U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                  Form 10-KSB

                  [ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d)
                   OF THE SECURITIES AND EXCHANGE ACT OF 1934
                  for the fiscal year ended September 30, 2003

               [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
        For the transition period from ______________ to ________________

                        Commission File Number: 0-30611

                                ITS Networks Inc.
                 ----------------------------------------------
                 (Name of small business issuer in its charter)

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

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

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

Securities  registered  under  Section  12(b)  of  the  Exchange  Act:

Title of each class                    Name of each exchange on which registered
-------------------                    -----------------------------------------
      N/A                                               N/A

         Securities registered under Section 12(g) of the Exchange Act:

                          common stock, par value $.001

     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 [X] No

     Check  if  there  is no disclosure of delinquent filers in response to Item
405  of  Regulation S-B is not contained in this form, and no disclosure will be
contained,  to  the  best  of  registrant's  knowledge,  in  definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or  any  amendment  to  this  Form  10-KSB.  [X]

     State  issuer's  revenues  for  its  most  recent  fiscal  year: $6,498,000

     The  aggregate  market  value  of  voting  and  non-voting  equity  held by
     non-affiliates  of  the  registrant as of September 30, 2003: Common stock,
     $.001  par  value:  $16,497,165

      ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS

     Check whether the issuer has 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  [ ].

     The  number  of  shares  of the registrant's common stock outstanding as of
September  30,  2003:  22,420,278  (post-split)  shares.

<PAGE>

     Documents  incorporated  by  reference:  None

     Transitional  Small  Business  Disclosure  Format:

                        Yes [ ]    No  [X]




























                                        2
<PAGE>

                                TABLE OF CONTENTS


PART  I

Item  1.   Description  of  Business                                           4

Item  2.   Description  of  Property                                          18

Item  3.   Legal  Proceedings                                                 18

Item  4.   Submission  of  Matters  to  a  Vote  of  Security  Holders        18

PART  II

Item  5.   Market  for  Common  Equity  and  Other  Stockholder  Matters      18

Item  6.   Managements' Discussion and Analysis or Plan of Operations         20

Item  7.   Financial  Statements                                              25

Item  8.   Changes  in  and  Disagreements  with  Accountants
           on Accounting and  Financial  Disclosure                           25

PART  III

Item  9.   Directors  and  Executive  Officers  of  Registrant                25

Item  10.  Executive  Compensation                                            26

Item  11.  Security  Ownership  of  Certain  Beneficial
           Owners  and Management and  Related  Stockholder  Matters          28

Item  12.  Certain  Relationships  and  Related  Transactions                 30

Item  13.  Exhibits  and  Reports  on  Form  8-K                              30

Item  14.  Controls  and  Procedures                                          31

Financial  Statements                                                         32

Signatures                                                                    34

Exhibit  Index                                                                35



                                        3
<PAGE>

                                     PART I

Item  1.   Description  of  Business.
           --------------------------

General

     ITS  Networks  Inc.  (the "Company") was incorporated under the laws of the
State  of  Florida  on  November  23,  1998.  However,  it  did  not conduct any
significant operations until December 2000 when there was a change in control of
the  Company.  The  new controlling stockholders changed its corporate name from
Technology  Systems  International,  Inc. to ITS Networks Inc. and increased the
authorized  number  of  shares  of  common  stock  from 25,000,000 to 50,000,000
shares.  In  connection  with  the  change of control of the Company in December
2000,  the  Company  acquired all of the issued and outstanding capital stock of
ITS  Europe,  S.L.,  a  Spanish telecommunications company that was organized in
1995.  As  a  result,  ITS  Europe,  S.L.  ("ITS  Europe") became a wholly owned
subsidiary  of  the  Company.

     On  December  15,  2002, the Company consummated a stock exchange agreement
with   the   majority   stockholders   of    Teleconnect  Comunicaciones,   S.A.
("Teleconnect"),  a  company  formed  under  the  laws of Spain which operates a
pre-paid  telephone  card  business  in Spain. The Company agreed to issue up to
1,500,000 shares, after effect of 1 for 2 reverse stock split, of its restricted
common  stock  to  the stockholders of Teleconnect in reliance upon Regulation S
under  the  Securities  Act  of  1933  and  also  agreed to assume and pay up to
approximately  2,200,000  Euro  of  the outstanding debts of Teleconnect; during
September  2003, the Company agreed to the issuance of a total of 2,500,000 post
split  shares  of its Common Stock to the stockholders of Teleconnect to resolve
disputes  regarding  the  Stock Exchange Agreement. During the 2003 fiscal year,
the  operating  activities  of  ITS Europe S.L. was assumed by Teleconnect. As a
result,  substantially  all  of  the  operations of the Company are conducted by
Teleconnect  which  are  primarily comprised of pre-paid and post-paid telephone
services  in  Spain.

     The  Company  is  engaged  in  the  telecommunication industry in Spain and
offers  telecommunications  services  for  home  and  business  use.

     During  the  2003 fiscal year, ITS Networks increased its authorized number
of  shares  of  Common  Stock  from  50,000,000  to  100,000,000  shares.

Telecommunication  Industry  in  Spain
--------------------------------------

     Full  deregulation  was  instituted  in Spain on December 1, 1998, almost a
year  behind  most  other  countries in western Europe, but since that time many
companies have entered the market providing end users with a variety of services
and  competitive  offers.   A  limited  number  of  operators have traditionally
dominated  the  European  telecommunications  market.  In  Spain,  the principal
operator  has  been,  and  still  is,  Telefonica  S.A.

     In  order  to  offer  telecommunications services in Spain, a company  must
apply  for  the  appropriate  license or authorization to conduct business.   In
Spain,  there  are  several  companies  with  carrier licenses which allow these
companies  to  build  their  own  telecommunications  infrastructures  and  also
interconnect  with  Telefonica.  ITS  Europe S.L.  (wholly owned by ITS Networks
Inc.)  possesses an "A" type authorization to resell telecommunications services
and  as  such  cannot  build  its  own  infrastructure.  Hence,  ITS Europe is a
reseller  of  telecommunications products and services.  ITS Europe can also act
as  a  VISP (virtual ISP) reselling Internet Access from actual Internet service
providers.  Teleconnect  does  have  a Carrier "A" license and as such can build
out  its  own  infrastructure.

     Long distance services in Spain have become very competitive since 1999 and
as  such  prices  have  been reduced considerably. Teleconnect focuses primarily
on  offering  inexpensive  international  calling  to foreign residents in Spain
that  make  a  higher than average number of calls internationally.  In order to
offer  this  service,  Teleconnect  resells the long distance services from UNI2

                                        4
<PAGE>

(France  Telecom  subsidiary in Spain). UNI2 has a carrier license in Spain, has
its  own  infrastructure  as  well  as direct international connections to other
carriers.  Teleconnect depends primarily on its relationship with UNI2 such that
any  failure  in  service  from  UNI2  would affect all of its customers of long
distance  calling.

     Several  new  companies  entered  the Spanish market in recent years on the
wave  of  new  technologies such as LMDS and UMTS. The former was intended as an
alternative  to Telefonica's local loop while the latter supposedly offered more
advanced services for mobile users. Today, due to the current market conditions,
a  lack  of  clients, or problems with the technologies, many of these companies
have  either  folded,  joined  together  or  left  their  business  projects  in
hibernation  awaiting  better  times.

Products  and  Services
-----------------------

     The  Company is providing voice telephone services to its customers through
prepaid  calling  cards  as  well  as  residential  and small business accounts.

Calling  Cards.
---------------

     The  Company  offers  various  types  of  pre-paid  calling  cards  to  its
customers.  Prepaid  calling cards are used primarily by tourists, students, and
immigrants.  They  are purchased from a variety of local merchants, kiosks, etc.
These  are cost effective and can be used from hotels, pay phones, public and/or
any  private  telephone.  The calling cards require the user to dial a toll free
prefix number, listen to the instructions, which can be given in either Spanish,
English,  German  or French, and dial in their "code" or "PIN". The code is then
confirmed  and the user dials the number. The calling cards typically have sixty
days  after  first  activation  expiration  date. Teleconnect sold approximately
700,000  calling  cards  during  its  fiscal  year  ended  September  30,  2003.

Residential  Accounts.
----------------------

     For  those  clients  who  have  a  fixed line and/or a mobile provided by a
telecom  operator  in Spain, the Company offers a residential account with which
they can save money on their international calls.  These customers are typically
foreigners  living  in  Spain or having a second home in Spain, as well as small
and medium enterprises with international contacts. During the 2003 fiscal year,
the  Company  offered  prepaid  and  postpaid accounts. The prepaid accounts are
based  on  credit  card  payments,  while  the  postpaid accounts are based on a
monthly  billing  cycle  and  automatic  collecting  system.

     The  prepaid accounts work the same as prepaid calling cards except for the
fact  that  our network recognizes the caller's line identification, so a PIN is
not  needed,  which  is  more  convenient for our customers than using a calling
card.  Customers  can  recharge their balance manually or automatically. Traffic
from  the  prepaid  accounts goes directly through our network, the same as with
prepaid  calling  cards.

     Postpaid  accounts work differently. The Company resells UNI2 long distance
service.    This  service   allows  the   private  or   business  user  to  call
internationally  at  reduced  rates  compared  to  Telefonica,  S.A.'s published
tariffs.  The user can make these calls in either one of two ways; by signing up
for  "preselection"  i.e.  having  all calls from his phone automatically routed
through  ITS-UNI2 even though the local loop is from Telefonica, or by dialing a
4-digit  access code before dialing the international number. In the first case,
it  is  Telefonica  that  automatically directs all calls to UNI2. In the second
case,  an alternative to introducing the 4-digit code, is to have ITS install an
autodialer.  The  Auto  Dialer  is  a  small  piece of hardware installed in the
customer's home or business located between the phone and the phone jack. When a
user  picks  up the handset to make a call, the dialer automatically inserts the
4-digit  code associated with UNI2 (1052) in a fraction of a second and then the
user  dials the number he wishes to reach. The auto dialer automatically directs
all  calls  through to UNI2. Teleconnect has approximately 5,000 customers using
its  telecommunications  calling  services.

                                        5
<PAGE>

WIFI  and  Associated  Services.
--------------------------------

     The  Company  started  in  mid  2002  to  offer WIFI solutions to potential
customers. The WIFI solutions offer wireless internet access at 11Mbps within an
area  of  coverage.  The  Company  was  specializing its coverage in open/public
areas.  This  service  is  particularly  useful  for  hotels,  restaurants, etc.
Teleconnect  provides  the  equipment,  installation,  engineering  project  and
consulting  as  well as the maintenance on the network. Teleconnect had two main
clients  of WIFI. These are the Port of Benalmadena and the Hotel Meli Don Pepe.
At  the  Port  of Benalmadena, the Company installed its open-air WIFI system to
provide  wireless  access  to  over  1,000  potential  boat  owners and to local
restaurants  and cafes. The Port Authority handles signing up the client and the
Company  manages  the network. The Hotel Don Pepe is similar. The local staff at
the front desk offers the service and signs up the client while the Company runs
and  manages  the network. At the hotel, a client with his portable computer has
access  to internet from anywhere on the hotel's property, including the pool or
even  the  beachfront.

     Because  of the integration with Teleconnect, the Company made the decision
to focus its efforts on the Prepaid telephone business and as such sold its WiFi
activities  to  a  third  party.

Marketing
---------

     The  marketing  strategy  of  the  residential  services   of  the  Company
(Teleconnect)  was  focused  during  fiscal  2003  on  foreigners  in Spain. The
customer  base  of  ITS  Europe  was  sold  to Teleconnect. These foreigners are
primarily  located on the coastal areas of Spain, including the islands. Such is
the  case of the long distance phone calling service which is primarily marketed
in  foreign-language  newspapers  and  magazines.  For  this service an end user
simply  dials  the  toll-free  number from the advertisement and the Teleconnect
call  center  can  take  down his information and give him access to the service
almost immediately without having to visit the end user at his home or business.

     In  the  case  of  our  pre-paid  calling  cards, the cards are distributed
throughout  Spain  via  distribution  channels  with  thousands  of  vending
points  as  well  as  via  large  accounts  (retail  chains).

     We  plan to expand our customer base through increased advertising in local
papers  and magazines in order to reach more foreign residents with the types of
calling  habits  we  seek;  i.e.  frequent  international  calling.  A potential
customer  attracted  by  the advertisement would call our Call Center asking for
information and should they wish to sign up they can do so right there and then.
The  Company is primarily focused on foreign residents in Spain with the need to
call  internationally but we do not exclude companies that have a need to reduce
their  international  phone  bill  and  that  call  us,  also  attracted  by our
publicity.  With  respect  to  businesses,  Teleconnect  serves  mainly  smaller
companies located in the coastal regions which traditionally have few options of
telecommunication  suppliers.  Teleconnect is not in a position, due to its size
and  financial  resources,  to  compete against the major carriers for corporate
clients in the big cities. Teleconnect requires additional external financing in
order  to carry out its marketing plans as well as to increase its capacity with
carriers.

Industry  Participants  and  Competition
----------------------------------------

     The  growth  of the telecommunications industry from 1997 to 2003 attracted
many  new  entrants  as well as existing businesses from different industries to
enter  the   telecommunications  business.   Current  and  prospective  industry
participants   include   multinational  alliances,   long  distance   and  local
telecommunications  providers,   systems  integrators,   cable  television   and
satellite  communications  companies,  software  and  hardware vendors, wireless
telecommunications  providers and national, local and regional ISPs. Our present
primary  competitor  is  Telefonica  S.A.  Other significant competitors include
British  Telecommunications  PLC,  France  Telecom  (UNI2),  and  JazzTel.

     Some  participants  specialize  in specific segments of the market, such as
access and/or backbone provision; managed access, e.g., intranets and extranets;
application  services,  e.g.,  Web hosting; security services; and communication
services,  e.g.,  IP-based  voice,  fax  and  video  services.

                                        6
<PAGE>

     In  order  to  become more competitive in the market, Teleconnect will have
to  invest  in  setting  up  additional  switching  infrastructure  in  order to
reduce  its traffic  carrying  cost  (telephone transmission costs). The Company
will  require  additional  funding  in  order  to  be  able  to  do  so.

Regulation
----------

     General.  The  Spanish  government  undertook  a  process  of  revising the
legislative   and   regulatory  scheme  applicable   to  participants   in   the
telecommunications  industry  in  preparation  for  the  liberalization  of  the
telecommunications market in December 1998. As the main step in this process, on
April  24,  1998,  the  Spanish  Parliament  passed  the  new   General  Law  on
Telecommunications (Law 11/1998). This law was published in the Official Gazette
on  April  25,  1998  and  took  effect  on  April  26,  1998.

     The  General Law on Telecommunications repealed and replaced nearly all the
existing  laws  and regulations on telecommunications (including laws regulating
satellite  and  cable  telecommunications). In general terms, the General Law on
Telecommunications   adopted  all   European  Union  directives   mandating  the
liberalization  of  telecommunications services. Among other things, the General
Law  on  Telecommunications  addresses  the  following  matters  relating to our
business:

     *    conditions  for  granting  licenses  to  provide  telecommunications
          services;  and

     *    the  obligation  of  telecommunications providers to extend service to
          rural  areas  and  the  financing  of  associated capital expenditures

     European  Union  Regulations.  Since 1995, the European Union has adopted a
number  of directives that regulate the provision of telecommunications services
in  European  Union  member  states,  including:

     *    regulations  designed  to  ensure  the  full   liberalization  of  the
          telecommunications  sector;

     *    regulations  which impose standard conditions throughout member states
          for  granting  individual  licenses  and  general  authorizations;

     *    regulations  regarding  access  and  interconnection between competing
          operators;

     *    regulations  dealing  with  the  universal  service  obligation;

     *    regulations  requiring  member states to allocate wireless radio based
          services  according  to  the  DCS-1800 standard and the UMTS standard;

     *    regulations relating to telecommunications data protection and privacy
          regulations;  and

     *     regulations  for  unbundled  access  to  the  local  loop.

     The General Law on Telecommunications and other applicable Spanish law were
designed  to  implement all applicable European Union directives with respect to
the  provision of telecommunications services. In 1999, the European Union began
to  revise  the   directives   in  force  with   respect  to  the  provision  of
telecommunications  services.  Today, Spain has revised its regulatory framework
to  comply  with  the  revised  directives.

