  2003  AND  2002

     We  incurred  a  $(797,000)  net  loss  for the three months ended December
31,  2003  as  compared  to  a  net  loss  of $(3,798,000) during the comparable
period  in  2002.    A  comparison  of   revenues  and   expenses  for  the  two
periods  is  as  follows:

                                       13
<PAGE>

REVENUES

     Sales  for  the  three  months  ended  December  31, 2003, increased 59% to
$1,472,000  from  $927,000  for  the  quarter  ended  December  31,  2002.  This
increase  in  revenues  is attributable to primarily to the inclusion in 2003 of
three months of Teleconnect revenues as compared to one month in 2002, offset in
part  by  the  sale  of  the  post  paid  business  effective  November 1, 2003.

COST  OF  GOODS  SOLD

     Cost  of  goods  sold  increased 135% to $1,571,000 during the three months
ended  December  31,  2003  from  $667,000  during the same period in 2002. This
increase  was  due  primarily  to  a  combination of aggressive pricing policies
combined  with  unexpectedly  high  line  costs.    The  high  line  costs  were
attributable  to the Company's inability to access cheaper carriers who required
prepayment  for their services.  The aggressive pricing polices were implemented
to  raise  cash  and  increase  market  share.

SELLING,  GENERAL  AND  ADMINISTRATIVE  EXPENSES

     Selling,  general  and  administrative  expenses  decreased 19% to $592,000
during  the  three  months  ended December 31,  2003 as compared to $733,000 for
the  comparable  period  in  2002. This decrease is due to cost cutting measures
implemented  by  management.

DEPRECIATION

     Depreciation  expense  increased  52%  to  $79,000  during the three months
ended December 31,2003 as compared to $52,000 for the comparable period in 2002.
This  is  due  primarily  to the acquisition of additional equipment through the
Company's  acquisition  of  Teleconnect  in  December  2002.

BAD  DEBT  EXPENSE

     The Company had no bad debts expense during the three months ended December
31,  2003  as  compared  to  $13,000 during the comparable period in 2002.  This
was  due  to  improved  credit  extension  and  collection  procedures.

IMPAIRMENT  ON  GOODWILL

     During  the  three months ended December 31, 2002, the Company recognized a
$3,254,000  impairment  on  the  goodwill  it  recorded  in  connection with the
acquisition of Teleconnect.  Goodwill was fully impaired for financial reporting
purposes  as of September 30, 2003, therefore the Company had no impairment loss
during  the  three  months  ended  December  31,  2003.

INTEREST  EXPENSE

     The Company incurred interest expenses of $27,000 during the quarter  ended
December  31,  2003.  No  interest  expense  was  incurred during the comparable
period  in 2002.  This interest expense is associated primarily with Teleconnect
debts.

LIQUIDITY  AND  CAPITAL  RESOURCES

     At  December  31,  2003,  the  Company  had  negative  working  capital  of
approximately $(9,896,000), compared to negative working capital of $(7,664,000)
at  December  31,  2002.

     The  ability  of the Company to satisfy its obligations will depend in part
upon  its  ability  to  raise funds through the sale of additional shares of its
Common  Stock,  increase  borrowings,  and  in  part upon its ability to reach a
profitable  level  of  operations  of  which  there  can  be  no  assurances.

                                       14
<PAGE>

     The  Company's capital  resources  have  been provided primarily by capital
contributions  from stockholders, stockholder loans, the exchange of outstanding
debt  into  Common  Stock  of the Company, and services rendered in exchange for
Common  Stock.

     The Company intends to sell its Common Stock and/or borrow additional funds
from  investors  to  pay  debts  and  for working capital.  However, there is no
assurance  that  such  capital  will  be  raised,  and the Company may seek bank
financing  and  other sources of financing to complete the payment of additional
debts  of  Teleconnect.

     Effective  November  1,  2003,  the  Company  sold  its  post paid business
accounts to a third party.  This sale was not recognized for financial reporting
purposes  as  the  sale price is not determinable at the current time.  Terms of
the sale call for the purchase price to be 550,000 euro subject to the following
adjustment,  if revenues generated from this business are less than 137,000 euro
for the month of April 2004, the sales price will be reduced to four times April
2004  revenues,  likewise  if  revenues  for April 2004 exceed 137,000 euro, the
purchase  price  will  be  adjusted  upwards  to  four  times April revenues. On
November  20,  2003,  the  Company  received a 400,000 euro payment towards this
sale,  the  proceeds  of which went directly to one of the Company's carriers in
partial  payment  of  past  due  charges.

     For  financial  reporting  purposes, the Company did not recognize the sale
during  the  period  ended December 31, 2003 but recorded deferred income in the
amount  of  505,000  euro representing the estimated sales price of 550,000 euro
less  45,000  euro  in  related costs. The sale will be recognized for financial
reporting  purposes  at  such  time  as  the  sales  price  is  determinable.

     On November 28, 2003 the Company entered into an agreement with an investor
whereby  the  investor  agreed to acquire sufficient shares to give the investor
60%  of  the  issued  and  outstanding  shares  of the Company's common stock at
closing  in  consideration  for  a  purchase  price  of  2,900,000  euros.  This
transaction  had  not  been  finalized  as  of  the  date  of  this  report.

CONTRACTUAL  OBLIGATIONS  AND  COMMERCIAL  COMMITMENTS

     The  following table is a recap of the Company's contractual obligations as
of  December  31,  2003.

