SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-KSB



|[X] | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934    
|--- | ----------------------------------------------------------------------------------------
|    |                                                                                         
|    | For the Fiscal Year Ended March 31, 2003                                                
|    |                                                                                         
|[_] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934
|    |                                                                                         
|    | For the transition period from _____ to _____.                                          



Commission File No.: 0-13992

CYBER DIGITAL, INC. .

(Name of small business issuer in its charter)



|New York .                      |  | 11-2644640 .       
|------------------------------- |  | -------------------
|(State or other jurisdiction of |  | (I.R.S. Employer   
|incorporation or organization)  |  | Identification No.)

|400 Oser Avenue, Hauppauge, New York     |  | 11788     
|---------------------------------------- |  | ----------
|(Address of principal executive offices) |  | (Zip Code)

Issuer's telephone number: (631) 231-1200

|Securities registered under Section 12(b) of the Exchange
Act:
|--------------------------------------------------------------
|Title of Classes                                              
|                                                              
|Common Stock, $.01 par value                                  

Securities registered under Section 12(g) of the Exchange Act: NONE









|Yes [X] |  | No [_]
|------- |  | ------



Check if disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this Form 10-KSB, 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. [_]



Issuer's revenues for its most recent fiscal year: $0



As of June 26, 2003, Registrant had 22,305,498 shares of Common
Stock outstanding ($.01 par value). On that Date, the aggregate market value of
the Common Stock held by persons other than those who may be deemed affiliates
of Registrant was $3,737,700 (based on the last sale price reported on
over-the-counter market electronic bulletin board on such date).



Transitional Small Business Disclosure Format (check one):



|Yes [_] |  | No [X]
|------- |  | ------





PART 1



We have provided a glossary of terms for your convenience
beginning on page 12.



ITEM 1 - DESCRIPTION OF BUSINESS



Overview



We design, develop software, manufacture and market a vast
array of high performance Internet infrastructure systems such as routers,
gateways, firewalls and servers for the creation of next-generation digital
broadband and virtual private network (VPN) services by Internet service
providers. We also design, develop software, manufacture and market a range of
advanced digital voice switching infrastructure equipment for private and public
switched voice network operators worldwide, especially for developing countries.
Our mission is to become the leading supplier of (i) digital broadband systems
in the U.S., and (ii) digital voice switches to developing countries. We believe
that service providers can offer affordable yet modern voice and broadband
Internet services by exclusively using our vast array of voice and Internet
systems without buying any equipment from our competitors.



Unlike our competitors systems, our systems are neither labor
nor capital intensive but are software intensive. This capability, in contrast
to that of our competitor's, makes our systems more affordable for both voice
and Internet network operators worldwide. Our digital voice switching and
Internet Protocol (IP) infrastructure systems are based on our proprietary
operating system software, which provides high performance, reliability and
functionality.



Our vast array of both digital voice and Internet
infrastructure systems address every facet of building affordable yet modern
telecommunication and digital broadband networks. Our voice and Internet
switching systems can use fiber optic or digital wireless transmission, which
enable developing countries such as Nigeria to easily and rapidly deploy
telecommunications services to consumers within months rather than years. We
believe that we are one of a very few, if not the only, company in the world
with proprietary technology of distributed digital switching. Our systems are
ideally suited for the U.S., in the aftermath of the recent telecommunication
meltdown, as well as developing countries such as Nigeria. During fiscal year
2003, we continued to develop a stronger foothold in the Nigerian
telecommunication market by having our digital wireless telephone network
solution accepted by five states. Since we offer an affordable
telecommunications as well as Internet capability, the Nigerian authorities have
selected us as the ideal supplier of telephone and Internet systems.



In the aftermath of the telecommunication meltdown in the U.S.,
which essentially occurred due to the failure of the Telecommunication Act of
1996 and lack of local-loop voice and digital broadband networks in place, we
believe that we are poised to be the leading supplier of local-loop voice and
digital broadband systems. In addition, Federal Communications Commission's
(FCC) new ruling on phone policy announced February 20, 2003, requires that
local switching for business customers will no longer be unbundled;
thereby access to Bell switches for voice and data by Bell's competitors is
eliminated. This ruling forces the Bell's competitors to build their own local
switching facilities, presumably using our affordable digital voice switches and
broadband systems which are ideal for business segment market. There is abundant
capacity of optically enabled IP backbone networks between all major cities in
the U.S., but as yet businesses or consumers do not have adequate access to that
capacity. Our vast array of digital voice switches and high-performance
distribution routers are specifically designed to allow Bell's competitors to
meet the requirements of local-loop voice and digital broadband networks. We
believe that we will establish a strong market position with early adopters of
this technology and will build on this position as the market reestablishes
itself.



In October 2002, we targeted the burgeoning
Homeland Security market with our digital broadband systems. Our VPN solution
creates secure high-speed data networks between remote locations to facilitate
information sharing between government departments. We plan to market our secure
VPN solution to U.S. Federal government agencies as an aid in the war against
terrorism.



We are a New York corporation formed on April 4, 1983. Our
executive offices are located at 400 Oser Avenue, Suite 1650, Hauppauge, NY
11788 and our telephone number is (631)-231-1200. Our Website is
www.cyberdigitalinc.com.







Industry Background



A $250 Billion International Target Market



The tremendous growth of the Internet has revolutionized the
communications industry. Today, the Internet connects millions of people around
the world who are able to share information instantly without geographic
boundaries. The Internet is bound only by the voice-network upon which it
resides; without this network in place users cannot take advantage of powerful
Internet applications.



In developed countries, such as the United States, the
requisite voice network is already in place, hence the number of Internet users
is growing at unprecedented rates. In developing countries such as Nigeria,
China, India and Brazil, there is little or no basic voice network, leaving many
of these nations struggling to take part in the Internet revolution.



The demand for Internet applications, such as distance
learning, municipal virtual private networks and medical/emergency
communications systems have induced developing countries to aggressively invest
in communications infrastructure. These countries must first build a basic voice
network, the platform of the Internet, before they can become part of this
information revolution.



The following table shows projected five-year communication
infrastructure spending for selected countries, according to Pyramid Research:





|Projected Communication Infrastructure Investment by
      2005
|---------------------------------------------------------------
|Country                                                        
|                                                               
|China                                                          
|India                                                          
|Brazil                                                         
|Nigeria                                                        



Unlike technologically advanced countries, where the existing
public voice telephone network consists of monolithic centralized digital
switches, developing countries are seeking an alternative cost-effective
approach, such as our distributed digital wireless switching systems. We believe
that the trend in the telecommunications industry towards distributed switching
from monolithic centralized switching is similar to the trend in the computer
industry towards distributed networking personal computers from monolithic
centralized mainframe computers. Similar to the computer industry where personal
computing has been brought closer to the users, our distributed wireless
switching systems are also being installed closer to groups of subscribers,
thereby dramatically reducing the cost of cabling. We believe that with our
distributed wireless switching system, the public telephone operating companies
in developing countries can rapidly provide telephone services to their
customers. It is substantially easier to install small, distributed switches
than large monolithic centralized switches with their corresponding long cabling
infrastructure. We believe that our digital wireless voice switches are well
suited for developing countries.



A $32 Billion Domestic Market



We believe that a substantial market opportunity exists in the
United States as a result of the convergence of seven factors:



the growing demand for high-speed access to the Internet and
virtual private networks (VPNs);



the inherent limitations of modems as a connection to data
networks;



the need for large companies to create enterprise-wide
networks to improve the productivity of their branch-office workers;



the need for small and medium sized businesses to have an
integrated gateway solution for their networking requirements;



emergence of Internet Protocol (IP) frame-relay or
private-line packet switched "broadband" technology;



the need for "firewall" or data security by businesses; and



the failure of the 1996 Telecommunications Act, as amended,
and FCC's new phone policy.



Growing Demand for High-Speed Access to the Internet and
Virtual Private Networks



Currently, business spending for connecting remote workers,
branch offices and corporate headquarters to each other and to customers,
suppliers and partners  either through the Internet or VPN  is large and
growing. IDC estimates that the investment in U.S. market for network service
provision by digital "broadband" means will grow from $17 billion in 1999 to $32
billion by 2003. Much of that growth is expected to result from increased demand
for e-mail, web hosting services, e-commerce, B2B e-services, software
application services, IT and Web-site operations, real-time video services and
applications.



Limitations of Dial-up, ISDN and DSL



The vast majority of Internet users access data networks
through slow dial-up modems, an integrated services digital network (ISDN) line
or a digital subscriber line (DSL) line offering typically 56 Kbps, 128Kbps and
640 Kbps respectively. DSL technology is very sensitive to the quality of the
voice grade existing lines. Therefore, DSL service is severely limited by the
length of wire from the central office of an Incumbent Local Exchange Carrier
(ILEC) to a subscriber location. This is generally less than 12,000 feet, which
represents less than 10% of the total market. This shortcoming is created by the
Incumbent Local Exchange Carriers (ILEC) existing voice grade lines and is
incurable. A local loop digital broadband solution using CIAN distribution
router provides 1.5Mbps (T1) to 45Mbps (T3) service without any distance
limitations and does not use ILEC voice lines.



Large Businesses Need to Create Enterprise-wide Networks to
Improve Branch-Office-Worker Productivity



Many large companies are currently interconnecting increasing
numbers of branch and remote offices by point-to-point high-speed T1 carrier
grade lines to their local area networks. This approach is very expensive. These
companies face the challenge of finding a cost effective way to make their
branch and remote office workers as productive as those who have access to all
of the high performance communications and networking resources available to
workers located at corporate headquarters. A high-speed VPN solution, such as
Cyber Virtual Private Network (CVPN), that encompasses access to the corporate
local area network, the Internet, the corporate video conferencing system,
customers, suppliers and partners could substantially increase branch office
worker productivity.



Small and Medium Businesses Need an Integrated Gateway
Solution



A significant number of small and medium sized businesses
cannot afford to connect to Internet at broadband speeds as they have to
purchase various expensive customer end equipment such as router, Ethernet-to-T1
converter, IP frame-relay and private-line equipment, CSU/DSU, firewall, e-mail
server, web server, etc. These businesses must contend with the cost and
complexity of retaining multiple vendor products and suffer from more points of
failure. We believe that these businesses can benefit from the uniqueness of our
CBIG gateway, which combines all the functions and features required by a
customer end network in one box, about the size of a reference handbook.



Emergence of Internet Protocol (IP) Frame-Relay or Private-Line
Packet Switched "broadband" Technology



"Internet Protocol (IP) frame-relay or private-line" is a
packet-switching based "broadband" technology that dramatically increases the
data-carrying capacity over standard T1 or T3 carrier-grade copper lines. It
also dramatically increases the reliability of packet data transmission because
of end-to-end integrity and connectivity. We believe IP frame-relay or
private-line packet-based networks are significantly more efficient than
traditional point-to-point networks, and allow end users to connect to any
location that can be assigned an Internet Protocol address. Traditional
point-to-point networks, including the traditional telephone network and private
data networks, are less efficient because they require a dedicated connection
between two locations. Our CBIG gateway IP frame-relay or private-line
packet-based networks allow multiple users to share connections between
locations.



Businesses Need "Firewall" or Data Security



Security of data transmission over the Internet is of paramount
importance to businesses and is referred to in the industry as "firewall". This
firewall must exist at the customers premises. Our CFW and CBIG provides the
"Ultimate Firewall" by IP packet filtering, IP masquerading, IP tunneling and IP
encryption security (IPSec). This firewall capability makes an enterprise-wide
VPN a reality. International Data Corporation (IDC) estimates that the worldwide
sales of hardware-based VPN and firewall equipment, such as our CFW and CVPN,
will grow from $0.9 billion in 2000 to $4 billion in 2005.