     Regulatory Framework. The provision of telecommunications services in Spain
is  regulated  and  overseen  by the Spanish government through the Secretary of
State  for Telecommunications and Information Society, a unit of the Ministry of
Science  and  Technology.  The  Ministry  of  Science and Technology has various
powers,  including  in  certain  cases  the  authority  to   grant  licenses  or
authorizations,  if  applicable,  for  telecommunications services and to impose

                                        7
<PAGE>

sanctions for certain infringements of the General Law on Telecommunications. An
additional independent oversight body, the Telecommunications Market Commission,
was  created  in  1996.  The Telecommunications Market Commission supervises the
activities  of  telecommunications  operators  and  has  the  authority to grant
licenses for telecommunications services and to arbitrate any conflicts that may
arise  between  operators, subject to the consent of the interested parties. The
Telecommunications  Market  Commission is also responsible for safeguarding free
competition  in  the  telecommunications  market,  particularly with regard to a
plurality  of service offerings, access to networks and network interconnection.
With  regard  to  interconnection,  the Telecommunications Market Commission may
make a binding decision in respect of any conflict between operators and may fix
tariffs (other than for regulated services), such as interconnection charges, in
the  event  of  disputes.

     The  Telecommunications  Market  Commission  has  advisory  and arbitration
responsibilities  with  respect  to  tariffs  for  end  user services. It issues
reports   on  all   proposed  tariffs   and  the   regulation   of   prices  for
telecommunications  services.  It  also  issues  reports on proposed tariffs for
exclusive  services  or  services  for  which  a  dominant  operator  exists.

     The   General  Law   on   Telecommunications.     The   General   Law    on
Telecommunications  culminates  the  liberalization process initiated in 1987 in
Spain  with  the  enactment   of  the   Telecommunications  Regulation  Law  and
establishes  a   regulatory   framework  for   telecommunications   services  in
accordance  with  applicable  European  Union  directives.  The  General  Law on
Telecommunications   provides   for  free  competition  with  respect   to   all
telecommunications  services  and with respect to the construction and operation
of  telecommunications  networks,  subject  to governmental licensing or general
authorization  requirements.  Individual  licenses  are  required:

     *    to  construct  or  operate  public  telecommunications  networks;

     *    to  provide  fixed-line  telephone services to the general public; and

     *    to  provide  telecommunications  services  or  construct  or  operate
          telecommunications  networks  using  radio  spectrum.

     The  Spanish  government  may determine pursuant to Royal Decree that other
activities  and  services  require individual licenses. In all other cases where
the  type of service or network does not fall within the scope of the individual
license   regime,  only   a  general  authorization   is  required.   A  general
authorization is automatically granted to any party who fulfills basic licensing
requirements.

     The  Ministry of Science and Technology may, in order to guarantee the most
efficient  use  of  radio  electric  spectrum,  limit  the  number of individual
licenses it will grant, in which case individual licenses will be granted to the
winner  of  a  bidding  contest  administered  by  the  Ministry  of Science and
Technology.

     Tariffs.   Under   the   general   principles   of  the   General  Law   on
Telecommunications, operators are free to fix tariffs. Nevertheless, the Spanish
government's Delegate Commission for Economic Affairs has the authority, subject
to  the  issuance  of  a  report by the Telecommunications Market Commission, to
establish  fixed,  maximum  or  minimum tariffs, or to determine the criteria by
which to establish tariffs and the mechanism for their control. In doing so, the
government's  Delegate  Commission  for Economic Affairs must take into account:

     *    the  effective  cost  of  the  applicable  service;  and

     *    the  degree  of  competition in the market for the applicable service.

     The  General  Law  on  Telecommunications  recognized  the  existence of an
imbalance  in  the  tariffs  charged for fixed-line telephone services as of the
date  of  its enactment and the need to rebalance such tariffs.  The General Law
on  Telecommunications  further  recognized  the possibility of compensating the
dominant  operator  (Telefonica  de  Espana, a subsidiary of Telefonica) for the
access  deficit  which  may  result  from  the  existing  rate  imbalance.

     Interconnection.  The  General Law on Telecommunications requires owners of
public  telecommunications  networks  to  allow competitors to interconnect with

                                        8
<PAGE>

their   networks   and   services  at   non-discriminatory   rates   and   under
non-discriminatory  conditions.  The  General Law on Telecommunications provides
that  the  conditions  for  interconnection  are  to  be freely agreed among the
parties  while  the  government  has  the  authority  to  establish  the minimum
conditions  for  interconnection  agreements,  which  must  be  included  in all
interconnection  agreements.  On  July  24,  1998, the government issued a Royal
Decree  elaborating  the  regulations  relating  to  interconnection.  Where the
parties  are  unable  to  reach  an  agreement,  the  Telecommunications  Market
Commission  may  impose  the  obligations to interconnect upon the conditions it
dictates.  Similarly,  the  Telecommunications  Market  Commission  may  release
certain  network  owners,  temporarily  and  on  a  case-by-case basis, from the
obligation  to interconnect where there are technical or commercial alternatives
to  such  interconnection.

     Although under the General Law on Telecommunications interconnection prices
may  be  freely  negotiated,  prices  charged  by  Telefonica  de Espana, as the
dominant operator in Spain, are determined by an Interconnection Offer Framework
approved  by  the  government.

     In  August  2001,   the   Telecommunications  Market  Commission   approved
modifications  to the Interconnection Offer Framework, which include among other
things, new interconnection prices that are between 20% and 30% below previously
existing interconnection prices. Consequently, on September 11, 2001, Telefonica
S.A.  filed a petition with the Telecommunications Market Commission against the
new  interconnection prices, claiming that they are below Telefonica de Espana's
actual costs, as measured in accordance with accounting criteria approved by the
Telecommunications    Market    Commission.    On    November   2,   2001,   the
Telecommunications  Market Commission dismissed Telefonica de Espana's petition,
except with respect to interconnection rates in connection with Internet access.
As  a  result,  Telefonica  de  Espana  is  seeking  relief  through
administrative  litigation.

     The modifications to the Interconnection Offer Framework approved in August
2001  provide  for  interconnection based on capacity as well as time.  In early
2002,  the Telecommunications Market Commission introduced further modifications
to  the  Interconnection  Offer  Framework  with  respect to intelligent network
services  and establishment of prices for the interconnection of circuits, which
were  reduced  by  approximately  25%.

     Public  Service Obligation.  The General Law on Telecommunications provides
that  the  owners  of  public  telecommunications networks, as well as operators
rendering telecommunications services on the basis of an individual license, are
subject  to  certain  public  service  obligations.  In  addition, some of these
obligations  may  be  imposed  on  operators  whose  services  require a general
authorization.

     The  public  service  obligations  include:

     *    the  universal  service  obligation,  which is elaborated in the Royal
          Decree  of  July  31,  1998;

     *     the  compulsory  services  obligation;  and

     *     other  public  service  obligations.

     The  universal  service  obligation  consists  of the obligation to provide
basic  telephone  to  all  end  users  within  Spain,  free  telephone directory
services,  sufficient public pay phones throughout Spain and access to telephone
services  for  disabled people.  These services must be provided by the dominant
operator  in each territory, and in certain cases, by another operator, pursuant
to  regulations.  Telefonica  is  the  dominant  operator in each territory and,
according  to  the  General  Law  on  Telecommunications,  Telefonica   will  be
considered  to  be  the  dominant  operator until at least 2005.  If meeting the
universal  service  obligation  in a particular territory is loss-producing, all
operators  in  that  territory  could be obligated to contribute to meeting this
obligation  through  the  National  Fund  for  Universal  Service.

     The  compulsory  services  obligation  enables  the government to appoint a
telecommunications  operator  to  provide  certain  essential telecommunications
services,  such  as  emergency call services and telex, telegraphic and maritime
communications.    Telefonica   was  designated  as  the  provider  of  maritime

                                        9
<PAGE>

communications  services.  Telefonica  may  in  the  future be designated as the
provider  of  other  telecommunications  services.  The  Spanish  government may
establish  further  public service obligations to the extent that the government
determines  that  such  services  are not adequately provided, are in the public
interest  or  are  necessary  for  national  defense.

     In  December  2001, the Spanish government adopted a ministerial order that
governs  certain  aspects  of  the universal service obligation, including among
others:

     *    maximum  time  periods for the provision of initial interconnection to
          telecommunications  networks;

     *    requirements  with  respect  to the guarantee of continuing fixed-line
          telephone  service  to  the  public;

     *    criteria  with respect to the information included in public telephone
          directories;  and

     *    standards  for  the  quality  of service and systems for measuring the
          quality  of  services.

     Terminal  Equipment.  The  General  Law on Telecommunications provides that
consumers  may  freely  purchase  or  lease  any  terminal  equipment, including
telephone  sets,  and  connect that equipment to the telecommunications network.
All  terminal  equipment is required by the General Law on Telecommunications to
meet  certain technical specifications and safety requirements and is subject to
the  prior  approval  of  the  Secretary  of  State  for  Telecommunications and
Information  Society.

     Ownership  Limitations.  Pursuant to the General Law on Telecommunications,
direct  or  indirect investments in us and by foreign persons may not exceed 25%
of  our  share  capital  unless  otherwise   provided   for  by  the  applicable
international  treaties  or  agreements,  including  the  Fourth Protocol of the
General  Agreement  on  Trade  in  Services (GATS), or authorized by the Spanish
government.  Pursuant  to  European Union directives, citizens of other European
Union  member  states,  including  entities domiciled in such countries, are not
considered  foreign  persons for the purposes of this provision.  However, under
Spanish  law  any  foreign  investment  by  non-European  Union  governments and
state-owned  and  state-controlled  entities  (regardless  of the amount of such
investment)  requires  the Council of Minister's prior approval unless otherwise
provided  for  in  the  applicable  treaties.  For purposes of computing the 25%
threshold,  only  holdings  of  capital  stock in excess of 5% and holdings that
would  entitle  the  foreign  investor  to  designate  a  member of our Board of
Directors  are  taken  into  account.  The  25%  threshold does not apply to our
subsidiaries  generally.  However,  certain  of  our subsidiaries may be subject
independently  to  similar  constraints.

     Telefonica S.A. is currently the only significant provider of comprehensive
local  service.  This  is  expected to change gradually as other cable operators
develop  their  networks.  In addition, in March 2000, the government issued six
new  licenses  (in addition to those previously awarded to Retevision and Lince)
for  the provision of local multipoint distribution services (LMDS), and the new
licensees  have begun to deploy their networks. These new licensees compete with
Telefonica  S.A.in  the  local  access  market.

     Pursuant  to  a  Royal  Decree adopted in December 2000, Telefonica S.A. is
required  to  implement  local  loop  unbundling,  line  sharing  and  sub  loop
unbundling.  Local loop unbundling enables other telecommunications operators to
provide  telecommunications  services,  including  DSL-type   services,  to  end
customers  using  Telefonica  S.A.'s  existing local loop (i.e., the connections
between  the  customer's  premises  and  the  exchange)  to  connect  with their
customers.  Other operators may install their own equipment either in Telefonica
S.A.'s exchanges or in nearby buildings to provide this service. Telefonica S.A.
has  offered  local  loop  unbundling since January 2001. Line sharing similarly
enables  other  telecommunications   operators  to  provide   telecommunications
services  using  a high frequency portion of Telefonica S.A.'s copper loop on an
unbundled  basis.  Therefore, shared access to the local loop enables a consumer
to  retain  Telefonica  S.A.  for voice service and use a competing operator for
high  speed  data  services.  Telefonica S.A. introduced line sharing in January
2001.

     In January 2001, Telefonica S.A. published its local loop unbundling offer.
The  tariffs  were  initially  approved  by the Delegate Commission for Economic

                                       10
<PAGE>

Affairs  of  the  Spanish government and later revised by the Telecommunications
Market  Commission  in certain respects. The monthly tariff for direct access to
the  local  loop  is 12.6 Euro, the monthly tariff for shared access is 4.8 Euro
and  the  monthly tariff for indirect access is between 22 and 90 Euro depending
on  the  speed  of  the  connection.

     Competition  in   domestic  and   international   long-distance   services,
particularly  in  the   residential   segment,  is   based  on   access  through
interconnection  with  Telefonica  S.A.  Since 2001, Telefonica S.A.'s customers
have  been  able  to  select alternative providers of domestic and international
long-distance  services without having to dial a designated code prior to making
each  call.  Preselection allows customers to choose their preferred local, long
distance,  international  long-distance  and  fixed-to-mobile  carrier.

     Telefonica  S.A.  faces indirect competition in international long-distance
services  from  a number of sources, including calling cards, call-back services
and  call  rerouting  by  other international operators. In addition, Telefonica
S.A.  competes  with  a  number  of international operators for the provision of
closed  user  group communications services to multinational and large corporate
customers  and  with  a  number  of  providers  of  data  transmission services.

     Type  A  License.  The Company holds a Type A license for telecommunication
and  fixed-line  networks.  This  license authorizes the provision of fixed-line
public  voice  telephone  service  through  the use of third-party switching and
transmission  equipment  without  the   corresponding  obligation  or  right  to
establish  and  operate  a  network  as  in  the  case  of  a  Type  B  license.

     Regulation  in  the United States.  Our operations are in Spain and as such
are  not  currently  subject to regulation in the U.S., either at the federal or
state  level.

Employees
---------

     As  of  September  30,  2003,  the  Company  and  its  subsidiaries  had 35
full-time  employees.  Of  the total  number  of 35 employees, 2 were engaged in
general  management, 16 in operations, 7 in marketing and sales, 7 in accounting
and  finance,  and  3  in  human  resources  and office management.  None of the
Company's  employees are represented  by  a  labor  union  with  respect  to his
or  her  employment  by  the  Company.

     The  Company  has experienced no organized work stoppages and believes that
its  relationship  with  its  employees  is  good.  None  of  our  employees are
represented  by  a  union.  The Company believes that an important factor in its
future  success  will  be  its  ability  to  attract and retain highly qualified
personnel.  Competition  for such personnel in the industry in Spain is intense.
There  can  be no assurance that the Company will be successful in attracting or
retaining  such  personnel,  and the failure to attract or retain such personnel
could  have a  material  adverse effect on the Company's business and results of
operations.  In  such  competitive environment, Teleconnect, as a small reseller
of  others   long-distance   telephone   service,   must  differentiate   itself
based  primarily  on  good customer care, ease for the customer to work with us,
clarity  of  its  invoices  and  quick  response  to service problems.  Since we
cannot pay high material  incentives to the  employees,  we attempt to provide a
healthy,  enjoyable   working   environment  where  personal   achievements  and
contributions  are  recognized.

Banking  Arrangements
---------------------

     The Company has a 200,000 euro bank loan from the BBVA bank in Madrid.  The
Company  intends to rely primarily upon equity and debt financing to finance its
operations.

Risk  Factors
-------------

     We  May  Not  Achieve  or Sustain Profitability in the Future. We are at an
early  stage of executing our new business plan implemented in May 2003. We have
incurred substantial net losses and negative cash flow from operations since our
inception.  As  of  September  30,  2003,  we  had  an  accumulated  deficit  of

                                       11
<PAGE>

$(14,094,000)  and  a stockholders' deficit of $(7,496,000). For the years ended
September  30,  2003,  and  2002,  we  had  net  losses  of  $(10,031,000),  and
$(1,284,000),  respectively.  We  may also in the future incur operating and net
losses  and  negative  cash  flow  from  operations,  due in part to anticipated
increases  in expenses for expansion of our sales and marketing capabilities. We
may  not  be  able  to  achieve  or  maintain  profitability.

     If our telecommunications services do not become widely used in our market,
it  is  unlikely  that  we  will  be  profitable.

     In order to be successful, and to achieve our strategic objectives, we must
successfully,  timely  and  cost-effectively  expand  our  network capacity with
carriers  and  expand our hardware switching platform.  We must also continue to
have  at  all  times  the  right  product/price  mix  for  each  target  market.

     Going  Concern  Qualification by Auditors.  The accountants' reports of the
independent  certified  public  accountants of the Company for fiscal years 2003
and 2002 express a going concern qualification by the auditors.  The Company has
had  recurring  operating  losses  for  the  past  several  years  which  raises
substantial  doubts  about  its  ability  to  continue  as a going concern.  See
Independent Auditors' Report(s), Note 2 to the Consolidated Financial Statements
of  the  Company, and Management's Discussion and Analysis or Plan of Operations
-  Plan  of  Operations.

     Information  Structure.  We  must  continue  to  develop   and  expand  our
information  systems  infrastructure as the number of our clients and the amount
of  information  they wish to access, as well as the number of services which we
offer,  increase.    The   development  of   our   Information  Systems  network
infrastructure  will  require  substantial financial, operational and management
resources.  We  may  not  be  able  to expand our network adequately to meet the
demand  for  increased  usage.  If  we  do not adapt our systems rapidly enough,
additional  stress may be placed on our network hardware, the traffic management
and other systems and operating facilities. Our network may be unable to service
a  substantial number of additional clients while maintaining high performance ,
timely  and  accurate  billing  and  high  level  customer  care. Expanding is a
function  of  having  the  necessary  funds  available.

     Transmission  Availability.   A  variety  of   factors,  uncertainties  and
contingencies  that  are  beyond  our  control,  such  as  the  availability  of
transmission  capacity,  the  price  of  transmission  capacity, availability of
wireless  transmission  capacity   and  technologies,   local  regulations   and
availability  of  sales  representatives  or other third party sales and support
channels  will  affect  the  expansion  of  our  network.  A failure of adequate
transmission  facilities  in  certain  new  locations  as  we expand our service
coverage as planned may have a material adverse effect on our ability to service
our  clients  and  grow  our  business.  Expanding  is  a function of having the
necessary  funds  available.

