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 March 31, 2004

             [ ] 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 [X]  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 latest practicable date: 32,653,280 shares

     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
     March  31,  2004  (Unaudited)                                             3

     Condensed  Consolidated  Statements  of  Operations
     for  the  Three and Six Months Ended  March  31,  2004
     and  2003  (Unaudited)                                                    4

     Condensed  Consolidated  Statements  of  Cash  Flows
     for  the Six  Months Ended  March  31,  2004  and
     2003  (Unaudited)                                                         5

     Notes  to  Condensed  Consolidated  Financial  Statements                 7

Item  2.  Management's Discussion  and  Analysis  or Plan of Operations       11

Item  3.  Controls  and  Procedures                                           18

PART  II.  OTHER  INFORMATION

Item  1.  Legal  Proceedings                                                  18

Item  2.  Changes  in  Securities                                             18

Item  3.  Defaults  upon  Senior  Securities                                  18

Item  4.  Submission  of  Matters  to  a  Vote  of  Security  Holders         19

Item  5.  Other  Information                                                  19

Item  6.  Exhibits  and  Reports  on  Form  8-K                               19

Signatures                                                                    19


                                        2
<PAGE>

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

                                ITS NETWORKS INC.
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                 MARCH 31, 2004
                                  (Unaudited)

                                     ASSETS
<TABLE>
<CAPTION>
CURRENT  ASSETS:
<S>                                                               <C>
  Cash  and  cash  equivalents                                    $     157,000
  Accounts  receivable  -  trade,  net  of  allowance
    for  doubtful  accounts  of  $1,263,000                             349,000
  Accounts  receivable  -  other                                        227,000
  Inventory                                                              69,000
  Prepaid  expenses                                                       3,000
                                                                  -------------
      Total  current  assets                                            805,000
                                                                  -------------

PROPERTY  AND  EQUIPMENT,  NET                                          983,000
                                                                  -------------

OTHER  ASSETS:
  Vendor  deposits                                                      240,000
                                                                  -------------

                                                                  $   2,028,000
                                                                  =============

                    LIABILITIES AND STOCKHOLDERS' (DEFICIT)

CURRENT  LIABILITIES:
  Accounts  payable  -  trade                                         3,267,000
  Accrued  liabilities                                                  732,000
  Current  portion  of  obligation  under  capital  lease                54,000
  Notes  payable  to  bank                                              244,000
  Current  portion  of  payment  obligation  to
    taxing  authority                                                    86,000
  Loans  from  related  parties                                       3,068,000
  Deferred  income                                                    2,380,000
                                                                  -------------

      Total  current  liabilities                                     9,831,000
                                                                  -------------

LONG  TERM  DEBT
  Payment  obligation  to  tax  agency,  net  of current
    portion shown above                                                 337,000
                                                                  -------------

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,  32,478,280  shares  outstanding                         33,000
  Additional  paid-in  capital                                        9,562,000
  Less:  Prepaid  syndication  fees                                    (418,000)
  Accumulated  (deficit)                                            (15,344,000)
  Effect  of  cumulative  translation  adjustment                    (1,973,000)
                                                                  -------------
      Total  stockholders'  (deficit)                                (8,140,000)
                                                                  -------------

                                                                  $   2,028,000
                                                                  =============
</TABLE>

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

                                        3
<PAGE>

                                ITS NETWORKS INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                     For three months ended     For six months ended
                                                             March 31,                 March 31,
                                                   ------------------------   -------------------------
                                                        2004         2003          2004          2003
                                                   -----------  -----------   ------------  ------------
<S>                                                <C>          <C>           <C>           <C>
SALES                                              $ 1,643,000  $ 1,885,000   $  3,325,000  $  2,812,000

COST OF GOODS SOLD (exclusive of Depreciation
  shown  separately  below)                          1,267,000    1,210,000      2,838,000     1,877,000
                                                   -----------  -----------   ------------  ------------