Failure of 1996 Telecommunications Act and FCC's new phone
policy



The 1996 Telecommunications Act, as amended, allows competitive
carriers to leverage limited parts of the existing Incumbent Local Exchange
Carrier (ILEC) infrastructure, as opposed to building a competing similar
infrastructure. The 1996 Telecommunications Act requires all ILECs to allow
competitive carriers to co-locate their access (DSL) equipment only (no digital
switches, packet switches or broadband routers) along with ILECs equipment in
ILECs central offices, which enables competitive carriers to access end users
through existing telephone line connections. ILECs existing telephone line
infrastructure is a "narrowband" network, however, and suitable for analog voice
transmission or DSL service limited to 12,000 feet. The infrastructure
limitation of (a) low bandwidth and (b) lack of integrated packet switching
imposed by the current ILECs network does not make economic or technical
justification for IP backbone service providers to enter the Internet market
using ILECs network. The result is the telecommunications meltdown in the U.S.,
when most DSL service providers filed bankruptcy due to poor grade of service
from ILECs and the "narrowband" nature of the network. While the companies that
supplied equipment to them - including Cisco Systems, Nortel Networks, and
Lucent Technologies - have suffered a significant drop in their business. In
addition, business and residential users of the Internet now only have very
expensive alternative to narrowband access. It is now clear to most IP backbone
providers who have built an over capacity of optically enabled IP network
between major cities that in order to enter the lucrative Internet market they
must build their own local-loop digital broadband networks to reach out
businesses and consumers. We believe our CIAN distribution routers are
specifically designed to allow Internet service providers to build local-loop
digital broadband networks including in multiple tenant unit buildings.
According to a report by Cahners In-Stat Group, the sales of broadband equipment
and services, such as our CIAN, tailored to the multiple tenant unit buildings
alone will reach $4.8 billion by 2004, up from $0.37 billion in 2000 in the
United States. In addition, Federal Communications Commission's (FCC) new ruling
on phone policy announced February 20, 2003, requires that local switching for
business customers will no longer be unbundled; thereby access to Bell
switches for voice and data by Bell's competitors is eliminated. This ruling
forces the Bell's competitors to build their own local switching facilities,
presumably using our affordable digital voice switches and broadband systems
which are ideal for business segment market.



Our Range of Internet Systems



Cyber Digital has fully developed Internet infrastructure
systems such as Cyber Business Internet Gateway (CBIG), Cyber Internet Access
Network (CIAN) distribution router, Cyber Firewall (CFW) IPSec based firewall
appliance and Cyber Web Server (CWEB). We intend to enhance our systems by new
technologies and software when the market requires.



Cyber Business Internet Gateway



We have developed and marketed the Cyber Business Internet
Gateway (CBIG) as customer end equipment. Our CBIG is a powerful Internet
Protocol (IP) Frame Relay and Private Line based gateway that replaces many
single function equipment such as router, network address translator,
Ethernet-to-T1 converter, IP frame-relay and private-line equipment, CSU/DSU,
firewall equipment, e-mail server and web server. We believe that our CBIG
gateway is unique in the industry as it combines all the functions and features
required by a customer-end network in one box, about the size of a reference
handbook. In addition, our CBIG gateway offers a capacity of 0.05 gigabits per
second that is the industry's fastest router for customer-end applications. Our
CBIG dramatically increases the reliability of the customer-end network by
eliminating many such devices while also lowering the overall cost of network
acquisition by 60% to 80%.



Our CBIG offers built-in standard security features and
enhanced security options, making it what we believe to be an ideal
enterprise-wide virtual private network (VPN). The firewalls are provided by IP
filtering, IP masquerading and IP tunneling. We believe that our VPN offering is
the most advanced in the industry.



Cyber Internet Access Network



We have developed and marketed our Cyber Internet Access
Network (CIAN) high-end distribution router, which permits multiple business
users to simultaneously access the Internet at a fixed committed bandwidth rate
(CBR) and an "always on" basis. Our CIAN creates a 'Mini-POP' (Points of
Presence) and brings the Internet closer to users thus eliminating bottlenecks,
reducing network delays and increasing reliability. Our CIAN distribution router
has the capacity of 0.1Gbps and is suitable for T1 to T3 carrier grade
applications. . Our CIAN distribution routers are specifically designed to allow
Internet service providers to build local-loop digital broadband networks.



Cyber Firewall



In January 2001, we developed and introduced
simple-do-it-yourself installation software on our proprietary standalone Cyber
Firewall (CFW) series IPSec firewall appliance for business -to-business
e-commerce secure access and virtual private network applications. IPSec is an
industry-wide standard for assuring the privacy, integrity and authenticity of
information crossing public IP networks. Adhering to IPSec standards makes
Internet "wiretapping" entirely impractical. Based on our proprietary software
technology, our CFW IPSec firewall provides a cost-effective way of creating an
enterprise-wide virtual private network (VPN) by enabling secure use of the
Internet. Our CFW series firewall appliance is standalone and totally
independent of customer's computing operating system platform. Our CFW firewall
is fully interoperable with Cisco Systems, Check Point Software Technologies,
and Nortel Networks firewalls. Our CFW series firewalls include IP Packet
Filtering, IP Masquerading, IP Tunneling and IP Security (IPSec) capabilities.
We believe that our IPSec based VPN offering is the most advanced in the
industry.



Cyber Web Server



We have developed and marketed our Cyber Web Server (CWEB) that
is based on Linux Operating System and Intel Pentium Processors. We believe that
our CWEB servers are robust and proven-in for high performance web applications.
We do not intend to compete in the low performance server market created by PC
manufacturers.



Our Range of Digital Voice Switches



We intend to constantly develop additional new technologies and
software. Our commitment to research and development has enabled us to create
new systems, employing SS7 and C7 signaling and wireless attributes. These
systems are Cyber Distributed Central Office (CDCO), Cyber Tandem Exchange
(CTSX) and Cyber Rural Exchange (CRX) for various applications, primarily for
use in developing countries and for domestic Competitive Local Exchange Carriers
(CLECs) attempting to bypass Incumbent Local Exchange Carriers (ILECs). We
believe that these systems are capable of providing the functions for which they
have been designed.



Cyber Distributed Central Office



We have developed and marketed our Cyber Distributed Central
Office (CDCO) which is designed to provide digital voice communications to
subscribers in densely populated urban areas. Our CDCO system is a digital
switch with trunk and tandem exchange capabilities enabling it to connect
subscribers served by other exchanges. Our CDCO system is designed to interface
with both modern digital telecommunications networks and older analog telephone
networks. Our CDCO system consists of nodes connected by standard digital links,
which permit optimization of the network with respect to specific size, required
traffic capacity and desired applications. We believe the modular nature of the
nodal structure of our CDCO will provide an economical digital switching
exchange from as little as a few hundred lines to as many as 1,000,000 lines of
capacity.



We expect the nodal structure of the system to permit changes
to the function of the system simply by the use of different software with the
same common hardware. The expected flexibility of our CDCO system will offer a
vast array of system configurations to telephone operating companies and
administrations to fulfill a wide range of applications, including the
following:



Local Cyber Distributed Central Office (CDCO) exchange serves
subscribers in cities and towns.



Cyber Tandem Exchange (CTSX), a regional exchange connecting
to various local exchanges.



Toll and transit Cyber Distributed Central Officer (CDCO)
exchanges for long distance national service and international gateway.



Integrated local and tandem exchanges.



Integrated local, tandem and toll exchanges.



Integrated local, tandem, toll and transit exchanges.



Cyber Multi-tenant exchange (CMT) for subscribers in large
office complexes and buildings where many business tenants can be served by a
resident exchange.



The control functions of our CDCO system are totally
distributed in autonomous processing sub-systems or nodes. Node processors are
loosely coupled and exchange information through standardized inter-nodal
communication digital links. We believe the distributed approach will permit
switching systems to be located closer to groups of subscribers or at
subscribers' premises, which could dramatically reduce the cost of wiring and
cabling and should result in instant installation. Moreover, a failure in one
node should not affect other nodes. In addition, the distributed approach should
eliminate bottlenecks, as the system offers multiple routes for call
completion.



Cyber Rural Exchange



We have developed and marketed our Cyber Rural Exchange (CRX),
which is a specialized version of Cyber Distributed Central Office (CDCO). Our
CRX is designed to handle the traffic requirements of widely dispersed
single-line users, such as users in a small town or rural area.



Cyber Switch Exchange



We have developed and marketed our Cyber Switch Exchange (CSX),
which is a digital switching system designed for use as a private branch
exchange (PBX) for offices, universities, hospitals and other large
organizations.



Customer, Sales and Marketing



Internet Systems



Under the AT&T Alliance program, we provided Internet
services to many medium and small businesses in Boston area for a period of
one-year ending February 2001, when our agreement with AT&T terminated.
During this period we successfully tested all our Internet systems, including
CBIG, CIAN, CFW and CWEB, for both local-loop digital broadband and VPN
applications. Our Internet systems provided network availability in excess of
99.999% when we provided Internet services in alliance with AT&T. We believe
that our systems are ideally suited for the next-generation of local-loop
digital broadband networks requiring increased reliability, performance,
scalability, interoperability and flexibility. Our strategy is to market our
Internet systems to Internet service providers who are willing to build the
next-generation local-loop digital broadband networks in the aftermath of the
telecommunications meltdown in the U.S. (See "Business - Industry Background -
Failure of the 1996 Telecommunications Act, and FCC's new phone policy.")



We expect to market our CFW series IPSec firewall appliance
through major strategic partners, resellers and distributors on a worldwide
basis. We have also targeted the burgeoning Homeland Security market with our
secure broadband data systems such as CIAN, CFW and CVPN. Our CVPN creates
secure high-speed data networks between remote locations to facilitate
information sharing between government departments. We plan to market CVPN to
U.S. Federal government agencies such as the Homeland Security, Department of
Defense, Immigration and Naturalization, U.S. Navy, Defense Communications
Agency, National Guard, U.S. Air Force and the U.S. Coast Guard as an aid in the
war against terrorism. We have had a history of relationships in working with
U.S. Federal government agencies.



Digital Voice Switches



To date, we have sold approximately 76 digital voice switches
to the defense agencies of the U.S. federal government and to China serving over
60,000 lines.



During the fiscal year 2003, we continued to develop a stronger
foothold in the Nigerian telecommunication market by having our digital wireless
telephone network solution accepted by five states. In addition, we were
recently selected, over established companies such as Alcatel and Siemens, to
provide Nigeria with a 10,000-line telephone network. Since we offer an
affordable telecommunications as well as Internet capability, the Nigerian
authorities have selected us as the ideal supplier of telephone and Internet
systems. We envisage supplying $42 million of our wireless systems to three
states, $26 million of our fiber optic landline systems to the government of
Nigeria, and $11.6 million of our wireless systems to 2 Systems Technologies,
Ltd., a private telephone operator.



Due to FCC's new phone policy announced February 20, 2003, our
strategy is to market our digital voice switches to telecommunications service
providers in the U.S. who are intending to build their critical 'last mile'
local-loop networks. (See "Business - Industry Background - Failure of the 1996
Telecommunications Act, and FCC's new phone policy.").



Competition



Internet Systems



The Internet related networking products business is
characterized by intense competition, except for certain products for niche
markets such as the market for our CBIG gateway, CIAN distribution routers and
CFW firewall products. The server market faces fierce competition from commodity
PC manufacturers, who have lately ventured into this market. We compete with
numerous well-established foreign and domestic companies, many of which possess
substantially greater financial, marketing, personnel and other resources than
we do. These companies have established reputations for success in the
development, sale and service of Internet products.

IP Backbone Routers

Up to a few years ago, Cisco Systems used to command the entire
market for IP backbone routers. Today, it maintains its monopoly by holding
approximately 90% of this market. It has lost about 10% of the market to
newcomers such as Juniper Networks, a niche player. Juniper Networks developed
router products for the IP backbone network or for the POP (Points of Presence).
Capacities of such routers are 1 gigabits per second, 2.5 gigabits per second
and 10 gigabits per second to match the bandwidth requirements of optical IP
backbone. Juniper Network's products are priced about 30% lower than comparable
Cisco's products. Network service providers are looking for lower cost
alternatives to Cisco's products to compete effectively in the their market and
to lower their capital investment for building Internet infrastructure.