     Growth.  Our  limited  growth  has  been  a  function  of  not  having  the
necessary funds available to invest in capacity and equipment.   This has placed
a  significant  strain  on  our  management,  financial  controls, operating and
accounting  systems,  personnel  and  other resources.   We currently  rely on a
relatively  small  core  management team.  If we grow, we must not  only  manage
demands  on  this  team  but  also  increase  management resources, among  other
things,  to continue to expand, train and manage our employee base and  maintain
close  coordination  among  our technical, accounting, financing, marketing  and
sales  staff.  In  addition,  our  network  infrastructure,  technical  support,
applications,  and  other  resources  may  not  be  sufficient to facilitate our
growth.  If  we  do  not  successfully  manage  our  growth, we may be unable to
adequately  support  our  clients'  communications  needs  in  the  future.

     Our  challenge  is  to  expand  our services and increase our customer base
simultaneously  so  that both are increased in a proportional relationship which
allows them to mutually support each other.  Rapid expansion of our service area
or  technical  facilities and capacity, without the customer base to support it,
would  be  inefficient and result in a substantial decrease in financial return.
Likewise,  a substantial increase in our customer base which cannot be supported
by  our technical facilities and service area would impact the Company's ability
to service its customers in a detrimental way and might result in an unfavorable
sales  environment  and  inability  to  maintain  the  Company's  customer base.

     Customer  Retention.  Our  ability  to  retain our clients and provide them
with  new and innovative service offerings may suffer if we are not able to keep

                                       12
<PAGE>

up  with  the  rapid  technological developments in our industry and continue to
ensure competitive prices of our services.  In addition, even though the current
telecoms  market  conditions are weeding out many players, other new competitors
are  arising from large, solid companies traditionally dedicated to telecoms and
other  non-telecoms  business.

     Technological  Changes.  The  global  communications industry is subject to
rapid  and significant technological changes, such as continuing developments of
alternative  technologies  for  providing  high-speed  data  communications.  We
cannot  predict  the  effect  of technological changes on our business.  We will
rely  in  part on third parties, including some of our competitors and potential
competitors,  for the development of and access to communications and networking
technologies.  We  expect  that  new services and technologies applicable to our
market will emerge.  New products and technologies may be superior and/or render
obsolete  the  products  and  technologies  that we currently use to deliver our
services.  Our  future success will depend in part, on our ability to anticipate
and  adapt  to technological changes and evolving industry standards.  We may be
unable  to  obtain access to new technologies on acceptable terms or at all, and
we  may  be  unable to obtain access to new technologies and offer services in a
competitive  manner.

     Management  Changes.  If  members  of  our senior management team leave the
Company,  then  our  ability to operate our business may be negatively affected.

     Our  future  success  depends  to  a  significant  extent  on the continued
services  of  our  senior  management,  particularly Gustavo Gomez and Herman de
Haas, and other employees of the new executive team.  The loss of their services
or  any  other  present  or  future key employee, could have a material  adverse
effect  on  the  management  of  our  business.  We  do  not  maintain  "key
person"  life  insurance  for  any  of  our  personnel.

     Competition  for  Employees.  Competition  for  highly-skilled personnel is
intense  and  the  success  of our business depends on our continuing ability to
attract  and retain highly-skilled employees.  As we  grow, we will need to hire
additional  personnel  in  all  areas.  Competition for personnel throughout the
data  and  voice  communications  industries  is  intense.  We  may be unable to
attract  or  retain  key  employees  or  other highly qualified employees in the
future.  We  have  from  time  to time in the past experienced, and we expect to
continue  to  experience  in  the  future,  difficulty  in  hiring and retaining
highly-skilled  employees with appropriate qualifications.  If we do not succeed
in  attracting  sufficient new personnel or retaining and motivating our current
personnel,  our  ability  to  provide our services could diminish.  Toward  this
goal,  we  established  an employee  Stock  Option,  SAR  and  Stock  Bonus Plan
during  fiscal  2002  for  the  benefit  of  our  employees.

     Sales  Relationships. If we are unable to maintain our sales representative
and  third-party  sales  channel  relationships,  then  our  ability to sell and
support  our  services  may  be  negatively  impacted.

     We  are  and  will  continue  to  be significantly dependent on a number of
third-party   relationships,   including  UNI2   (France  Telecom),   our  sales
representatives  and  partners, to market and support our services.  Many of our
arrangements  with third-party providers are not exclusive and may be terminated
at the convenience of either party.  We cannot provide any assurances that these
third  parties  regard  our  relationship  with  them  as important to their own
respective  businesses  and  operations,  that  they  will  not  reassess  their
commitment  to  us  at  any  time in the future, that they will meet their sales
targets  or  that  they  will  not  develop  their  own  competitive  services.

     We  may  not  be  able  to  maintain  our current relationships or form new
relationships  with  third  parties  that  supply  us  with clients, software or
related  products  that  are  important  to our success.  Accordingly, we cannot
provide  any  assurances  that  our  existing  or prospective relationships will
result  in  sustained  business   partnerships,  successful   offerings  or  the
generation  of  significant  revenues.

     We  rely  on  our  sales  representatives or distribution channels for some
of  the  support and local implementation necessary to deliver our services on a
broad  basis.  We  also  rely  on  these  sales  representatives or distribution
channels for  insights into local operating and market conditions.  The  failure
of  these  sales  representatives  to  perform  their  tasks  or  perform  their
responsibilities  effectively  could,  in  turn, adversely affect our  business.

                                       13
<PAGE>


     Regulatory  Approvals.  The Company directly assumes the responsibility for
obtaining  the  regulatory  approvals and licenses that it may need to offer our
communications  services  in  other  jurisdictions  and  provinces.

     Suppliers. Delays in receiving transmission capacity or delays in equipment
delivery  or  loss  of  our  equipment suppliers could impair the quality of our
services  and  our  growth.

     We  acquire,  by  lease  or by purchase, transmission capacity from various
suppliers  to  connect  client  premises  to  our  network and for other network
connections.  We  have  from  time  to  time  experienced  short-term  delays in
receiving  the  requisite  transmission  capacity  from  suppliers. There are no
assurances  that  we  will be able to obtain these services in the future within
the  time  frames  required  by  us  at a reasonable cost. Any failure to obtain
transmission capacity on a timely basis and at a reasonable cost in a particular
jurisdiction,  or  any  interruption  of  local  access  services, could have an
adverse  effect  on  our  service  levels  and  our  growth.

     Service Disruptions. If our network infrastructure is disrupted or security
breaches  occur,  we  may  lose  clients  or  incur  additional  liabilities.

     We  and  other service providers may in the future experience interruptions
in service as a result of fire, natural disasters, power loss, or the accidental
or  intentional  actions  of  service  users,  current  and former employees and
others.  Although  we continue to implement industry-standard disaster recovery,
security  and  service  continuity  protection  measures, including the physical
protection  of  our  offices  and  equipment, similar measures taken by us or by
others  have been insufficient or circumvented in the past. We cannot assure you
that  these measures will be sufficient or that they will not be circumvented in
the  future.  Unauthorized  use  of our network could potentially jeopardize the
security  of  confidential  information  stored  in  the   computer  systems  or
transmitted by our clients. Furthermore, addressing security problems may result
in  interruptions, delays or cessation of services to our clients. These factors
may  result  in  liability  to  us  or  our  clients.

     Competition.  The  markets  we  serve  are   highly   competitive  and  our
competitors  may have much greater resources to commit to growth, new technology
and  marketing.

     Our  current and potential competitors include other companies that provide
voice  and  data  communications  services  to multinational businesses, systems
integrators,  national  and  regional   Internet  Service  Providers,  or  ISPs,
wireless,  cable television and satellite communications companies, software and
hardware  vendors,  and global, regional and local telecommunications companies.
In  addition,  we  expect  that  the  predicted  growth  of  the  voice and data
communications  market  will  attract  other  established and start-up companies
building global networks and beginning to offer voice and data communications as
part  of  a  comprehensive  communications services portfolio.  Our competitors,
which  may  operate  in  one  or  more of these areas, include companies such as
Telefonica  S.A.,   British  Telecommunications,  or  BT,  and  France  Telecom.
Our   sales  representatives   and   suppliers  could  also  become  competitors
either  directly  or  through  strategic  relationships  with  our  competitors.

     Many of our competitors have substantially greater financial, technical and
marketing  resources,  larger  customer bases, greater name recognition and more
established  relationships  in  the  telecommunications industry than we do.  We
cannot  be  sure  that  we  will  have  the  resources  or  expertise to compete
successfully  in  the  future.  Our  competitors  may  be  able  to:

     *    develop and expand their network infrastructures and service offerings
          more  quickly;

     *    adapt  better  to  new  or  emerging  technologies and changing client
          needs;

     *    take  advantage  of acquisitions and other opportunities more readily;

     *    devote  greater  resources to the marketing and sale of their services
          and  products;  and

     *     adopt  more  aggressive  pricing  policies.

                                       14
<PAGE>

     Some of our competitors may also be able to provide clients with additional
benefits  at  lower  overall  costs.  We  cannot be sure that we will be able to
match  cost reductions of our competitors.  In addition, we believe it is likely
that  there will be additional consolidation in our market, which could increase
competition  in  ways  that  may  adversely  affect  our  business,  results  of
operations  and  financial  condition.

     Variable Revenues and Operating Results. Our revenues and operating results
may  vary  significantly from quarter to quarter due to a number of factors, not
all  of  which  are  in  our  control.  These  factors  include:

     *    the  size  and timing of significant equipment and software purchases;

     *     the  timing  of  new  service  offerings;

     *     changes  in  our  pricing  policies  or  those  of  our  competitors;

     *    the  timing  and  completion of the expansion of our service offering;

     *    market  acceptance  of voice and data communications generally, and of
          new  and  enhanced  versions  of  our  services  in  particular;

     *     the  length  of  our  contract  cycles;  and

     *    our  success  in  expanding  our  sales  force  and  expanding  our
          distribution  channels.

     In  addition,  a  relatively large portion of our expenses are fixed in the
short-term,  particularly  with  respect  to  global   communications  capacity,
depreciation,  office  lease  costs  and  interest  expenses  and personnel, and
therefore  our  results of operations are particularly sensitive to fluctuations
in  revenues.  Due  to the factors noted above and other risks discussed in this
section,  you  should not rely on period-to-period comparisons of our results of
operations.  Quarterly results are not necessarily meaningful and you should not
unduly  rely on them as an indication of future performance. It is possible that
in  some  future  periods our operating results may be below the expectations of
public  market  analysts  and  investors. In this event, the price of our Common
Stock  may  not  increase  or  may  fall. Please see Management's Discussion and
Analysis  of  Financial  Condition  or  Results  of  Operations.

     Governmental  Regulation.    We  face  uncertain  and  changing  regulatory
restrictions which could limit our operating flexibility and increase our costs.

     We  currently  hold  authorizations  for  international  telecommunications
services between  Spain  and  other countries based on a third party's networks.
Future  regulatory,  judicial  and  legislative  changes  in  Spain  may  impose
additional  costs  on us or restrict our activities.  In addition, regulators or
third  parties  may  raise  material  issues  with regard to our compliance with
applicable  regulations.  Failure  to comply with applicable laws or regulations
in  Spain  could  prevent  us  from carrying on our operations cost effectively.

     The law relating to the liability of online services companies and Internet
access  providers  for data and content carried on or disseminated through their
networks  is  currently unsettled and could expose us to unforeseen liabilities.
It  is  possible that claims could be made against online services companies and
Internet  access   providers   under  the  laws  of  Spain  and/or  EU  law  for
defamation,  negligence,  copyright or trademark infringement, or other theories
based  on  data  or  content disseminated through their networks, even if a user
independently originated this data or content.  Several private lawsuits seeking
to impose liability upon online services companies and Internet access providers
have  been filed in U.S. and foreign courts.  While the United States has passed
laws  protecting  Internet  access  providers  from  liability  for  actions  by
independent users in limited circumstances, this protection may not apply in any

                                       15
<PAGE>

particular  case at issue.  In addition, some countries, such as China, regulate
or  restrict the transport of voice and data traffic in their jurisdiction.  The
risk  to us, as an Internet access provider, of potential liability for data and
content  carried  on  or  disseminated  through  our  system could require us to
implement  measures  to reduce our exposure to this liability.  This may require
us  to expend substantial resources or to discontinue some of our services.  Our
ability  to  monitor,  censor or otherwise restrict the types of data or content
distributed  through  our  network  is  limited.  Failure  to  comply  with  any
applicable  laws  or  regulations  in  particular  jurisdictions could result in
fines,  penalties  or  the  suspension  or  termination of our services in these
jurisdictions.  The negative attention focused upon liability issues as a result
of these lawsuits and legislative proposals could adversely impact the growth of
public  Internet  use.  We  do  not  presently  have  any professional liability
insurance.  Our  professional  liability  insurance  in  the  future  may not be
adequate  to  compensate  or  may  not  cover  us  at  all in the event we incur
liability for damages due to data and content carried on or disseminated through
our  network.  Any  costs not covered by insurance that are incurred as a result
of  this liability or alleged liability, including any damages awarded and costs
of  litigation,  could  harm  our  business  and  prospects.

     It  is possible that claims could be made against online services companies
and  Internet  access  providers  under  the  laws  of  Spain  and/or EU law for
defamation,  negligence,  copyright or trademark infringement, or other theories
based  on  data  or  content disseminated through their networks, even if a user
independently originated this data or content.  Several private lawsuits seeking
to impose liability upon online services companies and Internet access providers
have  been filed in U.S. and foreign courts.  While the United States has passed
laws  protecting  Internet  access  providers  from  liability  for  actions  by
independent users in limited circumstances, this protection may not apply in any
particular  case at issue.  In addition, some countries, such as China, regulate
or  restrict the transport of voice and data traffic in their jurisdiction.  The
risk  to us, as an Internet access provider, of potential liability for data and
content  carried  on  or  disseminated  through  our  system could require us to
implement  measures  to reduce our exposure to this liability.  This may require
us  to expend substantial resources or to discontinue some of our services.  Our
ability  to  monitor,  censor or otherwise restrict the types of data or content
distributed  through  our  network  is  limited.  Failure  to  comply  with  any
applicable  laws  or  regulations  in  particular  jurisdictions could result in
fines,  penalties  or  the  suspension  or  termination of our services in these
jurisdictions.  The negative attention focused upon liability issues as a result
of these lawsuits and legislative proposals could adversely impact the growth of
public  Internet  use.  We  do  not  presently  have  any professional liability
insurance.  Our  professional  liability  insurance  in  the  future  may not be
adequate  to  compensate  or  may  not  cover  us  at  all in the event we incur
liability for damages due to data and content carried on or disseminated through
our  network.  Any  costs not covered by insurance that are incurred as a result
of  this liability or alleged liability, including any damages awarded and costs
of  litigation,  could  harm  our  business  and  prospects.

     Penny  Stock  Trading Rules. When the trading price of the Company's Common
Stock  is  below  $5.00  per  share, the Common Stock is considered to be "penny
stocks"  that  are  subject  to rules promulgated by the Securities and Exchange
Commission  (Rule 15-1 through 15g-9) under the Securities Exchange Act of 1934.
These   rules   impose  significant   requirements   on   brokers   under  these
circumstances,  including:   (a)  delivering  to   customers  the   Commission's
standardized  risk  disclosure  document; (b) providing to customers current bid
and  offers;   (c)  disclosing  to  customers   the  brokers-dealer   and  sales
representatives  compensation;  and  (d)  providing to customers monthly account
statements.

     Future  Sales  or  Our Common Stock May Depress Our Stock Price. The market
price  of  our  Common  Stock  could decline as a result of sales of substantial
amounts  of our Common Stock in the public market in the future. In addition, it
is  more  difficult  for  us  to  raise  funds   through  future   offerings  of
Common  Stock.  There  were approximately 19,489,251 post-split shares of Common
Stock  outstanding  as  "restricted  securities"  as  defined  in Rule 144 as of
September  30,  2003,  which  will  be  available for sale  in the future. These
shares  may  be sold in the future without registration under the Securities Act
to  the  extent permitted by Rule 144 or other exemptions under  the  Securities
Act.

     The  Company  has  registered  1,000,000  post-split shares of Common Stock
which will be reserved for issuance upon exercise of options or stock bonuses to
be  granted  or  reserved  for grant under our 2002 Stock Option, SAR and  Stock
Bonus  Consultant  Plan.  Upon  issuance  of  these  shares, they can be sold in
the  public  market,   subject  to   restrictions  under  the   securities  laws
applicable  to  resales  by affiliates.  In addition, the Company has registered
another  1,250,000 shares (post-split) of Common Stock which is reserved for our
2002  Employee  Stock  Option,  SAR  and  Stock  Bonus  Plan.

