UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB

         [X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                  SECURITIES 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 333-05112-C

                                TELEDIGITAL, INC.
        (Exact name of small business issuer as specified in its charter)

         Delaware                                                  93-0898539
(State or other jurisdiction of                                (I.R.S. Employer
incorporation or organization)                               Identification No.)


          1325 East 79th Street, Suite 6, Bloomington, Minnesota 55425
                    (Address of principal executive offices)

                                 (952) 876-0527
                           (Issuer's telephone number)


       -----------------------------------------------------------------
                     (Former name, former address and former
                   fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.     Yes [_]   No [X]

State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:

Common Stock, $.025 Par Value - 14,310,286 shares outstanding as of May 7, 2004.

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


<PAGE>

                                TELEDIGITAL, INC.
                                      INDEX

                                                                        Page No.
                                                                        --------
PART I.  FINANCIAL INFORMATION

   Item 1.  Financial Statements
        Consolidated Balance Sheets as of
        June 30, 2003 (Unaudited) and December 31, 2002                      3

        Consolidated Statements of Cash Flows (Unaudited) for
        the Three and Six Months Ended June 30, 2003 and 2002                4

        Consolidated Statements of Operations (Unaudited) for
        the Three and Six Months Ended June 30, 2003 and 2002                5

        Notes to Consolidated Financial Statements                           6

   Item 2.  Management's Discussion and Analysis or Plan of Operation       13

   Item 3.  Controls and Procedures                                         17


PART II. OTHER INFORMATION                                                  18

   Item 1.  Legal Proceedings

   Item 2.  Changes in Securities and Small Business Issuer
                 Purchases of Equity Securities

   Item 3.  Default Upon 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                                                                  20

EXHIBITS                                                                    21


                                       2
<PAGE>

PART I                         FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
                        TELEDIGITAL, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                               June 30,      December 31,
                                                                                 2003            2002
                                                                             ------------    ------------
                                                                              (Unaudited)
<S>                                                                          <C>             <C>
                                     ASSETS
CURRENT ASSETS
      Cash                                                                   $     47,629    $    123,284
      Accounts receivable, net                                                     85,232           4,490
      Due from related party                                                       32,574          42,574
      Inventories                                                                 253,147         718,487
                                                                             ------------    ------------
      Total Current Assets                                                        418,582         888,835
                                                                             ------------    ------------

PROPERTY AND EQUIPMENT, NET                                                        17,491          25,325
                                                                             ------------    ------------

OTHER ASSETS

      Debt issuance costs, net                                                    139,646            --
      Security and other deposits                                                  10,753          10,753
                                                                             ------------    ------------
            Total Other Assets                                                    150,399          10,753
                                                                             ------------    ------------
                 TOTAL ASSETS                                                $    586,472    $    924,913
                                                                             ============    ============

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
      Short-term debt                                                        $  2,107,641    $  2,233,120
      Notes payable - stockholders, net of original issue discount                370,000         470,000
      Current maturities of long-term debt                                          3,891           6,474
      Accounts payable                                                            430,659         307,376
      Accrued payroll and related taxes                                           258,142         316,898
      Accrued expenses                                                            236,970         124,578
      Deferred revenues and customer deposits                                      10,000          75,319
                                                                             ------------    ------------
      Total Current Liabilities                                                 3,417,303       3,533,765
LONG-TERM LIABILITIES
      Convertible debentures and long-term debt,
        net of current maturities                                                 371,434             577
      Other long-term liability                                                   400,000            --
                                                                             ------------    ------------
      Total Liabilities                                                         4,188,737       3,534,342
                                                                             ------------    ------------
COMMITMENT AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
      Undesignated preferred stock, 5,000,000 shares authorized
      Common stock, $.025 par value per share
        45,000,000 shares authorized
        14,064,232 and 14,030,409 shares issued and outstanding                   351,605         350,760
      Additional paid-in capital                                                9,723,179       9,568,510
      Accumulated Deficit                                                     (13,677,049)    (12,528,699)
                                                                             ------------    ------------
      Total Stockholders' Deficit                                              (3,602,265)     (2,609,429)
                                                                             ------------    ------------
      TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                            $    586,472    $    924,913
                                                                             ============    ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       3
<PAGE>



                        TELEDIGITAL, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                               Three months ended June 30,      Six months ended June 30,
                                                  2003            2002            2003            2002
                                              ------------    ------------    ------------    ------------
<S>                                           <C>             <C>             <C>             <C>
NET SALES                                     $    552,883    $     61,761    $    828,549    $    114,334
COST OF GOODS SOLD                                 552,927         146,863         795,252         152,176

INVENTORY WRITE-DOWN TO
LOWER OF COST OR MARKET                               --           120,000            --           120,000
                                              ------------    ------------    ------------    ------------
     Gross Profit (Loss)                               (44)       (205,102)         33,297        (157,842)
                                              ------------    ------------    ------------    ------------

OPERATING EXPENSES
     General and administrative                    362,260         328,527         627,387         633,749
     Research and development                       47,176          68,324         190,409          98,842
     Marketing                                      12,875           5,000          20,556          10,000
     Impairment of intangible asset                   --            56,290            --            56,290
                                              ------------    ------------    ------------    ------------
          Total Operating Expenses                 422,311         458,141         838,352         798,881
                                              ------------    ------------    ------------    ------------
     Operating Loss                               (422,355)       (663,243)       (805,055)       (956,723)
                                              ------------    ------------    ------------    ------------
OTHER INCOME (EXPENSE)
     Interest expense                             (215,148)        (51,658)       (343,363)        (69,316)
     Other income (expense)                             55            --                68            --
                                              ------------    ------------    ------------    ------------
          Net Other Expense                       (215,093)        (51,658)       (343,295)        (69,316)
                                              ------------    ------------    ------------    ------------
               Loss Before Income Tax
               Expense                            (637,448)       (714,901)     (1,148,350)     (1,026,039)

INCOME TAX EXPENSE                                    --              --              --              --
                                              ------------    ------------    ------------    ------------
     NET LOSS                                 $   (637,448)   $   (714,901)   $ (1,148,350)   $ (1,026,039)
                                              ============    ============    ============    ============

Basic and diluted net loss per common share   $      (0.04)   $      (0.07)   $      (0.08)   $      (0.11)
                                              ============    ============    ============    ============

Weighted-average common shares
outstanding

     Basic and diluted                          14,064,232      10,220,739      14,052,622       9,724,348
                                              ============    ============    ============    ============

</TABLE>


          See accompanying notes to consolidated financial statements.