Local-Loop Digital Broadband Systems

Currently, there is virtually no competition in the local-loop
digital broadband market due to the novelty of this market. Cisco Systems and
others are focusing on increasing the bandwidth capacity of their existing
centralized IP backbone routers i.e. increasing the bandwidth of the POPs. Our
focus is to introduce an intermediate stage distribution router or Mini-POP to
alleviate congestion of IP data traffic between customer-end point and POP. Our
CIAN distribution routers have a capacity of 0.1 gigabits per second, which is
more than sufficient for this application. Our CIAN distribution routers are
competitively priced to be about 50% to 65% of Juniper Networks' and Cisco
Systems' scaled down version of their products.

Customer Premise Products

With respect to the market for customer premise end router and
other networking products, the competition is intense, with numerous players
ranging from small manufacturers to giants like Cisco Systems and Nortel
Networks. Our CBIG gateway is uniquely positioned to become a leader in this
market, as it combines many single purpose networking products such as
customer-end router, network address translator, Ethernet to T1 interface, IP
frame relay or private-line protocol device, CSU/DSU device, e-mail server, web
server and firewall device, into one software driven universal product. Our CBIG
gateway dramatically increases the reliability of the customer-end network by
eliminating many such devices while also lowering the overall cost of network
acquisition by about 60% to 80%. Our CBIG gateway is unique in the industry as
it combines all the functions and features required by a customer-end network in
one box, about the size of a reference handbook. In addition, our CBIG gateway
offers a capacity of 0.05 gigabits per second, which is industry's fastest
router for customer-end applications.

Firewalls

Firewalls are offered in the market in two distinct forms. One
set of firewall is implemented by software only on customer's computing
platform. The other set is implemented by hardware and software on a standalone
basis independent of customer's computing platform. The current leader in the
software firewalls is Check Point Software Technologies Ltd., while Cisco
Systems maintains the number one position in standalone firewalls. Software
based firewalls are dependent on customer's computing operating system platform
such as Windows NT, Windows 95, UNIX, HP-UX, Solaris, SunOS, BSD/OS, etc., hence
need to be integrated into customer's environment by specialists, often a costly
proposition. Standalone firewalls are totally independent of customer's
computing operating system platforms and are easily implemented by in-house
staff of users. Software firewalls prices vary from $3,000 to $40,000 for basic
firewall to fully IPSec compliant firewall, respectively from over a hundred
software suppliers. Comparatively, the number of standalone firewall suppliers
are few, namely Cisco Systems, Galea Network Security, Radguard, and Secant
Network technologies with their prices ranging from $4,500 to $52,000 for
similar offerings.

Our CFW series firewall products are standalone and totally
independent of customer's computing operating system platform. Our CFW firewalls
are competitively priced ranging from $2,000 to $18,000 for basic firewall to
fully IPSec compliant firewall, respectively. In addition, our CFW series
firewalls are fully interoperable with Cisco Systems, Check Point Software and
Nortel Networks firewalls. Furthermore, our CFW IPSec product costs 50% less
than comparable Cisco Systems products.

Servers

Our CWEB servers are based on Linux Operating System and Intel
Pentium Processors. They cost 15% to 20% less than servers produced by Cobalt
Networks (now Sun Microsystems). Our CWEB servers are robust and proven-in for
high performance web applications.

Digital Voice Switches



The telecommunications and related networking industries are
characterized by intense competition. We compete with numerous well-established
foreign and domestic companies, many of which possess substantially greater
financial, marketing, personnel and other resources than us. These companies
have established reputations for success in the development, sale and service of
high-speed digital switching and networking and related products.



Systems that perform many of the functions similar to our
digital voice switches are readily available from several competitors, including
Lucent Technologies, Nortel Networks, Ericsson, Alcatel and Siemens. However,
our competitors systems are based on previous generation single-function
centralized switching technology offering poor reliability, low performance, no
scalability and no flexibility. Furthermore, these systems are large in physical
size with fixed capacity, consume more power, and are cumbersome to use with
modern wireless and optical technologies. We have developed our systems on a
next generation multi-function distributed switching technology offering
superior reliability, performance, scalability and flexibility. Our systems
offer modular growth in increments of 1,000 to unlimited number of subscribers
and typically occupy 1/20th the space that of our competitors
offerings. Most importantly, we have developed specialized software for modern
wireless and optical technologies. We can easily and rapidly implement future
advancements in our systems through software. On the other hand, our competitors
also have the research and development capabilities and financial and technical
resources necessary to enable them to respond to technical advances as well as
evolving industry requirements and standards.



We believe that our systems have the following three
strengths:

1. the installed cost of our digital voice switches (wireless or landline)
    is less than those of the competition;
2. our switches can be engineered, installed and put into service much more
    quickly; and
3. distributed architecture of our switches eliminates stranding capacity
    and capital.



Proprietary Technology



We do not hold any patents or copyrights and have no patent or
copyright applications pending. We regard our software technology and certain
components of our system hardware as proprietary and rely for protection upon
copyright and trade secret laws and confidentiality agreements with our
employees. In addition, we require our customers to enter into a license and
confidentiality agreement permitting the customer the exclusive use of the
system operating software, which is furnished to the customer in object or
binary form only.



We believe that these protections are sufficient to protect our
rights to our systems and software. Despite these protections, however, it is
possible that competitors, employees, licensees or others may copy one or more
of our systems or our technology or obtain information that we regard as
proprietary. In addition, there can be no assurance that others will not
independently develop systems or technologies similar to those of ours, that
confidentiality agreements will not be breached or that we will have adequate
resources to protect our proprietary technology. We believe that because of the
rapid pace of technological change in the digital switching and networking
industries, protection for our systems is less significant than the knowledge,
ability and experience of our employees, the frequency of product enhancements
and the level of service and support provided to customers by us.



Government Regulation and Industry Standards



The telecommunications and related networking industries in
which we compete are highly regulated in both the United States and
internationally. Imposition of public carrier tariffs and taxation of
telecommunications services could materially adversely affect demand for our
systems. Furthermore, regulation or deregulation of public carrier services by
the United States and other governments, including permitting local carriers to
manufacture switching equipment, may determine the extent to which we will be
able to penetrate markets in the United States and internationally and may
result in significantly increased competition, which would significantly impact
our future operating results. In addition, our systems must comply with
equipment, interface and installation standards promulgated by communications
regulatory authorities, including the Federal Communications Commission.



We are required to obtain a license from the Department of
Commerce prior to exporting to certain countries. A denial of an export license
to us, however, would probably be based upon a policy, which would also affect
other U.S. companies exporting similar systems.



Industry standards organizations, such as International
Telephone Union ("ITU"), Bellcore in the U.S., and Internet Engineering Task
Force ("IETF") have created committees to address the matter of standards within
the telecommunications and Internet industries. The purpose of such standards is
to facilitate the inter-operability of products from various vendors and,
through standardization, create a competitive environment, which is anticipated
to result in lower product costs. During the past few years, many new standards
have been adopted and more are pending. The International Standards Organization
(ISO), one of the primary standard setting bodies in the communications
industry, has developed a framework for network standards called the Open System
Interconnection Reference Model (the "OSI Model"). The OSI Model represents a
standard approach by which information can be communicated throughout a network,
so that a variety of independently developed computer and communications devices
can inter-operate. The design of our systems incorporates the OSI Model and
accommodates most existing and pending ISDN, AIN, SS7, C7, X.25, Frame Relay,
Private Line, and IPSec standards, including applicable ITU, Bellcore and IETF
specifications. In most foreign countries, government departments or ministries
set industry standards.



Changes in government policies, regulations and interface and
installation standards or industry standards imposed by domestic and foreign
carriers in the future could require our company to alter methods of operation,
resulting in additional costs, which could have a material adverse effect on our
company.



Production and Supply



We are engaged in manufacturing, software programming,
assembly, system testing and quality assurance at our facility in Hauppauge, New
York. Our operations involve the creation of the required system software, the
inspection of system components manufactured by third parties, programming of
microchips and microprocessors, assembly of the components of the system
hardware and quality control and testing to certify final performance
specification. We believe that we have sufficient excess production capacity to
satisfy any increased demand for our systems in the foreseeable future.



We are dependent on third-party manufacturers for the
production of all of the component parts incorporated into our systems. We
purchase our component parts from numerous third-party manufacturers and believe
that numerous alternative sources of supply for most component parts are readily
available, except for a few semiconductor components purchased from single
source vendors. These are Pentium processors from Intel Corp., programmable gate
array chips from Altera Corp., and certain telecom chips from Motorola, Inc.,
Rockwell Semiconductors Systems and PMC-Sierra Corp. If these are discontinued
by their respective manufacturers, we would be required to redesign some of our
systems by using other vendors components, which could cause delays in delivery
of systems. We believe that alternative sources of supply for such components
are available. We are substantially dependent on the ability of our suppliers,
among other things, to satisfy performance and quality specifications and
dedicate sufficient production capacity for parts within scheduled delivery
times. We do not maintain contracts with any of our suppliers. We purchase
components pursuant to purchase orders placed from time to time in the ordinary
course of business. Our ability to deliver systems on timely and competitive
basis could be adversely affected due to failure or delay in delivery of parts
caused by our suppliers.



We offer a one-year warranty for sales covering operating
defects, during which period we will replace parts and make repairs to the
system components at our expense.



Research and Development



Since the inception we have devoted substantial resources to
the design and development of our systems. For the fiscal years ended March 31,
2003 and 2002, we expended approximately $132,778 and $108,432, respectively, on
research and development. During the year ended March 31, 2002, most research
and development expenditures were attributable to enhancements to our CDCO and
CTSX for the Nigerian market, and to the creation of secure VPN for homeland
security market. Although our systems are fully developed such as our CBIG,
CIAN, CFW, CDCO, CTSX, CRX and CSX, we are continually seeking to refine and
enhance our systems, including enhancements to comply with emerging regulatory
or industry standards or the requirements of a particular customer or
country.



The markets for our systems are characterized by rapidly
changing technology and evolving industry standards, often resulting in rapid
systems obsolescence. Accordingly, our ability to compete depends on timely
introduction of our systems to the marketplace, continual enhancements to our
systems, and adapting to technological changes and advances in the
communications industry, including assuring continuing compatibility with
evolving industry standards. There can be no assurance that we will be able to
compete successfully, that competitors will not develop technologies or products
that render our systems obsolete or less marketable, or that we will be able to
keep pace with the technological demands of the marketplace or successfully
enhance and adapt our systems to satisfy industry standards.



Service and Support



We believe that service, support and training are important
factors in promoting sales and customer satisfaction. Services we provide our
customers include feasibility studies, site surveys, engineering planning,
project estimating, network planning, network design, system planning, site
preparation, system installation, customer training and maintenance.



Since, our system hardware consists of a cabinet with shelves
having printed circuit boards inserted into physical slots, a substantial part
of repair and maintenance can be accomplished by simply substituting the
component in need of repair. In addition, our systems are designed to be
accessible by computer from our headquarters, allowing our service personnel to
remotely call up, diagnose and otherwise support systems, thereby reducing
response time and cost. In addition, we intend to enter into agreements with
third party service providers to provide customer support on a local basis in
foreign markets, as needed.



Employees



As of the date hereof, we have four full and two part time
employees, of which two were engaged in marketing and sales activities, two were
engaged in research and development, and two were in administration. None of our
employees is represented by a labor union. We consider our employee relations
satisfactory.







|GLOSSARY OF TERMS                        
|-----------------------------------------
|Analog                                   
|                                         
|Backbone                                 
|                                         
|Bandwidth                                
|                                         
|Broadband                                
|                                         
|Central Office                           
|                                         
|Collocation                              
|                                         
|Competitive Local Exchange Carrier (CLEC)
|                                         
|Copper Line or Loop                      
|                                         
|Digital                                  
|                                         
|DSL                                      
|                                         
|E-Commerce                               
|                                         
|Firewall                                 
|                                         
|Frame Relay                              
|                                         
|Incumbent Local Exchange Carrier (ILEC)  
|                                         
|Internet                                 
|                                         
|Internet Protocol                        
|                                         
|ISDN                                     
|                                         
|Internet Service Provider                
|                                         
|Kbps.                                    
|                                         
|Mbps                                     
|                                         
|Modem                                    
|                                         
|Packets                                  
|                                         
|Private Line                             
|                                         
|Router                                   
|                                         
|T-1                                      







ITEM 2 - Description of Property



Our executive offices and assembly operations are located in
approximately 8,200 square feet of leased space in Hauppauge, New York. The
lease provides for annual rent of $55,350 and expires on March 31, 2004. We
believe that our facility is adequate for our current needs. We believe that
additional physical capacity at our current facility will accommodate expansion,
if required.