                                       16
<PAGE>

Subsequent  Events.
-------------------

     During  October  2003,  the  Company  had  to  secure the continuity of its
connection  and  business  relation with UNI2, and sold its postpaid business to
Affinalia,  a  Spanish  postpaid  accounts  reseller, also working together with
UNI2.  The  sale  of  the  Company's postpaid business was planned for 2004, but
unfortunately  the  Company  was forced by UNI2 to sell its postpaid business to
Affinalia  so  that  its  net  credit  risk  for UNI2 decreased drastically. The
Company's  focus  now  is  only  on  prepaid  voice  services.

     On October 22, 2003, an investment agreement was reached between GreenRidge
Investment  Ltd  ("GreenRidge") and ITS Networks by which  GreenRidge would have
injected  2,900,000  Euros  into  the  Company  in exchange for 60% of the total
outstanding  shares  of  the  Common  Stock  of  the  Company.  Other associated
conditions  included  the  conversion of all shareholder debt to equity.  Due to
circumstances  beyond  its  control, GreenRidge representatives could not  carry
out  the  purchase  within  the  required  period  of  time.

     As  such,  the  management  of  the Company attempted to close with another
potential  investor  which  had showed interest.  On November 28, 2003, Henk van
Elst signed an investment agreement whereby he would invest 2,900,000 Euros into
the  Company  with  very  similar conditions to GreenRidge, but without, amongst
other  things,  the  obligation  for  existing  debtholders  to  convert  their
outstanding  debt  in  the  Company  into  equity.

     As  agreed between the parties, funds to be received from Mr. van Elst will
be  used  for:  (i)  the  last  phase  of  the  restructuring  (i.e. solving the
financial  situation  with  main  carrier  UNI2);  (ii)  increasing  the network
capacity;  (iii)  providing  bank  guarantees  and/or prepayments to carriers to
increase  the  potential  traffic volume; (iv) paying back certain bridge loans;
and  (v)  additional  working  capital,  as  follows:

<TABLE>
<CAPTION>
                                                                Amount
                                                              ---------
<S>                                                           <C>
     Main  Carrier                                              650,000 Euros
     SG&A  October                                              200,000 Euros
     Increase  network  capacity                                150,000 Euros
     Payments  and  bank  guarantees  carriers                  500,000 Euros
     Budget  acquisition  planning
      (due  diligence,  first  payments)                        500,000 Euros
     Working  capital                                           900,000 Euros
                                                              ---------
                                        Total                 2,900,000 Euros
                                                              =========
</TABLE>

     Hence,  this  agreement provides the Company with sufficient funds to repay
major debts, as well as providing  the necessary operating capital to expand its
business  and  be  more competitive.  However, the Company  has not received the
investment  proceeds  from  Mr.  van  Elst which is expected in the near future.

     Due to the U.S. Patriots Act, the injections of funds from Mr. van Elst has
been  delayed.  The  Company  has  been  informed  that  the  funds will be made
available  during  the  month  of  February 2004.   These funds are necessary to
ensure  the  continued  operations  of  the  Company.

     Technological  Changes.  The  global  communications industry is subject to
rapid  and significant technological changes, such as continuing developments of
alternative  technologies  for  providing  high-speed  data  communications.  We
cannot  predict  the  effect  of technological changes on our business.  We will
rely  in  part on third parties, including some of our competitors and potential
competitors,  for the development of and access to communications and networking
technologies.  We  expect  that  new services and technologies applicable to our
market will emerge.  New products and technologies may be superior and/or render
obsolete  the  products  and  technologies  that we currently use to deliver our
services.  Our  future success will depend in part, on our ability to anticipate
and  adapt  to technological changes and evolving industry standards.  We may be
unable  to  obtain access to new technologies on acceptable terms or at all, and

                                       17
<PAGE>

we  may  be  unable to obtain access to new technologies and offer services in a
competitive  manner.  Any  new  products  and technologies may not be compatible
with  our  technologies  and   business  plan.    We  believe  that  the  global
communications  industry  should set standards to allow for the compatibility of
various  products and technologies.  The industry however, may not set standards
on a timely basis or at all.  As such, the Company is investing in launching new
services  in  Spain  based  on technologies which exist in the United States but
that  are  still  relatively  new  to  Europe.

     Voting  Control.  No  single  stockholder alone has a majority stake in ITS
Networks  Inc.  The  largest  single  shareholder, and initial founder, Carnival
Enterprises,  Ltd.,  owned approximately 30% of the Company's outstanding Common
Stock  as  of  September 30, 2003.  This  stockholder has exercised considerable
influence over all matters requiring approval by our stockholders, including the
election of directors  and approval of significant corporate transactions.  This
concentration  of ownership may also have the effect of delaying or preventing a
change  in  control  of  our  Company, should the need arise, which could have a
material  adverse  effect  on  our  stock  price.

Item  2.   Description  of  Property
           -------------------------

     The Company moved its principal executive offices from C/Villanueva 16, 5th
Floor,  28001 Madrid, Spain to Edif, Marina Marbella, Severo Ochoa 28, Planta 9,
29600  Marbella,  Spain,  which is comprised of approximately 1,800 square feet,
and  is  leased for 12,426 Euros per month.  The lease expires in November 2004.

     These  facilities  are leased at commercial rates under standard commercial
leases  in  the  geographic  area.  We  believe  that  suitable  space for these
operations  is  generally  available on commercially reasonable terms as needed.

Item  3.   Legal  Proceedings
           ------------------

     There  are  no  current  material  legal  proceedings threatened or pending
against  the  Company  or  its  subsidiaries.

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

     The  shareholders  of the Company held a special meeting by written consent
on  November  8, 2002, authorizing the President of the Company to negotiate and
enter  into  acquisitions  of  other  companies, specifically the acquisition of
Teleconnect  Comunicaciones,  S.A., granted a power of attorney to the President
of the Company to execute agreements to acquire Teleconnect Comunicaciones, S.A.
and  to  open  bank  accounts  in  Spain  and  the  United  States.

     The  shareholders  of the Company held a special meeting by written consent
on  January  24, 2003 to authorize an Amendment to the Articles of Incorporation
to  increase  the number of shares of authorized common stock from 50,000,000 to
100,000,000  shares  of  common  stock,  $0.001  par  value.

     The  shareholders  of the Company held a special meeting by written consent
on  February  24,  2003,  to authorize the sale of  its operations in ITS Europe
S.L.  to  its  subsidiary  Teleconnect  Comunicaciones,  S.A.

     The  shareholders  of  Teleconnect held a special meeting on March 7, 2003,
where  effective  March  11,  2003, Nicholas Bruemmer assumed the management and
legal  responsibilities  for  Teleconnect  and  ITS  Europe  in Spain in lieu of
Gustavo  Gomez,  who  would  remain  President  of  the  Company.

     After  Nicholas Bruemmer quit from this post in June 2003, at a Teleconnect
shareholders'  meeting  held June 29, 2003, Herman de Haas was named to the post
of  Managing  Director  and  Executive  officer  of Teleconnect in Spain.  As of
September  30,  2003,  Mr. de Haas is the top executive at Teleconnect in Spain.

                                    PART II

Item  5.   Market  for  Common  Equity  and  Other  Shareholder  Matters
           -------------------------------------------------------------

General
-------

                                       18
<PAGE>

     The Common Stock of the Company is currently traded on the NASD  Electronic
Bulletin  Board  over-the-counter  market,  and is quoted under the symbol ITST.

Market  Price
-------------

     The following table sets forth the range of high and low closing bid prices
per  share  of  the  Common Stock of the Company (reflecting inter-dealer prices
without  retail  mark-up,  mark-down  or commission and may not represent actual
transactions)  as  reported by Pink Sheets (formerly known as National Quotation
Bureau,  L.L.C.)  for  the  periods  indicated.

<TABLE>
<CAPTION>
                                            High  Closing(1)   Low  Closing  (1)
Year  Ended  December  31,  2001               Bid  Price         Bid  Price
--------------------------------            ----------------   -----------------
<S>                                             <C>                <C>
1st  Quarter                                    $  3.375           $  0.78125
2nd  Quarter                                    $  2.05            $  0.65
3rd  Quarter                                    $  1.06            $  0.63
4th  Quarter                                    $  1.07            $  0.60

YEAR  ENDED  DECEMBER  31,  2002
--------------------------------
1st  Quarter                                    $  0.75            $  0.40
2nd  Quarter                                    $  0.96            $  0.33
3rd  Quarter                                    $  0.52            $  0.31
4th  Quarter                                    $  0.60            $  0.30

YEAR  ENDED  DECEMBER  31,  2003
--------------------------------
1st  Quarter                                    $  0.92            $  0.41
2nd  Quarter                                    $  1.07            $  0.63
3rd  Quarter                                    $  1.01            $  0.28
4th  Quarter  through  12/28/2003  .            $  0.54            $  0.27
4th  Quarter 12/29/2003 through 12/31/2003      $  0.36            $  0.22
--------------------------------
</TABLE>

(1)  Except  for  the  fourth  quarter of 2003, the above prices reflect trading
     prior  to  a 1-for-2 reverse stock split of the common stock of the Company
     which  was  effective  on  December  29,  2003.

     The  closing  bid  price  of the Common Stock (pre-split) of the Company on
September  30,  2003  was  $0.53  per  share.

Stock  Option,  SAR  and  Stock  Bonus  Consultant  Plan
--------------------------------------------------------

     Effective  March  27, 2002, the Company adopted and approved its 2002 Stock
Option,  SAR  and  Stock  Bonus  Consultant  Plan  (the  "Plan")  which reserved
1,000,000  post-split  shares  of Common Stock for issuance under the Plan.  The
Plan  allows  us to issue awards of incentive non-qualified stock options, stock
appreciation  rights,  and stock bonuses to consultants to the Company which may
be  subject  to  restrictions.

Sale  of  Unregistered  Securities
----------------------------------

     On September 30, 2003, the Company authorized the issuance of an additional
1,000,000  restricted  (post-split)  shares  of   Common  Stock  to  settle  and
resolve  disputes  with  the  former stockholders of Teleconnect Comunicaciones,
S.A.  which  the  Company  acquired  during  November  2002,  in  reliance  upon
Regulation  S  under  the  Securities  Act  of  1933.

                                       19
<PAGE>


Item  6.   Management's  Discussion  and  Analysis  or  Plan  of  Operations
           -----------------------------------------------------------------

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

Forward  Looking  Statements
----------------------------

     When  used  in  this  annual report on Form 10-KSB and in our other filings
with  the  SEC,  in  our  press  releases  and  in oral statements made with the
approval of one of our authorized executive officers, the words or phrases "will
likely  result",  "plans",  "will  continue",   "is  anticipated",  "estimated",
"expect", "project" or "outlook" or similar expressions (including confirmations
by  one  of  our authorized executive officers of any such expressions made by a
third  party  with  respect  to  us)  are  intended to identify "forward-looking
statements"  within  the meaning of the Private Securities Litigation Reform Act
of  1995. We caution readers not to place undue reliance on any such statements,
each  of  which  speaks only as of the date made. Such statements are subject to
certain  risks  and  uncertainties,  including but not limited to our history of
losses,  our limited operating history, our need for additional financing, rapid
technological  change,  and an uncertain market, that could cause actual results
to differ materially from historical earnings and those presently anticipated or
projected. Factors that may cause actual results to differ materially from those
contemplated  by  such  forward-looking  statements  include,  among others, the
factors  described  below  and  in  the  Description of Business section of this
annual  report. We undertake no obligation to release publicly revisions we made
to  any  forward-looking statements to reflect events or circumstances occurring
after  the  date  of  such  statements.  All  written  and  oral forward-looking
statements  made  after the date of this annual report and/or attributable to us
or  persons  acting  on  our behalf are expressly qualified in their entirety by
this  discussion.

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

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

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

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

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

                                       20
<PAGE>

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

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

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

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

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

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

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

Overview
--------

     We  derive  our  revenues  primarily  from  the  sale  of our long-distance
telecommunication  services.  Our  revenues and operating results have depended,
and will continue to depend, upon the continued adoption and use of our products
and  services  by  consumers  and  small  businesses.  The  rate  of adoption is
influenced  significantly  over the longer term by government laws and mandates,
performance  and pricing of our products/services, relationships with the public
and  other  factors.

                                       21
<PAGE>

     Our  revenues also may be impacted by other factors including the length of
our  sales  cycle,  the  timing of sales orders, budget cycles of our customers,
competition,  the  timing  and introduction of new versions of our products, the
loss  of,  or difficulties affecting, key personnel and distributors, changes in
market  dynamics  or  the timing of product development or market introductions.
These  factors have impacted our historical results to a greater extent than has
seasonality.  Combinations  of  these  factors  have historically influenced our
growth  rate  and profitability significantly in one period compared to another,
and  are  expected to continue to influence future periods, which may compromise
our  ability  to  make  accurate  forecasts.

     No  single  customer  accounted for more than 10% of our revenues during of
the  last  three  years.  Domestic  sales  in  Spain  accounted  for 100% of our
revenues  in  each  of  the  last  two  years.

     Telecommunication  revenues increased by 297% in fiscal 2003 as a result of
our  acquisition  of  Teleconnect  Comunicaciones,  S.A.  in  November  2002.

     Cost of goods sold consists primarily of the costs associated with carriers
which  supply  the telecom services for the Company to resell.  We rely on third
parties  to  offer  the  majority  of  the  services  we  have in our portfolio.
Accordingly,  a  significant  portion  of  our  cost  of  goods sold consists of
payments  to  these  carriers.  Cost  of  goods  sold  revenues also consists of
customer  support costs, training and professional services expenses, and parts.

     Our  gross profit has been and will continue to be affected by a variety of
factors,  including competition, the mix and average selling prices of products,
maintenance  and  services,  new  versions  of  products, the cost of equipment,
component  shortages,  and  the  mix  of distribution channels through which our
products  are  sold.  Our  gross  profit  will  be  adversely  affected by price
declines  if  we are unable to reduce costs on existing products or to introduce
new  versions  of  products  with  higher  margins.

     Selling,  general and administrative expenses consist primarily of salaries
and  related  expenses  for  executive,  finance,  accounting,  legal  and human
resources  personnel,  professional  fees  and  corporate  expenses.  We  expect
general and administrative expenses to increase in absolute dollars as we employ
additional  personnel  and  incur  additional costs related to the growth of our
business  and  our  operation  as  a  public  company.  We  present  stock-based
compensation  as  a  part  of  general  and  administrative  expenses.

     Stock-based compensation charges are recorded when the exercise price of an
option  or  the  sales  price  of  stock  is  less  than  the  fair value of the
underlying  Common  Stock  for  awards to employees.  We also record stock-based
compensation  charges  when  options are granted to non-employees.  Compensation
charges  for  non-employees  are based on estimates of the underlying stock fair
values.  As  of  September  30,  2003,  the  Company  has  not granted any stock
options,  but  the   Company   has  issued   Common  Stock  to  consultants  and
professionals  in  exchange  for  services  to  the  Company.

Year  Ended  September  30,  2003,  Compared  to  September  30,  2002
----------------------------------------------------------------------

     The  following table sets forth certain operating information regarding the
Company,  including  its  subsidiary  Teleconnect  Comunicaciones,  S.A.

<TABLE>
<CAPTION>
                                           Year  Ended          Year  Ended
                                       September 30, 2002    September 30, 2003
                                       ------------------    ------------------
<S>                                       <C>                   <C>
Revenues                                  $  2,186,000          $   6,498,000
Cost  of  goods  sold                     $  1,544,000          $   5,071,000
Selling,  general and administrative      $  1,698,000          $   4,078,000
Depreciation                              $     52,000          $     367,000
Bad  Debt  Expense                        $    175,000          $     255,000
Impairment  of  goodwill                  $          0          $   6,637,000

                                       22
<PAGE>

Other  Income  (Expenses)                 $     (1,000)         $    (121,000)
Net  Loss                                 $ (1,284,000)         $ (10,031,000)
Net  Loss  Per Share                      $       (.03)         $       (0.58)
</TABLE>

     Revenues.  Revenues  for  the  year  ended September 30, 2003, increased to
$6,498,000,  compared  to  $2,186,000  or 297% from the prior year revenues. The
increase  in  revenues  was  due  primarily to the acquisition of Teleconnect in
November  2002.

     Our  revenues  during  the year ended September 30, 2003, were derived from
providing  a  broad  range  of  integrated  service  solutions  to  our clients:

     *  Prepaid  Calling  Cards
     *  International  long  distance  calling  (postpaid);
     *  Prepaid  fixed  line  long  distance  calling
     *  Other

     Cost  of  Goods  Sold.  Cost of goods sold for the year ended September 30,
2003 were $5,071,000, an increase of $3,527,000 or 328% from the prior year cost
of  sales  of  $1,544,000.  This  increase  was due in part to increase in sales
arising  from  the  acquisition  of  Teleconnect in November 2002. Gross profits
decreased by 7% from 29% in fiscal 2002 compared to 36% in fiscal 2003. The cost
of  goods  sold  increased  more  than  the  sales due to the mix of prepaid and
postpaid  services  where  the prepaid has lower margins. Management consciously
selected  postpaid  clients  that  were  advantageous  to  our bottom line while
simultaneously  cutting  services  to  customers  which  produced more cost than
profit  to  the  Company.  As  market  conditions are becoming more competitive,
management  has  tightened  its  selection  criteria  for  "profitable" postpaid
clients.