GROSS  PROFIT                                          376,000      675,000        487,000       935,000
                                                   -----------  -----------   ------------  ------------

OPERATING  EXPENSES:
  Selling,  general and administrative expenses        752,000    1,302,000      1,344,000     2,035,000
  Depreciation                                         119,000      113,000        198,000       165,000
  Bad  debt  expense                                         -        5,000              -        18,000
  Impairment  on  goodwill                                   -            -              -     3,254,000
                                                   -----------  -----------   ------------  ------------

      Total  operating  expenses                       871,000    1,420,000      1,542,000     5,472,000
                                                   -----------  -----------   ------------  ------------

(LOSS)  FROM  OPERATIONS                              (495,000)    (745,000)    (1,055,000)   (4,537,000)
                                                   -----------  -----------   ------------  ------------

OTHER  INCOME  (EXPENSES):
  Interest  expense                                   (168,000)     (33,000)      (195,000)      (39,000)
                                                   -----------  -----------   ------------  ------------

                                                      (168,000)     (33,000)      (195,000)      (39,000)
                                                   -----------  -----------   ------------  ------------

(LOSS)  BEFORE  INCOME  TAXES                         (663,000)    (778,000)    (1,250,000)   (4,576,000)

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

NET  (LOSS)                                        $  (663,000) $  (778,000)  $ (1,250,000) $ (4,576,000)
                                                   ===========  ===========   ============  ============

BASIC  EARNINGS  (LOSS)  PER  SHARE                $     (0.02) $     (0.05)  $      (0.05) $      (0.30)
                                                   ===========  ===========   ============  ============

AVERAGE  COMMON  AND  COMMON
  EQUIVALENT  SHARES  OUTSTANDING                   28,945,104   16,868,740     25,690,871    15,414,612
                                                   ===========  ===========   ============  ============

THE  COMPONENTS  OF  COMPREHENSIVE  LOSS:
  Net  (loss)                                      $  (663,000) $  (778,000)  $ (1,250,000) $ (4,576,000)
  Foreign  currency  translation  adjustment           308,000     (335,000)  $   (402,000)   (1,032,000)
                                                   -----------  -----------   ------------  ------------

COMPREHENSIVE  (LOSS)                              $  (355,000) $(1,113,000)  $ (1,652,000) $ (5,608,000)
                                                   ===========  ===========   ============  ============
</TABLE>



       See accompanying summary of accounting policies and notes to financial
                                   statements






                                        4

<PAGE>

                                ITS NETWORKS INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                   Page 1 of 2

<TABLE>
<CAPTION>
                                                         For six months ended
                                                              March  31,
                                                   -----------------------------
                                                         2004           2003
                                                   --------------   ------------

CASH  FLOWS  FROM  OPERATING  ACTIVITIES:
<S>                                                <C>              <C>
  Net  (loss)                                      $  (1,250,000)   $(4,576,000)
  Adjustments  to  reconcile  net  (loss)  to
    net  cash  used  in  operating  activities:
      Depreciation                                       198,000        165,000
      Bad  debt  expense                                       -         18,000
      Loss  on  impairment  on  goodwill                       -      3,254,000
    Decrease  (increase)  in  operating  assets:
      Accounts  receivable  -  trade                    (150,000)      (988,000)
      Accounts  receivable  -  other                      (8,000)             -
      Inventory                                          (10,000)      (105,000)
      Prepaid  expenses                                    7,000        (32,000)
      Vendor  and  other  deposits                       (31,000)      (312,000)
    Increase (decrease) in operating liabilities:
      Accounts payable and accrued  liabilities         (876,000)     4,706,000
      Deferred  income  and deposits received            730,000      1,440,000
                                                   -------------    -----------
        Net  cash  provided  by  (used  in)
          operating  activities                       (1,390,000)     3,570,000
                                                   -------------    -----------