ITEM 3 - Legal Proceedings



Although, as of the date hereof, no legal action has commenced
against our company by our former legal counsel, Mr. Rajan K. Pillai and
Uniworld Communications Co., ("UCC"), a New York company, in which Mr. Pillai is
the principal, Mr. Pillai has threatened our company for a possible litigation
arising due to the contention that our company refused to remove restrictive
legend on 500,000 shares of our common stock held by UCC. Our company had issued
500,000 restricted shares to UCC pursuant to a stock option agreement for the
purposes of UCC to deliver "Cyber India Project". On March 23, 2000, Mr. Pillai
notified our company officially, for the first time, that he or UCC did not
intend to deliver "Cyber India Project". Mr. Pillai was also our companys
Managing Director (Asia) from June 1997 until his resignation on March 9, 2000.
Our company believes that Mr. Pillais or UCCs threatened claims, if any, are
without merit and our company will vigorously defend its position, if and when
required.



ITEM 4 - Submission of Matters to a Vote of Security
Holders



None.



PART II



ITEM 5 - Market for Common Equity and Related Stockholder
Matters



Our common stock is quoted on the Over-the-Counter Bulletin
Board under the symbol "CYBD." The following table shows the quarterly high and
low trade prices on the Over-the-Counter Bulletin Board. The prices reflect
inter-dealer prices, without retail mark-up, mark-down, or commission and may
not represent actual transactions.



|                                 | Price Per Share .
|-------------------------------- | -----------------
|                                 | High             
|Fiscal Year Ended March 31, 2003 |                  
|                                 | First Quarter    
|                                 | Second Quarter   
|                                 | Third Quarter    
|                                 | Fourth Quarter   
|                                 |                  
|Fiscal Year Ended March 31, 2002 |                  
|                                 | First Quarter    
|                                 | Second Quarter   
|                                 | Third Quarter    
|                                 | Fourth Quarter   



On March 31, 2003, the closing trade price of our common stock
as reported on the Bulletin Board was $0.30 per share. On that date, there were
approximately 500 stockholders of record of our common stock. We believe that on
March 31, 2003, there were more than 2,400 beneficial holders of our common
stock.



To date, we have not paid any dividends on our common stock and
we do not expect to declare or pay any dividends in the foreseeable future. We
intend to retain all earnings for use in our business operations.









ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS



Forward Looking Statements



When used in this report, press releases and elsewhere by the
management of our company from time to time, the words "believes",
"anticipates", and "expects" and similar expressions are intended to identify
forward-looking statements that involve risks and uncertainties. Additionally,
certain statements contained in this discussion may be deemed forward-looking
statements that involve a number of risks and uncertainties. Among the factors
that could cause actual results to differ materially or adversely are the
following: the ability of our company to meet its working capital and liquidity
needs, the status of relations between our company, its primary customers and
distributors, the availability of long-term credit, unanticipated changes in the
U.S. and international economies, business conditions and growth in the
international and the U.S. telecommunications industry, level of growth in both
voice and internet systems sales generally, the timely development and
acceptance of new products, the impact of competitive products and pricing,
changes in the cost of component materials, changes in product mix, the outcome
of litigation in which our company is involved, along with product delays and
other risks detailed from time to time in our companys SEC reports, including
but not limited to this Annual Report on Form 10-KSB for the year ended March
31, 2003. Readers are cautioned not to place undue reliance on these
forward-looking statements which speak only as of the date hereof. Our company
undertakes no obligation to publicly release the results of any events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.



Overview



We are a manufacturer, software developer and provider of a
vast array of high performance Internet infrastructure systems such as routers,
gateways, firewalls and servers for the creation of next-generation digital
broadband and virtual private network (VPN) services by Internet service
providers. We are also a manufacturer and software developer of a range of
advanced software driven digital voice switching infrastructure equipment for
private and public switched voice network operators worldwide, especially for
developing countries. Our mission is to become the leading provider of (i)
digital broadband systems in the U.S., and (ii) digital voice switches to
developing countries. We believe that service providers can offer affordable yet
modern voice and broadband Internet services by exclusively using our vast array
of voice and Internet systems without buying any equipment from our
competitors.



Under the AT&T Alliance program, we provided Internet
services to many medium and small businesses in the Boston area for a period of
one-year ending February 2001, when our agreement with AT&T terminated.
During this period we successfully tested all our Internet systems, including
CBIG, CIAN, CFW and CWEB, for both local-loop digital broadband and VPN
applications. Our Internet systems provided network availability in excess of
99.999% when we provided Internet services in alliance with AT&T. We believe
that our systems are ideally suited for the next-generation of local-loop
digital broadband networks requiring increased reliability, performance,
scalability, interoperability, and flexibility. Our strategy is to market our
Internet systems to Internet service providers who are willing to build the
next-generation local-loop digital broadband networks in the aftermath of the
recent telecommunications meltdown in the U.S. (See "Business Industry Background Failure of
1996 Telecommunications Act, and FCC's new phone policy.")

In the aftermath of that telecommunications meltdown, and the
subsequent new phone ruling by FCC on February 20, 2003, we believe that we are
poised to be the leading supplier of local-loop voice and digital broadband
systems for critical 'last mile' applications. There is abundant capacity of
optically-enabled IP backbone network between all major cities in the United
States, but as yet businesses or consumers do not have adequate access to that
capacity. Our distributed CDCO and CTSX voice switches, and CIAN
high-performance distribution routers are specifically designed to allow
competitive service providers to meet the requirements of local-loop digital
voice and broadband networks including in multiple tenant unit buildings.
According to a report by Cahners In-Stat Group, the sales of broadband equipment
and services, such as our CIAN, tailored to the multiple tenant unit buildings
alone will reach $4.8 billion by 2004, up from $0.37 billion in 2000 in the
United States. We believe that we will establish a strong market position with
early adopters of this technology and will build on this position as the market
reestablishes itself, however, there can be no assurance that we will be
successful in this market.

International Data Corporation (IDC) estimates that the
worldwide sales of hardware-based VPN and firewall equipment, such as our CFW
and CVPN, will grow from $0.9 billion in 2000 to $4 billion in 2005. We expect
to market our CFW series IPSec firewall appliance through major strategic
partners, resellers and distributors on a worldwide basis. We have also targeted
the burgeoning Homeland Security market with our secure broadband data systems
such as CIAN, CFW and CVPN. Our CVPN creates secure high-speed data networks
between remote locations to facilitate information sharing between government
departments. We plan to market CVPN to U.S. Federal government agencies such as
the Homeland Security, Department of Defense, Immigration and Naturalization,
U.S. Navy, Defense Communications Agency, National Guard, U.S. Air Force and the
U.S. Coast Guard as an aid in the war against terrorism. We have had a history
of relationships in working with U.S. Federal government agencies, in the past,
however that does not guarantee that we will be successful in securing any
Homeland Security business.

During fiscal year 2003, we continued to develop a stronger
foothold in the Nigerian telecommunications market by having our digital
wireless telephone network solution accepted by five states. In addition, we
were recently selected, over established companies such as Alcatel and Siemens,
to provide Nigeria with a 10,000-line telephone network. Since we offer an
affordable telecommunications as well as Internet capability, the Nigerian
authorities have selected us as the ideal supplier of telephone and Internet
systems. We envisage supplying $42 million of our wireless systems to three
states, $26 million of our fiber optic landline systems to the government of
Nigeria, and $11.6 million of our wireless systems to 2 Systems Technologies,
Ltd., a private telephone operator. Generally, payment terms for these sales
consist of some cash-in-advance and the remaining balance paid through an
irrevocable confirmed letters of credit. However, there can be no assurance that
we will be successful in supplying any of our systems to the Nigerian
Telecommunications market.

Results of Operations



Year Ended March 31, 2003, Compared to Year Ended March 31,
2002



Net sales



Net sales for the year ended March 31, 2003 (referred to as
"fiscal year 2003"), were $0 from $0 for the year ended March 31, 2002 (referred
to as "fiscal year 2002"). Zero sales were due to our strategic shift to enter
the Nigerian telecommunications market. Since no payments have been made against
the initial engineering services rendered no sales have been recorded.



Gross margin



We include in our cost of goods and services sold the materials
and labor used, subcontractor costs and overhead incurred in the manufacture of
our systems. Gross margins unchanged from 0% to 0% of net sales from fiscal year
2002 to fiscal year 2003. Zero gross margins were primarily attributable to no
sales recorded from the Nigerian market.



Selling, general and administrative



Selling, general and administrative expenses decreased from
$835,410 in fiscal year 2002 to $561,590 in fiscal year 2003, representing a
decrease of $273,820. These expenses in fiscal year 2002 and fiscal year 2003
were principally due to the result of initial engineering and selling expenses
incurred in Nigeria, respectively.



Research and development



Research and development expenses increased from $108,432 in
fiscal year 2002 to $132,778 in fiscal year 2003, representing an increase of
$24,346 or approximately 22%. These expenses were primarily due to certain
enhancements made to our CDCO and CTSX systems for the Nigerian market. All
development costs are expensed in the period incurred.



Income (loss) from operations



Loss from operations in fiscal year 2003 was $(694,398) or
$(.04) per share as compared with a loss of $(943,842) or $(.05) per share in
fiscal year 2002.



Net income (loss) available to Common Stockholders



As a result of the foregoing, the net loss in fiscal year 2003
was $(758,848) or $(.04) per share as compared to a net loss of $(942,315) or
$(.05) per share in fiscal year 2002.



Liquidity and Capital Resources



Our ability to generate cash adequate to meet our needs results
primarily from sale of preferred and common stock and cash flow from operations.
Total working capital increased by $322,811 to $(23,614) at March 31, 2003 from
$(346,425) at March 31, 2002. The current ratio of current assets to current
liabilities increased to 1.0 to 1 as at March 31, 2003 from 0.7 to 1 as at March
31, 2002. Current levels of inventory are adequate to meet sales for the next
six months. We believe that our current sources of liquidity will be sufficient
to meet our needs for many years because of our entry into the Nigerian
telecommunications market. In addition, as of March 31, 2003, there remains a
maximum available balance of $2 million under our private equity line agreement
with an accredited institutional investor. We believe that we will be able to
obtain additional funds beyond those available under the equity line agreement,
if required for future needs. We have no off-balance sheet arrangements.



We used $0 and $0 during fiscal year 2003 and fiscal year 2002,
respectively, for investing activities. The cash used for investing activities
relates primarily to purchases of equipment in fiscal year 2003 and fiscal year
2002.



Net cash provided (used) in financing activities was $539,039
and $564,091 for fiscal year 2003 and fiscal year 2002, respectively.



On July 11, 1996, we concluded a private placement of its
Series A preferred stock and accompanying warrants to accredited institutional
investors and received net proceeds of approximately $7.1 million. The Series A
preferred stock was issued without registration in reliance on Regulation S
promulgated by the Securities and Exchange Commission under the Securities Act
of 1933, as amended. Some of the proceeds from this offering have been used to
retire long-term debt, redeem Series A preferred shares prior to conversion and
to fund research and development, marketing and production expenses. All of the
Series A preferred stock has been converted or redeemed and there are no such
shares outstanding. On July 10, 2001, 824,013 warrants expired in connection
with the offering of Series A preferred stock at an exercise price of $6.35 per
share.



On December 30, 1996, we concluded a private placement of 2,000
shares of its Series B-1 preferred stock to Syndicated Communications Venture
Partners III, L.P. and received net proceeds of $1.7 million. The Series B-1
preferred stock was issued without registration in reliance on Section 4(2) of
the Securities Act of 1933, as amended. On each of December 30, 1997 and
December 30, 1998, the Series B-1 preferred stockholders received a 10% stock
dividend of 200 and 220 shares, respectively, of Series B-1 preferred stock in
accordance with the terms of the private placement. On April 14, 1999, all of
outstanding Series B-1 preferred stock was converted into 861,230 shares of our
common stock at a conversion price of $2.89 per share.