     Selling,  General  and Administrative.  Selling, general and administrative
expenses  for  the year ended September 30, 2003 were $4,078,000, an increase of
$2,380,000  or 240% from the prior year's operating expenses of $1,698,000.  The
principal  reasons  for  the  increase was taking over the operating expenses of
Teleconnect  but  relatively  improved  due to the synergies associated with the
consolidation  of  the  business;  Teleconnect and ITS  Europe.

     Depreciation  Expense.  Depreciation  expense  for the year ended September
30,  2003  was  $367,000,  an increase of $315,000 or 705% from the prior year's
depreciation  expense  of  $52,000.  This  increase is due primarily to property
additions  during  2003  by  the  acquisition  of  Teleconnect.

                                       23
<PAGE>

     Impairment  of  Goodwill.  During  the  year  ended September 30, 2003, the
Company  fully impaired the goodwill associated with the Teleconnect acquisition
in  the amount of $6,637,000.  This impairment was recorded as a result of lower
than  projected operating results from the acquired subsidiary.  The Company had
no  investment  in  goodwill  at  September  30,  2002.

     Bad  Debt  Expense.  Bad debt expense for the year ended September 30, 2003
was  $255,000,  an increase of $80,000 from the prior year's bad debt expense of
$175,000.  The  principal  reason  for  the increase was due to the write-off of
past  due  accounts  incurred  due  to  increased  business  levels.

     Interest  Expense.  Interest  expense for the year ended September 30, 2003
was  $121,000  as compared to only $1,000 for the prior year.  This increase was
due  primarily to interest incurred on loans made from affiliated parties during
fiscal  2003  to  finance  the  Teleconnect  acquisition  and  operations.

     Net  Loss.  The  net  loss of the Company increased to $(10,031,000) during
the  fiscal  year  ended  September 30, 2003 compared to $(1,284,000) during the
fiscal  year  ended  September  30, 2002, an increase of approximately 781%. The
increase in the net loss of the Company is attributable primarily to an increase
in  its  operating  costs,  marketing  costs,  and  its  selling and general and
administrative  expenses  of  the Company during the fiscal year ended September
30,  2003,  following  the  acquisition  of  Teleconnect.

     Liquidity  and  Capital  Resources.  At September 30, 2003, the Company had
negative  working  capital  of  approximately $(7,453,000), compared to negative
working  capital of $(377,000) at September 30, 2002.  This decrease  in working
capital  is  attributable  primarily  to operating losses incurred during fiscal
2003.

     The  ability of the Company to satisfy its obligations and to continue as a
going  concern  will  depend in part upon its ability to raise funds through the
sale  of additional shares of its Common Stock, increasing borrowing, and impart
upon  its  ability  to  reach  a  profitable level of operations.  The Company's
financial  statement  so  not  reflect  adjustments  that  might result from its
inability  to  continue  as  a  going  concern  and  these  adjustments could be
material.

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

     Pricing  Policies     The pricing for our services differs depending on the
services  provided,  the  speed  of  service,  geographic  location and capacity
utilization.  In the case of services directed at foreign residents in Spain for
them  to  call  long  distance,  pricing  is  oriented  to provide a significant
discount  compared  to  the  incumbent operator.  It is not the intention of the
Company to enter "price wars" with other similar companies.  The Company strives
to  differentiate itself with the quality of our customer care, with the quality
of the service, and the accuracy of the billing.  For services directed at small
and medium companies, we try to position ourselves to provide a turnkey solution
to  their  telecommunications  needs,  providing  voice  local and long distance
calling, access to the internet, email, web hosting, PBX supply and maintenance,
etc.  With  our  prepaid  calling  card  services,  we have sought tourists that
needed  to  call home but at cheaper prices than the hotel phone or local public
phone.

     Client  Contracts.  Our  contracts  with  customers  generally  include  an
agreed-upon  price  schedule  that  details  both  fixed and variable prices for
contracted  services. The client contracts generally have a term of one to three
years, however, when clients implement a number of our services, they may choose
to  extend  the contracts for a longer period of time. Our sales representatives
can  easily  add  additional services to existing contracts, enabling clients to
increase the number of locations through which they access our network, increase
the  speed of that access, increase the sophistication of the services they use,
or  extend  the  term  for  existing  services.

     Contractual Obligations and Commercial Commitments.  The following table is
a  recap  of  the  Company's  contractual  obligations as of September 30, 2003.

<TABLE>
<CAPTION>
                                          Payments Due by Period
                                          ----------------------
                                 Total     Less than One Year     1-3  Years
                              ----------     -------------       ------------
<S>                           <C>            <C>                 <C>
     Long-Term  Debt          $1,564,000     $     142,000       $  1,422,000
     Operating  Leases           472,000           232,000            240,000
                              ----------     -------------       ------------
     Total  Contractual
     Cash  Obligations        $2,036,000     $     374,000      $   1,662,000
                              ==========     =============       ============
</TABLE>

     Plan of Operations.  The Company expects that with new funds to be injected
into  the  Company  in  early  2004 that it will expect to generate an operating
profit  during  its  fiscal  year  ending  September 30,  2004.

     The  Company will be offering to sell its Common Stock and other securities
to further capitalize the Company, and will also borrow from banks and others to
the  extent  necessary  to  provide  liquidity  for  its  operations.

                                       24
<PAGE>

     The  Company  has  maintained  its  telecommunications  activities  and the
associated  costs consistent with its plan of operations in order to develop its
telephone   and  other   communications   services  and  products  for  proposed
residential and commercial use.  The Company expects to continue the development
of  its  telephone and other communications products and services to incorporate
technical  changes  and  improvements. In addition, as the Company increases its
marketing activities, the Company will incur additional operating and equipments
costs.

     Recent  Accounting Pronouncements.  SFAS No. 133, Accounting for Derivative
Instruments  and  Hedging  Activities,  became  effective  January 1, 2001. This
statement  establishes  accounting  and reporting standards requiring that every
derivative  instrument,  including  certain  derivative  instruments imbedded in
other  contracts,  be  recorded  in  the  balance  sheet  as  either an asset or
liability  measured  at its fair value. The statement also requires that changes
in  the  derivative's fair value be recognized in earnings unless specific hedge
accounting  criteria  are  met. We believe the adoption of SFAS No. 133 will not
have  an  effect  on  our  financial  statements  because  we  do  not engage in
derivative  or  hedging  activities.

     In  December 2002, the FASB issued SFAS No 148, "Accounting for Stock-Based
Compensation  - Transition and Disclosure".  This statement amends SFAS No. 123,
"Accounting for Stock-Based Compensation."  The provisions of this statement are
effective  for  interim  and annual financial statements for fiscal years ending
after  December  15,  2002.  This  statement  provides  alternative  methods  of
transition  for  a voluntary charge to the fair value based method of accounting
for  stock-based  employee  compensation.  Also,  this  statement  amends    the
disclosure  requirements  of  SFAS No. 123 to require disclosures in both annual
and  interim financial statements about the method of accounting for stock-based
employee  compensation  and  the effect of the method used on reporting results.
The  Company  continues  to apply APB 25 recognition and measurement principles,
but  will  comply with the new disclosure requirements of this statement.  As of
September  30,  2003  the Company has not issued any stock under its stock-based
employee  compensation  plan.

     In  December  1999,  the  Securities and Exchange Commission released Staff
Accounting  Bulletin No. 101, Revenue Recognition in Financial Statements, which
provides  guidance  on  the  recognition, presentation and disclosure of revenue
having  a  material  impact  on  our  financial  statements.

Item  7.   Financial  Statements
           ---------------------

     The  consolidated  financial statements of the Company for its fiscal years
ended  September  30,  2003  and  2002,  are  provided  with  this  Form 10-KSB.

Item  8.   Changes  in  and  Disagreements  with  Accountants  on Accounting and
           ---------------------------------------------------------------------
Financial  Disclosure
---------------------

     There  have  been  no  disagreements  regarding  accounting  and  financial
disclosure  matters  with  the  independent  certified public accountants of the
Company.

                                    PART III

Item  9.   Directors  and  Executive  Officers
           -----------------------------------

     The  directors and officers of the Company as of September 30, 2003, are as
follows:

<TABLE>
<CAPTION>

     Name                        Age     Position
     ----------                  ---     --------
<S>                               <C>    <C>
     Gustavo  A.  Gomez           40     Director,  President  and  Treasurer

     Herman  C.  de  Haas         42     Director, Executive Vice President and
                                         Chief  Operating Officer, and Managing
                                         Director  of  Teleconnect
                                         Comunicaciones,  S.A.

     Leonardus  Geeris            63     Director
</TABLE>

                                       25
<PAGE>

The  background  and  principal  occupations of each director and officer of the
Company  are  as  follows:

     Mr.  Gomez became a director, the President, Secretary and Treasurer of the
Company on March 6, 2002.  From May 2001 to the present, he has been the founder
and  operator  of OpenVia S.L., a European telecommunication consulting company.
From  January 2000 to April 2001, he was the co-founder and Managing Director of
Broadband  Optical  Access  S.A.,  a  carrier  engaged in the European broadband
access  market.  From  January  1998  to January 2000, Mr. Gomez was its Account
Director in Spain with Nortel Networks Corp. and previously was Nortel's Manager
GSM products in Spain until September 1998.  From April 1997 to January 1998, he
was  the Director of Marketing of Retevision.  From February 1996 to April 1997,
Mr.  Gomez was the Deputy Commercial Director of Telefonica S.A.'s international
business  unit.  Mr.  Gomez received a Bachelor of Electrical Engineering degree
from  McGill University in 1986, and received a MBA degree from the Instituto de
Empresa  (Madrid  Business  School)  in  1997.  On  March  16, 2002, the Company
entered  into a contract for professional services with Mr. Gomez which provides
for annual compensation of 121,000 Euros, and bonuses based upon the performance
of  his  services  to  the  Company; and was issued 250,000 shares of restricted
Common  Stock.

     Mr.  de  Haas  became a director of the Company in May 2003, and became the
President  and  Chief  Operating Officer of the Company on May 27, 2003; and has
been  the  Managing  Director of Teleconnect Comunicaciones, S.A., the principal
subsidiary  of  the  Company,  since  March  2003.  From  September  2000 to the
present, he has been the Chief Executive Officer and owner of ShareWorks Capital
Management, a management and investment consulting firm.  From September 1999 to
August  2000,  Mr.  de Haas was the Managing Director and 50% owner of Vermeulen
Adviesgroep  B.V.  From  February  1996  to  August 1999, he was the Director of
Operations  of McDonald's Nederland B.V.  Mr. de Haas graduated with a degree in
Industrial  Engineering  &  Business   Administration  in  1986  from  Technical
University  of  Rotterdam.

     Mr.  Geeris  became  a  director  of  the  Company  in May 2003.  He is the
President,  managing  director  and owner of Geeris Holding Nederland B.V. which
owns  and  invests  in  real  estate  and  other  industries.

Item  10.  Executive  Compensation
           -----------------------

     All  executive  officers,  for  services  in all capacities to the Company,
received  the  following compensation during the fiscal year ended September 30,
2003.

<TABLE>
<CAPTION>
                                                                Long-Term Compensation(2)
                                                            ---------------------------------
                                Annual compensation (1)             Awards            Payouts
                              ---------------------------   -----------------------
                                                  Other                  Securities
Names and                                         Annual    Restricted   Underlying
Principal                                         Compen    Stock        Options/     LTIP      Compen-
Position               Year   Salary      Bonus   -sation   Awards (3)   Sars         Payouts   sation
-------------------    ----   --------    -----   -------   ----------   ----------   -------   --------
Gustavo Gomez
President and
<S>                    <C>    <C>         <C>      <C>       <C>           <C>         <C>        <C>
Treasurer              2003   $138,000    $   0    $   0     $   0         $   0       $   0      $     0

Martin-Luis Becerra
former Chief Finan-
cial Officer and
Secretary (4)          2003   $ 55,200    $   0    $   0     $   0         $   0       $   0     $ 40,250

                                       26
<PAGE>

Nicholar Breummer
Former Managing
Director of
Teleconnect
Comunicaciones,
S.A.                   2003   $ 94,875    $  0     $   0     $   0         $   0       $   0     $      0

Herman de Haas
Executive Vice
President and Chief
Operating Officer,
and
Managing Director
of Teleconnect
Comunicaciones, S.A.
Former
Secretary (5)          2003   $ 92,000    $   0    $   0     $   0         $   0       $   0     $      0
</TABLE>

     All  executive  officers  as  a  group  (4  persons)  $420,325.
     ----------------------------

     (1)  Personal  benefits  received  by  the Company's executive officers are
          valued below the levels which would otherwise require disclosure under
          the  rules  of  the  U.S.  Securities  and  Exchange  Commission.
     (2)  The  Company  does  not  currently  provide any contingent or deferred
          forms  of  compensation arrangements, annuities, pension or retirement
          benefits.
     (3)  Represents  stock  bonuses of shares of Common Stock that were awarded
          by  the  Board  of  Directors  as  compensation.
     (4)  Mr.  Becerra,  a previous Chief Financial Officer and Secretary of the
          Company,  was  removed  effective  March  2003.

Committees  of  the  Board  of  Directors
-----------------------------------------

     The  Company  does  not  have  an  audit committee, compensation committee,
nominating  committee, or an executive committee of the Board of Directors.  The
Company  does  have  a Stock Option Plan Committee which has been established to
administer  the  stock  option,  SAR  and stock bonus plans of the Company.  The
Board  of  Directors  plans  to  establish  various  committees  in  the future.

Compliance  with  Section  16(a)  of  the  Securities  Exchange  Act
--------------------------------------------------------------------

     Section 16(a) of the Exchange Act requires the Company's executive officers
and  directors,  and  persons  who beneficially own more than ten percent of the
Company's  equity  securities,  to  file  reports  of  ownership  and changes in
ownership  with the Securities and Exchange Commission.  Officers, directors and
greater  than 10% percent shareholders are required by SEC regulation to furnish
the  Company  with  copies  of  all  Section  16(a)  forms  they  file.

     Based on its review of the copies of such forms received by it, the Company
believes  that  during  the  year  ended  September  30,  2003,  all such filing
requirements  applicable  to  its  officers  and  directors  were complied with.

2002  Employee  Stock  Option,  SAR  and  Stock  Bonus  Plan
------------------------------------------------------------

     Effective June 10, 2002, the Company adopted and approved its 2002 Employee
Stock  Option,  SAR  and  Stock Bonus Plan (the "Plan") which reserves 1,250,000
(after effect of split) shares of Common Stock for issuance under the Plan.  The

                                       27
<PAGE>

Plan  allows  us  to  issue  awards of incentive or non-qualified stock options,
stock  appreciation  rights,  and  stock  bonuses  which   may  be   subject  to
restrictions.  No  awards  of stock options, stock appreciation rights, or stock
bonuses  have  been  granted to officers and employees as of September 30, 2003.

Stock  Option,  SAR  and  Stock  Bonus  Consultant  Plan

     Effective  March  27, 2002, the Company adopted and approved its 2002 Stock
Option,  SAR  and  Stock  Bonus  Consultant  Plan  (the  "Plan")  which reserved
1,000,000 shares (after effect of split)  of Common Stock for issuance under the
Plan.  The  Plan  allows  us  to  issue  awards of incentive non-qualified stock
options,  stock  appreciations  rights,  and stock bonuses to consultants to the
Company  which  may  be  subject  to  restrictions.

Benefit  Plans
--------------

          The  Company  does not have any pension plan, profit sharing plan,  or
similar plans for the benefit of its officers, directors or employees.  However,
the  Company  may  establish  such  plans  in  the  future.

Board  Compensation
-------------------

     Directors  of  the  Company  have  not  received  any compensation in their
capacity  as  directors  during  the  fiscal  year  ended  September  30,  2003.

Director  and  Officer  Indemnification  and  Limitations  on  Liability
------------------------------------------------------------------------

     Article  X  of  our  Articles of Incorporation and Article VI of our Bylaws
limit  the  liability of directors, officers and employees to the fullest extent
permitted  by  Florida  law.  Consequently, our directors will not be personally
liable  for  monetary damages for breach of their fiduciary duties as directors,
except  in  the  following  circumstances:

     *    A  violation  of  the  criminal  law,  unless  the  director, officer,
          employee  or  agent  had  reasonable  cause to believe his conduct was
          lawful or had no reasonable cause to believe his conduct was unlawful;

     *    A  transaction  from  which  the director, officer, employee, or agent
          derived  an  improper  personal  benefit;

     *    In  the  case  of a director, a circumstance under which the liability
          provisions  of Section 607.0834 under the Florida Business Corporation
          Act  are  applicable;  or

     *    Willful  misconduct or a conscious disregard for the best interests of
          the  corporation in a proceeding by or in the right of the corporation
          to  procure  a  judgment  in its favor on in a proceeding by or in the
          right  of  a  shareholder.

