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, 2002

              [] 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
         (State or other jurisdiction of incorporation or organization)

                                   52-2137517
                      (I.R.S. Employer Identification No.)

                 C/Villaneuva 16, 5th Floor, 28000 Madrid Spain
                    (Address of principal executive offices)

                               011-34-952-772-057
                          (Issuer's telephone number)

                                 Not Applicable
   (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: 27,830,780 shares at February
18,  2003

     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,  2002  (unaudited)                                          3

     Condensed  Consolidated  Statements  of  Operations
     for  the  three months ended  December  31,  2002
     and  2001  (unaudited)                                                    4

     Condensed  Consolidated  Statements  of  Cash  Flows
     for  the three months ended  December  31,  2002  and
     2001  (unaudited)                                                         5

     Notes  to  Condensed  Consolidated  Financial  Statements                 6

Item  2.  Management's  Discussion  and  Analysis  or Plan of Operations      10

Item  3.  Controls  and  Procedures                                           12

PART  II.  OTHER  INFORMATION

Item  1.  Legal  Proceedings                                                  12

Item  2.  Changes  in  Securities                                             13

Item  3.  Defaults  on  Senior  Securities                                    14

Item  4.  Submission  of  Matters  to  a  Vote  of  Security  Holders         14

Item  5.  Other  Information                                                  14

Item  6.  Exhibits  and  Reports  on  Form  8-K                               14

Signatures                                                                    15


                                        2
<PAGE>

                          PART I FINANCIAL INFORMATION

ITEM  1.  FINANCIAL  STATEMENTS

                       ITS NETWORKS INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                  (Unaudited)

<TABLE>
<CAPTION>
                  ASSETS                                     December  31,  2002
                                                             -------------------
CURRENT  ASSETS
<S>                                                            <C>
     Cash  and  cash  equivalents                              $        233,000
     Accounts  receivable, net of allowance for
       doubtful accounts of  $1,082,000                               1,286,000
     Inventory                                                          120,000
     Prepaid  expense                                                    35,000
                                                               ----------------

TOTAL  CURRENT  ASSETS                                                1,674,000
                                                               ----------------

PROPERTY  AND  EQUIPMENT,  NET                                        1,444,000
                                                               ----------------

OTHER  ASSETS:
     Vendor  and  other  deposits                                       379,000
     Goodwill, net of impairment
       reserve of $3,254,000                                          1,085,000
                                                               ----------------

                                                                      1,464,000
                                                               ----------------

TOTAL  ASSETS                                                  $      4,582,000
                                                               ================

      LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT  LIABILITIES
     Accounts  payable  and  accrued  expenses                 $      4,514,000
     Other  current  liabilities                                        933,000
     Loans  from  related  parties                                    2,708,000
     Deferred  income                                                 1,182,000
                                                               ----------------

TOTAL  CURRENT  LIABILITIES                                           9,337,000
                                                               ----------------

LONG-TERM  DEBT:
    Loans                                                               944,000
                                                               ----------------

STOCKHOLDERS'  DEFICIT
     Preferred  stock,  par  value  $.001;
     5,000,000  shares  authorized, no  shares
     outstanding                                                              -

     Common  stock,  par  value  of  $0.001;
       50,000,000  shares  authorized;
       27,830,780  shares  outstanding                                   28,000
     Additional  paid  in  capital                                    4,872,000
     Less:  Prepaid  syndication  fees                                 (418,000)
     Less:  Stock  held  in  escrow                                  (1,379,000)
     Accumulated  (deficit)                                          (7,861,000)
     Effect  of  cumulative  translation  adjustment                   (941,000)
                                                               ----------------

TOTAL  STOCKHOLDERS'  DEFICIT                                        (5,699,000)
                                                               ----------------

TOTAL  LIABILITIES  AND  STOCKHOLDERS'  DEFICIT                $      4,582,000
                                                               ================
</TABLE>

  See accompanying notes to these condensed consolidated financial statements

                                        3
<PAGE>
                       ITS NETWORKS INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                             Three  months  ended  December  31,
                                            -------------------------------------
                                                   2002                  2001
                                            ----------------     ----------------
<S>                                         <C>                  <C>
SALES                                       $        927,000     $        750,000
COST  OF  GOODS  SOLD                                667,000              571,000
                                            ----------------     ----------------
GROSS  PROFIT                                        260,000              179,000
                                            ----------------     ----------------

OPERATING  EXPENSES:
     Selling,  general and administrative
       expenses                                      733,000              187,000
     Depreciation                                     52,000                5,000
     Bad  debt  expense                               13,000                9,000
                                            ----------------     ----------------