On July 12, 1999, we concluded a private placement of 310
shares of its Series C preferred stock, par value $.05 per share, and
accompanying warrants to accredited investors and received net proceeds of
approximately $310,000. In connection with this placement, we issued warrants to
accredited investors to purchase an aggregate of 12,710 shares of our common
stock, par value $.01 per share, at an exercise price of $6.00 per share. The
Series C preferred stock was issued without registration in reliance on Section
4(2) of the Securities Act of 1933, as amended. As of July 11, 2002, all 12,710
warrants expired at an exercise price of $6.00 per share.



On October 5, 1999, we concluded a private placement of 3,000
shares of our Series D1 preferred stock, par value $.05 per share, and
accompanying warrants to an accredited institutional investor and received net
proceeds of approximately $2.7 million. In connection with this placement, we
issued warrants to the accredited institutional investor to purchase an
aggregate of 190,678 shares of our common stock, par value $.01 per share, at an
exercise price of $5.70 per share for an aggregate amount of $1,086,865. In
connection with this transaction, the Zanett Securities Corporation, financial
advisor to our company, has been issued a warrant to purchase 45,000 shares of
our common stock, par value $.01 per share, at an exercise price of $5.70 per
share. The Series D1 preferred stock was issued without registration in reliance
on Section 4(2) of the Securities Act of 1933, as amended. All of the Series D1
preferred stock has been converted or redeemed and there are no such shares
outstanding. On October 4, 2002, all accompanying warrants in the aggregate
amount of 235,678 expired in connection with the offering of Series D1 preferred
stock at an exercise price of $5.70 per share.



In March 2001, we concluded a private placement of 645,253
restricted shares of our common stock, par value $.01 per share, to certain
accredited investors and received net proceeds of $300,000. These securities
were issued without registration in reliance on Section 4(2) of the Securities
Act of 1933, as amended.



On July 2, 2001, we concluded a firm commitment of $6 million
private equity line from an accredited institutional investor. We are able to
draw down, at our discretion, up to a maximum of $250,000 and a minimum of
$100,000 per month, during a term of thirty months from July 2, 2001. We are
allowed to make a maximum of 24 draw downs over this period, including a cushion
period of 7 days during which no draw down can be made. If we do not draw down
in a specific month, our available equity line reduces by $250,000. During the
years ended March 31, 2003 and 2002, we drew down $413,000 and $209,000 against
the equity line and issued 842,934 and 453,004 shares of common stock,
respectively. As of March 31, 2003, there remains a maximum available balance of
$2 million under this private equity line. In consideration for the accredited
institutional investors commitment to purchase shares of our common stock under
our equity-line agreement with them, we have issued to the institutional
investor a warrant to purchase 250,000 of our shares of our common stock at
$4.10 per share and a warrant to purchase 125,000 of our shares of our common
stock at $5.15 per share. We have also issued to Ladenburg Thalmann & Co.
Inc., in consideration for their having introduced us to the institutional
investor, a warrant to purchase 250,000 of our shares of our common stock at
$4.10 per share and a warrant to purchase 125,000 of our shares of our common
stock at $5.15 per share. All four warrants expire on July 1, 2005.



On March 12, 2002, we borrowed $325,000 from J.C. Chatpar,
president of our company, under a promissory note with one-year maturity date
and applicable interest rate of ten percent per annum. The promissory note and
all amounts due thereunder are secured by all assets of our company. We may
prepay the principal amount, in whole or in part, at any time, without premium
or penalty.



On December 10, 2002, in lieu of foregone salaries by all employees in the
aggregate amount of $516,658, the Board of Directors approved the issuance of
516,658 incentive stock options to all employees for their dedication and in
recognition of them forego one-half of their salary since October 17, 2000.
These options were granted at $.15 per share which was above 100% of fair market
value on the date of the grant.



In December 2002, we concluded a private placement of 500,000
restricted shares at a price of $0.20 per share of our common stock, par value
$.01 per share, to certain accredited investors and received net proceeds of
$100,000. The accredited investors also received accompanying warrants in the
aggregate to purchase 100,000 shares of our common stock at an exercise price of
$0.40 per share. These warrants expire on December 20, 2004. These securities
were issued without registration in reliance on Section 4(2) of the Securities
Act of 1933, as amended. These securities were issued pursuant to Rule 144
promulgated under the Act that require, among other conditions, a one year
holding period prior to the resale (in limited amounts) of securities acquired
by these accredited investors in a non-public offering without having to satisfy
the registration requirements under the Act.



Based on amounts received in the Series A, Series B, Series C,
Series D1 preferred stock and private equity line financings, together with the
expected exercise of options and warrants and expected cash flow from
operations, we believe that our sources of capital will be adequate to satisfy
anticipated capital needs until March 31, 2004.



Impact of Inflation



Inflation has historically not had a material effect on our
operations.



ITEM 7 - Financial Statements



The Financial Statements of the Company are filed as part of
this Form 10-KSB.



ITEM 8 - Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure.



None.





PART III



ITEM 9 - Directors, Executive Officers, Promoters and Control
Persons; Compliance With Section 16(a) of the Exchange Act.



The directors, executive officers and key employees of our
company are:



|Name               | Age | Office                                                             
|------------------ | --- | -------------------------------------------------------------------
|                   |     |                                                                    
|Jawahar C. Chatpar | 55  | Chairman of the Board, President, and Chief Executive
      Officer
|                   |     |                                                                    
|Jack P. Dorfman    | 65  | Director                                                           
|                   |     |                                                                    
|Jatinder V. Wadhwa | 68  | Director                                                           
|                   |     |                                                                    
|Terry L. Jones     | 55  | Director                                                           
|                   |     |                                                                    
|Andrew Van Etten   | 41  | Director                                                           
|                   |     |                                                                    
|Larry S. Shluger   | 64  | Vice President of Operations and
  Secretary                       
|                   |     |                                                                    
|Dale A. Johnson    | 39  | Controller and
Treasurer                                           



Jawahar C. Chatpar is a founder of our company and has served
as Chairman of the Board, Chief Executive Officer and President since March
1991, as Chairman of the Board, Chief Executive Officer and Secretary from
November 1986 until March 1991, and as President and Chief Executive Officer
since inception until November 1986. Mr. Chatpar has also served as a director
since inception. Mr. Chatpar founded our company in 1983 as a successor to a
Canadian corporation of the same name, which he founded in 1982. From 1980 to
1982, Mr. Chatpar was employed by Bayly Engineering Limited, a manufacturer of
digital telecommunication systems and a member of A.E.G. Telefunken Group, as a
General Manager of Digital Transmission and Fiber Optics Engineering (research
and development). From 1974 to 1980, Mr. Chatpar served in various engineering,
general management and marketing positions with Northern Telecom. He holds an
B.Tech (honors) degree in Electrical Engineering from the Indian Institute of
Technology, Bombay, India and an M.S. degree in Electrical Engineering from the
University of Waterloo, Canada.



Jack P. Dorfman joined our company as a Director in November
1993, and has served as Secretary from October 1995 until March 2000. Mr.
Dorfman has otherwise been retired since June 1996. Prior thereto, since 1992,
Mr. Dorfman served as consultant and manager for a number of pharmacies. From
1990 to 1992, he served as a management consultant for Clark Container, a
division of Mark IV Industries, a conglomerate. From 1988 to 1990, he served as
Vice President and Treasurer of US Distribution, a transportation company. Prior
to 1988, he owned, managed and operated an independent community pharmacy for
over fifteen years.



Jatinder Wadhwa has served as a Director of our company since
1986 and as Treasurer from August 1997 until March 2000. He had been the
Secretary of our company from 1993 to 1995. Since 1994, Mr. Wadhwa has served as
the Chief Executive Officer of Security First Financial Corp., a financial
institution dealing with first and second mortgages on residential and
commercial properties. From 1989 to 1994, Mr. Wadhwa had served as a management
consultant to Gibbons Goodwin van Amerongen, an investment banking firm, Wells
Aluminum Corporation, a manufacturer of aluminum extrusion products and Sealy
Mattress Company. From 1970 to 1990, Mr. Wadhwa had served as Chief Operating
Officer and Vice President of Operations of EZ Por Corporation, a manufacturer
of aluminum products.



Terry L. Jones has served as a Director of our company since
November 1997. He has been the President of Syndicated Communications, Inc.
("Syncom"), a communications venture capital investment company, since 1990. He
joined Syncom in 1978 as a Vice President. Mr. Jones serves in various
capacities, including director, president, general partner and vice president
for various other entities affiliated with Syncom. He also serves on the Board
of Directors of Radio One, Inc. Mr. Jones earned his B.S. degree from Trinity
College, his M.S. from George Washington University and his M.B.A. from Harvard
Business School.



Andrew Van Etten joined our company as a Director in March
2000. He is currently serving as Senior Director, Strategic Business
Development, Electronics and Information Business Division at Mitsui &
Company, (USA) Inc. He joined Mitsui & Company in 1988. Mitsui & Company
is one of the oldest and largest international trading companies headquartered
in Japan. Mr. Etten is Mitsuis representative as shareholder for PageMart
Wireless, Inc. and portfolio manager for America Online, Inc. and America Online
Japan. He also serves on the Board of Directors of Lana Film Company. Mr. Etten
holds an B.S. degree in Business Administration from Plymouth State College of
the University of New Hampshire.



Larry S. Shluger has been Vice President of Operations of our
company from August 1996 and Secretary since March 2000. From 1991 to 1996, Mr.
Shluger was Director of Purchasing and Operations at Cashtek Corporation, a
company which designs, develops and manufactures computerized gaming systems.
From 1975 to 1991, he was Director of Purchasing and Operations at Kenilworth
Systems Corporation until its acquisition by Cashtek Corporation. Prior to 1975
he was employed in various management positions at Ecologic Instruments
Corporation, a company which designs, develops and manufactures test equipment
for the environment and pollution control fields, and Dynamic Instruments
Corporation, a manufacturer of battery chargers.



Dale A. Johnson has been Controller of our company from March
1998, and Treasurer since March 2000. She joined our company on March 1995 as an
Accountant. From 1984 to 1994, she worked as Accountant for various CPA firms.
She holds a B.B.A. degree in Accounting from Dowling College, NY.



We have no family relationship among our directors and
officers. All our executive officers are appointed annually by and serve at the
discretion of the board of directors. All our executive officers and key
employees are at-will employees.



Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), requires our company's directors and executive
officers, and persons who own more than ten (10%) percent of a registered class
of our company's equity securities, to file with the Securities and Exchange
Commission (the "Commission") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of our company.
Reporting persons are required by Commission regulations to furnish our company
with copies of all Section 16(a) forms they file.



To our company's knowledge, based solely on review of the
copies of such reports furnished to our company, all such persons, on a timely
basis, filed the reports required by Section 16(a) of the 1934 Act.













Summary Compensation Table



The following table sets forth information concerning the
compensation for services in all capacities for the fiscal years ended March 31,
2003, 2002 and 2001 of those persons who were, at March 31, 2003 the chief
executive officer (the "named officer"). During such periods, no executive
officer of our company received compensation in excess of $100,000.



|                                                                                 | Annual Compensation        | Long Term Compensation               | All Other
      Compensation
|-------------------------------------------------------------------------------- | -------------------------- | ------------------------------------ | ----------------------------
|                                                                                 |                            |                                      |                             
|Name and Principal
      Position                                                | Year                       | Salary
      ($)                     | Bonus
      ($)             
|J.C. Chatpar, Chairman of the Board, President and Chief Executive
      Officer | 2003
      2002
      2001 | $92,500
      $92,500
      $123,900 | None
      None
      None  

____________

(1) We have concluded that the aggregate amount of perquisites
and other personal benefits paid to each of the named officers named in the
table did not exceed the lesser of 10% of such officer's total annual salary and
bonus for the 2003, 2002 and 2001 fiscal years or $50,000, thus, such amounts
are not included in the table.