     This  limitation  of  liability  does  not  apply   arising  under  federal
securities  laws and does not affect the availability of equitable remedies such
as  injunctive  relief  or  rescission.

     Insofar as indemnification for liabilities arising under the Securities Act
may  be permitted to directors, officers, and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that  in  the  opinion  of the Commission such indemnification is against public
policy  as  expressed  in  the  Securities  Act  of  1933  and,   is  therefore,
unenforceable.

Item  11.  Security  Ownership  of  Certain  Beneficial  Owners  and  Management
           ---------------------------------------------------------------------

     The  total  number of shares of Common Stock of the Company, as adjusted to
record  effects  of  stock  split beneficially owned by each of the officers and
directors,  and  all  of  such  directors  and  officers  as  a group, and their
percentage ownership of the outstanding shares of Common Stock of the Company as
of  September  30,  2003,  are  as  follows:

                                       28
<PAGE>
<TABLE>
<CAPTION>
                                           Shares
     Management                            Beneficially      Percent  of
     Shareholders  (1)                     Owned  (1)        Common  Stock
     -----------------                     ------------      -------------
<S>                                         <C>               <C>
     Gustavo  A.  Gomez                       125,000          0.6%
     Leonardus  Geeris                      5,187,063(2)      23.1%
     Herman  C.  de  Haas                         -0-          -0-

     Directors  and  officers
       as  a  group (3 persons,
       including the above persons)        5,312,063         23.7%
-------------------
</TABLE>

(1)  Except  as  otherwise noted, it is believed by the Company that all persons
     have full voting and investment power with respect to the shares indicated.
     Under  the  rules  of  the Securities and Exchange Commission, a person (or
     group  of persons) is deemed to be a "beneficial owner" of a security if he
     or  she,  directly  or  indirectly,  has  or shares the power to vote or to
     direct the voting of such security, or the power to dispose of or to direct
     the  disposition of such security. Accordingly, more than one person may be
     deemed  to  be  a  beneficial  owner of the same security. A person is also
     deemed  to  be a beneficial owner of any security which that person has the
     right  to  acquire  within 60 days, such as options or warrants to purchase
     the  Common  Stock  of  the  Company.

(2)  Mr.  Geeris  beneficially  owns  these  shares  of Common Stock through his
     ownership  of  Geeris  Holding  Nederland  B.V.

     The  following  table sets forth information with respect to the beneficial
ownership  of  the  Company's  Common Stock, as adjusted for the stock split, by
each  shareholder  who  beneficially  owns  more  than  five percent (5%) of the
Company's  Common Stock, the number of shares beneficially owned by each and the
percent  of  outstanding  Common  Stock  so owned of record as of  September 30,
2003. It is believed by the Company that all persons listed have sole voting and
investment  power  with  respect to their shares, except as otherwise indicated.

<TABLE>
<CAPTION>
                                                   Shares  of       Percent
                                   Title  of       Outstanding      Beneficially
Names  and  Addresses              Class           Common  Stock    Owned
---------------------              ---------       -------------    ------------
<S>                                 <C>              <C>                <C>
Carnival  Enterprises  Ltd.         Common           6,693,480          29.8%
Suite  4,  4  Giro's  Passage
Gibralter,  Spain

Geeris Holding Nederland B.V.(1)    Common           5,187,063          23.1%
Helvoirtseweg 146, 5263, EH Vught
Postbus  317,  5260,  AH  Vught
The  Netherlands

WKC  Groenwoud                      Common           3,616,350          16.1%
Helvoirtsweg  146  Postbus  2190
5260  CD  Vught
The  Netherlands

Volim  Holding  B.V.                Common           1,176,864           5.2%
Zandpad  55
3621  NE  Breukelen
The  Netherlands
---------------------------
</TABLE>

                                       29
<PAGE>

(1)  Geeris  Holding  Nederland B.V. is owned by Leonardus Geeris, a director of
     the  Company.

Item  12.  Certain  Relationships  and  Related  Transactions
           --------------------------------------------------

     During  February  2003,  the  following  large  stockholders of the Company
converted  loans  they  had made to the Company of approximately $2,470,000 into
6,737,092  as  adjusted  for  stock  split  shares of restricted Common Stock in
reliance  upon  Regulation S under the Securities Act of 1933, as amended, which
were  issued  to Geeris Holding Nederland B.V. (2,500,000 shares as adjusted for
stock  split)  that is owned by Leonardus Geeris, a director of the Company, WKC
Groenwoud  (3,136,360  shares  as adjusted for stock split), Smithoak Properties
(6,367shares  as  adjusted  for  stock  split, and Talgon Corporation (1,084,375
shares  as  adjusted  for  stock  split).

     During  the  year  ended  September  30, 2003, Mr. Leonardus Geeris made an
unsecured  loan of 778,750 Euro ($903,000) to the Company which is due on demand
with  no  interest  payable  on  this  loan.

     In  March  2003,  Teleconnect  Comunicaciones,  S.A.,  a  subsidiary of the
Company,  while  under  the  management of Mr. Nicholas Breummer, entered into a
consulting  agreement  with Mr. Yves Horoit with compensation of 5,000 Euros per
month.  Mr.  Horoit  is  the  owner  of  Carnival  Enterprises Ltd. which is the
largest  stockholder  of  the  Company  (29.8%).

Item  13.  Exhibits  and  Reports  on  Form  8-K
           -------------------------------------

           (A)     Reports  on  Form  8-K

          Current  reports  were  filed  on  Form  8-K  on December 10, 2003 and
          December  12,  2003,  concerning the Company's proposed sale of common
          Stock  to  Mr. Hendrick  van  Elst.

          (B)     Exhibits


1(i)  Articles of Incorporation          The Articles of Incorporation of the
      of the Company                     Company are incorporated  herein by
                                         reference to Exhibit 3.1 to the Form
                                         SB-2  registration  statement  of  the
                                         Company  (File  No.  333-93583)

1(ii)  Amendment  to Articles            The Amendment to the Articles of
       of Incorporation                  Incorporation of the Company is
                                         incorporated  herein by reference to
                                         Exhibit 99.1 to  the  Form  8-K current
                                         report of the Company dated January 29,
                                         2001.

1(iii)  Amendment to Articles            The Amendment to the Articles of
        of Incorporation                 Incorporation  of  the  Company  filed
                                         on  February  26,  2003.

1(iv)  By-Laws  of  the  Company         The  By-Laws  of  the Company are
                                         incorporated  herein  by  reference to
                                         Exhibit 3.2 to the Form SB-2
                                         registration statement  of  the Company
                                         (File  No.  333-93583)

10.  Material  Contracts

     10(a)                               Agreement to amend and resolve disputes
                                         between  the Company and former
                                         shareholders of Teleconnect
                                         Comunicaciones, S.A. under  Stock  Swap
                                         Agreement  of  November  2002.

     10(b)                               Consulting   Agreement   between
                                         Teleconnect Comunicationes,  S.A.  and
                                         Yves  Horoit.

                                       30
<PAGE>

     10(c)                               Consulting  Agreement  with  Lawrence
                                         Skolnik dated  September  10,  2003.

     10(d)                               Purchase  Agreement  between Hendrik
                                         van Elst and  TS  Networks  Inc.  dated
                                         November  28,  2003 is  incorporated
                                         herein by reference  to  Exhibit  10.1
                                         to the Form 8-K current report of the
                                         Company dated December  10,  2003.

11.  Statement re:  computation of
       per  share earnings               Reference  is made to the Consolidated
                                         Statements  of  Operations  of  the
                                         Consolidated Financial Statements which
                                         are incorporated by  reference  herein.

21.  A  description  of  the
       subsidiaries of the Company       Description  of the subsidiaries of the
                                         Company.

23.  Consent of Murrell, Hall,
       McIntosh &  Co.,  PLLP            Consent  f Murrell, Hall ,McIntosh
                                         & Co., PLLP,  independent  auditor

27.  Financial  Data  Schedule           Not  applicable.


Item  14.  Controls  and  Procedures

     A.  Evaluation  of  Disclosure Controls and Procedures. The Company's Chief
Executive  Officer  and  the  Company's  principal   financial  officer,   after
evaluating the effectiveness of the Company's disclosure controls and procedures
(as  defined  in the Securities Exchange Act of 1934 Rule 13a-14(c)and 15d-14(c)
as of a date within 90 days of the filing date of this report on Form 10-KSB for
September 30, 2003, have concluded that as of the Evaluation Date, the Company's
disclosure  controls  and  procedures were adequate and effective to ensure that
material  information  relating  to  the  Company and the Company's consolidated
subsidiaries  would  be  made  known  to  them  by others within those entities,
particularly  during  the  period in which this annual report on Form 10-KSB was
being  prepared.

     B.  Changes in Internal Controls.  There were no significant changes in the
Company's  Internal controls or in other factors that could significantly affect
the  Company's  disclosure  controls and procedures subsequent to the Evaluation
Date, nor any significant deficiencies or material weaknesses in such disclosure
controls  and  procedures  requiring  corrective  actions.   As   a  result,  no
corrective  actions  were  taken.

                                       31

<PAGE>


Financial  Statements

Independent  Auditors'  Report                                               F-1
Consolidated  Balance  Sheet                                                 F-2
Consolidated  Statements  of Operations                                      F-3
Consolidated  Statements  of  Stockholders' Deficit                          F-4
Consolidated  Statements  of  Cash  Flows                                    F-5
Notes  to  Consolidated  Financial  Statements                               F-7





















                                       32
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To  the  Board  of  Directors
ITS  Networks,  Inc.

We  have  audited  the  accompanying consolidated balance sheet of ITS Networks,
Inc. and its subsidiaries as of September 30, 2003, and the related consolidated
statements  of  income, retained earnings, and cash flows for the two years then
ended.  These  financial  statements  are  the  responsibility  of the Company's
management.  Our  responsibility  is  to  express  an opinion on these financial
statements  based  on  our  audit.

We  conducted our audit in accordance with auditing standards generally accepted
in  the  United  States  of  America.  Those  standards require that we plan and
perform  the  audit  to  obtain reasonable assurance about whether the financial
statements  are free of material misstatement. An audit includes examining, on a
test  basis,  evidence  supporting  the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made  by  management,  as well as evaluating the overall
financial  statement  presentation.  We  believe  that  our   audit  provides  a
reasonable  basis  for  our  opinion.

In  our  opinion,  the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of ITS Networks, Inc.
and  its  subsidiaries as of September 30, 2003, and the consolidated results of
its  operations  and its consolidated cash flows for the two years then ended in
conformity with accounting principles generally accepted in the United States of
America.

The  accompanying  consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
financial  statements, the Company has suffered recurring losses from operations
and  has  a  net  capital  deficiency,  which  raise substantial doubt about its
ability  to  continue  as  a  going  concern. Management's plans regarding those
matters  also  are  described in Note 2. The financial statements do not include
any  adjustments  that  might  result  from  the  outcome  of  this uncertainty.

/s/Murrell,  Hall,  McIntosh  &  Co.,  PLLP

January  19,  2003
Oklahoma  City,  Oklahoma

                                      F-1
<PAGE>

                                ITS NETWORKS INC.
                           CONSOLIDATED BALANCE SHEET
                               SEPTEMBER 30, 2003

                                     ASSETS
<TABLE>
<CAPTION>
CURRENT  ASSETS:
<S>                                                               <C>
  Cash  and  cash  equivalents                                    $     159,000
  Accounts  receivable  -  trade,  net  of  allowance
    for  doubtful  accounts  of  $1,515,000                             199,000
  Accounts  receivable  -  other                                        219,000
  Inventory                                                              59,000
  Prepaid  expenses                                                      10,000
                                                                  -------------

      Total  current  assets                                            646,000
                                                                  -------------

PROPERTY  AND  EQUIPMENT,  NET                                        1,170,000
                                                                  -------------

OTHER  ASSETS:
  Vendor  deposits                                                      209,000
                                                                  -------------

                                                                  $   2,025,000
                                                                  =============

                    LIABILITIES AND STOCKHOLDERS' (DEFICIT)

CURRENT  LIABILITIES:
  Accounts  payable  -  trade                                         3,864,000
  Accrued  payroll                                                      173,000
  Taxes  payable                                                        303,000
  Accrued  interest                                                      68,000
  Current  portion  of  obligation  under  capital  lease                28,000
  Reserve  for  litigation  and  other  contingencies                   313,000
  Other  accrued  liabilities                                           173,000
  Notes  payable  to  bank                                              233,000
  Current  portion  of  payment  obligation  to  taxing
    authority                                                           114,000
  Loans  from  related  parties                                       1,180,000
  Deferred  income                                                    1,650,000
                                                                  -------------

      Total  current  liabilities                                     8,099,000
                                                                  -------------

LONG  TERM  DEBT
  Payment  obligation  to  tax  agency,  net  of
    current portion shown above                                         366,000
  Obligation  under  capital  leases,  net  of  current
    portion shown above                                                   7,000
  Loans  from  related  parties                                       1,049,000
                                                                  -------------

      Total  long-term  debt                                          1,422,000
                                                                  -------------

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,  22,420,278  shares  outstanding  after  effect
    of  reverse  stock  split,  December  29,  2003                      22,000
  Additional  paid-in  capital  after  effect  of  reverse
    stock  split,                                                     8,565,000
  Less:  Prepaid  syndication  fees                                    (418,000)
  Accumulated  (deficit)                                            (14,094,000)
  Effect  of  cumulative  translation  adjustment                    (1,571,000)
                                                                  -------------
      Total  stockholders'  (deficit)                                (7,496,000)
                                                                  -------------

                                                                  $   2,025,000
                                                                  =============
</TABLE>

                See accompanying notes to financial statements.

                                      F-2
<PAGE>
                                ITS NETWORKS INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                FOR THE YEARS ENDED SEPTEMBER 30, 2003 AND 2002

<TABLE>
<CAPTION>
                                                         2003           2002
                                                   -------------   ------------
<S>                                                <C>             <C>
SALES                                              $   6,498,000   $  2,186,000

COST  OF  GOODS  SOLD  (exclusive
  of  Depreciation  shown  separately  below)          5,071,000      1,544,000
                                                   -------------   ------------

GROSS  PROFIT                                          1,427,000        642,000
                                                   -------------   ------------

OPERATING  EXPENSES:
  Selling, general and administrative expenses         4,078,000      1,698,000
  Depreciation                                           367,000         52,000
  Bad  debt  expense                                     255,000        175,000
  Impairment  on  goodwill                             6,637,000              -
                                                   -------------   ------------

      Total  operating  expenses                      11,337,000      1,925,000
                                                   -------------   ------------

(LOSS)  FROM  OPERATIONS                              (9,910,000)    (1,283,000)
                                                   -------------   ------------

OTHER  INCOME  (EXPENSES):
  Interest  expense                                     (121,000)        (1,000)
  Non  operating  profit                                       -              -
                                                   -------------   ------------

                                                        (121,000)        (1,000)
                                                   -------------   ------------

(LOSS)  BEFORE  INCOME  TAXES                      $ (10,031,000)  $ (1,284,000)
                                                   =============   ============

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

NET  (LOSS)                                        $ (10,031,000)  $ (1,284,000)
                                                   =============   ============

BASIC  EARNINGS  (LOSS)  PER SHARE                 $       (0.58)  $      (0.11)
                                                   =============   ============

AVERAGE  COMMON  AND  COMMON
  EQUIVALENT  SHARES  OUTSTANDING                     17,439,287     11,499,893
                                                   =============   ============

THE  COMPONENTS  OF  COMPREHENSIVE  LOSS:
  Net  (loss)                                      $ (10,031,000)  $ (1,284,000)
  Foreign  currency  translation  adjustment       $  (1,571,000)      (131,000)
                                                   -------------   ------------

COMPREHENSIVE  (LOSS)                              $ (11,602,000)  $ (1,415,000)
                                                   =============   ============
</TABLE>



                See accompanying notes to financial statements.

