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 June 30, 2003

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

        For the transition period from ______________ to ________________

                        Commission File Number: 0-24857

                                ITS NETWORKS INC.
        (Exact name of small business issuer as specified in its charter)

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

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

                               011-34-91-431-2475
                          ---------------------------
                          (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  latest  practicable  date:  41,510,003  shares.

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

<PAGE>

                                ITS NETWORKS INC.
                                      INDEX

PART  I.  FINANCIAL  INFORMATION

Item  1.  Condensed Consolidated Financial  Statements:

            Condensed Consolidated Balance  Sheet  as  of  June  30,  2003

            Condensed Consolidated Statements  of  Operations  for  the  three
            months  and  nine  months  ended  June  30,  2003,  and  2002

            Condensed Consolidated Statements  of  Cash  Flows  for  the  nine
            months  ended  June  30,  2003  and  2002

            Notes  to  the Condensed Consolidated Financial  Statements

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

Item  3.  Controls  and  Procedures

PART II.  OTHER  INFORMATION

Item  1.  Legal  Proceedings

Item  2.  Changes  in  Securities

Item  3.  Defaults  on  Senior  Securities

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

Item  5.  Other  Information

Item  6.  Exhibits  and  Reports  on  Form  8-K

Signatures




<PAGE>



                          PART I. FINANCIAL INFORMATION

Item  1.  Financial  Statements


























<PAGE>
                                ITS NETWORKS INC.
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 2003
                                  (Unaudited)

                                     ASSETS

<TABLE>
<CAPTION>
CURRENT  ASSETS:
<S>                                                               <C>
  Cash  and  cash  equivalents                                    $     192,000
  Accounts  receivable,  net  of  allowance
    for doubtful accounts of $1,088,000                               1,755,000
  Inventory                                                             155,000
  Prepaid  expenses                                                     136,000
                                                                  -------------
        Total  current  assets                                        2,238,000
                                                                  -------------

PROPERTY  AND  EQUIPMENT,  NET                                        1,299,000
                                                                  -------------

OTHER  ASSETS:
  Vendor  deposits                                                      321,000
                                                                  -------------

                                                                  $   3,858,000
                                                                  =============


                    LIABILITIES AND STOCKHOLDERS' (DEFICIT)

CURRENT  LIABILITIES:
  Accounts  payable  and  accrued expenses                        $   4,251,000
  Other  current  liabilities                                         1,651,000
  Loans  from  related  parties                                         789,000
  Deferred  income                                                    1,938,000
                                                                  -------------

        Total  current  liabilities                                   8,629,000
                                                                  -------------

LONG  TERM  DEBT
  Loans  from  related  parties                                       1,053,000
                                                                  -------------

        Total  long-term  debt                                        1,053,000
                                                                  -------------

 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,  41,584,580  shares  outstanding                         42,000
  Additional  paid-in  capital                                        7,104,000
  Less:  Prepaid  syndication  fees                                    (418,000)
  Less:  Stock  held  in  escrow                                       (913,000)
  Accumulated  (deficit)                                            (10,367,000)
  Effect  of  cumulative  translation  adjustment                    (1,272,000)
                                                                  -------------

        Total  stockholders'  (deficit)                              (5,824,000)
                                                                  -------------

                                                                  $   3,858,000
                                                                  =============
</TABLE>

    The accompanying notes are an integral part of these financial statements.

<PAGE>
                                ITS NETWORKS INC.
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                      For three months ended      For the nine months ended
                                             June 30,                     June 30,
                                       2003            2002          2003            2002
                                  ------------   -------------   ------------   ------------
<S>                               <C>            <C>             <C>            <C>
SALES                             $  2,125,000   $     471,000   $  4,937,000   $  1,725,000

COST  OF  GOODS  SOLD  (exclusive
  of  Depreciation  shown
  separately  below)                 1,408,000         334,000      3,285,000       1,246,000
                                  ------------   -------------   ------------   -------------