(2) In fiscal year 2001, Mr. Chatpar was granted options to
purchase 110,000 shares of our common stock at an exercise price of $1.50 per
share.



(3) In fiscal year 2002, Mr. Chatpar was granted options to
purchase 1,000,000 shares of our common stock at an exercise price of $0.40. Mr.
Chatpar was also granted options to purchase 1,000,000 shares of our common
stock at an exercise price of $0.50. In addition, Mr. Chatpar was granted
conditional performance based options with a three-year exercise term as
follows: (a) stock options to purchase 1,000,000 shares of our common stock at
an exercise price of $0.50 per share, provided the 10 day moving average stock
price is above $5.00, (b) additional stock options to purchase 1,000,000 shares
of our common stock at an exercise price of $0.50 per share, provided the 10 day
moving average stock price is above $10.00, and (c) additional stock options to
purchase 1,000,000 shares of our common stock at an exercise price of $0.50 per
share, provided the 10 day moving average stock price is above $15.00.



(4) In fiscal year 2003, Mr. Chatpar was granted options to
purchase 230,366 shares of our common stock at an exercise price of $0.15 per
share.



Option Grants In Last Fiscal Year



The following table sets forth information concerning stock
option grants made during fiscal year 2003 to the named officers. We have not
granted any stock appreciation rights.



|Individual Grants
|-----------------
|                 
|                 
|                 
|Name             
|                 
|J.C. Chatpar     

_________________

(1) During fiscal year 2002, options to purchase an aggregate
of 230,366 shares of our common stock were granted to Mr. Chatpar and options to
purchase an aggregate of 286,292 shares of our common stock were granted to five
other employees.



(2) The exercise price of the options granted was equal to the
fair market value of the underlying stock on the date of grant.



1. Options are immediately exercisable.



Aggregated Fiscal Year End Option Values



The following table sets forth information concerning the
number of unexercised options and the Fiscal 2003 year-end value of unexercised
options on an aggregated basis held by the named officers. We have not granted
any stock appreciation rights in Fiscal 2003.





|             |  | Number of Securities
      Underlying UnexercisedOptions at Fiscal Year-End (#) |  | Value of
      Unexercised In-The-MoneyOptions at Fiscal Year-End ($)
|------------ |  | ------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------
|Name         |  | Exercisable                                                                     |  | Unexercisable                                                        
|             |  |                                                                                 |  |                                                                      
|J.C. Chatpar |  | 3,885,366                                                                       |  | 3,000,0000                                                           



____________

(1) Options are "in-the-money" if, on March 31, 2003, the
market price of the Common Stock ($0.30) exceeded the exercise price of such
options. The value of such options is calculated by determining the difference
between the aggregate market price of our common stock underlying the options on
March 31, 2003 and the aggregate exercise price of such options.



Compensation of Directors



We pay our directors $250 per board meeting. During Fiscal
2003, the board of directors met two times and each director attended at least
75% of the meetings of the board of directors. In addition, we currently
reimburse each director for expenses incurred in connection with his attendance
at each meeting of the board of directors.



Committees of the Board of Directors



We have a standing compensation committee composed of all
members of the board of directors. The compensation committee reviews and acts
on matters relating to compensation levels and benefit plans for our executive
officers and key employees, including salary and stock options. The compensation
committee is also responsible for granting stock awards, stock options and stock
appreciation rights and other awards to be made under our existing incentive
compensation plans. We also have a standing audit committee composed of Messrs.
Jones, Etten and Dorfman. The audit committee assists in selecting our
independent auditors and in designating services to be performed by, and
maintaining effective communication with, those auditors.



Employment Agreements and Insurance



We have entered into an amended and restated employment
agreement with Mr. J.C. Chatpar dated as of August 4, 1997 (the "Employment
Agreement") for a three year term. Such three-year term shall be automatically
extended for successive three-year terms unless either party gives the other
party 120 days prior written notice of termination before the end of any such
three-year period. Our board, however, has the authority to terminate such
extension upon cause. "Cause" is defined as conviction of a felony or willful
misconduct. Mr. Chatpar is entitled to receive a salary of $150,000 per annum,
with an annual increase of 10%. In recognition of the complex scientific and
technical leadership which Mr. Chatpar brings to our company, we have also
agreed that our board of directors may raise his salary during the term of his
employment as soon as our financial resources and other business conditions
permit. In such event, Mr. Chatpar's salary shall be at a level comparable to
that of chief executive officers of other comparable technology-driven publicly
held companies.



In addition to his base salary, Mr. Chatpar shall be entitled
to receive a bonus based upon the following formula: (a) 1% of gross revenues
for each fiscal year in excess of $3 million provided, however,
that our company shall be profitable, plus (b) 5% of net income after deduction
of the bonus provided for in (a) above, and plus (c) 10% of the increase in net
income over that of the prior fiscal year after deduction of the bonus provided
for in (a) above.



In the event of a termination of Mr. Chatpar's employment due
to disability, he shall receive royalty payments of 5% of the gross revenues
earned by our company ("Royalties") for a period of 15 years following
termination. In the event of Mr. Chatpar's death, his wife, if any, or his
estate, shall receive a payment equal to six months of his base salary and
Royalties for 15 years. In the event of a termination of Mr. Chatpar's
employment for any reason other than pursuant to disability, death or for cause,
or if there is a change of control (as defined in the Employment Agreement) of
our company which results in an actual or constructive termination of employment
(as defined therein), he shall receive a payment equal to three years of his
base salary plus three times his prior year's bonus, Royalties for 15 years, and
all of his outstanding options will be deemed immediately vested and exercisable
for a period of one year from the effective termination date.



We do not have employment contracts with any other officer or
director.



Employee Benefit Plan



We offer basic health, major medical and life insurance to our
employees. We have not adopted any retirement, pension or similar programs.



ITEM 11 - Security Ownership of Certain Beneficial Owners and
Management



The following table sets forth certain information regarding
beneficial ownership of our company's common stock as of March 31, 2003, for (i)
each person or group that is known to us to be a beneficial owner of more than
5% of the outstanding shares of our common stock, (ii) each of the named
officers and directors, and (iii) all directors and executive officers of our
company as a group. Except as otherwise indicated, we believe that such
beneficial owners, based on information furnished by such owners, have sole
investment and voting power with respect to such shares, subject to community
property laws, where applicable.



|Names and AddressOf Beneficial Owners                                                         | Number of Shares | Percentage Owned (1)(2)
|--------------------------------------------------------------------------------------------- | ---------------- | -----------------------
|J.C. Chatpar(3)
      c/o Cyber Digital, Inc.
      400 Oser Avenue
      Hauppauge, NY 11788 | 8,923,578        | 33.9%                  
|Jack P. Dorfman(4)                                                                            | 260,000          | 1.0%                   
|Jatinder V. Wadhwa(5)                                                                         | 257,812          | 1.0%                   
|Terry L. Jones (6)                                                                            | 60,000           | *                      
|Andrew Van Etten(7)                                                                           | 40,000           | *                      
|All directors and executive officers as a group: (5)
    persons                              | 9,541,390        | 36.3%                  

*less than 1%



(1) For purposes of computing the percentage of outstanding
shares of Common Stock held by each person or group of persons named above, any
security which such person or persons have or have the right to acquire within
60 days is deemed to be outstanding, but is not deemed to be outstanding for the
purpose of computing the percentage of ownership of any other person.



(2) Assumes the exercise of the warrants to purchase in the
aggregate 750,000 shares of our common stock issued in connection with the
private equity line agreement. Assumes the exercise of all other outstanding
warrants to purchase in the aggregate 550,000 shares of our common stock.



(3) Includes 3,885,366 shares as to which Mr. Chatpar holds
non-qualified stock options, which are exercisable at any time. Excludes
3,000,000 shares as to which Mr. Chatpar holds non-qualified stock options,
which are not exercisable until certain conditions are attained. Does not
include 476,000 shares owned by his wife, Sylvie Chatpar, to which shares Mr.
Chatpar disclaims beneficial ownership.



(4) Includes 140,000 shares as to which Mr. Dorfman holds a
non-qualified stock option, which are exercisable at any time. Does not include
360,000 shares owned by his wife, Sandra Dorfman, to which shares Mr. Dorfman
disclaims beneficial ownership.



(5) Includes 100,000 shares as to which Mr. Wadhwa holds
non-qualified stock options which are exercisable at any time.



(6) Terry Jones is a general partner of a limited partnership
that is the general partner of Syndicated Communications Venture Partners III,
L.P. ("Syncom III"), a fund which on April 14, 1998, Syncom III converted all of
its outstanding Series B-1 preferred stock into 861,230 shares of our common
stock at a conversion price of $2.89 per share. Includes 60,000 shares as to
which Mr. Jones holds non-qualified stock options which are exercisable at any
time.



(7) Includes 40,000 shares as to which Mr. Van Etten holds
non-qualified stock options that are exercisable at any time.





ITEM 12 - Certain Relationships and Related
Transactions



On December 30, 1996, we consummated a private placement of its
Series B-1 convertible preferred stock, par value $.05 per share, to Syncom III.
We issued 2,000 shares of its Series B-1 stock to Syncom III in return for
$2,000,000. On April 14, 1998, Syncom III converted all of its outstanding
Series B-1 preferred stock into 861,230 shares of common stock at a conversion
price of $2.89 per share.



Terry Jones, a director, is the general partner of WJM Partners
III, L.P. ("WJM"), the general partner of Syncom III. Pursuant to the terms of
the stock purchase agreement so long as Syncom III holds our common stock, our
company's board of directors shall consist of not less than five members and
that we shall use our best efforts to cause Terry Jones (or another partner of
WJM) to be elected as a director.















ITEM 13 - Exhibits and Reports on Form 8-K



1. Exhibits.





|3.1   | Composite Amended and Restated Certificate of Incorporation of the
      Company (including the Certificate of Amendment for the Series D1
      Preferred Stock) (incorporated herein by reference to Exhibit 3.1 to the
      Companys Report on Form 8-K filed on October 8, 1999 (the
      "8-K").
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.2   | Composite Amended and Restated Bylaws of the Company (incorporated
      herein by reference to Exhibit 3.1 to the Companys Quarterly Report on
      Form 10-QSB for the period ended September 30, 1997 (the "September 1997
      Form 10-QSB")).                                                   
|4.1   | Form of Warrant Certificate (incorporated herein by reference to
      Exhibit 4.1 to the 8-K).                                                                                                                                                                                                        
|4.2   | Form of Registration Rights Agreement, dated as of September 30, 1999,
      relating to the Series D1 Preferred Stock (incorporated herein by
      reference to Exhibit 4.2 to the 8-K).                                                                                                             
|10.1  | 1993 Stock Incentive Plan (incorporated herein by reference to Exhibit
      10(a) to the Companys Annual Report on Form 10-K for the fiscal year
      ended March 31, 1994 (the "1994 Form 10-K").                                                                                                   
|10.2  | Amended and Restated Employment Agreement dated as of August 4, 1997,
      between the Company and J.C. Chatpar (incorporated herein by reference to
      Exhibit 10.1 to the September 1997 Form 10-QSB).                                                                                           
|10.3  | Manufacturing License Contract between the Company and National
      Telecommunications Co., dated as of December 4, 1995 (incorporated herein
      by reference to Exhibit 10(c) to the Companys 1996 Form
      10-KSB/A).                                                                         
|10.4  | Manufacturing License Contract between the Company and Gujarat
      Communications and Electronics, Ltd. dated as of May 30, 1996
      (incorporated herein by reference to Exhibit 10.5 to the Companys Annual
      Report on Form 10-KSB for the fiscal year ended March 31,
    1997).           
|10.5  | Securities Purchase Agreement, dated as of September 30, 1999, by and
      among the Company and the Purchaser named therein, relating to the Series
      D1 Preferred Stock (incorporated herein by reference to Exhibit 10.1 to
      the 8-K).                                                    
|10.6  | 1997 Stock Incentive Plan (incorporated herein by reference to Exhibit
      10.5 to the Companys 1999 Form 10-KSB/A).                                                                                                                                                                                 
|10.7  | Private equity line of credit agreement dated as of July 2, 2001,
      between Cyber Digital and Grenville Finance Ltd. (incorporated herein by
      reference to Exhibit 10.7 to the Company's Registration Statement on Form
      SB2 dated August 2, 2001).                                      
|10.8  | Registration rights agreement between Cyber Digital and Grenville
      Finance Ltd. (incorporated herein by reference to Exhibit 10.8 to the
      Company's Registration Statement on Form SB2 dated August 2,
      2001).                                                                          
|10.9  | Form of warrant dated July 2, 2001, issued by Cyber Digital to
      Grenville Finance Ltd. (incorporated herein by reference to Exhibit 10.9
      to the Company's Registration Statement on Form SB2 dated August 2,
      2001).                                                                   
|10.10 | Form of warrant dated July 2,2001, issued by Cyber Digital to Ladenburg
      Thalmann & Co. Inc. (incorporated herein by reference to Exhibit 10.10
      to the Company's Registration Statement on Form SB2 dated August 2,
      2001).                                                            
|99.1  | Certification of Chief Executive Officer and Chief Financial Officer
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.                                                                                                             







(b) Reports of Form 8-K. Current Report on Form 8-K,
Item 4 - Changes in Registrant's Certifying Accountant, filed on May 28,
2003.