                                      F-3
<PAGE>
                                ITS NETWORKS INC.
          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

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

Balance,  September  30,  2001       10,658,334   10,000    1,327,000          -      (2,779,000)         9,000     (1,433,000)
Common  shares  issued  upon
  exercise  of  warrants                 10,000        -       16,000          -               -              -         16,000
Common stock issued for
  conversion of debt to equity        1,186,040    1,000    1,464,000          -               -              -      1,465,000
Common shares issued for cash,
  April  2002                             9,750        -       11,000          -               -              -         11,000
Common  shares  issued  for
  services                              241,500        -      195,000          -               -              -        195,000
Common stock options issued for
  advertising,  September  2002               -        -       84,000          -               -              -         84,000
Common  shares  issued  for
  syndication  costs,
  September  2002                       526,312    1,000      417,000   (418,000)              -              -              -
Common  shares  repurchased
  and  retired                         (125,000)       -       (5,000)         -               -              -         (5,000)
Foreign  currency  translation
  adjustment, September 30, 2002              -        -            -          -               -       (131,000)      (131,000)
Net (loss) for the year ended
  September  30,  2002                        -        -            -          -      (1,284,000)             -     (1,284,000)
                                     ----------  -------  -----------  ---------    ------------    -----------    -----------

Balance,  September  30,  2002       12,506,935   12,000    3,509,000   (418,000)     (4,063,000)      (122,000)    (1,082,000)
Common stock issued for conversion
  of  debt  to  equity                9,767,093   10,000    4,976,000          -               -              -      4,986,000
Common stock bonus for consulting
  services in lieu of cash payment      150,000        -       86,000          -               -              -         86,000
Common  shares  repurchased
  and  retired                           (3,750)               (6,000)         -                                        (6,000)
Foreign  currency  translation
  adjustment,  September  30,  2003           -        -            -          -               -      (1,449,000)   (1,449,000)
Net  (loss)  for  the  year  ended
  September  30,  2003                        -        -            -          -     (10,031,000)              -   (10,031,000)
                                     ----------  -------  -----------  ---------    ------------    -----------    -----------

Balance,  September  30,  2003       22,420,278  $22,000  $ 8,565,000  $(418,000)   $(14,094,000)   $ (1,571,000)  $(7,496,000)
                                     ==========  =======  ===========  =========    ============    ============   ===========
</TABLE>


                See accompanying notes to financial statements.

                                      F-4
<PAGE>
                                ITS NETWORKS INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE YEARS ENDED SEPTEMBER 30, 2003 AND 2002
                                  Page 1 of 2

<TABLE>
<CAPTION>
                                                         2003           2002
                                                    -------------   ------------
CASH  FLOWS  FROM  OPERATING  ACTIVITIES:
<S>                                                 <C>             <C>
  Net (loss)                                        $(10,031,000)   $(1,284,000)
  Adjustments  to  reconcile  net  (loss)  to
    net  cash  used  in  operating  activities:
      Depreciation                                       367,000         52,000
      Bad debt expense                                   255,000        708,000
      Loss on disposition of assets                      110,000
      Non cash expenditures paid with stock               86,000        175,000
      Loss on impairment on goodwill                   6,637,000              -
    Decrease  (increase)  in  operating  assets:
      Accounts receivable - trade                       (249,000)       (98,000)
      Accounts receivable - other                       (116,000)             -
      Inventory                                          (59,000)             -
      Prepaid expenses                                     6,000        (16,000)
      Vendor and other deposits                         (115,000)       (24,000)
    Increase (decrease) in operating liabilities:
      Accounts payable and accrued liabilities         4,180,000        (84,000)
      Deferred Income                                  1,642,000              -
                                                    ------------    -----------
        Net cash provided by (used in)
          operating activities                         2,713,000       (571,000)
                                                    ------------    -----------

CASH  FLOWS  FROM  INVESTING  ACTIVITIES:
  Purchased goodwill                                  (4,339,000)             -
  Purchase of property and equipment                  (1,427,000)      (107,000)
                                                    ------------    -----------

        Net cash (used in) investing activities       (5,766,000)      (107,000)
                                                    ------------    -----------

CASH  FLOWS  FROM  FINANCING  ACTIVITIES:
  Loan proceeds from related parties                   3,906,000      1,010,000
  Loan proceeds from bank                                233,000              -
  Loan proceeds from tax agency                          480,000
  Loan principal payments                                      -     (1,223,000)
  Proceeds from sale of common stock                           -      1,063,000
  Cash paid for treasury stock                            (6,000)        (5,000)
                                                    ------------    -----------

        Net cash provided by financing activities      4,613,000        845,000
                                                    ------------    -----------

EFFECT OF EXCHANGE RATE                               (1,449,000)      (131,000)
                                                    ------------    -----------

NET  INCREASE  (DECREASE)  IN  CASH  AND
  CASH EQUIVALENTS                                       111,000         36,000

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

CASH  AND  CASH  EQUIVALENTS,
  END OF YEAR                                       $    159,000    $    48,000
                                                    ============    ===========
</TABLE>


                See accompanying notes to financial statements.

                                      F-5
<PAGE>

                               ITS NETWORKS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE YEARS ENDED SEPTEMBER 30, 2003 AND 2002
                                  Page 2 of 2

<TABLE>
<CAPTION>
                                                         2003           2002
                                                    -------------   ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash  paid  during  the  year  for:
<S>                                                 <C>             <C>
    Interest                                        $     121,000   $    (1,000)


SUPPLEMENTAL  DISCLOSURE  OF  NONCASH  TRANSACTIONS:
  Stock issued as additional purchase
    consideration (Goodwill)                        $   2,297,500   $         -
                                                    =============   ===========
  Long-term debt converted to common stock          $   4,136,000   $ 1,465,000
                                                    =============   ===========
  Common stock issued for services received         $      86,000   $   708,000
                                                    =============   ===========
</TABLE>
















                See accompanying notes to financial statements.

                                      F-6
<PAGE>
                               ITS NETWORKS, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                          SEPTEMBER 30, 2003 AND 2002


1.  THE  COMPANY

ITS  Networks  Inc.  (the "Company") was incorporated in the State of Florida on
November  23, 1998. On December 22, 2000, the Company issued 8,433,334 shares of
common  stock,  after  the effect of the 1 for 2 reverse stock split on December
29,  2003,  in  exchange for 100% of the outstanding common stock of ITS Europe,
S.L.  ("ITS  Europe"),  a  Spanish  telecommunications  company.  For accounting
purposes, the acquisition has been recorded as a recapitalization of ITS Europe,
with ITS Europe as the acquirer. The 8,433,334 shares, after the effect of the 1
for  2 reverse stock split on December 29, 2003, issued are treated as issued by
ITS  Europe for cash.  ITS Europe was engaged in providing both prepaid and post
paid  long  distance  telephone  calling  services.

In  December  2002  the  Company   acquired   Teleconnect  Comunicaciones,  S.A.
("Teleconnect") for up to 1,500,000 shares of the Common Stock, after the effect
of  the  1 for 2 reverse stock split on December 29, 2003, of the Company valued
at  $.9190  (after  effect  of  reverse  split)  per share and the assumption of
approximately  2,200,000  Euros  of net debt.  See Note 4 for further details on
this  acquisition.   Teleconnect  provided  principally  provided  prepaid  long
distance services via the sale and servicing of prepaid telephone calling cards.

The  consolidated  financial  statements  include  the  accounts  of ITS Europe,
Teleconnect,   and  the   Company.    The  Company  is  a  provider  of  various
telecommunication services and products within Spain.  Significant inter-company
balances  and  transactions  have  been  eliminated  in  consolidation.


2.  GOING  CONCERN

During the two years ended September 30, 2002 and 2003, the Company incurred net
(losses)  of  ($1,284,000)  and ($10,031,000), respectively. As of September 30,
2003, the Company had negative working capital of ($7,453,000) and a deficit net
worth  of  ($7,496,000).   These  factors  raise  substantial  doubt  about  the
Company's  ability  to  continue  as  a  going  concern.

Subsequent  to  the  year  ended September 30, 2003, the Company entered into an
agreement  with an individual to issue additional shares in the Company equal to
60%  of  the  thereafter  issued  and  outstanding stock for a purchase price of
2,900,000.  As of the date of this report, the sale had not been finalized.  See
Note  16  for  further  details.

Subsequent to the year ended September 30, 2003, the Company also sold its fixed
line business operations for a price of up to  550,000.  See Note 16 for further
details.

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

                                      F-7
<PAGE>

plan  will  be  successful.   The  financial  statements   do  not  include  any
adjustments  that  might  result  from  the  outcome  of  this  uncertainty.


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  September  30,  2003.

Consolidation  Policies  -  The  accompanying  consolidated financial statements
include  the  accounts  of  the Company and all of its wholly owned and majority
owned subsidiaries.  Intercompany transactions and balances have been eliminated
in  consolidation.

Revenue  Recognition  -  Revenues  from  the  sale  of  prepaid calling cards is
recognized  as the time the cards is used.  Unused time is reflected in deferred
revenue until the time is utilized or the card reaches its expiration date.  The
Company  had  deferred  revenues of $1,650,000 and none as of September 30, 2003
and  2002  respectively.

Revenues  from  fixed line long distances charges are recognized at the time the
services  are  rendered.

Inventory  -  Inventory consists primarily of unused calling cards.  Inventories
are  stated at the lower of cost determined on the first in first out method, or
cost.

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.  Maintenance  and repairs are charged
to  operations  when  incurred.

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  a  reduction  in  carrying  value  due  to  impairment.

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

Loss  per  Share - Loss per common and common equivalent share is computed based
on  the  weighted  average  number  of  common  shares  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

                                      F-8
<PAGE>

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 assets and liabilities of ITS
Europe  and  Teleconnect  whose  functional  currency  is the Euro (formerly the
Peseta),  are generally  translated  into  US  dollars at the September 30, 2003
exchange  rate.  The  revenues  and  expenses are translated at average exchange
rates  for   the  periods.    Resulting  translation adjustments are accumulated
and  reflected  as  a  separate  component  of  stockholders'  equity.

Transaction  gains  and  losses  that  arise  from exchange rate fluctuations on
transactions  denominated  in  a currency other than the functional currency are
included in the results of operations as incurred. Foreign transaction gains and
losses  in  the  functional  currencies  are  immaterial.


4.  CONCENTRATION  OF  CREDIT

The  Company extends credit to customers for long distances services provided to
fixed  line  customers.  Substantially all sales are made in Spain.  The Company
has  incurred  substantial  losses  in the past from the extension of credit but
believes that as of September 30, 2003 its allowance for loan losses is adequate
to  cover  any  uncollectible  receivables.

The  Company  does not require collateral or other security to support financial
instruments  that  are  subject  to  credit  risk.

As  of September 30, 2003, no customer accounted for 10% of accounts receivable.
For  the years ended September 30, 2003 and 2002, no customer accounted for more
than  10%  of  total  sales.


5.  ACQUISITION  OF  TELECONNECT  COMMUNICACIONES,  S.A.

In  December  2002,  the  Company  acquired   Teleconnect  Comunicaciones,  S.A.
("Teleconnect")  in  consideration for the issuance of up to 1,500,000 shares of
the  Common  Stock,  after  the  effect  of  the  1 for 2 reverse stock split on
December  29,  2003,of the Company valued to be valued at $.919 (after effect of
reverse  split) per share and the assumption of approximately 2,200,000 Euros of
net  debt.  The  stock  issuance  was  subject to guarantees made by Teleconnect
shareholders  that  Teleconnect  liabilities  will  not  exceed  2,200,000 Euro.
Management  anticipated  that  Teleconnect  debts  would sufficiently exceed the
2,200,000  Euro  limit that no additional shares would be required to be issued.

Upon  completion  of the acquisition in December of 2002, which was treated as a
purchase   for   financial  reporting  purposes,   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

                                      F-9
<PAGE>

associated  with  this acquisition before taking into consideration the value of
any  additional  shares  that  might  have  been  due  the   former  Teleconnect
shareholders.

On  September  29,  2003,  the  Company entered into an agreement with the major
former  shareholders  of Teleconnect whereby the Company agreed to waive the Net
Debt  calculations  called  for  in the original stock purchase agreement and to
issue  the former Teleconnect shareholders the original 1,500,000 shares plus an
additional  1,000,000  shares  for  a total of 2,500,000 shares of the Company's
restricted common stock, after the effect of the reverse stock split on December
29,  2003.  These  2,500,000  shares  were  valued at $.919 per share or a total
consideration  of  $2,277,500.

Following  this  transaction,  the Company had $6,636,000 in goodwill associated
with  the  Teleconnect  acquisition.

In  accordance  with  Financial  Accounting  Standards Board Opinion No 142, the
Company recognized an impairment loss of $6,636,000 during the fiscal year ended
September  30,  2003.  This impairment was recognized as a result of the failure
of  the  Teleconnect  acquisition  to  generate  sufficient operating profits to
support  the  carrying  value  of  the  goodwill.


Unaudited  pro  forma  operating results for the fiscal year ended September 30,
2002  as  if  the acquisition had been effective October 1, 2002 are as follows:

<TABLE>
<CAPTION>
<S>                                                 <C>
     Pro  forma  sales                             $ 9,762,000
     Pro  forma  cost  of  sales                     7,508,000

     Pro  forma  gross  profit                       2,254,000
     Operating  expenses                             8,962,000

     (Loss)  from  operations                       (6,708,000)
     Other  (Expense)                                  (88,000)

     Net  (loss)  before  income  taxes             (6,796,000)
     Provision  for  income  taxes                           -
                                                   -----------
     Net  (loss)                                   $(6,796,000)
                                                   ===========
</TABLE>


6.  PROPERTY  AND  EQUIPMENT

Property  and  equipment,  substantially  all  of which is located in Spain,  at
September  30,  2003  was  comprised  as  follows:

<TABLE>
<CAPTION>
<S>                                                <C>
     Computers  and  switching  systems            $ 1,117,000
     Leasehold  improvements                           967,000
     Furniture  and  fixtures                          127,000
     Transportation  equipment                          13,000
                                                   -----------
          Total  at  cost                            2,224,000
     Less:  Accumulated  depreciation
          and  amortization                         (1,054,000)
                                                   -----------

                                      F-10
<PAGE>

     Net  Property  and  Equipment                 $ 1,170,000
                                                   ===========
</TABLE>

The  useful  lives  of  property  and  equipment  for  purposes  of  computing
depreciation  are  as  follows:

<TABLE>
<CAPTION>
<S>                                                 <C>
     Computers  and  switching  systems             5-7  years
     Leasehold  improvements                          5  years
     Furniture  and  fixtures                         7  years
     Transportation  equipment                        4  years
</TABLE>

All  depreciation  is computed on a straight line bases over their useful lives.

As  of  September  30,  2003,  the  Company had $365,612 in equipment held under
capital lease agreements.  This equipment held under capital lease agreements is
included  on  computers  and  switching  systems  shown  above.


7.  LOANS  FROM  RELATED  PARTIES

As  of  September 30, 2003, the Company had short term loans totaling $1,180,000
from  shareholders.  These  loans  due not bear interest, are unsecured, and are
due  upon  demand.


8.  NOTE  PAYABLE  TO  BANK

As  of  September  30,  2003,  the Company had a $233,000 ( 200,000) loan from a
bank.  This  loan bears interest at the rate of 4.25% is unsecured and is due on
December  12,  2003.


9.  LONG-TERM  DEBT

As of September 30, 2003, the Company had two loans due to shareholders totaling
$1,049,000  (  900,000).  These  notes  are  unsecured, bear interest at 10% per
annum  and  are  due on November 25, 2004.  As additional consideration for this
loan, these shareholders were granted stock options to purchase 3,000,000 shares
of  the  company's stock, after the effect of the 1 for 2 reverse stock split on
December  29,  2003,  effective  December  10,  2003  as  follows:

     500,000  shares  at  an  exercise  price  of  $.50  per  share
     500,000  shares  at  an  exercise  price  of  $1.00  per  share
     500,000  shares  at  an  exercise  price  of  $1.20  per  share
     500,000  shares  at  an  exercise  price  of  $1.50  per  share
     500,000  shares  at  an  exercise  price  of  $2.00  per  share
     500,000  shares  at  an  exercise  price  of  $2.50  per  share

In  addition during November of 2002, the Company entered into an agreement with
Spanish  taxing  authorities to pay past due employment tax liabilities incurred
during  the  period commencing in January of 2001 through April of 2002 totaling
412,356.  Payment  terms  call  for  a  sixty  month  payout with  interest paid
monthly at 4.24% per annum and  principal payments ranging from  3,436 per month

                                      F-11
<PAGE>

in  year  one  to  10,309  per  month  in  year five.  As of September 30, 2003,
$358,000  (  309,000)  of  this  debt  is  long  term.