<TABLE>
<CAPTION>
  Contractual Obligations             Payments Due by Period
  -----------------------             ----------------------
                                                  Less  Than     One  to
                                      Total       One  Year    Three  Years
                                      -----       ----------   ------------
<S>                               <C>           <C>            <C>
     Long-term  Debt              $ 1,137,000   $    846,000   $    291,000

     Operating  Losses                472,000        232,000        240,000

     Service  Agreements              988,000        290,000        698,000
                                  -----------   ------------   ------------

     Total Contractual Cash
     Obligations                  $ 2,597,000   $  1,368,000   $  1,229,000
                                  ===========   ============   ============
</TABLE>

ITEM  3.  CONTROLS  AND  PROCEDURES

The  Company's  Chief  Executive  Officer  and Chief Financial Officer/Principal
Accounting  Officer  (collectively, the Certifying Officers) are responsible for
establishing and maintaining disclosure controls and procedures for the Company.
Such  officers have concluded (based upon their evaluation of these controls and
procedures  as  of  a date within 90 days of the filing of this report) that the
Company's  disclosure  controls  and  procedures  are  effective  to ensure that
information  required  to  be  disclosed  by  the  Company  in  this  report  is
accumulated  and  communicated  to  the   Company's  management,  including  its
principal executive officers as appropriate, to allow timely decisions regarding
required  disclosure.

                                       15
<PAGE>

     The  Certifying Officers also have indicated that there were no significant
changes  in  the  Company's  internal  controls  or  other  factors  that  could
significantly  affect  such controls subsequent to the date of their evaluation,
and there were no corrective actions with regard to significant deficiencies and
material  weaknesses.

                                    PART II

                                OTHER INFORMATION

ITEM  1.  LEGAL  PROCEEDINGS

     In the normal course of its operations, the Company has, from time to time,
been named in legal actions seeking monetary damages. While the outcome of these
matters  cannot  be  estimated with certainty, management does not expect, based
upon  consultation  with legal counsel, that they will have a material effect on
the  Company's  business or financial condition or results of operations, except
that  as  of  December  31,  2003,  the  Company  has  accrued  $118,000 for the
settlement  of  pending  litigation.

ITEM  2.  CHANGES  IN  SECURITIES

     During  the  three  months  ended December 31, 2003, the Company effected a
one-for-two  (1-for-2)  reverse stock split of its outstanding common stock. The
trading  symbol  for  the  common  stock of the Company was changed from ITSN to
ITST.

     During  December  2003,  the  Company  issued  a  total of 1,506,757 shares
(post-split)  of  the  restricted  common  stock  to  59  former shareholders of
Teleconnect  Comunicaciones, S.A. which the Company acquired in November 2002 in
order  to resolve and settle disputes regarding the terms of the acquisition and
to  convert  debt  of  1,300,000  Euros  held  by   certain  former  Teleconnect
shareholders  into  common  stock  of the Company (1,000,001 shares) in reliance
upon  Regulation  S  under  the  Securities  Act  of  1933,  as  amended.

     During  December  2003, the Company issued 1,150,000 shares (post-split) of
its  restricted  common stock to Henricus Matheus van Dunn for $.10 per share in
reliance  upon  Regulation  S  under  the  Securities  Act  of 1933, as amended.

     During  December 2003, the Company issued 20,000 shares (post-split) of its
restricted  common  stock  to  Charles  A.  Moskowitz for consulting services in
reliance  upon  Section  4(2)  under  the  Securities  Act  of 1933, as amended.

ITEM  3.  DEFAULTS  UPON  SENIOR  SECURITIES

     None

ITEM  4.  SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SHAREHOLDERS

     No  matter  was  submitted to a vote of the security holders of the Company
during  the  three  month  period  ended  December  31,  2003.

ITEM  5.  OTHER  INFORMATION

     None

ITEM  6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

     (A)  Reports  on  Form  8-K:

                                       16
<PAGE>

     The  Company filed a Form 8-K current report and Form 8-K/A report (Item 1)
regarding  a Purchase Agreement dated November 28, 2003, between the Company and
Mr.  Henrick  van Elst to sell restricted common stock of the Company to Mr. van
Elst  that  would  then  represent  approximately  60%  of  the total issued and
outstanding common stock of the Company for a purchase price of 2,900,000 Euros.
This  transaction would cause a change in control of the Company.  However, this
transaction  has been delayed and has not closed as of the date of the filing of
this  Form  10-QSB.

     (B)  Exhibits

          99.1  Certification  of  Gustavo  Gomez

          9.2  Certification  of  Herman  de  Haas

          99.3  Certification  of  Gustavo  Gomez  and  Herman  de  Haas































                                       17
<PAGE>

                                   Signatures

     In  accordance  with  the  requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

February  19,  2004

ITS  Networks  Inc.

By:  /s/  Gustavo  Gomez                 By:  /s/  Herman  de  Haas
     -----------------------------            -------------------------------
     Gustavo Gomez, Director,                 Herman  de  Haas,
     Chief Executive Officer,                 Director, Executive Vice
     President, Chief Financial               President and Chief Operating
     Officer and Treasurer                    Officer





























                                       18
<PAGE>

                                INDEX TO EXHIBITS

Exhibit  No.          Description

99.1               Certification  of  Gustavo  Gomez

99.2               Certification  of  Herman  de  Haas

99.3               Certification  of  Gustavo  Gomez  and  Herman  de  Haas




























                                       19