SIGNATURES

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

Dated: June 27, 2003

| | CYBER DIGITAL, INC.                                               
| | ------------------------------------------------------------------
| |                                                                   
| | By: /s/ J.C. Chatpar                                              
| | J.C. Chatpar                                                      
| | Chairman of the Board, President and Chief Executive
      Officer



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



|Signature                                   | Title                                                                                                                | Date         
|------------------------------------------- | -------------------------------------------------------------------------------------------------------------------- | -------------
|                                            |                                                                                                                      |              
|/s/ J.C. Chatpar
      J.C. Chatpar         | Chairman of the Board, President and
      Chief Executive Officer (Principal
      Executive and Financial Officer) | June 27, 2003
|                                            |                                                                                                                      |              
|/s/ Dale A. Johnson
      Dale A. Johnson   | Controller and Treasurer
      (Principal Accounting Officer)                                                        | June 27, 2003
|                                            |                                                                                                                      |              
|/s/ Jack P. Dorfman
      Jack P. Dorfman   | Director                                                                                                             | June 27, 2003
|                                            |                                                                                                                      |              
|/s/ Jatinder Wadhwa
      Jatinder Wadhwa   | Director                                                                                                             | June 27, 2003
|                                            |                                                                                                                      |              
|/s/ Terry Jones
      Terry Jones           | Director                                                                                                             | June 27, 2003
|                                            |                                                                                                                      |              
|/s/ Andrew Van Etten
      Andrew Van Etten | Director                                                                                                             | June 27, 2003





CERTIFICATIONS OF

CHIEF EXECUTIVE OFFICER AND

CHIEF FINANCIAL OFFICER

PURSUANT TO

SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002



I, J.C. Chatpar, certify that:

1. I have reviewed this annual report on Form 10-KSB of Cyber Digital, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
  statement of a material fact or omit to state a material fact necessary to
  make the statements made, in light of the circumstances under which such
  statements were made, not misleading with respect to the fiscal year covered
  by this annual report;
3. Based on my knowledge, the financial statements, and other financial
  information included in this annual report, fairly present in all material
  respects the financial condition, results of operations and cash flows of the
  registrant as of, and for, the fiscal years presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
  establishing and maintaining disclosure controls and procedures (as defined in
  Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
  a) Designed such disclosure controls and procedures to ensure that material
  information relating to the registrant, including its consolidated
  subsidiaries, is made known to us by others within those entities,
  particularly during the period in which this annual report is being
  prepared;
  b) Evaluated the effectiveness of the registrant's disclosure controls and
  procedures as of a date within 90 days prior to the filing date of this annual
  report (the "Evaluation Date"); and
  c) Presented in this annual report our conclusions about the effectiveness
  of the disclosure controls and procedures based on our evaluation as of the
  Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
  our most recent evaluation, to the registrant's auditors and the audit
  committee of registrant's board of directors (or persons performing the
  equivalent function):
  a) All significant deficiencies in the design or operation of internal
  controls which could adversely affect the registrant's ability to record,
  process, summarize and report financial data and have identified for the
  registrant's auditors any material weakness in internal controls; and
  b) Any fraud, whether or not material, that involves management or other
  employees who have a significant role in the registrant's internal controls;
  and
6. The registrant's other certifying officers and I have indicated in this
  annual report whether or not there were significant changes in internal
  controls or in other factors that could significantly affect internal controls
  subsequent to the date of our most recent evaluation, including any corrective
  actions with regard to significant deficiencies and material
weaknesses.



June 27, 2003

/s/ J.C. Chatpar

J.C. Chatpar

Chief Executive Officer and

Chief Financial Officer





Exhibit 99.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In connection with the Annual Report of Cyber Digital, Inc. (the "Company")
on Form 10-KSB for the fiscal year ending March 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, J.C.
Chatpar, Chief Executive Officer and Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. (S) 1350, as adopted pursuant to ' 906 of the Sarbanes-Oxley Act of 2002,
that:

1. The Report fully complies with the requirements of section 13(a) or 15(d)
  of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
  respects, the financial condition and results of operations of the
  Company.



/s/ J.C. Chatpar

J.C. Chatpar

Chief Executive Officer and

Chief Financial Officer

June 27, 2003











Index to Exhibits





|Exhibit No. | Description of Document                                                                                                                                                                                                                                                                                
|----------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1         | Composite Amended and Restated Certificate of Incorporation of the
      Company (including the Certificate of Amendment for the Series D1
      Preferred Stock) (incorporated herein by reference to Exhibit 3.1 to the
      Companys Report on Form 8-K filed on October 8, 1999 (the
      "8-K").
|3.2         | Composite Amended and Restated Bylaws of the Company (incorporated
      herein by reference to Exhibit 3.1 to the Companys Quarterly Report on
      Form 10-QSB for the period ended September 30, 1997 (the "September 1997
      Form 10-QSB")).                                                   
|4.1         | Form of Warrant Certificate (incorporated herein by reference to
      Exhibit 4.1 to the 8-K).                                                                                                                                                                                                        
|4.2         | Form of Registration Rights Agreement, dated as of September 30, 1999,
      relating to the Series D1 Preferred Stock (incorporated herein by
      reference to Exhibit 4.2 to the 8-K).                                                                                                             
|10.1        | 1993 Stock Incentive Plan (incorporated herein by reference to Exhibit
      10(a) to the Companys Annual Report on Form 10-K for the fiscal year
      ended March 31, 1994 (the "1994 Form 10-K").                                                                                                   
|10.2        | Amended and Restated Employment Agreement dated as of August 4, 1997,
      between the Company and J.C. Chatpar (incorporated herein by reference to
      Exhibit 10.1 to the September 1997 Form 10-QSB).                                                                                           
|10.3        | Manufacturing License Contract between the Company and National
      Telecommunications Co., dated as of December 4, 1995 (incorporated herein
      by reference to Exhibit 10(c) to the Companys 1996 Form
      10-KSB/A).                                                                         
|10.4        | Manufacturing License Contract between the Company and Gujarat
      Communications and Electronics, Ltd. dated as of May 30, 1996
      (incorporated herein by reference to Exhibit 10.5 to the Companys Annual
      Report on Form 10-KSB for the fiscal year ended March 31,
    1997).           
|10.5        | Securities Purchase Agreement, dated as of September 30, 1999, by and
      among the Company and the Purchaser named therein, relating to the Series
      D1 Preferred Stock (incorporated herein by reference to Exhibit 10.1 to
      the 8-K).                                                    
|10.6        | 1997 Stock Incentive Plan (incorporated herein by reference to Exhibit
      10.5 to the Companys 1999 Form 10-KSB/A).                                                                                                                                                                                 
|10.7        | Private equity line of credit agreement dated as of July 2, 2001,
      between Cyber Digital and Grenville Finance Ltd. (incorporated herein by
      reference to Exhibit 10.7 to the Company's Registration Statement on Form
      SB2 dated August 2, 2001).                                      
|10.8        | Registration rights agreement between Cyber Digital and Grenville
      Finance Ltd. (incorporated herein by reference to Exhibit 10.8 to the
      Company's Registration Statement on Form SB2 dated August 2,
      2001).                                                                          
|10.9        | Form of warrant dated July 2, 2001, issued by Cyber Digital to
      Grenville Finance Ltd. (incorporated herein by reference to Exhibit 10.9
      to the Company's Registration Statement on Form SB2 dated August 2,
      2001).                                                                   
|10.10       | Form of warrant dated July 2,2001, issued by Cyber Digital to Ladenburg
      Thalmann & Co. Inc. (incorporated herein by reference to Exhibit 10.10
      to the Company's Registration Statement on Form SB2 dated August 2,
      2001).                                                            
|99.1        | Certification of Chief Executive Officer and Chief Financial Officer
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.                                                                                                             



























CYBER DIGITAL, INC.

FINANCIAL STATEMENTS



AND



AUDITORS REPORT

MARCH 31, 2003 AND 2002











































|                            | TABLE OF CONTENTS                                       |     
|--------------------------- | ------------------------------------------------------- | ----
|                            |                                                         | Page
|                            |                                                         |     
|Independent Auditors Report |                                                         |     
|                            |                                                         |     
|Financial Statements        |                                                         |     
|                            |                                                         |     
|                            | Balance Sheets                                          |     
|                            |                                                         |     
|                            | Statements of Operations                                |     
|                            |                                                         |     
|                            | Statements of Changes in Shareholders' Equity (Deficit) |     
|                            |                                                         |     
|                            | Statements of Cash Flows                                |     
|                            |                                                         |     
|                            | Notes to Financial Statements                           |     
|                            |                                                         |     





































B L A N C H F I E L D, K O B E R & C O M P A N Y, P.C.

CERTIFIED PUBLIC ACCOUNTANTS



1200 VETERANS MEMORIAL HIGHWAY  SUITE
350  HAUPPAUGE, NEW YORK 11788  (631) 234-4200  FAX
234-4272













INDEPENDENT AUDITORS REPORT









To the Board of Directors and Shareholders

Cyber Digital, Inc.

Hauppauge, New York





We have audited the accompanying balance sheet of Cyber
Digital, Inc. (a New York Corporation) as of March 31, 2003 and the related
statements of operations, shareholders' equity (deficit), and cash flows for the
year 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 audits. The financial statements of Cyber
Digital, Inc. as of March 31, 2002 were audited by other auditors whose report
dated June 21, 2002 expressed an unqualified opinion on those statements.



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
audits provide a reasonable basis for our opinion.



In our opinion, the financial statements referred in the first
paragraph present fairly, in all material respects, the financial position of
Cyber Digital, Inc. as of March 31, 2003 and the results of its operations and
its cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America.







/s/ Blanchfield, Kober & Company, P.C.



Hauppauge, New York

June 21, 2003.











A L B R E C H T , V I G G I A N O , Z U R E C K

& C O M P A N Y , P . C .



25 SUFFOLK COURT

HAUPPAUGE, NY 11788

(631) 434-9500





INDEPENDENT AUDITORS REPORT









To the Board of Directors and Shareholders

Cyber Digital, Inc.

Hauppauge, New York





We have audited the accompanying balance sheets of Cyber
Digital, Inc. (a New York Corporation) as of March 31, 2002 and 2001 and the
related statements of operations, shareholders' equity (deficit), and cash flows
for the 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 audits.



We conducted our audits 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
audits provide a reasonable basis for our opinion.



In our opinion, the financial statements referred in the first
paragraph present fairly, in all material respects, the financial position of
Cyber Digital, Inc. as of March 31, 2002 and 2001 and the results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.



/s/ Albrecht, Viggiano, Zureck and Company, P.C.