     Total  operating  expenses                      798,000              201,000
                                            ----------------     ----------------

(LOSS)  FROM  OPERATIONS                            (538,000)             (22,000)
                                            ----------------     ----------------

OTHER  INCOME  (EXPENSES):
     Interest  Expense                                (6,000)                   -
     Impairment loss on goodwill                  (3,254,000)                   -
                                            ----------------     ----------------

                                                  (3,260,000)                   -
                                            ----------------     ----------------

(LOSS)  BEFORE  INCOME  TAXES                     (3,798,000)            (22,000)
PROVISION  FOR  INCOME  TAXES                              -                   -
                                            ----------------     ----------------

NET  LOSS                                   $     (3,798,000)    $       (22,000)
                                            ================     ===============

BASIC  EARNINGS  PER  SHARE                 $          (0.15)    $             -
                                            ================     ===============

AVERAGE  COMMON  AND  COMMON
EQUIVALENT  SHARES  OUTSTANDING                   25,013,870          21,796,740
                                            ================     ===============
</TABLE>

                                        4
<PAGE>


<TABLE>
<CAPTION>
THE COMPONENTS OF COMPREHENSIVE LOSS:
<S>                                         <C>                  <C>
     Net  (loss)                            $    (3,798,000)     $       (22,000)

     Foreign currency translation adjustment       (819,000)              40,000
                                            ----------------     ----------------

COMPREHENSIVE  (LOSS)                       $    (4,617,000)     $        18,000
                                            ===============      ===============
</TABLE>

              See accompanying notes to these financial statements





























                                        5
<PAGE>
                       ITS NETWORKS INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                             Three  months  ended  December  31,
                                            -------------------------------------
                                                   2002                  2001
                                            ----------------     ----------------
Cash  flows  from  operating  activities:
<S>                                         <C>                  <C>
Net  Loss                                   $   (3,798,000)     $       (22,000)
Adjustments  to  reconcile  net  (loss)
  to net cash used in operating  activities:
     Depreciation                                   52,000                 5,000
     Bad  debt  expense                             13,000                 9,000
     Loss  on  write  down  and  sale  of
       fixed  assets                                13,000                     -
     Impairment loss on goodwill                 3,254,000                     -

Decrease (increase) in operating assets:
     Accounts  receivable                          229,000                37,000
     Inventory                                      45,000                     -
     Prepaid  expenses                              55,000                (1,000)
     Vendor  and  other  deposits                   30,000               (28,000)
Increase (decrease) in operating
  liabilities:
     Accounts payable and accrued
       liabilities                              (1,668,000)              (78,000)
     Cash  overdraft                                     -                10,000
     Guarantees and deposits received                    -                (2,000)
                                            ----------------     ----------------

Net cash (used in) operating activities         (1,775,000)              (70,000)
                                            ----------------     ----------------

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

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

CASH  FLOWS  FROM  FINANCING  ACTIVITIES:
     Loan  proceeds                              2,642,000                43,000
     Loan  principal  payments                           -               (24,000)
                                            ----------------     ----------------

Net cash provided by financing activities        2,642,000                19,000
                                            ----------------     ----------------

EFFECT  OF  EXCHANGE  RATE                        (819,000)               40,000
                                            ----------------     ----------------


NET  INCREASE  (DECREASE)  IN  CASH
  AND  CASH  EQUIVALENTS                            31,000               (11,000)

CASH  AND  CASH  EQUIVALENTS,
  BEGINNING  OF  PERIOD                            202,000                12,000
                                            ----------------     ----------------

CASH AND CASH EQUIVALENTS, END OF PERIOD    $      233,000       $         1,000
                                            ==============       ===============
</TABLE>

                                        6
<PAGE>

<TABLE>
<CAPTION>
SUPPLEMENTAL  DISCLOSURES  OF
  CASH  FLOW  INFORMATION:
    Cash paid during the period for:
<S>                                         <C>                  <C>
      Interest                              $       (6,000)      $             -
                                            ==============       ===============
SUPPLEMENTAL  DISCLOSURE  OF  NONCASH
  TRANSACTIONS:
    Stock issued in connection with
      Teleconnect acquisition               $    1,379,000                     -
                                            ==============       ===============

    Debt  converted  to  common  stock                   -       $       720,000
                                            ==============       ===============
</TABLE>

  The accompanying notes are an integral part of these condensed consolidated
                              financial statements

























                                        7
<PAGE>
                       ITS NETWORKS INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2002
                                  (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
16,886,667 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
16,866,677  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 3,000,000 shares of the Common Stock of the Company
valued at 1,378,759 Euro and the assumption of approximately 2,200,000 Euro of
net debt.  The stock issuance is  subject  to  guarantees  made  by  Teleconnect
shareholders  that  Teleconnect  liabilities  will  not  exceed  2,200,000 Euro.
Management  anticipates  that  Teleconnect  debts  will  sufficiently exceed the
2,200,000 Euro limit so that none of this stock presently held in escrow will be
released.