GROSS  PROFIT                          717,000         137,000      1,652,000         479,000
                                  ------------   -------------   ------------   -------------

OPERATING  EXPENSES:
  Selling,  general  and
    administrative  expenses         1,183,000         834,000      3,218,000       1,200,000
  Depreciation                         136,000          11,000        301,000          26,000
  Bad  debt  expense                     3,000         147,000         21,000         148,000
  Impairment  on  goodwill           1,085,000               -      4,339,000               -
                                  ------------   -------------   ------------   -------------

        Total operating expenses     2,407,000         992,000      7,879,000       1,374,000
                                  ------------   -------------   ------------   -------------

(LOSS)  FROM  OPERATIONS            (1,690,000)       (855,000)    (6,227,000)       (895,000)
                                  ------------   -------------   ------------   -------------

OTHER  INCOME  (EXPENSES):
  Interest  expense                    (38,000)         (5,000)       (77,000)         (6,000)
  Non  operating  profit                     -          19,000              -               -
                                  ------------   -------------   ------------   -------------

                                       (38,000)         14,000        (77,000)         (6,000)
                                  ------------   -------------   ------------   -------------

(LOSS)  BEFORE  INCOME  TAXES     $ (1,728,000)  $    (841,000)  $ (6,304,000)  $    (901,000)

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

NET  (LOSS)                       $ (1,728,000)  $    (841,000)  $ (6,304,000)  $    (901,000)
                                  ============   =============   ============   =============

 BASIC EARNINGS (LOSS) PER SHARE  $      (0.04)  $       (0.04)  $      (0.18)  $       (0.04)
                                  ============   =============   ============   =============

AVERAGE  COMMON  AND  COMMON
  EQUIVALENT SHARES OUTSTANDING     40,968,045      24,021,788     34,168,567      22,706,048
                                  ============   =============   ============   =============

THE COMPONENTS OF COMPREHENSIVE
  LOSS:
    Net (loss)                    $ (1,728,000)  $    (841,000)  $ (6,304,000)  $    (901,000)
    Foreign  currency
    translation  adjustment           (118,000)        (88,000)   $(1,272,000)        (48,000)
                                  ------------   -------------   ------------   -------------

COMPREHENSIVE  (LOSS)             $ (1,846,000)  $    (929,000)  $ (7,576,000)  $    (949,000)
                                  ============   =============   ============   =============
</TABLE>


    The accompanying notes are an integral part of these financial statements.


<PAGE>

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

<TABLE>
<CAPTION>
                                                        For nine months ended
                                                               June 30,
                                                          2003          2002
                                                      ------------  ------------
CASH  FLOWS  FROM  OPERATING  ACTIVITIES:
<S>                                                   <C>           <C>
  Net  (loss)                                         $(6,304,000)  $  (901,000)
  Adjustments  to  reconcile  net  (loss)  to
    net  cash  used  in  operating  activities:
      Depreciation                                        301,000        26,000
      Bad  debt  expense                                   21,000       167,000
      Non  cash expenditures paid with stock               24,000       370,000
      Loss  on  impairment  on  goodwill                4,339,000             -
    Decrease  (increase)  in  operating  assets:
      Accounts  receivable                             (1,468,000)      (80,000)
      Inventory                                          (155,000)            -
      Prepaid  expenses                                  (120,000)       (1,000)
      Vendor  and  other  deposits                       (227,000)      (77,000)
    Increase  (decrease)  in  operating  liabilities:
      Accounts payable and accrued liabilities          5,153,000      (153,000)
      Deferred  revenue  and deposits received          1,930,000             -
                                                      -----------   -----------

        Net cash (used in) operating activities         3,494,000      (649,000)
                                                      -----------   -----------

CASH  FLOWS  FROM  INVESTING  ACTIVITIES:
  Purchased  goodwill                                  (4,339,000)            -
  Purchase  of  property  and  equipment               (1,381,000)      (72,000)
                                                      -----------   -----------

        Net cash (used in) investing activities        (5,720,000)      (72,000)
                                                      -----------   -----------