                                       4
<PAGE>


                        TELEDIGITAL, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                  For the Six Months Ended June 30,
                                                                       2003            2002
                                                                    -----------    -----------
<S>                                                                  <C>            <C>
 CASH FLOWS FROM OPERATING ACTIVITIES
     Net loss                                                        $(1,148,355)   $(1,026,039)
     Adjustments to reconcile net loss to net cash
     flows from operating activities:
          Depreciation and amortization                                    7,834          9,596
          Impairment of intangible asset                                    --           56,290
          Inventory write-down to lower of cost or market                   --          120,000
          Amortization of original issue discount                        147,314           --
          Amortization of debt issuance costs                             10,287           --
          Common stock issued for services                                 8,200         29,675
          Changes in operating assets and liabilities:
               Accounts receivable, net                                  (80,742)        28,288
               Inventories                                               465,340     (1,372,588)
               Due from related party                                     10,000           --
               Accounts payable                                          123,288         93,722
               Accrued payroll and related taxes                         (58,756)      (136,540)
               Accrued expenses                                          123,826         14,418
               Deferred revenues and customer deposits                   (65,319)          --
                                                                     -----------    -----------
                    Net Cash Flows from Operating Activities            (457,083)    (2,183,178)
                                                                     -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES
     Purchases of property and equipment                                    --          (12,871)
                                                                     -----------    -----------
                    Net Cash Flows from Investing Activities                --          (12,871)
                                                                     -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES
     Checks issued in excess of bank balance                                --          (31,206)
     Net advances (payments) on short-term debt                         (225,479)     1,308,000
     Net advances (payments) on long-term debt                            (3,160)        19,313
     Net proceeds from (payments on) notes
     payable - stockholders and warrants issued                          360,000        (25,000)
     Proceeds from other long- term liability                            400,000           --
     Payments for debt issuance costs                                   (149,933)          --
     Payments on due to related party                                       --          (13,005)
     Proceeds from the exercise of stock warrants                           --          177,047
     Proceeds from the issuance of common stock                             --          760,900
                                                                     -----------    -----------
               Net Cash Flows from Financing Activities                  381,428      2,196,049
                                                                     -----------    -----------
          NET CHANGE IN CASH                                             (75,655)          --
CASH - Beginning of Period                                               123,284           --
                                                                     -----------    -----------
     CASH - END OF PERIOD                                            $    47,629    $      --
                                                                     ===========    ===========
Supplemental cash flow disclosures:
     Cash paid for interest                                          $   151,727    $    34,888
                                                                     ===========    ===========
     Conversion of notes payable-stockholders and
     accrued interest into long-term debt                            $   371,434    $      --
                                                                     ===========    ===========
     Conversion of notes payable - stockholders to short-term debt   $   100,000    $      --
                                                                     ===========    ===========
</TABLE>

          See accompanying notes to consolidated financial statements.



                                       5
<PAGE>

                        TELEDIGITAL, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002
                                   (UNAUDITED)



(1)  BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Teledigital,
Inc. and Subsidiary ("the Company" or "we") have been prepared by the Company in
accordance with accounting principles generally accepted in the United States of
America for interim financial information, pursuant to the rules and regulations
of the Securities and Exchange Commission. Pursuant to such rules and
regulations, certain financial information and footnote disclosures normally
included in the consolidated financial statements have been condensed or
omitted. The results for the periods indicated are unaudited, but reflect all
adjustments (consisting only of normal recurring adjustments) which management
considers necessary for a fair presentation of operating results.

Operating results for the three and six months ended June 30, 2003 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2003. These unaudited consolidated financial statements should be
read in conjunction with the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2002.

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the Company's significant accounting policies consistently applied
in the preparation of the accompanying financial statements follows:

PRINCIPLES OF PRESENTATION. On July 17, 2002, XOX Corporation, filed a Current
Report on Form 8-K with the Securities and Exchange Commission reporting the
merger of Tele Digital Development, Inc. ("Tele Digital") with TD Acquisition,
Inc., then a wholly owned subsidiary of XOX Corporation (XOX). As described in
the Current Report, for accounting purposes, the merger was accounted for as a
reverse acquisition, with Tele Digital as the acquirer. The historical financial
statements of Tele Digital became the historical financial statements of XOX,
and the assets and liabilities of XOX are accounted for as required under the
purchase method of accounting. Results of operations of XOX are included in the
financial statements from July 3, 2002, the effective date of the merger. All
share data has been restated to give effect to the retroactive application of
Tele Digital's one-for-two reverse stock split, as approved by its Board of
Directors on June 27, 2002. All share data has been restated to give effect of
the merger under which each Tele Digital share was converted into .7483 shares
of Teledigital (Note 4).

Effective April 9, 2003, XOX changed its name to Teledigital, Inc.

REVENUE RECOGNITION. The Company recognizes revenue when it is realized and
earned. This generally does not occur until all of the following are met:
persuasive evidence of an arrangement to purchase exists, delivery has occurred,
the price is fixed and collection is reasonably assured. The Company considers
delivery to have occurred when its products are shipped.

Software license revenue is recognized when all of the following criteria have
been met: there is an executed license agreement, software has been delivered to
the customer, the license fee is fixed and payable within twelve months,
collection is deemed probable and product returns are reasonably estimable.

DEFERRED REVENUES AND CUSTOMER DEPOSITS. Deferred revenues represent payment
received in advance of products to be delivered and are recognized as revenue
when the product is shipped. Customer deposits are received from various

                                       6
<PAGE>

customers and are refundable upon termination of the contract.

SOFTWARE DEVELOPMENT COSTS. Software development costs are expensed as incurred.
Management is required to use professional judgment in determining whether
development costs meet the criteria for immediate expense or capitalization.

ALLOWANCE FOR DOUBTFUL ACCOUNTS. The Company maintains allowances for doubtful
accounts for estimated losses resulting from the inability of our customers to
make required payments. If the financial condition of specific customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required or revenue could be deferred until
collectibility becomes probable. Accounts receivable are shown net of allowance
of $1,500 at both June 30, 2003 and December 31, 2002.

INVENTORIES AND RELATED ALLOWANCE FOR OBSOLETE AND EXCESS INVENTORY. Inventories
are valued at the lower of cost or market. Inventory consists of purchased
cellular telephones. An inventory obsolescence reserve was not considered
necessary at December 31, 2002 since an inventory write down of $545,984 was
recorded during the year. Management does not believe that an inventory
obsolescence reserve is required at June 30, 2003.

LONG-LIVED ASSETS. Property, equipment, and intangible assets are amortized over
their useful lives. Useful lives are based on management's estimates of the
period that the assets will generate revenue. Property and equipment and
intangible assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.