     The  acquisition  of  Teleconnect resulted in the creation of $4,339,000 in
goodwill  associated  with  this acquisition. There is doubt about the Company's
ability  to  realize all of the goodwill. The Company does attribute substantial
value to the Teleconnect branding and distribution systems. Therefore management
has  elected  to  reserve  $3,254,000  of  this goodwill for financial reporting
purposes  as  of  December  31,  2002.

     Results  for  the three months ended December 31, 2002, are not necessarily
indicative  of  the  results  that may be expected for the year ending September
30,  2003.  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,  2002.

     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  financial  statements,  the  Company incurred losses of
$(3,798,000) and $(22,000)  for  the  quarters ended December 31, 2002 and 2001,
respectively.  In  addition,  the  Company has incurred substantial losses since
its  inception.  As  of  December  31,  2002, current liabilities exceed current
assets  by  $7,663,000  and total liabilities exceed total assets by $5,699,000.
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.
Furthermore,  it  anticipates that it will be able to achieve a profitable level
of  operations  since  it  has completed the consolidation of its ITS Europe and
Teleconnect  operations.

     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

                                        8
<PAGE>

equivalents.  There  are  no  cash  equivalents  at  December  31,  2002.

     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 bases 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.

     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 US dollars at
December  31,  2002  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
15  years.  For  the  year  ended September 30, 2002, the available tax loss ITS
Europe  has accumulated is $2,744,000 which may be used to offset future taxable
income.  Teleconnect,  which  was acquired in December of 2002 has available tax
losses of approximately $10,000,000 as of December 31, 2002.  The utilization of
the  loss expires in years from 2010 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  US  parent  Company has net operating loss carry forwards totaling
approximately  $197,000,  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, 2002, the Company has
accrued  $233,000 for  the  settlement  of  pending  litigation.


                                        9
<PAGE>

6.  LOANS  PAYABLE

     At  December  31,  2002,  the  Company has loans payable to related parties
totaling  $3,652,000  of  which,  $2,708,000 have no maturity dates or repayment
terms  and  are  interest free. The remaining $944,000 is due November 25, 2004.
Interest  is  to  be  computed  and  paid  monthly  at  an  interest rate of 9%.

7.  ACQUISITION  OF  TELECONNECT

     Effective  December  5, 2002, the Company acquired substantially all of the
outstanding  stock  of Teleconnect for the assumption of approximately 2,200,000
Euro  of  Teleconnect  net  debt plus the issuance of up to 3,816,910 shares of
Common  Stock  of  the Company.  In accordance with the terms of this agreement,
the  former Teleconnect shareholders made certain warranties about Teleconnect's
net  debt  level at the date of acquisition.  If Teleconnect had specified debts
in  excess  of  2,200,000 Euro on the acquisition date, the former shareholders
have  agreed  to  reduce the number of shares they are entitled to receive by an
amount  that  the  specified  debt  exceeds 2,200,000 Euro.  The shares will be
valued  at  approximately  .46  Euro per share for purposes of this reduction in
shares  to be issued.  The 2,816,910 shares of the Company's Common Stock issued
to  the  former  stockholders  of  Teleconnect  are  to  be held in escrow until
November  14,  2003  at  which  time  a  final  accounting  will  be  made.

     Management  presently  anticipates that the specified debts will exceed the
value  assigned to the 2,816,910 shares of stock held in escrow and that none of
the  stock  will  be  released.

     For  financial reporting purposes, the 2,816,910 shares of Common Stock has
been  valued  at $1,379,000   and is shown as issued with an offset in the
equity  section  to  reflect the stock held in escrow which management presently
believes  will  not  be  required  to  be  released  to  the  former Teleconnect
shareholders.

8.  SUBSEQUENT EVENTS

     On  February 17, 2003, certain debt holders agreed to convert $2,695,000 of
existing  loans at $.20 per share into 13,474,000 shares of the Company's common
stock.

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 INCLUDES 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 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.