CASH  FLOWS  FROM  FINANCING  ACTIVITIES:
  Loan  proceeds  from  related  parties                3,520,000       810,000
  Proceeds  from  sale  of  common  stock                       -        11,000
                                                      -----------   -----------

        Net cash provided by financing activities       3,520,000       821,000
                                                      -----------   -----------

EFFECT OF EXCHANGE RATE                                (1,150,000)      (48,000)
                                                      -----------   -----------

NET  INCREASE  (DECREASE)  IN  CASH  AND
  CASH  EQUIVALENTS                                       144,000        52,000

CASH  AND  CASH  EQUIVALENTS,
  BEGINNING  OF YEAR                                       48,000        12,000
                                                      -----------   -----------

CASH  AND  CASH  EQUIVALENTS,
  END  OF  YEAR                                       $   192,000   $    64,000
                                                      ===========   ===========
</TABLE>


    The accompany notes are an integral part of these financial statements.

<PAGE>

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

<TABLE>
<CAPTION>
                                                        For nine months ended
                                                               June 30,
                                                          2003          2002
                                                      ------------  ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<S>                                                   <C>           <C>
  Cash  paid  during  the  year  for:
    Interest                                          $    77,000   $    (1,000)
                                                      ===========   ===========

SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
  Long-term  debt  converted  to  common  stock       $ 4,067,000   $ 1,465,000
                                                      ===========   ===========

  Stock  issued  for  services                        $    24,000   $   370,000
                                                      ===========   ===========
</TABLE>
















      The accompanying notes are an integral part of these financial statements.


<PAGE>
                       ITS NETWORKS INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2003
                                  (Unaudited)


1.  THE  COMPANY

     ITS Networks Inc. (the  "Company") was incorporated in the State of Florida
on  November  23,  1998.  On  December  22,  2000, the Company issued 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 1,378,500 Euros and the assumption of approximately 2,200,000 Euros of
net debt. At June 30, 2003, 1,986,525 shares have been issued with an additional
938,603 shares pending as exchange for 1,348,000 euros debt of outstanding loans
from previous Teleconnect shareholders. It is expected that this debt for equity
exchange will be carried out before the end of September 2003 in order to comply
with  the  purchase contract of November 11, 2002. The stock issuance is subject
to guarantees made by Teleconnect shareholders that Teleconnect liabilities will
not  exceed  2,200,000  Euro.  As  per  the Teleconnect purchase agreement dated
November  11,  2002, management will review in detail, during November 2003, the
actual state of Teleconnect's debts and liabilities and determine what amount of
this  stock  presently  held  in  escrow  will  be  released.

     Upon  completion of the acquisition, management determined that Teleconnect
assets  had  been  less  and  its  liabilities  more  than believed based on due
diligence.  This  resulted  in the creation of $4,339,000 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.  During the
three  months  ended June 30, 2003, management determined the Company was unable
to  obtain  the  level  of  operating profits provided for in its business plan;
thus,  management  has  elected  to impair the $4,339,000 goodwill for financial
reporting  purposes  as  of  June  30,  2003.

     Results  for  the  nine  months  ended  June  30, 2003, 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  accompanying  financial statement, the Company incurred
losses  of  $(6,304,000)  and $(901,000) for the nine months ended June 30, 2003

<PAGE>

and  2002,  respectively.  In  addition,  the  Company  has incurred substantial
losses  since  its  inception.  As  of June 30, 2003, current liabilities exceed
current  assets  by  $6,391,000  and  total  liabilities  exceed total assets by
$5,824,000.  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
current  shareholders  have shown their commitment to the Company by financially
supporting the operations. During the nine months ended June 30, 2003 $4,067,000
of  debt  was  converted  to equity. Furthermore, it anticipates that it will be
able  to  achieve  a  profitable  level of operations since it has completed the
consolidation  of  ITS  Europe and Teleconnect operations. Management expects to
finalize the  legal  consolidation of ITS Europe into Teleconnect by October 20,
2003.