NET LOSS PER COMMON SHARE. Basic net loss per common share is computed by
dividing the net loss by the weighted average number of common shares
outstanding for the reporting period. Diluted net loss per common share is
computed by dividing net loss by the sum of the weighted average number of
common shares outstanding plus all additional common stock that would have been
outstanding if potentially dilutive common shares related to common share
equivalents (stock options and stock warrants) had been issued. Potentially
dilutive common equivalent shares of 5,811,738 and 3,534,329 at June 30, 2003
and 2002, respectively, have not been included in the computation of diluted net
loss per common share for all periods presented because their inclusion would be
anti-dilutive.

STOCK-BASED COMPENSATION. In accordance with Accounting Principles Board (APB)
Opinion No. 25 and related interpretations, the Company uses the intrinsic
value-based method for measuring stock-based compensation cost which measures
compensation cost as the excess, if any, of the quoted market price of the
Company's common stock at the grant date over the amount the employee must pay
for the stock. The Company's general policy is to grant stock options at fair
value at the date of grant. Options and warrants issued to nonemployees are
recorded at fair value, as required by Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," using the
Black Scholes pricing model.

In December 2002, the Financial Accounting Standards Board (FASB) issued SFAS
No. 148 as an amendment to SFAS No. 123 providing alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation and also provides required additional
disclosures about the method of accounting for stock-based employee
compensation. The amendments are effective for financial statements for fiscal
years ending after December 31, 2002 and for interim periods beginning after
December 15, 2002. The Company adopted the annual disclosure provision of SFAS
No. 148 during the year ended December 31, 2003. The Company has currently
chosen to not adopt the voluntary change to the fair value based method of
accounting for stock-based employee compensation, pursuant to SFAS No. 148.

No stock options were granted by the Company during the six months ended June
30, 2003. Stock options having a weighted average exercise price of $1.71 per
share for 729,153 shares were granted in the merger of XOX in the quarter ended
June 30, 2002. Also, during the three months ended June 30, 2002, stock options
for 336,735 shares with an exercise price of $0.53 were granted to employees.

                                       7
<PAGE>

Pursuant to APB No. 25 and related interpretations, $0 and $29,675, and $8,200
and $29,675 of compensation cost has been recognized in the accompanying
consolidated statements of operations for the three and six months ended June
30, 2003 and 2002, respectively. Had compensation cost been recognized based on
the fair value of options at the grant dates consistent with the provisions of
SFAS No. 123, the Company's pro forma net loss and basic and diluted net loss
per common share would have been as follows:

<TABLE>
<CAPTION>
                                               Three Months Ended June 30,    Six Months Ended June 30,
                                               ---------------------------   ---------------------------
                                                   2003           2002           2003           2002
                                               ------------   ------------   ------------   ------------
<S>                                            <C>            <C>            <C>            <C>
Net Loss:
         As reported                           $  (637,448)   $  (714,901)   $(1,148,350)   $(1,026,039)
         Pro forma                             $  (637,448)   $  (714,901)   $(1,148,350)   $(1,026,039)

Basic and diluted net loss per common share:
         As reported                           $     (0.04)   $     (0.07)   $     (0.08)   $     (0.11)
         Pro forma                             $     (0.04)   $     (0.07)   $     (0.08)   $     (0.11)

Stock-based compensation:
         As reported                           $      --      $    29,675    $     8,200    $    29,675
         Pro forma                             $      --      $      --      $      --      $      --
</TABLE>

In determining the compensation cost of the options granted during the three
months ended June 30, 2002, as specified by SFAS No. 123, the fair value of each
option grant has been estimated on the date of grant using the Black-Scholes
pricing model and the weighted average assumptions used in these calculations
are summarized as follows:

                                                            2002
                                                          --------
       Risk-free interest rate                               3.25%
       Expected life of options granted                   10 years
       Expected volatility range                                0%
       Expected dividend yield                                  0%

The above table for expected volatility was zero as the Company was unable to
obtain stock pricing information for the three months ended June 30, 2002.

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 amounts
reported in the consolidated financial statements and accompanying notes. Actual
results could differ from those estimates.

(3)  ABILITY TO CONTINUE AS A GOING CONCERN

The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern. However, the Company
incurred a net loss of $2,450,855 for the year ended December 31, 2002 and had a
working capital deficit of $2,644,930 at December 31, 2002. Also, the Company
incurred a net loss of $1,148,355 for the six months ended June 30, 2003 and had
a working capital deficit of $2,998,726 at June 30, 2003.

Recoverability of a major portion of the recorded asset amounts shown in the
accompanying consolidated balance sheet is dependent upon the Company obtaining
additional financing. The consolidated financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or classification of liabilities that might be necessary should the
Company be unable to continue in existence.

                                       8
<PAGE>

The Company's ability to continue as a going concern is dependent on its
ultimately achieving profitability and/or raising additional capital. Management
intends to obtain additional debt or equity capital to meet all of its existing
cash obligations and fund its operations, however, there can be no assurance
that additional capital will be available on terms favorable to the Company.
(See Note 11 - Subsequent Events and Item 2 - Liquidity and Capital Resources
for debt and equity financing completed since June 30, 2003).

(4)  BUSINESS ACQUISITION

Effective July 3, 2002, the Company completed its merger pursuant to an
Agreement and Plan of Merger dated as of January 7, 2002 by and among XOX
Corporation, Tele Digital Development, Inc. ("Tele Digital"), and TD
Acquisition, Inc., a wholly owned subsidiary of XOX, as amended by Amendment No.
1 to Agreement and Plan of Merger dated as of March 29, 2002 and Amendment No. 2
to Agreement and Plan of Merger dated as of June 30, 2002 (the "Merger
Agreement"). In the merger, TD Acquisition, Inc. merged with Tele Digital, with
Tele Digital being the surviving company and becoming a wholly owned subsidiary
of XOX.

In the merger, the former shareholders of Tele Digital received shares of XOX
common stock. In addition, in the merger, warrants and options to purchase
shares of Tele Digital common stock were converted into warrants and options to
purchase shares of XOX common stock. Each share of Tele Digital common stock was
converted into .7483 shares of XOX common stock, each warrant and option to
purchase one share of Tele Digital common stock was converted into a warrant or
option to purchase .7483 shares of XOX common stock.

Immediately after the merger, the former Tele Digital shareholders, option
holders and warrant holders together owned a total of approximately 77% of XOX
common stock on a fully-diluted basis, (assuming the exercise of all options and
warrants to purchase XOX common stock), and the pre-merger XOX stockholders
owned a total of approximately 23% of XOX common stock on a fully-diluted basis.
The merger involved only the issuance of XOX common stock, and no cash
consideration or other consideration was issued or used in the merger.