COMPARISON  OF  THE  THREE  MONTHS  ENDED  DECEMBER  31,  2002  AND  2001

     We  incurred  a  $(3,798,000) net loss  for the three months ended December
31,  2002 as compared  to  a  net loss of $(22,000) during the comparable period
in  2001.  A comparison  of  revenues  and  expenses  for  the  two  periods  is
as  follows:

REVENUES

     Sales  for  the  three  months  ended  December  31, 2002, increased 24% to
$927,000 from $750,000 for  the  quarter  ended December 31, 2001. This increase
in  revenues  is  attributable  to Teleconnect revenues since its acquisition in
December 2002 of $426,000 offset in part by a decrease in ITS Europe revenues of
$249,000.   The  reduction  in  ITS Europe revenues was due to the reductions in
the  Company's "Intelligent Numbers" line of business, which had low margins and
required  a  high  administrative  workload.  Even  though  revenues  from  the
Company's  long-distance postpaid business continue to increase at a very modest
but  steady  rate,  revenues for Intelligent Numbers have consistently declined.

                                       10
<PAGE>

COST  OF  GOODS  SOLD

     Cost  of  goods  sold  increased  17%  to  $667,000 during the three months
ended  December  31,  2002  from  $571,000  during the same period in 2001. This
increase  was  due  primarily  to  the acquisition of Teleconnect by the Company
during  December  2002, offset in part by improved gross profit margins by ITS
Europe  from  24%  in  2001  to  35%  for  the  comparable  period  in  2002.

SELLING,  GENERAL  AND  ADMINISTRATIVE  EXPENSES

     Selling, general  and  administrative  expenses  increased 292% to $733,000
during  the  three  months  ended December 31,  2002 as compared to $187,000 for
the  comparable  period  in 2001.  This increase is due to the following factors
(a)  the addition of $261,000 in Teleconnect selling, general and administrative
expenses  incurred since its acquisition; (b) an increase in ITS Europe expenses
of  approximately  $166,000;  and  (c) approximately $103,000 of expenses at the
parent  Company  level  which  consist  primarily  of costs associated with the
acquisition  of  Teleconnect  and  the  costs  of  complying  with  regulatory
requirements.  The  principal  reasons  for the increase at the ITS Europe level
were  costs  incurred  to  move  its home office to Madrid, reinforcement of the
management  team  with additional managers from the telecom section, and the use
of  external  professional  services  in  order to develop and implement the new
business  and  financial  strategy  of  the  Company.

DEPRECIATION

     Depreciation  expense  increased  940%  to  $52,000 during the three months
ended  December 31,2002 as compared to $5,000 for the comparable period in 2001.
This is due  primarily to the acquisition of additional equipment by ITS Europe
and the Teleconnect acquisition.

BAD  DEBT  EXPENSE

     Bad  debt  expense  increased  44% to $13,000 during the three months ended
December  31,  2002  as compared to $9,000 during the comparable period in 2001.
This  increase  is  due  primarily  to  our  increased  sales.

INTEREST  EXPENSE

     The  Company incurred interest expenses of $6,000 during the quarter  ended
December  31,  2002.  No  interest  expense  was  incurred during the comparable
period  in 2001.  This interest expense is associated primarily with Teleconnect
debts.

IMPAIRMENT LOSS

     During  2002  the  Company  recognized  an  impairment  loss  of $3,254,000
associated  with  the  write  down  of  goodwill acquired with the Teleconnect
acquisition.  The Company had no impairment loss during the same period in 2001.

LIQUIDITY  AND  CAPITAL  RESOURCES

     At  December  31,  2002,  the  Company  had  negative  working  capital  of
approximately  $(7,663,000),  compared to negative working capital of $(432,000)
at  December  31,  2001.

     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 is no assurance.

     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 entered into an Equity Line of Credit Agreement dated June 18,
2002  (the  "Agreement")  with  Cornell  Capital  Partners, LP ("Cornell").  The
Agreement  provides  for  Cornell  to  commit  to purchase up to an aggregate of
$10,000,000 (U.S.) of the Common Stock of the Company, not to exceed 9.9% of the
then  total  issued  and  outstanding  shares of Common Stock of the Company, as
requested  from  time  to  time by the Company as its equity capital needs arise
during the term of the Agreement.  Upon written notice from the Company, Cornell
is  committed  to purchase Common Stock of the Company at a purchase price equal
to  95%  of the then current market closing bid prices.  Market price is defined
to  mean  the  lowest  bid  price for the Common Stock during the five preceding