     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  June  30,  2003.

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

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

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

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


<PAGE>

     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  June  30,  2003  exchange  rate.  Long-term  assets  are  translated at the
exchange  rate  in effect on the date of acquisition.  The revenues and expenses
are  translated at average exchange rates for the period.  Resulting translation
adjustments  are  accumulated  and  reflected  as  a  separate  component  of
stockholders'  equity.

4.  INCOME  TAXES

     The  Company's  wholly-owned subsidiaries, ITS Europe, S.L. and Teleconnect
file  their  income taxes on a calendar year basis.  Statutory tax laws of Spain
allow  net  losses  from  operations  to  be carried forward for a period of ten
years.  For the year ended September 30, 2002, the available tax loss ITS Europe
has  accumulated  is  $2,744,000,  which  may  be  used to offset future taxable
income.  Teleconnect,  which  was  acquired  in December 2002, has available tax
losses of approximately $10,000,000 as of December 31, 2002.  The utilization of
the  loss expires in years from 2005 to 2012.  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  $176,000,  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 June 30, 2003, the Company has accrued 225,000
Euros  for  the  settlement  of  pending  litigation.


<PAGE>

6.  LOANS  PAYABLE

     At June 30, 2003, the Company has loans payable to related parties totaling
$1,842,000, of which $789,000 have  no maturity dates or repayment terms and are
interest free. The remaining $1,053,000 is due November 25, 2004. Interest is to
be  computed  and  paid  monthly  at  an  interest  rate  of  9%  per  annum.

7.  ACQUISITION  OF  TELECONNECT

     Effective December 5, 2002, the Company acquired Teleconnect, a Spain-based
telecom operator marketing prepaid services, to allow the Company to become more
competitive  in  the  Spain  market  by  increasing sales, implementing new cost
control  procedures  and  minimizing  redundancies.  The acquisition involved an
exchange  of  up  to  3,000,000  shares  of  Common Stock of the Company and the
assumption  of  approximately  2,200,000  Euros  of  Teleconnect  net  debt  for
substantially  all  of  the  outstanding stock of Teleconnect. At June 30. 2003,
1,986,525  shares  have been issued with an additional 938,603 shares pending as
exchange for 1,348,000 euros debt of outstanding loans from previous Teleconnect
shareholders.  It is expected that this debt for equity exchange will be carried
out  before  the  end  of  September  2003  in order to comply with the purchase
contract  of  November  11,  2002.

     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
Euros 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  Euros.  The shares will be valued at approximately .46
Euros per share for purposes of this reduction in shares to be issued. The up to
3,000,000 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  will  decide  in November 2003 whether the specified debts will
exceed  the  value  assigned  to the 3,000,000 shares of stock held in escrow in
order  to  determine  what  amount  of the stock will be released. For financial
reporting  purposes,  the  1,986,525  shares  of Common Stock has been valued at
913,000  Euros  based  on  the stock price on November 11, 2002, the date of the
agreement,  and  is  shown  as  issued  with  an  offset in the equity section..

     Liabilities  assumed  exceeded assets by $4,339,000.  The summarized assets
and  liabilities  of  Teleconnect  on  the  acquisition  date  were  as follows:

<TABLE>
<CAPTION>
<S>                                               <C>
     Cash                                         $  210,000
     Accounts  receivable                            984,000
     Inventory                                       120,000
     Property  and  equipment,  net                1,247,000
     Prepaid  assets                                  22,000
     Other  assets                                   288,000
                                                  ----------
                                                  $2,871,000
                                                  ==========

     Accounts  payable  and  accrued  expenses    $2,952,000
     Other  current  liabilities                   2,851,000
     Loans  from  related  parties                   233,000
     Deferred  income                              1,174,000
                                                  ----------
                                                  $7,210,000
                                                  ==========
</TABLE>


<PAGE>

Since  the  liabilities assumed exceeded those previously estimated, it resulted
in  more  goodwill  than  anticipated.  There  is  substantial  doubt  about the
Company's  ability  to  realize  all  of  the  goodwill  associated  with  the
acquisition.  An  impairment test was performed based on the discounted value of
anticipated  future  cash flows and $3,254,000 of the goodwill was determined to
be  impaired at December 31, 2002.  During the three months ended June 30, 2003,
management determined that the remaining goodwill of $1,085,000 was impaired and
should  be  charged  to  expense.  This  impairment is a result of the Company's
inability  to  obtain the level of operating profit provided for in its business
plan.