CASH  FLOWS  FROM  INVESTING  ACTIVITIES:
  Purchased  goodwill                                          -     (4,339,000)
  Purchase  of  property  and  equipment                 (10,000)    (1,381,000)
                                                   -------------    -----------

        Net  cash  (used  in)
          investing  activities                          (10,000)    (5,720,000)
                                                   -------------    -----------

CASH  FLOWS  FROM  FINANCING  ACTIVITIES:
  Loan  proceeds  from  related  parties               1,731,000      3,554,000
  Loan  proceeds  from  bank                              11,000              -
  Payment  on  tax  agency  obligation                   (57,000)             -
  Proceeds  from  sale  of  common  stock                115,000              -
                                                   -------------    -----------

        Net  cash  provided  by
          financing  activities                        1,800,000      3,554,000
                                                   -------------    -----------

EFFECT  OF EXCHANGE RATE                                (402,000)    (1,032,000)
                                                   -------------    -----------

NET  INCREASE  (DECREASE)  IN  CASH  AND
  CASH  EQUIVALENTS                                       (2,000)       372,000

CASH  AND  CASH  EQUIVALENTS,
  BEGINNING  OF  YEAR                                    159,000         48,000
                                                   -------------    -----------

CASH  AND  CASH  EQUIVALENTS,
  END  OF  YEAR                                    $     157,000    $   420,000
                                                   =============    ===========
</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)
                                   Page 2 of 2

<TABLE>
<CAPTION>
                                                         For six months ended
                                                              March  31,
                                                   -----------------------------
                                                         2004           2003
                                                   --------------   ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash  paid  during  the  year  for:
<S>                                                <C>              <C>
  Interest                                         $      12,000    $         -
                                                   =============    ===========

SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
  Long-term  debt  converted  to  common stock     $     893,000    $ 3,848,937
                                                   =============    ===========
</TABLE>












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













                                        6
<PAGE>

                       ITS NETWORKS INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004
                                  (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  six  months  ended  March  31, 2004, 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.


                                        7
<PAGE>

     As shown  in  the  accompanying  financial statements, the Company incurred
losses  of $(1,250,000) and $(4,576,000) for the six months ended March 31, 2004
and 2003, respectively. In addition, the Company has incurred substantial losses
since  its  inception.  As of March 31, 2004, current liabilities exceed current
assets  by  $9,026,000  and total liabilities exceed total assets by $8,140,000.
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  March  31,  2004.

     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.


                                        8
<PAGE>

     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.

     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  March  31,  2004  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 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,  2003,  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  2023.

     The  Company has a deferred tax asset principally due to net operating loss
carryforwards.  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.


                                        9
<PAGE>

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 March 31, 2004, the Company has accrued 103,000
Euros  for  the  settlement  of  pending  litigation.

6.  LOANS  PAYABLE

     At  March  31,  2004,  the  Company has a bank and loans payable to related
parties  totaling  $244,000  and  $3,068,000, respectively,  all of which is due
within  the  next  twelve months. Interest on the bank loan is computed and paid
monthly  at  an  interest  rate  of 4.25%. Interest computed on the loans to the
related  parties  range  from  0%  to  24%.

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  March  31,  2004 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.



                                       10
<PAGE>

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.

     Due  to unforeseen circumstances, Mr. Van Elst has not been able to date to
inject any portion of the funds into the Company. This situation has created the
need for the Bridge Loans described as well as has created additional costs, and
debts  the  Company. The Company will grant Mr. Van Elst an extension of time to
inject  the funds subject to meeting some prerequisite conditions, amongst which
is  included  providing  the  Company  with  a  proof  of  funds.

     Although  Mr. Van Elst continues to appear committed to injecting the funds
as  soon  as  he  has  them  available, The Company reserves itself the right to
request  from  Mr.  Van Elst compensation for damages experienced as a result of
his  breach of contract. This decision will be taken in the future as a function
of the final configuration of investors bringing investment money to the Company
and  of  Mr.  Van  Elst's  actions  to  that  time.