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<PAGE>

trading  days  during  a  pricing period (the date following the notice from the
Company) to Cornell.  On September 27, 2002, the Company issued 1,026,316 shares
of  Common  Stock  for  syndication  fees  for  this  equity line of credit.  In
addition,  in  connection  with  the  Equity Line of Credit Agreement, we issued
26,316  shares  of out Common Stock to Westrock Advisors, Inc. ("Westrock") as a
placement agent fee.  For financial reporting purposes, these shares were valued
at $418,000 which were treated as additional paid in capital with an offset to a
contra  additional  paid in capital account.  As of December 31, 2002 no capital
was  raised  under  this  line  of credit as it has not become available This is
because  the  shares  covered  under  this  equity  line of credit have not been
registered  with  the  U.S.  Securities  and Exchange Commission.  The shares of
Common  Stock  and  warrants  of  the  Company  to  be  issued  to  Cornell  and
underwriters  are  covered  by  a  Registration  Rights  Agreement requiring the
Company  to  file a registration statement with the U.S. Securities and Exchange
Commission  to  register  such securities under the Securities Act of 1933 (File
No.  333-100549). With respect to the Equity Line of Credit, the Company expects
to  draw down approximately $1,000,000 during 2003, representing the issuance of
approximately  2,000,000  shares  of  non-restricted  Common  Stock.

     On  December 5, 2002, the Company acquired Teleconnect Comunicaciones, S.A.
("Teleconnect"),  a  company  formed  under  the  laws of Spain which operates a
pre-paid  telephone  card  business  in  Spain.  The  Company  agreed  to  issue
up  to  3,000,000  shares  of its restricted Common Stock to the shareholders of
Teleconnect in reliance upon Regulation S under the Securities Act of 1933.  The
Company  also  agreed  to  and loaned Teleconnect 2,200,000 euro which was used
to  cancel  existing  debt.

     The Company intends to sell its Common Stock and/or borrow additional funds
from investors to procure up to $3,000,000 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.

CONTRACTUAL  OBLIGATIONS  AND  COMMERCIAL  COMMITMENTS

     The  following table is a recap of the Company's contractual obligations as
of  December  31,  2002.

<TABLE>
<CAPTION>
     Contractual                            Payments Due by Period
                               ----------------------------------------------
     Obligations                 Total        Less than 1 year      1-3 years
     -----------                 -----        ----------------      ---------
<S>                            <C>               <C>               <C>
     Long-term Debt            $  944,000        $        -        $  944,000
     Operating Leases           1,262,000           465,000           797,000
     Service Agreements           988,000           290,000           698,000
                               ----------        ----------        ----------

                               $3,194,000        $  755,000        $2,439,000
                               ==========        ==========        ==========
</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.

     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, 2002, the Company has
accrued  $233,000 for  the  settlement  of  pending  litigation.

ITEM  2.  CHANGES  IN  SECURITIES

     During  the  three  months  ended  December 31, 2002, the Company agreed to
issue  up  to  3,000,000  shares  of  its  Common  Stock  in connection with its
acquisition  of  Teleconnect, in reliance upon Regulation S under the Securities
Act  of  1933.  This  transaction was valued at 1,379,000 Euro. These shares are
being  held  in  escrow  at December 31, 2002. Management anticipates that these

                                       12
<PAGE>

shares  will ultimately not be issued to the former Teleconnect shareholders due
to  certain  warranties  these  shareholders  have  provided. The shares held in
escrow  are  reflected  as a reduction in the equity section of the December 31,
2002  financial  statements.

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, 2002, except a memorandum of
action  dated  November  8,  2002,  was  executed  by  a  majority  vote  of the
stockholders  of  the  Company  to  approve  the  acquisition  of  Teleconnect
Comunicaciones  S.A.



ITEM  5.  OTHER  INFORMATION


     None



ITEM  6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

     (A)  Reports  on  Form  8-K:

          The  Company filed a current report on Form 8-K (Item 2) regarding its
          acquisition of Teleconnect Comunicaciones, S.A. during December  2002.

     (B)  Exhibits

          10.1     Private Stock Swap Agreement is incorporated by reference to
                   Exhibit 10.1 of the Form 8K current reports of the Company
                   dated November 11, 2002.*



          10.2     Escrow Agreement regarding escrow of Common Stock issuable to
                   former  stockholders  of  Teleconnect  Comunicaciones,  S.A.

          10.3     Consulting  Agreement  with  City  Telecom  Services Limited.

          10.4     Consulting  Agreement  with  Nicholas  Breumemr.

          99.1     Certification  of  Gustavo  Gomez

          99.2     Certification  of  Martin-Luis  Becerra

          99.3     Certification  of  Gustavo  Gomez  and  Martin-Luis  Becerra



                                       13
<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,  2003

ITS  Networks  Inc.

By:  /s/  Gustavo  Gomez                    By:  /s/  Martin-Luis  Becerra
-------------------------------             ---------------------------------
Gustavo  Gomez                              Martin-Luis  Becerra,
President  and  Treasurer                   Chief  Financial  and  Accounting
Officer

























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