The  result  of  operations  of  Teleconnect  is  included  in  the accompanying
financial  statements  since  date of acquisition.  The following summarized pro
forma  (unaudited)  information  for the nine months ended June 30, 2003 assumes
the  acquisition  occurred  on  October 1, 2001:

<TABLE>
<CAPTION>
                                       June  30,  2003           June  30,  2002
                                                                     Pending
                                       ---------------          ----------------
<S>                                       <C>                      <C>
Net  sales                                $5,794,000               $5,886,000
Cost  of  goods  sold                      3,740,000                4,496,000
                                          ----------               ----------
Gross  Profit                              2,054,000                1,390,000
                                          ----------               ----------

Selling,  general  &  administrative       3,797,000                4,254,000
Depreciation                                 366,000                  162,000
Bad  debt  expense                            21,000                   61,000
Impairment  of  goodwill                   4,339,000                        -
                                          ----------               ----------

Total  operating  expense                  8,523,000                4,477,000
                                          ----------               ----------

Loss  from  operations                    (6,469,000)              (3,087,000)

Other  income  and  expenses                 (83,000)                 (26,000)
                                          ----------               ----------

Net  loss                                $(6,552,000)             $(3,113,000)
                                         ===========              ===========

Loss  per  share                         $     (0.19)             $     (0.13)
                                         ===========              ===========
</TABLE>















<PAGE>

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

RESULTS  OF  OPERATIONS

     Prior  to  December  2000,  the  Company was a development stage technology
company  and  had  no  revenues.  After the Company's acquisition of ITS Europe,
S.L.  ("ITS  Europe"),  through  a  share exchange agreement entered on December
22,  2000, the Company's previous business plan was implemented. For information
concerning  the  Company's prior full fiscal year, the Company refers the reader
to  the  financial  statements  provided  in  its previous annual report on Form
10-KSB  filed  for  its  fiscal  year  ended  September  30,  2002.

     On  December  22,  2000, the Company acquired 100% ownership of ITS Europe,
S.L.,  a  telecommunications  company  based  in  Malaga, Spain. ITS Europe is a
provider  of  various  telecommunications services and products primarily within
Spain;  all  of  the  operations  of  ITS  Europe  were  founded  prior  to  the
deregulation  of  the  telecommunications  industry  in  Spain  in  1998.

     Effective   November  11,  2002,   the   Company    acquired    Teleconnect
Comunicaciones,  S.A.  ("Teleconnect") based in Marbella, Spain, in exchange for
up  to  3,000,000  shares  of the Common Stock of the Company. At June 30, 2003,
only  1,986,525  shares have been issued pending an additional 938,603 shares to
be  issued  in  as  exchange  for 1,348,000 euros debt of outstanding loans from
previous  Teleconnect  major  shareholders.  It  is  expected that this debt for
equity exchange will be carried out before the end of September 2003 in order to
comply  with  the  Change  carrier  to carried purchase contract of November 11,
2002.  Teleconnect  is  a  provider  of  pre-paid  telephone  cards.

COMPARISON  OF  THE  THREE  MONTHS  ENDED  JUNE  30,  2003  AND  2002

     We  incurred  a  $(1,728,000)  net  loss  for  the  three months ended June
30, 2003 as compared to a net loss of $(841,000) during the comparable period in
2002.  A  comparison of revenues and expenses for the two periods is as follows:

REVENUES

     Sales  for  the  three  months  ended  June  30,  2003,  increased  351% to
$2,125,000  from  $471,000 for the quarter ended June 30, 2002. This increase in
revenues is attributable primarily to our acquisition of Teleconnect in November
2002.