     Management,  in  parallel, contacted  Euro Partners Company Ltd. to work on
alternative financing. As such, Management gave on Febrary 19, 2004, the mandate
to  Euro  Partners  to  produce  the  required  funds  under  similar investment
conditions  received  by  Mr.  Van  Elst. Seeing as Mr. Van Elst is in breach of
contract, should he bring funds to the Company in the future, he will be offered
other  investment  conditions  at  that  time,  consistent with the state of the
Company  at  that  moment.

     Euro  Partners  Company  Ltd. and  ITS  Networks  have  signed  a Placement
Agreement  on  May 13, 2004 whereby the former reserves itself the option on 60%
of  the total share capital of the Company in exchange for the full injection of
$5,000,000  usd.  Euro  Partners has advanced negotiations with investor parties
which are expected to come to fruition before the end of May 2004 with the first
$2,000,000  due  under  the  Agreement.


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.


                                       11
<PAGE>

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,


<PAGE>

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
from  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
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


                                       12
<PAGE>

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.



                                       13
<PAGE>

     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  March 31, 2004, the Company has negative
working  capital  of  $(9,026,000)  and a deficit net worth of $8,140,000.  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  MARCH  31,  2004  AND  2003

     We  incurred  a  $(663,000)  net  loss for the three months ended March 31,
2004  as  compared  to  a net loss of $(778,000) during the comparable period in
2003.  A  comparison of revenues and expenses for the two periods is as follows:

REVENUES

     Sales  for  the  three  months  ended  March  31,  2004  decreased 12.8% to
$1,643,000  from  $1,885,000 for the quarter ended March 31, 2003. This decrease
was  due primarily to the sale of postpaid  business in November 2003.  Postpaid
sales  for  the  three  months  ended  March  31,  2003  total  $500,979.

COST  OF  GOODS  SOLD

     Cost  of  goods  sold  increased 4.6% to $1,267,000 during the three months
ended  March  31,  2004  from  $1,210,000  during  the same period in 2003. This
increase  in  cost of goods sold is attributable to lower profit margin on cards
sold  prior  to  March 31, 2004, which were recognized in 2004 as the cards were
utilized.

SELLING,  GENERAL  AND  ADMINISTRATIVE  EXPENSES

     Selling,  general  and  administrative expenses decreased 42.2% to $752,000
during  the  three months ended March 31, 2004 as compared to $1,302,000 for the
comparable  period  in  2003.  This  decrease  is  due  to cost cutting measures
implemented  by  management.

DEPRECIATION

     Depreciation  expense  increased  5%  to  $119,000  during the three months
ended  March 31, 2004 as compared to $113,000 for the comparable period in 2003.



                                       14
<PAGE>


BAD  DEBT  EXPENSE

     The  Company  had  no bad debts expense during the three months ended March
31,  2004  as compared to $5,000 during the comparable period in 2003.  This was
due  to  improved  credit  extension  and  collection  procedures.

IMPAIRMENT  OF  GOODWILL

     During  the  three months ended December 31, 2002, the Company recognized a
$3,254,000  impairment  of  all  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  March  31,  2004.

INTEREST  EXPENSE

     The  Company incurred interest expenses of $168,000 during the three months
ended  March  31,  2004  as  compared to $33,000 during the comparable period in
2003.  This  increase  in  interest expense is due to interest and penalties for
bridge  loans obtained from related parties.

COMPARISON  OF  THE  SIX  MONTHS  ENDED  MARCH  31,  2004  AND  2003

     We incurred a $(1,250,000) net loss for the six months ended March 31, 2004
as  compared to a net loss of $(4,576,000) during the comparable period in 2003.
A  comparison  of  revenues  and  expenses  for  the  two periods is as follows:

REVENUES

     Sales for the six months ended March 31, 2004 increased 18.2% to $3,325,000
from  $2,812,000  for the quarter ended March 31, 2003. During the quarter ended
December  31,  2003,  the  Company  offered prepaid cards at a discount to raise
additional  capital,  this more than offset the sale of the postpaid business in
November  2003.  Postpaid  sales for the six months ended March 31, 2003 totaled
$939,069.