The Merger was accounted for as a reverse acquisition by Tele Digital, and,
accordingly, was deemed to be equivalent, for accounting purposes, to the
issuance of Tele Digital capital stock in exchange for the fair market value of
the assets and liabilities of XOX. As a result, no goodwill was recorded, and
the assets and liabilities of Tele Digital continue to be recorded at their
historic values.

(5) SHORT-TERM DEBT

On May 3, 2002, the Company signed a $1,308,000 note payable with a commercial
finance company. The debt was incurred to finance the purchase of cellular
telephones. The note is collateralized by the cellular telephones purchased
under the agreement, a collateralized interest in all assets, and is jointly and
severally guaranteed by two stockholders and an officer of the Company. A
warrant to purchase 260,000 shares of the Company's common stock at an exercise
price of $0.50 was issued under the loan agreement. The proceeds of $1,308,000
were allocated between the note payable and the warrant based on the relative
fair values of the securities at the time of issuance. The warrant was valued
using the Black Scholes pricing model which determined it to be zero. The note
payable accrued interest at a rate of 13% (effective rate of 13%) and matured on
January 31, 2003. It was extended in January 2003 at which time an additional
financing fee was incurred and the interest rate was increased to 15% (effective
rate of 22%) and the extended due date is June 1, 2004 (Note 9). At June 30,
2003 and December 31, 2002, the balance due on the note payable along with
accrued financing costs and interest was $1,199,641 and $1,290,120,
respectively. Interest expense on this note payable for the three months ended
June 30 2003 and 2002 was $43,123 and $27,395, respectively and was $116,018 and
$27,395 for the six months ended June 30, 2003 and 2002, respectively.

The Company had term loans outstanding due to a bank totaling $908,000 and
$943,000 at June 30, 2003 and December 31, 2002. The loans outstanding at
December 31, 2002 accrued interest at prime plus 1% with a minimum interest rate
of 6.0% (effective rate of 6.0% at December 31, 2002). An installment loan with
a balance of $900,000 matured on April


                                       9
<PAGE>

14, 2003. The loan was renewed with an interest rate of prime plus 3% with a
minimum rate of 7.25% (effective rate of 7.25% at June 30, 2003) and is due June
30, 2004. The loans are collateralized by substantially all the assets of the
Company and are jointly and severally guaranteed by two stockholders of the
Company and the revocable trust of one stockholder. Accrued interest was $7,269
and $4,650 at June 30, 2003 and December 31, 2002, respectively. Interest
expense on these loans was $19,048 and $15,715 for the three months ended June
30, 2003 and 2002, respectively and was $35,344 and $30,632 for the six months
ended June 30, 2003 and 2002, respectively.

(6) LONG-TERM DEBT

Effective January 21, 2003, the Company commenced an offering (the "Offering")
of up to 500,000 units ("Units"). Each Unit consisted of a 10% convertible
promissory note in the principal amount of $1.00 and a five-year warrant to
purchase two shares of Common Stock with an exercise price of $0.75 per share.
As of June 30, 2003, the Company raised a total of $460,000 ($300,000 during
2003), which includes the $160,000 bridge note to stockholder (Note 9), with net
proceeds of approximately $351,000 and debt issuance costs of approximately
$109,000. As of June 30, 2003, warrants for 920,000 shares had been issued in
conjunction with the Offering with 600,000 warrants being issued during the six
months ended June 30, 2003 and 320,000 warrants being issued on December 31,
2002. The warrants were valued using the Black Scholes pricing model. The
resulting original issue discount, the fair value of the warrants, was amortized
over the life of the promissory notes using the straight-line method, which
approximates the interest method. Effective June 30, 2003, principal of $360,000
and interest of $11,434 was converted into two-year 10% debenture notes
convertible into common stock with a conversion price of $0.40 per share (the
"Conversion"). The notes are reflected on the financial statements as long-term
debt. One promissory note for $100,000 was not converted (Note 9). For each
$1.00 converted into the debenture, one five-year warrant with an exercise price
of $0.75 was issued. A total of 371,434 warrants were issued in conjunction with
the Conversion. The proceeds of $371,434 were allocated between the debenture
notes and the warrants based on the relative fair values of the securities at
the time of conversion. The warrants were valued using the Black Scholes pricing
model. The resulting original issue discount, is being amortized over the life
of the debenture notes using the straight-line method, which approximates the
interest method. The beneficial conversion of the promissory notes into
debenture notes was valued using the Black Scholes pricing model, and determined
to be zero. In conjunction with the Conversion, the Company agreed to grant the
underwriter a five-year warrant for 91,000 shares with an exercise price of
$0.40 per share.

(7)  OTHER LONG-TERM LIABILITY

Effective April 7, 2003, the Company commenced an offering (the "Revenue
Offering") consisting of a minimum of three units and a maximum of ten units
(collectively, the "Revenue Units"). Each $50,000 Revenue Unit consists of a
right to receive a fee (the "Fee") in the amount of $0.07 for each monthly
license (PIN) sold by the Company, regardless of the dollar denomination of the
PIN, exclusive of PIN revenue generated in connection with the 9278 Mobile's
license agreement. The Revenue Units began earning Fees as of December 1, 2003
("Beginning Date") and will end the later of: (i) twenty-nine (29) months after
the Beginning Date or (ii) the date Investors receive 150% of the amount paid
for the Revenue Units. The Fees are to be paid on a monthly basis and are not
secured or guaranteed, and will be accreted monthly. As of June 30, 2003 the
Company raised gross proceeds of $400,000 in the Revenue Offering with net
proceeds of $336,500 and debt issuance costs of $63,500. A long-term liability
for the amount of the gross proceeds has been recorded in the accompany
financial statements. The Company agreed to issue a five-year warrant to the
underwriter for the Revenue Offering for 100,000 shares with an exercise price
of $0.40 per share. The warrant was valued using the Black Scholes pricing
model.

(8) STOCKHOLDERS' DEFICIT

On June 27, 2002, the Company's Board of Directors approved a one-for-two
reverse stock split of its $0.01 par value (pre merger) common stock. The
reverse stock split reduced the number of shares of common stock previously
issued and outstanding at December 31, 2001, subject to an increase to eliminate
fractional interests resulting from the reverse stock split. No fractional
shares of common stock were issued in connection with the reverse stock split.
All share data is presented to give effect to the retroactive application of the
reverse stock split as if it occurred on December 31, 2001.