COST  OF  GOODS  SOLD

     Cost  of goods sold increased to $1,408,000, or 66% of the revenues for the
three months ended June 30, 2003 from $334,000 or 71% of revenue during the same
period  in  2002. This increase of $1,074,000 was primarily due tot he expansion
of business. The improvement in gross margin is the result of the better margins
of  the  Teleconnect residential account business and improved buying processes.

SELLING,  GENERAL  AND  ADMINISTRATIVE  EXPENSES

     Selling,  general  and  administrative  expenses have increased by $349,000
or  42%  from $834,000 for the quarter ended June 30, 2002 to $1,183,000 for the
quarter  ended  June  30, 2003.  This increased is due primarily to the addition
of  the  Teleconnect  business.

DEPRECIATION

     Depreciation  expense increased by $125,000 from $11,000 during the quarter
ended  June  30,  2002  to  $136,000  for  the quarter ended June 30, 2003. This
increase is  due  to  the  inclusion  in  deprecations  in 2003 of Teleconnect's
depreciable  assets  which  include  a substantial amount of telephone switching
equipment  and  call  tracking  software.

BAD  DEBTS  EXPENSE

     Bad debts expense decreased by 98% from $147,000 to $3,000 during the three
months  ended June 2002 and 2003, respectively. This decrease is a result of the
Company's  efforts  to  tighten  its  credit  policies.

IMPAIRMENT OF GOODWILL

     During  the  quarter  ended  June  30,  2003,  the  Company  recognized  an
impairment  loss  of  $1,085,000  associated  with  the  write  down of goodwill
acquired  with  the  Teleconnect acquisition. The Company had no impairment loss
during  the  same  period  in  2002.

OTHER  INCOME  AND  EXPENSES

     Interest  expense  increased  from $5,000 during the quarter ended June 30,
2002  to  $38,000 for the quarter ended June 30, 2003. This increase is a result
of  borrowings  incurred  in  connections  with  the Teleconnect acquisition. In
addition,  the  Company  enjoys  $19,000  in  other  income  during  2002.



<PAGE>

COMPARISON  OF  THE  NINE  MONTHS  ENDED  JUNE  30,  2003  AND  2002

     We incurred a  net  loss of $(6,304,000) for the nine months ended June 30,
2003  as compared  to  a  net  loss  of  $(901,000) for the comparable period in
2002.  A comparison  of  revenues  and  expenses  for  the  two  periods  is  as
follows:

REVENUES

     Sales  for  the  nine  months  ended  June  30,  2003, increased by 186% to
$4,937,000  from  $1,725,000 for the nine months ended comparable period in June
30,  2002. These increases were due primarily to the growth in customer base and
increased  sales  of  telecommunications  services  as  well  as the purchase of
Teleconnect  in  December  of  2002.  The  Teleconnect  addition  accounted  for
substantially  all  of  this  increase.

COST  OF  GOODS  SOLD

     Cost of goods sold increased to $3,285,000, or 67% of revenues for the nine
months  ended  June  30,  2003,  from  $1,246,000 or 72% of revenues in the nine
months ended June 30, 2002. This increase of $2,039,000 was primarily due to the
expansion  of  business.  The  improvement  in gross margin is the result of the
better  margins  of  the  Teleconnect  residential account business and improved
buying  processes.

SELLING,  GENERAL  AND  ADMINISTRATIVE  EXPENSES

     Selling,  general  and administrative expenses have increased by $2,018,000
or  268%  from  $1,200,000 for the nine months ended June 30, 2002 to $3,218,000
for  the nine months ended June 30, 2003. This increased is due primarily to the
addition  of  the  Teleconnect business and the additional costs associated with
acquiring Teleconnect and consolidating its operations with those of ITS Europe.