COST  OF  GOODS  SOLD

     Cost  of  goods  sold  increased  51.2% to $2,838,000 during the six months
ended  March  31,  2004  from  $1,877,000  during  the same period in 2003. This
increase  in  cost of goods sold is attributable to lower profit margin on cards
sold  prior  to  March 31, 2004, which were recognized in 2004 as the cards were
utilized.

SELLING,  GENERAL  AND  ADMINISTRATIVE  EXPENSES

     Selling,  general  and  administrative expenses decreased 34% to $1,344,000
during  the  six  months  ended March 31, 2004 as compared to $2,035,000 for the
comparable  period  in  2003.  This  decrease  is  due  to cost cutting measures
implemented  by  management.

DEPRECIATION

     Depreciation  expense  increased  20%  to  $198,000  during  the six months
ended  March 31, 2004 as compared to $165,000 for the comparable period in 2003.


                                       15
<PAGE>

BAD  DEBT  EXPENSE

     The  Company  had  no  bad  debts expense during the six months ended March
31,  2004  as  compared  to  $18,000 during the comparable period in 2003.  This
was due  to  improved  credit  extension  and  collection  procedures.

IMPAIRMENT  OF  GOODWILL

     During  the  six  months  ended  March  31,  2003, the Company recognized a
$3,254,000  impairment  of  all  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  six  months  ended  March  31,  2004.

INTEREST  EXPENSE

     The  Company  incurred  interest expenses of $195,000 during the six months
ended  March  31,  2004  as  compared to $39,000 during the comparable period in
2003.  This  increase  in  interest expense is due to interest and penalties for
bridge  loans  obtained  from  related  parties.

LIQUIDITY  AND  CAPITAL  RESOURCES

     At   March  31,  2004,  the  Company   had  negative   working  capital  of
$(9,026,000),  compared to negative working capital of $(6,165,000) at March 31,
2003.

     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.

     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.


                                       16
<PAGE>

     Effective  November  1,  2003,  the  Company  sold  its  post paid business
accounts  to  a  third  party.  This  sale has not been 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  March  31,  2004 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. As such Euro
Partners  Company Ltd. and ITS Networks have signed a Placement Agreement on May
13, 2004 whereby the former reserves itself the option on 60% of the total share
capital  of  the  Company in exchange for the full injection of $5,000,000 used.
Euro Partners has advanced negotiations with investor parties which are expected
to  come  to  fruition  before  the  end  of  May 2004 for the first $2,000,000.

CONTRACTUAL  OBLIGATIONS  AND  COMMERCIAL  COMMITMENTS

     The  following table is a recap of the Company's contractual obligations as
of  September  30,  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  Leases                  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>


                                       17
<PAGE>

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.

     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 March 31, 2004, the Company has accrued $103,000 for the settlement
of  pending  litigation.

ITEM  2.  CHANGES  IN  SECURITIES

     During February 2004, two stockholders converted loans they had made to the
Company  for  approximately  $893,000  into  8,922,000  shares of its restricted
Common  Stock in reliance upon Regulation S under the Securities Act of 1933, as
amended,  specifically  to  Geeris Holding Nederland B.U. (4,461,000 shares) and
Franz  Broekhof  (4,461,000  shares).

ITEM  3.  DEFAULTS  UPON  SENIOR  SECURITIES

     None


                                       18
<PAGE>


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  March  31,  2004.

ITEM  5.  OTHER  INFORMATION

     None

ITEM  6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

     (A)  Reports  on  Form  8-K:

     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































                                       19
<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.

May  20,  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





























                                       20
<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




























                                       21