Maturities  on  long  term  debt  by  year  are  as  follows:

<TABLE>
<CAPTION>
<S>                                  <C>
     Due  within  one  year          $  114,000
     Due  in  year  two               1,151,000
     Due  in  year  three               115,000
     Due  in  year  four                149,000
     Due  in  five  years                     -
     Thereafter                               -
                                     ----------
          Total                      $1,529,000
                                     ==========
</TABLE>


10.  INCOME  TAXES

The Company's subsidiaries, ITS Europe and Teleconnect,  file their income taxes
on  a  calendar  year  basis.  Statutory  tax  laws  of  Spain  allow net losses
from  operations  to  be  carried  forward  for  a  period  of 15 years. For the
year  ended  December  31,  2002,  the  available tax loss carryforwards for ITS
Europe  and   Teleconnect  are   3,771,000   and  9,777,000  respectively.   The
utilization  of  these  losses  expires  as  follows:

<TABLE>
<CAPTION>

                                       ITS  Europe          Teleconnect
          Year
<S>                                  <C>                  <C>
          2010                           11,000 Euros              - Euros
          2011                           25,000 Euros              - Euros
          2012                           63,000 Euros              - Euros
          2013                           79,000 Euros              - Euros
            2014                        713,000 Euros        129,000 Euros
          2015                        1,319,000 Euros        638,000 Euros
          2016                          783,000 Euros      2,770,000 Euros
          2017                          778,000 Euros      6,240,000 Euros

          Total                       3,771,000 Euros      9,777,000 Euros
</TABLE>

The  US  parent  Company   has   net  operating   loss   carryforwards  totaling
approximately  $739,000,  which  is  available  to  offset future parent Company
taxable  income  in  years  2021  to  2023.

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

The  US  carryforward  expiration  years  and  amounts  are  as  follows:

<TABLE>
<CAPTION>
                Year      Amount
                ----      ------
<S>                     <C>
                2021    $    6,000
                2022       191,000
                2023       542,000
                        ----------
                        $  739,000
                        ==========
</TABLE>

                                      F-12
<PAGE>


11.  OPERAATING  LEASES

The  Company  leases  various  office space and equipment under operating leases
expiring  in  various  years  through  2005  Rent  expense incurred in operating
leases  for  the fiscal years ended September 30, 2003 and 2002 are $220,154 and
$141,000  respectively.

Minimum  future  rental  payments  under  non-cancelable operating leases having
remaining  terms  in  excess of on year as of September 30, 2003 for each of the
next  five  years  and  in  the  aggregate  are:

<TABLE>
<CAPTION>
     Year  ended  September  30,                     Amount
<S>                                                  <C>
             2004                                    $231,964
             2005                                    $210,575
             2006                                    $ 29,661
             2007                                           -
             2008                                           -
             Thereafter                                     -
                                                     --------

     Total  minimum  future  rental  payments        $472,200
                                                     ========
</TABLE>

12.  CAPITAL  LEASES

The Company has entered into capital leases on equipment totaling $352,000 which
is  included  in  property  and  equipment  described in Note 6 to the financial
statements.

Minimum  future lease payments under capital leases as of September 30, 2003 for
each  of  the  next  five  years  and  in  the  aggregate  are  as  follows:

<TABLE>
<CAPTION>
     Year  ended  September  30,                     Amount
<S>                                                  <C>
             2004                                    $99,000
             2005                                      7,000
                                                    --------

          Total  minimum  lease  payments           $106,000
                                                    ========
</TABLE>


13.  LITIGATION  AND  CONTINGENT  LIABILITIES

In  the  normal course of its operations, the Company may, from time to time, be
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.  As of
September  30,  2003,  the Company has accrued $216,000 to cover the anticipated
cost  of  settling  several  small  litigation  matters.

During 2003, the Company underreported certain tax liabilities totaling $163,000
to  the  taxing  authorities.  These  liabilities  were  correctly  accrued  for

                                      F-13
<PAGE>

financial  reporting  purposes.  It  is  management's  intention to file amended
returns  reporting  these  underreported amounts.  No liability has been accrued
for  any  interest  or  penalties  that  might  be association with filing these
amended  returns  and  paying  the  delinquent  taxes.

14.  INFLATION

The Company believes that inflation has not had a material impact on its results
of  operations  for  the  year  ended  September  30,  2003.

15.  PREFERRED  STOCK

The Company has 5,000,000 shares of authorized and unissued Preferred Stock with
par  value  of  $0.001,  which  is  noncumulative  and  nonparticipating.

16.  STOCK  TRANSACTIONS

During  the  year  ended September 30, 2002, $1,465,000 of debt was converted to
1,186,036  shares of Common Stock, after the effect of the 1 for 2 reverse stock
split  on  December  29, 2003.  In addition the Company issued 136,250 shares of
Common  Stock,  after  the effect of the 1 for 2 reverse stock split on December
29,  2003,  for  legal  and  advertising  services.

During  the  year ended September 30, 2002, the Company issued 125,000 shares of
Common  Stock,  after  the effect of the 1 for 2 reverse stock split on December
29,  2003,  as  agreed upon in the employment contract with the president of the
Company.

During  the  year  ended  September 30, 2002, the Company entered into an equity
line  of  credit  with Cornell Capital Partners, L.P.  ("Cornell").  Pursuant to
the  equity  line  of  credit  agreement,  the  Company, at its discretion, will
periodically  sell  to Cornell shares of Common Stock for a total purchase price
of up to $10,000,000.  For each share of common stock purchased under the equity
line  of  credit,  Cornell  will  pay 95% of the lowest closing bid price on the
Over-the-Counter  Electronic  Bulletin  Board or other principal market on which
our  Common  Stock  is  traded for the five consecutive trading days immediately
following  the  notice  date.  On September 27, 2002, the Company issued 513,158
shares  of  Common Stock, after the effect of the 1 for 2 reverse stock split on
December  29,  2003,  for  syndication  fees for this equity line of credit.  In
addition,  in  connection  with  the  Equity Line of Credit Agreement, we issued
13,158 shares of our Common Stock, after the effect of the 1 for 2 reverse stock
split  on  December  29,  2003,  to  Westrock  Advisors,  Inc. ("Westrock") as a
placement  agent  fee.  As  of  December  20,  2002, this line of credit has not
become available as the shares covered under this equity line of credit have not
been registered with the Securities and Exchange Commission. Given the change in
market  conditions  up  to  September 2003, the decision was taken to cancel the
equity  line.

During the year ended September 30, 2002, the Company repurchased 125,000 shares
of Common Stock, after the effect of the 1 for 2 reverse stock split on December

                                      F-14
<PAGE>

29,  2003,  from the former president of the Company for $5,000.  These treasury
shares  were  treated  as  retired.

During the year ended September 30, 2003, the Company issued 9,767,092 shares of
restricted  common stock, after the effect of the 1 for 2 reverse stock split on
December  29,  2003,  in  exchange  for  debts totaling $4,986,000.  In addition
150,000  restricted  shares, after the effect of the 1 for 2 reverse stock split
on  December  29,  2003, were issued for services rendered valued at $86,000 and
3,750  shares,  after  the effect of the 1 for 2 reverse stock split on December
29,  2003,  that  were  repurchased  for  $6,000  and  retired during that year.


17.  STOCK  WARRANTS  AND  OPTIONS

As  of  September  30,  2003,  the  Company has warrants outstanding to purchase
440,000  shares  of  Common Stock, after the effect of the 1 for 2 reverse stock
split  on  December  29,  2003,  at the exercise price of $2.00 per share, which
expire  on or before December 24, 2004.  Each of the warrants contain provisions
for  the  adjustment  of  the  exercise price and the aggregate number of shares
issuable  upon  the  exercise  of  the warrants in the event of stock dividends,
stock  splits,  reorganization  and  reclassifications  and  consolidations.

During  the  fiscal  year  ended  September  30,  2002,  the  Company has issued
outstanding  stock  options  covering  315,790 shares of Common Stock, after the
effect  of  the  1 for 2 reverse stock split on December 29, 2003,exercisable at
$.20  per  share  until  March  27, 2007 for advertising services rendered.  For
financial  reporting  purposes, these options were valued at $84,000, which were
treated  as  advertising  expense  with an offset to additional paid in capital.

Stock  options  for an additional 3,000,000 shares of stock, after the effect of
the  1  for  2  reverse stock split on December 29, 2003, were issued during the
fiscal year ended September 30, 2003.  These options are exercisable on or after
December 10, 2003.  These stock options expire on November 28, 2007.  See Note 9
above  for  option  exercise  prices.

As  of  March  30,  2003,  the  Company had not issued stock options through the
employee  stock-based  compensation  plan, described below.  The Company applies
APB  25 and related interpretations in accounting for its plan. Compensation for
services  that  a   corporation  receives  under   APB  25  through  stock-based
compensation plans should be measured by the quoted market price of the stock at
the  measurement  date  less  the   amount,  if  any,  that  the  individual  is
required  to  pay.  No  compensation expense was recorded during the years ended
September  30, 2003, and 2002 related to its stock option plan under APB 25.  If
the Company had elected to recognize compensation based on the fair value of the
options  granted  at  the  grant  date  as prescribed by "Statement of Financial
Accounting  Standards  No.  123,   ("SFAS  123")  Accounting   for   Stock-Based
Compensation",  net  earnings  (loss)  and net earnings (loss)  per  share would
have  increased  to  the  pro  forma  amounts shown below for the  years  ending
September  30,  2003  and  2002:

                                      F-15
<PAGE>
<TABLE>
<CAPTION>
                                                          2003          2002
                                                     -------------  ------------

     Pro  forma  net  (loss)  applicable
<S>                                                  <C>            <C>
     to  common  stockholders                        $(10,031,000)  $(1,284,000)

     Less:  Total  stock  based  compensation
     expense  determined  under  fair  value
     based  method  for  all  awards,  net
     of  related  tax  effect                                   -             -
                                                     ------------   -----------

     Pro forma net (loss)  per common  share         $(10,031,000)  $(1,284,000)
                                                     ============   ===========


                                                          2003          2002
                                                     ------------   -----------

Earnings  (loss)  per  share:

Basic  -  as  reported                               $      (0.58)   $    (0.11)
                                                     ============    ==========

Basic  -  pro  forma                                 $      (0.58)   $    (0.11)
                                                     ============    ==========

Diluted  -  as  reported                             $      (0.58)   $    (0.11)
                                                     ============    ==========

Diluted  -  pro  forma                               $      (0.58)   $    (0.11)
                                                     ============    ===========
</TABLE>

      Information  with  respect  to  stock  options and warrants outstanding to
certain  employees,  directors  and  service  providers  are  as  follows:

<TABLE>
<CAPTION>
                                                                2003
                                                     ------------------------
                                                       Shares
                                                    (After  the
                                                effect  of  the  1
                                                  for  2  reverse        Average
                                                 stock  split  on       Exercise
                                               December  29,  2003)       Price
                                               --------------------     ---------
<S>                                                  <C>                <C>
Outstanding  at  beginning  of  year                   315,790          $   0.10

Granted  at  market  value                           3,440,000              3.45

Exercised                                                    -                 -

Expired                                                      -                 -
                                                     ---------          --------

Outstanding  at  the  end  of  year                  3,755,790          $   3.65
                                                     =========          ========
</TABLE>

<TABLE>
<CAPTION>
                          Options  Outstanding             Options  Exercisable
                 --------------------------------------   -----------------------
                     Shares        Average     Average      Shares       Average
                   Outstanding    Remaining    Exercise   Outstanding    Exercise
                     9/30/03    Life  (Years)   Price      9/30/03        Price
                   -----------  -------------  --------   ------------   --------
<S>                 <C>              <C>        <C>        <C>           <C>
$0.20                 315,790        3.5        $ 0.20       315,790     $ 0.10
$2.00                 440,000        1.2          2.00       440,000       1.00
$0.50  -  $2.50     3,000,000        4.2          1.45     3,000,000       0.725
                    ---------                   ------     ---------     -------

                    3,755,790                   $ 3.65     3,755,790     $ 1.825
                    =========                   ======     =========     =======
</TABLE>

                                      F-16
<PAGE>

18.  STOCK  OPTION  PLANS

During  the year ended September 30, 2002, the Company adopted an Employee Stock
Option, SAR and Stock Bonus Plan (the "Employee Plan"), which reserves 1,250,000
shares  of  Common Stock, after the effect of the 1 for 2 reverse stock split on
December  29,  2003,  for issuance under the Plan.  The Employee Plan allows the
Company  to  issue  awards  of  incentive  or non-qualified stock options, stock
appreciation  rights,  and  stock bonuses, which may be subject to restrictions.

During  the  year  ended September 30, 2002, the Company adopted a Stock Option,
SAR  and  Stock  Bonus  Consultant  Plan (the "Consultant Plan"), which reserves
1,000,000  shares of Common Stock, after the effect of the 1 for 2 reverse stock
split  on  December  29, 2003, for issuance under the Plan.  The Consultant Plan
allows  the Company to issue awards of incentive or non-qualified stock options,
stock  appreciation  rights,  and  stock  bonuses,   which  may  be  subject  to
restrictions.

No  awards  of  stock  options, stock appreciation rights, or stock bonuses have
been  granted to employees or consultants as of September 30, 2003, except for a
stock bonus of a net 9,750 shares of common stock, after the effect of the 1 for
2  reverse stock split on December 29, 2003, which was awarded during the fiscal
year  ended  September  30,  2002.


19.  EARNINGS  (LOSS)  PER  SHARE

Basic  earnings  per  share  amounts  are computed based on the weighted average
number  of  shares  outstanding on that date during the applicable periods.  The
numbers  of  shares  used  in  the  computations  were  17,439,287  in  2003 and
11,499,893,  after the effect of the 1 for 2 reverse stock split on December 29,
2003,  in  2002.

Diluted  earnings  per share was not disclosed as of September 30, 2003 and 2002
since  the  options  and  warrants outstanding at those dates were antidilutive.
Warrants  and  options total 755,790 share and 3,440,000 shares were outstanding
at  September  30, 3002 and 2003, respectively as adjusted for the reverse stock
split.


20.  SUBSEQUENT  EVENTS

During  November  of  2003,  the  Company entered into an agreement with a third
party  to sell its post paid long distance business.  The sales price was set at
550,000  subject  to  a downward price adjustment should revenues generated from
the  accounts sold be less than  137,000 during the month of April 2004.  Should
revenues  for  the  sold  accounts  be less than  137,000 during April 2004, the
purchase  price  would  be  adjusted  downward  to  equal  four times April 2004
revenues.  During  November 2003, the purchaser paid  400,000 directly to one of
the Company's creditors in partly settlement of this purchase obligation.  Based
on  a  sales  price  of  550,000,  the  management  anticipates the Company will
recognized  a  pre  tax  gain  of  approximately  $360,000.

                                      F-17
<PAGE>

Effective  November  28,  2003,  the  Company  entered into an agreement with an
individual  to  issue restricted common stock of the Company equal to 60% of the
then  issued and outstanding stock for a consideration of  2,900,000.  As of the
date  of  this  report,  this  transaction  has  not  been  finalized.

On  December  29,  2003,  the  Company  had  a 1 for 2 reverse stock split.  The
effects  of  this  reserve  stock split have been reflected retroactively in the
September  30,  2003  financial  statements.






















                                      F-18
<PAGE>


                                   SIGNATURES

          In accordance with Section 13 or 15(d) of the Securities Exchange Act,
the registrant caused this report to be signed on its behalf by the undersigned,
hereunto  duly  authorized.


January  30,  2003                     ITS  Networks  Inc.


                                       By:/s/Gustavo  Gomez
                                          --------------------------------------
                                          Gustavo  Gomez
                                          Director,  President  and  Treasurer


                                       By:/s/Herman  de  Haas
                                          --------------------------------------
                                          Chief  Financial  Officer,
                                          Executive  Vice  President  and
                                          Principal  Accounting  and
                                          Financial  Officer

     In  accordance  with the Exchange Act, this report has been signed below by
the  following  persons on behalf of the registrant and in the capacities and on
the  dates  indicated.


January  30,  2004                     By:/s/Gustavo  Gomez
                                          --------------------------------------
                                          Gustavo  Gomez
                                          Director, President  and  Treasurer



                                       By:/s/Herman  de  Haas
                                          --------------------------------------
                                          Director,  Chief  Financial  Officer,
                                          Executive  Vice  President  and
                                          Principal  Accounting  and  Financial
                                          Officer

















                                       34
<PAGE>

                           INDEX OF EXHIBITS ATTACHED

Exhibit                         Description
-------                         -----------

1(iii)                                 The Amendment to the Articles of
                                       Incorporation filed on  February  26,
                                       2003.

10.  Material  Contracts:

     10(a)                             Agreement to amend and resolve disputes
                                       between the Company  and  former
                                       shareholders of Teleconnect
..                                      Comunicaciones, S.A. under Stock  Swap
                                       Agreement  of  November  2002.

     10(b)                             Consulting  Agreement between Teleconnect
                                       Comunicationes,  S.A.  and  Yves  Horoit.

     10(c)                             Consulting  Agreement  with Lawrence
                                       Skolnik  dated September  10,  2003.

21.  A  description  of  the
     subsidiaries of the Company       Description of the subsidiaries of the
                                       Company.

23.  Consent of Murrell,  Hall,
     McIntosh &  Co.,  PLLP            Consent of Murrell, Hall, McIntosh & Co.,
                                       PLLP, independent  auditor


99.1  Certification of Gustavo  Gomez

99.2  Certification of Herman de Haas

99.3  Certification of Gustavo Gomez
      and  Herman  de  Haas






                                       35