DEPRECIATION

     Depreciation  expense increased by $275,000 from $26,000 to $301,000 during
the  nine  months  periods  ended  June  30,  2002  and 2003, respectively. This
increase  is  due  to  the  inclusion  in  deprecations in 2003 of Teleconnect's
depreciable  assets  which  include  a substantial amount of telephone switching
equipment  and  call  tracking  software.

BAD  DEBTS  EXPENSE

     Bad debts expense decreased by 93% from $148,000 to $21,000 during the nine
months  periods  ended  June 30, 2002 and 2003, respectively. This decrease is a
result  of  the  Company's  efforts  to  tighten  its  credit  policies.

IMPAIRMENT  OF  GOODWILL

     During  the  quarters  ending December, 2002 and June 30, 2003, the Company
wrote  down  goodwill  acquired in connection with acquisition of Teleconnect by
$3,254,000  and  $1,085,000,  respectively.  This  impairment is a result of the
Company's inability to obtain the levels of operating principles provided for in
its  business  plan.  The  Company  had  no  impairment  loss  in  2002.

OTHER  INCOME  AND  EXPENSES

     Interest  expense  increased  from $6,000 during the nine months ended June
30,  2002 to $77,000 for the nine months ended June 30, 2003. This increase is a
result  of borrowing incurred in connection with the Teleconnect acquisition. In
addition,  the  Company  enjoyed  $19,000  in  other  income  during  2002.

PLAN  OF  OPERATIONS  FOR  THE  COMPANY

     Since  the  approval  of  the  new business plan by the Board in early June
2003,  the  Company  has  taken  the  necessary steps to comply with the actions
defined.  As  such,  it has increased debt and looked for additional debt/equity
funding.  The  services have been redefined as a part of a new marketing mix and
certain  services relaunched with a new image and brand name associated with the
pre-paid  telephone  card  business  of  Teleconnect.

     ITS  is  currently  in  the process of reinforcing its sales force, further
reducing its operating costs and improving margins on sales.  The new budget has
a  section  for  marketing  and  further  expanding  brand  name  and  image  of
Teleconnect.

     One  of  the  Company's  main  objectives for the current fiscal year is to
complete  the integration of ITS Europe S.L. and Teleconnect Comunicaciones S.A.
and  in  this  way take maximum advantage of the synergies of both local Spanish
companies.

     As  of  June  30, 2003, all clients of ITS Europe have been integrated with
Teleconnect's client base, ITS Europe's assets have either been absorbed or sold
off,  and  any  outstanding  creditors  have either been liquidated or a payment
arrangement has been agreed whereby Teleconnect ultimately assumes the debt left
by  ITS  Europe  S.L.  Steps are being taken to legally dissolve ITS Europe S.L.
into  Teleconnect  where  the  latter  would  assume  the  former's  assets  and
liabilities.

     In  addition, another objective is to regain prepaid card market share that
Teleconnect lost last year and in so doing aim to increase prepaid card sales by
more  than  1,000,000  euro monthly during the next six months. The Company will
also  eliminate  all  lines  of business that are not profitable or that use too
many  resources  and  in  so doing, the Company will be able to focus on prepaid
telephone  card  services.  Hence,  as  of  June 30, 2003, the company no longer
offers in Spain, 906 (intelligent number service), internet access or web design
and  hosting,  nor  does  it  offer  Wireless  Fidelity  ("WiFi")  access.

     Cost  reduction  is  a  major  objective  for  the company during this last
quarter  and  it has further reduced staff another 10% by reducing 3 more people
and  remaining  with  31.  In  addition,  the  Company  has set up international
connections  outside of Spain which allow it to send international traffic (long
distance  phone  calls)  at  a  significant  reduction from previous costs using
locally-based  carriers.

     It  is  the  Company's  goal  to  acquire  other similar telecommunications
companies,  primarily  in  Spain  with  the  objective  of adding more volume of
business onto the existing infrastructure and improving positive Earnings Before
Interest,  Income  Taxes,  Depreciation  and  Amortization ("EBITDA") faster. No
other  specific  acquisitions are presently planned though initial conversations
with  other  parties  are  underway.