                                       10
<PAGE>

During the year ended December 31, 2002, the Company issued 1,429,066 shares of
common stock at $0.53 per share for gross proceeds of $763,900.

During the year ended December 31, 2002 the Company issued 3,320,028 shares of
common stock for the exchange of the fair market value of the assets and
liabilities of XOX Corporation of $504,056, which is net of costs of $207,655.

During the six months ended June 30, 2003, the Company issued 15,340 shares of
common stock in lieu of cash for services rendered of $8,200.

(9)  RELATED PARTY TRANSACTIONS

DUE TO RELATED PARTIES. The Company has received advances from the Chairman of
the Board. At June 30, 2003 and December 31, 2002, the balance due was $220,000
and $260,000, respectively. Interest on $100,000 was the prime rate plus 1% with
a minimum interest rate of 6% (6% at December 31, 2002) and was unsecured. This
loan was repaid in April 2003. The remaining advances of $220,000 and $160,000
bear interest at 6.25%, and are unsecured. The advances outstanding at December
31, 2002 were due on March 5, 2003 and were extended to March 5, 2004. An
additional advance in March 2003 of $60,000 originally was due on December 31,
2003 and was extended to June 30, 2004 (Note 9).

The Company received an advance on a bridge loan payable for $160,000 from a
stockholder of the Company. Interest on the $160,000 is being charged at 10%
(effective rate of 40%). Under the terms of the bridge loan agreement, $60,000
of the debt was converted in June 2003 into 60,000 units with each unit
consisting of one dollar principal amount of a 10% convertible debenture and a
five-year warrant to purchase one share of the Company's common stock at an
exercise price of $0.75 per share (Note 5). The remaining balance of $100,000
was originally due on December 31, 2003 and has been extended to December 31,
2004 (Note 9). In conjunction with the bridge loan a warrant was issued to
purchase 320,000 shares of the Company's common stock at an exercise price of
$0.75 per share, that expires in March 2008. The warrant was valued using the
Black Scholes pricing model, and the value was determined to be zero.

The Company received advances from a stockholder the Company. At both June 30,
2003 and December 31, 2002, the balance due was $50,000. Interest is 13% and the
note is unsecured. Per the agreement, if principal was not repaid by December 1,
2001, a three-year warrant to purchase 3,742 common shares would be issued for
every 30 days the note was unpaid after December 31, 2001. Three-year warrants
to purchase 56,122 shares of common stock were granted with the issuance of the
note and an additional three-year warrant to purchase 3,742 shares was granted
as the note was unpaid at December 31, 2001. An additional three-year warrant to
purchase 44,898 shares was granted during the year ended December 31, 2002. The
Company owes the stockholder a warrant for an additional 22,452 shares as of
June 30, 2003 as the note was not repaid. The warrants have an exercise price of
$1.34, and expire through December 2006. The warrants were valued using the
Black Scholes pricing model, and were determined to have zero value at December
31, 2002. The note is convertible into common stock at the stockholder' option
at a rate of $1.34 per share. The beneficial conversion of the note into common
stock was valued using the Black Scholes pricing model, and determined to be
zero.

Accrued interest on the notes payable - stockholders was $14,173 and $929 at
June 30, 2003 and December 31, 2002, respectively. Interest expense on the notes
payable - stockholders for the three months ended June 30 2003 and 2002 was
$15,558 and $4,642, respectively and was $28,328 and $7,273 for the six months
ended June 30, 2003 and 2002, respectively.

(10)  COMMITMENTS AND CONTINGENCIES

PAYROLL AND UNEMPLOYMENT TAXES. In March 2002, the Company filed the required
payroll and unemployment tax returns to the Internal Revenue Service (IRS), the
Minnesota Department of Revenue, and the Maryland Department of Revenue for the
years ended December 31, 2001 and December 31, 2000. Settlement agreements have
been finalized with all three taxing authorities. In June 2002, the State of
Minnesota filed a state tax lien against the Company's assets with respect to
the Company's withholding tax liabilities which remained outstanding. As of
December 31, 2002, this lien has


                                       11
<PAGE>

been released. In July 2002, the IRS filed a federal tax lien against the
Company's assets with respect to the Company's withholding tax liabilities which
remained outstanding. The Company entered into an agreement with the IRS
effective April 1, 2003 which included monthly payments of $12,500 during the
months April through June, 2003, monthly payments of $17,500 for the months July
through September, 2003, and monthly payments of $20,000 beginning in October
2003 until debt is paid in full. At June 30, 2003 and December 31, 2002, an
estimated liability for the amounts due, including an estimate for penalties and
interest, of approximately $212,000 and $296,000, respectively, is included in
accrued payroll and related taxes.

(11)  SUBSEQUENT EVENTS

In addition to the 460,000 Units sold in the January 21, 2003 Offering (Note 5),
the remaining 40,000 Units were sold in July 2003. Approximately $37,000 of
additional net cash proceeds were raised and a five year warrant for 80,000
shares with an exercise price of $0.75 was issued. The warrant was valued using
the Black Scholes pricing model. The resulting original issue discount, the fair
value of the warrant, was expensed. The $40,000 note was immediately converted
into a two-year 10% debenture convertible into Common Stock with a conversion
price of $0.40 per share and a five-year warrant to purchase 40,000 shares with
an exercise price of $0.75 was issued. The $40,000 converted was allocated
between the debenture note and the warrant based on the relative fair values of
the securities at the time of issuance. The warrant was valued using the Black
Scholes pricing model. The beneficial conversion of the promissory note into the
debenture was valued using the Black Scholes pricing model, and determined to be
zero. In conjunction with the Conversion, the Company granted the underwriter a
five-year warrant for 100,000 shares, including the 91,000 shares disclosed in
Note 5, with an exercise price of $0.40 per share.

The Company raised an additional $235,000 in the Revenue Offerings (Note 7)
during the third quarter of 2003. Including the $400,000 raised in the second
quarter, we raised a total of $635,000 in the Revenue Offerings with net cash
proceeds of $535,543 and debt issuance costs of $440,045, including $36,206 of
non-cash debt issuance costs. The underwriter for the Revenue Offering was
granted a five-year warrant for 158,750 shares, including the 100,000 shares
disclosed in Note 7, with an exercise price of $0.40 per share. The warrants
were valued using the Black Scholes pricing model.