You  should  read  the following discussion and analysis in conjunction with our
consolidated  financial  statements   and   related  notes   included  elsewhere
herein.

LIQUIDITY  AND  CAPITAL  RESOURCES

     General.  The  principal  shareholders  of  the  Company  have  made verbal
commitments  for  additional  financing  to  the  Company  in  order to fund its
strategic  plan.  Despite  that,  there  can be no assurance that any additional
financing  would  be  available in a timely manner, or if available, would be on
terms acceptable to the Company. Furthermore, any additional equity financing or
convertible  debt  financing could be dilutive to our then-existing shareholders
and  any  debt  financing  could  involve  restrictive covenants with respect to
future  capital   raising  activities,   dividends,  and  other   financial  and
operational  matters.

     During  the  three  months ended June 30, 2003, the Company put on hold its
Equity  Line  of  Credit Agreement dated June 18, 2002, as amended, with Cornell
Capital  Partners. The Company is currently negotiating the sale of a $1,000,000
(U.S.)  convertible  note  with  Cornell  Capital  Partners.

Item  3.     Controls  and  Procedures

     The Company's President and is Chief Operating 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

     None

Item  2.  Changes  in  Securities

     The  following  sets  forth  a  description  of  all unregistered sales and
issuances  of  the Company's securities during the three month period ended June
30, 2003, covered by this report. The Company relied upon one or more exemptions
from  registration  under  the Securities Act of 1933, including Section 4(2) of
the  Securities  Act  of  1933 and Regulation S with respect to certain sales to
non-U.S.  persons,  as  defined  by  Regulation  S.

     On  May  20, 2003, the Company issued 1,060,000 shares of restricted Common
Stock  to  Geeris Holding Nederland, B.V., a company owned by Leonardo Geeris, a
director  of the Company, to convert a debt owed to it by the Company of 200,000
Euros into Common Stock of the Company, in reliance upon exemptions provided for
in  Regulation  S  under  the  Securities  Act  of  1933,  as  amended.

Item  3.  Defaults  Upon  Senior  Securities

     None

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

     No  matter  was  submitted to a vote of the security holders of the Company
during  the  three  month  period  ended  June  30,  2003.

Item  5.  Other  Information

     During  May  2003,  the  Company moved its principal executive offices
from  Madrid,  Spain  to  Marbella,  Spain.

     On  May  12,  2003,  Herman  de Haas and Leonardus Geeris were appointed as
directors  of  the  Company  to  fill  vacancies  on  the  Board  of  Directors.

     On  May 27, 2003, Herman de Haas was appointed by the Board of Directors as
the  Executive  Vice  President  and  Chief  Operating  Officer  of the Company.

     On  June  30, 2003 at the Teleconnect shareholders meeting, it was voted to
accept  Mr.  Nicholas von Bruemmer's resignation from any administrative role at
Teleconnect  Comunicaciones  S.A.  At this meeting, Mr. Herman de Haas was named
new  CEO  of  Teleconnect  Comunicaciones  S.A.

Item  6.  Exhibits  and  Reports  on  Form  8-K

(a)  EXHIBITS


<PAGE>

     31     Certificate  of  Gustavo  Gomez

     31.1   Certificate  of  Herman  de  Haas

     32     Certificate  of  Gustavo  Gomez

     32.1   Certificate  of  Herman  de  Haas


(b)  REPORTS  ON  FORM  8-K

     None

                                   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.

                                   ITS  NETWORKS  INC.

Date:  August  19,  2003           /s/  Gustavo  Gomez
                                   ------------------------------------
                                   Gustavo  Gomez,  President,


                                   /s/  Herman  de  Haas
                                   ------------------------------------
                                   Herman  de  Haas,  Executive  Vice President,
                                   Chief  Operating  Officer  and  principal
                                     accounting  and  financial  officer