Effective October 20, 2003, the Company commenced an offering (the "Private
Placement Offering") of up to 1,500,000 units, each unit consisting of a 10%
convertible two-year promissory note (the "Private Placement Note") in the
principal amount of $1.00 and a five-year warrant (the "Private Placement
Warrant") to purchase three shares of common stock, at an exercise price of
$0.75 for the first share, $1.00 for the second share and $1.25 for the third
share. An additional 225,000 units were reserved for over-subscription. The
Private Placement Notes bear interest at the rate of ten percent (10%) per annum
payable at maturity, and are convertible at any time until the maturity date
into two and one-half (2-1/2) shares of common stock for each $1.00 of principal
amount converted. Payment of the Private Placement Notes is not secured or
guaranteed. In connection with the Private Placement Offering, the Company
retained an agent to act as the Company's exclusive agent to offer and sell the
units. Further, the Company agreed to issue to the agent, as part of the agent's
compensation, a warrant to purchase a number of shares of common stock equal to
ten percent (10%) of the number of shares of Common Stock into which the Private
Placement Notes sold in the Private Placement Offering may be converted. The
Company issued 2,604,000 Private Placement Warrants to purchase common stock at
prices ranging from $.75 to $1.25 per share in connection with the Private
Placement Offering. The gross proceeds of $868,000 were allocated between the
Private Placement Notes and the Private Placement Warrants based on the relative
fair values of the securities at the time of issuance. The Private Placement
Warrants were valued using the Black Scholes pricing model. The resulting
original issue discount, the fair value of the Private Placement Warrants and
the beneficial conversion of the Private Placement Notes into common stock as
defined in EITF 00-27, "Application of Issue No. 98-5 to Certain Convertible
Instruments", will be amortized over the life of the Private Placement Notes
using the straight-line method, which approximates the interest method. As of
May 7, 2004 the Company has sold 868,000 units for net cash proceeds to the
Company of approximately $725,000 with debt issuance costs of $470,772 and has
issued the underwriter a five-year warrant with an exercise price of $0.40 for
217,000 shares of Common Stock. The Private Placement Offering through the
underwriter expired as of March 23, 2004 and the Company is continuing the
offering without the underwriter.

                                       12
<PAGE>

The maturity date on the $100,000 note payable - stockholder that was not part
of the Conversion (Note 6) was extended to December 31, 2004. As consideration
for the extension, the note holder was granted a warrant that expires on October
30, 2008 for 100,000 shares of the Company's common stock with an exercise price
of $0.75 per share (Note 5). The warrant was valued using the Black Scholes
pricing model. The resulting original issue discount, the fair value of the
warrant, is being amortized over the life of the loan payable using the
straight-line method, which approximates the interest method.

In August 2003, as consideration for the Company not repaying the short term
note payable to purchase inventory, the Company issued a warrant to purchase
240,000 shares of the Company's common stock at an exercise price of $0.50 per
share, expiring in August 2006. The warrant was valued using the Black Scholes
pricing model. The resulting original issue discount, the fair value of the
warrant, is being amortized over the life of the note payable using the
straight-line method, which approximates the interest method. This note has been
extended to June 1, 2004 (Note 5).

As of June 30, 2003, $220,000 was due to the Chairman of the Company's Board of
Directors. This individual advanced an additional $116,000 to the Company to
cover a payment on the bank debt, product development and operating expenses.
These advances are to be repaid on June 30, 2004 and have an annual interest
rate of 6.25% (Note 9).

On April 28, 2004 the Company signed an $830,000 note payable to a bank. The
note has a term of five years and accrues interest at the variable prime rate
(currently 4.0%) plus 2.0%, with a minimum of 6.0% and a maximum of 8.5% and had
a 1.0% origination fee. Repayment terms include interest only through December
2004 with monthly principal and interest payments of $7,042, beginning January
2005. A penalty of 5% on any prepayment in excess of 10% of the loan balance
during the first year of the loan will have to be paid; this prepayment penalty
decreases one percent each year during the term of the loan. The loan is
guaranteed by the Company's Chairman of the Board and a shareholder and the
Company's Chairman has pledged collateral equaling at least 133% of the loan
amount.

$800,000 of the April 28, 2004 bank loan was used to make a payment to the
finance company on the loan to the purchase of cellular telephones that was
entered into on May 3, 2002. The Company anticipates that the remaining
principal and accrued interest due on that loan of $422,457 will be converted
into units of the October 20, 2003 Private Placement Offering for a two-year 10%
debenture convertible into common stock of the Company at a conversion rate of
$0.40 and five-year warrants for 1,267,371 shares with an average exercise price
of $1.00 per share. The Company also anticipates that the Company's Chairman and
a shareholder will each personally guarantee $100,000 of the $422,457
obligation.















                                       13
<PAGE>


        ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

RESULTS OF OPERATIONS

THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 2003 COMPARED JUNE 30, 2002

Net sales increased for the three months ended June 30, 2003 by 795% to $552,883
from $61,761 for the same period in 2002. This increase was the result of
selling Audiovox CDM-135 dual-mode cellular telephones and selling the airtime
to be used on those phones. Net sales increased for the six months ended June
30, 2003 by 625% to $828,549 from $114,334 for the same period in 2002. In
addition to selling dual-mode cellular telephones, this increase was also the
due to receiving a $50,000 one-time license fee.

Cost of goods sold increased from $146,863 to $552,927 or 276% for the three
months ended June 30, 2003 and increased 423% from $152,176 to $795,252 for the
six months ended June 30, 2003 compared to the same periods in 2002. The major
components of the increases were sales of Audiovox CDM-135 telephones and the
increase in airtime volume sold. Inventory was written down by $120,000 in the
second quarter of 2002 to reflect its decrease in market value.

General and administrative expenses increased by $33,733 to $362,260 for the
three months ended June 30, 2003 and decreased by $6,357 to $627,392 for the six
months ended June 30, 2003 compared to the same periods in 2002. The second
quarter increase was primarily the result of a write off of an account
receivable of approximately $90,000 for telephones the Company delivered for
which payment was never received offset by professional fees related to the
merger in the same period in the prior year. For the six-month period, this
increase was offset by not having penalties and interest related to delinquent
prior years' payroll and unemployment taxes in 2003 that were recorded in 2002
(see Note 10 to Consolidated Financial Statements under Item 1). Research and
development costs decreased during the three months ended June 30, 2003 by
$21,148 to $47,176 compared to the same period in 2002 due to a reduction in use
of outside contractors. Management expects general and administrative expenses
to remain at about this level for the rest of the year. The $91,567 increase in
research and development costs to $190,409 for the six months ended June 30,
2003 compared to the same period in 2002 consisted of a $125,000 payment to
Audiovox for software development in 2002 offset by the reduction of outside
contractors in 2003. The expected expenses for the second half of 2003 are for
contract services and are expected to be comparable to the prior year. Marketing
expenses increased from $5,000 to $12,875 for the three months ended June 30,
2003 and from $10,000 to $20,556 for the six months ended June 30, 2003 compared
to the same periods in 2002. The increase for both periods was due to increased
travel related to sales efforts offset by not retaining an outside contractor.
No large marketing expenditures are budgeted for the remainder of 2003.

Interest expense increased by $163,490 to $215,148 during the three months ended
June 30, 2003 and by $274,047 to $343,363 during the six months ended June 30,
2003 compared with the same periods in 2002. This increase was primarily due to
the addition of the short-term note payable to a commercial finance company to
finance inventory in May 2002 (see Note 5 to Consolidated Financial Statements
under Item 1), interest on the promissory notes issued under the Offering and
amortization of original issue discount interest expense of the fair value of
warrants issued under the Offering in the first six months of 2003 (see Note 6
to Consolidated Financial Statements under Item 1).













                                       14
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2003, the Company had total current assets of $418,583, of which
$253,147 was inventory of telephones held for resale. Current assets decreased
by $470,252 from December 31, 2002, primarily as the result of selling telephone
inventory and a reduction of cash which was used in operations. At June 30,
2003, the Company had total current liabilities of $3,417,303. Current
liabilities decreased by $116,462 from December 31, 2002, primarily as the
result of payments on the note to finance inventory and payments on payroll tax
liability. Long term liabilities increase $771,434 during the six months ended
June 30, 2003 as a result of the Conversion and the Revenue Offering (see Notes
5, 6, and 7 to Consolidated Financial Statements under Item 1).

The Company used $457,083 of cash for operating activities during the six months
ended June 30, 2003, primarily the result of a $1,148,355 net loss from
operations for the period which included a non-cash charge of $147,314 for
amortization of original issue discount, offset by a $465,340 decrease in
inventories. The Company had no investing activities during the six months ended
June 30, 2003. Financing activities generated $381,428 during the six months
ended June 30, 2003, which primarily consisted of net proceeds from the Offering
and the Revenue Offering (see Notes 5, 6, and 7 to Consolidated Financial
Statements under Item 1).

Funding operating deficits and current liability payments will continue to
challenge the Company. Operating expenses will continue to exceed revenue in the
near future. Principal and interest obligations on Company debts, accrued
payroll taxes and outstanding accounts payable all require additional cash
payments.

The Company continues to generate operating losses. In 2003, we raised
additional capital of approximately $390,000 by issuing promissory notes under
the Offering for $500,000 of which $400,000 and the related accrued interest
were converted into 2-year notes with annual interest of 10% convertible into
the Company's common stock with a conversion price of $0.40 per share and
five-year warrants with an exercise price of $0.75 per share for every $1.00
converted. We raised gross proceeds of $635,000 (net of approximately $535,000)
in two Revenue Offerings that commenced in April and September 2003 under which
every $50,000 investment is entitled to a revenue share of $0.07 on each PIN
sold over a 29-month period beginning December 2003 with a minimum payback of
150% invested. In October 2003, we commenced the Private Placement Offering to
raise up to $1.5 million in 10% convertible promissory notes and three five-year
warrants with an average exercise price of $1.00 for every $1.00 invested. As of
March 23, 2004, gross proceeds of $868,000 (net of approximately $725,000) have
been raised under this offering.

Our ability to continue as a going concern is dependent on ultimately achieving
profitability and/or raising additional capital. We intend to obtain additional
debt or equity capital to meet all of our existing cash obligations and to fund
our operations, however, there can be no assurance that additional capital will
be available on terms favorable to the Company. We believe that we will need to
raise incremental financing of $600,000 to $800,000 over the next six months
from the date of this filing to finance our operations and service current
liabilities until operating cash flows are sufficient to fund the Company's cash
requirements. There can be no assurance that we can raise the necessary capital
at all or under terms acceptable to us. The report of the Company's independent
certified public accountants for 2002 expresses substantial doubt as to the
ability of the Company to continue as a going concern.

We intend to obtain strategic investors that along with investing cash in the
Company will also generate additional revenue but once again, there can be no
assurance that we will be successful in obtaining any strategic investors.

Additional funds will also be required to add our prepaid software to additional
models of handsets.

At its current stage of business development, the Company's quarterly revenues,
results of operations and cash flows may be materially affected by, among other
factors, market acceptance of the Company and its products, demand for the
Company's products, development and introduction of next generation products,
general economic conditions and negotiations with current debtors. Some of these
factors are not within the control of the Company. As a result, there can be no
assurance that the Company will be sufficiently funded.

                                       15
<PAGE>

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The accounting policies used in preparing our interim 2003 consolidated
financial statements are the same as those described in our Annual Report on
Form 10-KSB for fiscal year ended December 31, 2002. Our significant accounting
policies are:

REVENUE RECOGNITION. The Company recognizes revenue when it is realized and
earned. This generally does not occur until all of the following are met:
persuasive evidence of an arrangement to purchase exists, delivery has occurred,
the price is fixed and collection is reasonably assured. The Company considers
delivery to have occurred when its products are shipped.

SOFTWARE DEVELOPMENT COSTS. Software development costs are expensed as incurred.
Management is required to use professional judgment in determining whether
development costs meet the criteria for immediate expense or capitalization.

ALLOWANCE FOR DOUBTFUL ACCOUNTS. The Company maintains allowances for doubtful
accounts for estimated losses resulting from the inability of our customers to
make required payments. If the financial condition of specific customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required or revenue could be deferred until
collectibility becomes probable. Accounts receivable are shown net of allowance
of $1,500 at both June 30, 2003 and December 31, 2002.

INVENTORIES AND RELATED ALLOWANCE FOR OBSOLETE AND EXCESS INVENTORY. Inventories
are valued at the lower of cost or market. Inventory consists of purchased
cellular telephones. An inventory obsolescence reserve was not considered
necessary at December 31, 2002 since an inventory write down of $545,984 was
recorded during the year. Management does not believe that an inventory
obsolescence reserve is required at June 30, 2003.

LONG-LIVED ASSETS. Property, equipment, and intangible assets are amortized over
their useful lives. Useful lives are based on management's estimates of the
period that the assets will generate revenue. Property and equipment and
intangible assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.

NET LOSS PER COMMON SHARE. Basic net loss per common share is computed by
dividing the net loss by the weighted average number of common shares
outstanding for the reporting period. Diluted net loss per common share is
computed by dividing net loss by the sum of the weighted average number of
common shares outstanding plus all additional common stock that would have been
outstanding if potentially dilutive common shares related to common share
equivalents (stock options and stock warrants) had been issued. Potentially
dilutive common equivalent shares of 5,811,738 and 3,534,329 at June 30, 2003
and 2002, respectively, have not been included in the computation of diluted net
loss per common share for all periods presented because their inclusion would be
anti-dilutive.

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 amounts
reported in the consolidated financial statements and accompanying notes. Actual
results could differ from those estimates.


CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS

Preparing 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 in the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.



                                       16
<PAGE>

This Quarterly Report on Form 10-QSB, including the information incorporated by
reference herein and the exhibits hereto, and other written and oral statements
made from time to time by us may include "forward-looking" statements.
Forward-looking statements broadly involve our current expectations for future
results. Any statement that is not a historical fact, including estimates,
projections, future trends and the outcome of events that have not yet occurred,
are forward-looking statements. Our forward-looking statements generally relate
to our financing plans, trends affecting our financial condition or results of
operations, our growth and operating strategy, product development, competitive
strengths, the scope of our intellectual property rights, sales efforts, and the
declaration and payment of dividends. Words such as "anticipates," "believes,"
"could", "estimates," "expects," "forecast," "intend," "may," "plan,"
"possible," "project," "should," "will" and similar expressions generally
identify our forward-looking statements. You must carefully consider
forward-looking statements and understand that such statements involve a variety
of assumptions, risks and uncertainties, known and unknown, and may be affected
by a number of factors, including, among others, the factors discussed in our
Annual Report on Form 10-KSB for the year ended December 31, 2002.

We also caution you that forward-looking statements speak only as of the date
made. We undertake no obligation to update any forward-looking statement, but
investors are advised to consult any further disclosures by us on this subject
in our filings with the Securities and Exchange Commission, especially on Forms
10-KSB, 10-QSB, and 8-K (if any), in which we discuss in more detail various
important factors that could cause actual results to differ from expected or
historic results. We intend to take advantage of the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995 regarding our
forward-looking statements, and are including this sentence for the express
purpose of enabling us to use the protections of the safe harbor with respect to
all forward-looking statements.

ITEM 3. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Company conducted an
evaluation, under the supervision and with the participation of the Chief
Executive Officer and Chief Financial Officer, of the Company's disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (the "Exchange Act")). Based on this evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures are effective to provide reasonable
assurance that information required to be disclosed by the Company in reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
of the Securities and Exchange Commission. The Company's delinquent filings have
been the result of the Company not having funds available to pay independent
auditors for their services on a timely basis.

The Company also evaluated, with the participation of the Chief Executive
Officer and Chief Financial Officer of the Company, any change in the Company's
internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) that occurred during the fiscal quarter
covered by this Quarterly Report on Form 10-QSB. There was no change in the
Company's internal control over financial reporting identified in that
evaluation that occurred during the fiscal quarter covered by this Quarterly
Report on Form 10-QSB that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting.
Management is aware that there is a lack of segregation of duties due to the
small number of employees dealing with general administrative and financial
matters. However, management has decided that considering the employees involved
and the control procedures in place, risks associated with such lack of
segregation are insignificant and the potential benefits of adding employees to
clearly segregate duties do not justify the expenses associated with such
increases.













                                       17
<PAGE>

                                     PART II
                                OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

On April 13, 2004, Telemac Corporation filed a complaint in the Central District
of California U.S. District Court against Teledigital, Inc. and Tele Digital
Development, Inc. for patent infringement; unregistered mark infringement; false
description, representation and designation; and unfair competition asking the
Court to enjoin the Company from violating Telemac's intellectual property
rights under its patents and unregistered mark and to impose upon the Company
damages for its infringement of Telemac's intellectual property rights.

The Company and its legal counsel have conducted a review of the intellectual
property rights of both the Company and the third party. At this time, the
Company and its counsel do not believe that the third party's intellectual
property rights are as valid and enforceable as asserted.

We believe there are certain defenses and strategies available to the Company to
defend this matter; however, we cannot provide assurance that we will be
successful in defending ourselves against such claims. The Company is in the
process of retaining trial counsel and developing an activities budget to manage
this litigation. It is too early to determine what, if any, business arrangement
will develop as a result of discussions with Telemac, Inc. regarding this
matter. The costs involved in contesting the third party's claims can be
significant, but the Company believes they can be contained while a business
dialogue ensues. Because of the unpredictable nature of this process, there can
be no assurance on the outcome of this exchange or the litigation.

ITEM 2. CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY
SECURITIES

The Company had no sales of unregistered securities during the three months
ended June 30, 2003.

ITEM 3. DEFAULT UPON SENIOR SECURITIES

None

















                                       18
<PAGE>



ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

A special meeting of the stockholders of XOX Corporation, was held on April 9,
2003, with the following matters submitted to a vote and the results of the
vote:

<TABLE>
<CAPTION>
                                                                         Number of shares voted
                                                                         ----------------------
                                                                                                    Broker
                                                             For         Against     Abstained     Non-Vote
                                                          ---------      -------     ---------     --------
<S>                                                       <C>            <C>           <C>
(1) To approve an amendment to the Amended
and Restated Certificate of Incorporation of
the Company to change the name of the
Company from "XOX Corporation" to
"Teledigital, Inc."                                       7,929,453      50,896        44,899           --

(2) To approve an amendment to the Amended
and Restated Certificate of Incorporation of
the Company to:
        (a) Increase the number of authorized shares
        of capital stock to 50,000,000 shares,
        (b) Increase the number of authorized shares
        of common stock to 45,000,000 shares, and
        (c) Eliminate the 5,000,000 shares reserved
        as undesignated shares                            6,433,649     194,739        69,166      1,327,694
</TABLE>

Both matters were approved by the stockholders.

ITEM 5.  OTHER INFORMATION
None
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

All financial statement schedules not listed have been omitted because the
required information is included in the Condensed Financial Statements or the
Notes thereto, or is not applicable.

         (a)      Exhibits

                  31.1 Certification of Chief Executive Officer and Chief
                  Financial Officer pursuant to Rule 13a - 14(a) of the
                  Securities Exchange Act of 1934 (filed herewith
                  electronically).

                  32.1 Certification of Chief Executive Officer and Chief
                  Financial Officer pursuant to 18 U.S.C Section 1350, as
                  adopted pursuant to Section 906 of the Sarbanes - Oxley Act of
                  2002 (filed herewith electronically).

         (b)      Reports on Form 8-K

                  The Company did not file any reports on Form 8-K during the
                  three months ended June 30, 2003.







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<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.

Dated: May 7, 2004                      Teledigital, Inc.



                                        /s/ Richard L. Barnaby
                                        -------------------------------------
                                        Richard L. Barnaby
                                        President and Chief Executive Officer






















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