Hauppauge, New York

June 21, 2002, (except for Note 13, dated August 14, 2002

and Note 14, dated June 24, 2003)











|                                                                             | CYBER DIGITAL, INC.                                               |                                                 
|---------------------------------------------------------------------------- | ----------------------------------------------------------------- | ------------------------------------------------
|                                                                             | BALANCE SHEETS                                                    |                                                 
|                                                                             | March 31, 2003 and 2002                                           |                                                 
|                                                                             |                                                                   |                                                 
|                                                                             |                                                                   | 2003                                            
|ASSETS                                                                       |                                                                   |                                                 
|                                                                             |                                                                   |                                                 
|Current Assets                                                               |                                                                   |                                                 
|                                                                             | Cash and cash equivalents                                         | $                                               
|                                                                             | Inventories                                                       |                                                 
|                                                                             | Prepaid and other current assets                                  |                                                 
|                                                                             |                                                                   |                                                 
|                                                                             | Total Current Assets                                              |                                                 
|                                                                             |                                                                   |                                                 
|Property and Equipment, net                                                  |                                                                   | 13,458                                          
|                                                                             |                                                                   |                                                 
|Other Assets                                                                 |                                                                   | 26,374                                          
|                                                                             |                                                                   |                                                 
|TOTAL ASSETS                                                                 | $                                                                 | 674,186                                         
|                                                                             |                                                                   |                                                 
|LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)                               |                                                                   |                                                 
|                                                                             |                                                                   |                                                 
|Current Liabilities                                                          |                                                                   |                                                 
|                                                                             | Accounts payable, accrued expenses, and taxes                     | $                                               
|                                                                             | Officer note payable                                              |                                                 
|                                                                             | Settlement payable-current portion                                |                                                 
|                                                                             |                                                                   |                                                 
|                                                                             | Total Current Liabilities                                         |                                                 
|                                                                             |                                                                   |                                                 
|Long Term Debt                                                               |                                                                   |                                                 
|                                                                             | Settlement payable                                                |                                                 
|                                                                             |                                                                   |                                                 
|Total Liabilities                                                            |                                                                   | 682,191                                         
|                                                                             |                                                                   |                                                 
|Commitments and Contingencies                                                |                                                                   |                                                 
|                                                                             |                                                                   |                                                 
|Shareholders' Equity (Deficit)                                               |                                                                   |                                                 
|                                                                             | Preferred stock - $.05 par value; cumulative, convertible
    and |                                                 
|                                                                             |                                                                   | Participating; authorized 10,000,000 shares     
|                                                                             |                                                                   | Series C; issued and outstanding  310 shares at 
|                                                                             |                                                                   | March 31, 2002 and 2001                         
|                                                                             | Common stock - $.01 par value; authorized 60,000,000
    shares;  |                                                 
|                                                                             |                                                                   | issued and outstanding 21,978,287 and 20,650,352
|                                                                             |                                                                   | shares at March 31, 2003 and 2002, respectively 
|                                                                             | Additional paid-in-capital                                        |                                                 
|                                                                             | Accumulated deficit                                               |                                                 
|                                                                             |                                                                   |                                                 
|                                                                             | Total Shareholders' Equity (Deficit)                              |                                                 
|                                                                             |                                                                   |                                                 
|TOTAL LIABILITIES AND SHAREHOLDERS'
    EQUITY                               | $                                                                 | 674,186                                         
|                                                                             |                                                                   |                                                 
|                                                                             |                                                                   |                                                 
|                                                                             |                                                                   |                                                 
|                                                                             |                                                                   |                                                 
|See independent accountant's report and notes to financial
      statements.
|                                                                             |                                                                   |                                                 
|Page 2                                                                      







|                                                                             | CYBER DIGITAL, INC.                          |                             
|---------------------------------------------------------------------------- | -------------------------------------------- | ----------------------------
|                                                                             | STATEMENTS OF OPERATIONS                     |                             
|                                                                             | March 31, 2003 and 2002                      |                             
|                                                                             |                                              |                             
|                                                                             |                                              | 2003                        
|                                                                             |                                              |                             
|Net Sales                                                                    | $                                            | 0                           
|                                                                             |                                              |                             
|Cost of Sales                                                                |                                              | 0                           
|                                                                             |                                              |                             
|                                                                             | Gross Profit                                 |                             
|                                                                             |                                              |                             
|                                                                             |                                              |                             
|Operating Expenses                                                           |                                              |                             
|                                                                             | Selling, general and administrative expenses | $                           
|                                                                             | Research and development                     |                             
|                                                                             |                                              |                             
|                                                                             | Total Operating Expenses                     |                             
|                                                                             |                                              |                             
|                                                                             | Loss from Operations                         |                             
|                                                                             |                                              |                             
|Other Income (Expense)                                                       |                                              |                             
|                                                                             | Interest income                              |                             
|                                                                             | Loss on disposal of fixed assets             |                             
|                                                                             | Interest expense                             |                             
|                                                                             | Other income                                 |                             
|                                                                             | Other expense                                |                             
|                                                                             |                                              |                             
|                                                                             |                                              | Total Other Income (Expense)
|                                                                             |                                              |                             
|                                                                             |                                              | Loss before Income Taxes    
|                                                                             |                                              |                             
|Provision for Income Taxes                                                   |                                              | 1,352                       
|                                                                             |                                              |                             
|Net Loss                                                                     |                                              | (758,848)                   
|                                                                             |                                              |                             
|Preferred Stock Dividend                                                     |                                              | 0                           
|                                                                             |                                              |                             
|Income Available to Common Shareholders                                      | $                                            | (758,848)                   
|                                                                             |                                              |                             
|Net Loss Per Share of Common Stock (See Note 7)                              |                                              |                             
|                                                                             |                                              |                             
|                                                                             |                                              | Loss from Operations - Basic
|                                                                             |                                              | Diluted                     
|                                                                             |                                              |                             
|                                                                             |                                              | Net Loss - Basic            
|                                                                             |                                              | Diluted                     
|                                                                             |                                              |                             
|Weighted average number of common shares outstanding                         |                                              | 21,278,473                  
|                                                                             |                                              |                             
|                                                                             |                                              |                             
|                                                                             |                                              |                             
|                                                                             |                                              |                             
|                                                                             |                                              |                             
|                                                                             |                                              |                             
|                                                                             |                                              |                             
|See independent accountant's report and notes to financial
      statements.
|                                                                            
|Page 3                                                                      











|                                                                             |                                                               | CYBER DIGITAL, INC. |              |        
|---------------------------------------------------------------------------- | ------------------------------------------------------------- | ------------------- | ------------ | -------
|                                                                             | STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
      (DEFICIT) |                    
|                                                                             | Years ended March 31, 2003 and 2002                           |                    
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             | Preferred Stock                                               |                     |              |        
|                                                                             | Series C                                                      | Series D-1          | Common Stock | Paid in
|                                                                             | Shares Amount                                                 | Shares Amount       | Shares       | Amount 
|                                                                             |                                                               |                     |              |        
|Balance at March 31, 2001                                                    | 310                                                           | $ 16                | -0-          | $ -0-  
|                                                                             |                                                               |                     |              |        
|Issuance of Common Stock                                                     |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|Net Loss                                                                     |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|Balance at March 31, 2002                                                    | 310                                                           | $ 16                | -0-          | $ -0-  
|                                                                             |                                                               |                     |              |        
|Issuance of Common Stock                                                     |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|Retirement of Common Stock                                                   |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|Issuance of Stock Options                                                    |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|Net Loss                                                                     |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|Balance at March 31, 2003                                                    | 310                                                           | $ 16                | -0-          | $ -0-  
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|                                                                             |                                                               |                     |              |        
|See independent accountant's report and notes to financial
      statements.
|                                                                            
|Page 4                                                                      







|                                                                             | CYBER DIGITAL, INC.                                                               |                                              
|---------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | ---------------------------------------------
|                                                                             | STATEMENTS OF CASH FLOWS                                                          |                                              
|                                                                             | Years ended March 31, 2003 and 2002                                               |                                              
|                                                                             |                                                                                   |                                              
|                                                                             |                                                                                   | 2003                                         
|                                                                             |                                                                                   |                                              
|Cash Flows from Operating Activities                                         |                                                                                   |                                              
|                                                                             | Net loss                                                                          | $                                            
|                                                                             | Adjustments to reconcile net loss to net cash used in operating
      activities: |                                              
|                                                                             |                                                                                   | Depreciation                                 
|                                                                             |                                                                                   | Inventory valuation allowance                
|                                                                             |                                                                                   | Loss on disposal of property and equipment   
|                                                                             |                                                                                   | (Increase) decrease in operating assets:     
|                                                                             |                                                                                   | Accounts receivable                          
|                                                                             |                                                                                   | Inventories                                  
|                                                                             |                                                                                   | Prepaid and other current assets             
|                                                                             |                                                                                   | Other assets                                 
|                                                                             |                                                                                   | Increase (decrease) in operating liabilities:
|                                                                             |                                                                                   | Accounts payable, accrued expenses and taxes 
|                                                                             |                                                                                   | Settlement payable                           
|                                                                             |                                                                                   |                                              
|                                                                             |                                                                                   | Net Cash Used in Operating Activities        
|                                                                             |                                                                                   |                                              
|Cash Flows from Financing Activities                                         |                                                                                   |                                              
|                                                                             | Issuance of common stock                                                          |                                              
|                                                                             | Proceeds from officer loan                                                        |                                              
|                                                                             |                                                                                   |                                              
|                                                                             |                                                                                   | Net Cash Provided by Financing Activities    
|                                                                             |                                                                                   |                                              
|Net Decrease in Cash and Cash Equivalents                                    |                                                                                   | (5,885)                                      
|                                                                             |                                                                                   |                                              
|Cash and Cash Equivalents at Beginning of Period                             |                                                                                   | 13,330                                       
|                                                                             |                                                                                   |                                              
|Cash and Cash Equivalents at End of Period                                   | $                                                                                 | 7,445                                        
|                                                                             |                                                                                   |                                              
|                                                                             |                                                                                   |                                              
|Supplemental Disclosures of Cash Flow Information                            |                                                                                   |                                              
|                                                                             | Cash paid during the period for:                                                  |                                              
|                                                                             |                                                                                   | Income taxes                                 
|                                                                             |                                                                                   |                                              
|Noncash Operating and Financing Activities                                   |                                                                                   |                                              
|                                                                             | Stock issued for services                                                         | $                                            
|                                                                             | Stock options issued to satisfy liabilities                                       | $                                            
|                                                                             |                                                                                   |                                              
|                                                                             |                                                                                   |                                              
|                                                                             |                                                                                   |                                              
|                                                                             |                                                                                   |                                              
|                                                                             |                                                                                   |                                              
|                                                                             |                                                                                   |                                              
|                                                                             |                                                                                   |                                              
|                                                                             |                                                                                   |                                              
|                                                                             |                                                                                   |                                              
|                                                                             |                                                                                   |                                              
|                                                                             |                                                                                   |                                              
|                                                                             |                                                                                   |                                              
|                                                                             |                                                                                   |                                              
|See independent accountant's report and notes to financial
      statements.
|                                                                            
|Page 5                                                                      



CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2003 AND 2002



Note 1 - Summary of Significant Accounting Policies



Description of Business



Cyber Digital, Inc. (the "Company") was incorporated in the
State of New York in April 1983. The Company designs, develops, manufactures and
markets digital switching, internet and networking systems that enable
simultaneous communication of voice and data to a large number of users. The
Company's systems are based on its proprietary software technology which permits
"modemless" transmission of data between a variety of incompatible and
dissimilar end-user equipment, such as personal computers, printers, work
stations and data terminals, over standard telephone lines.



Operating and Financing Matters



Since inception, the Company has devoted substantial resources
to the design and development of the Company's systems and technology. As such,
the Company has not achieved revenue growth and has incurred operating losses.
At March 31, 2003, the Company had an accumulated deficit of $(18,961,665) and a
shareholders' deficit of $(8,005). The decrease in equity from March 31, 2002 to
March 31, 2003 is due mainly to a net operating loss during the fiscal year
ended March 31, 2003. During the fiscal years ended March 31, 2003 and 2002, the
Company received advances of $41,600 and $325,000 respectively, from the Chief
Operating Officer. In addition, the Company issued common stock under an equity
line of credit of $416,366 and $210,000 for the years ended March 31, 2003 and
2002 respectively. An additional $100,000 was raised in December 2002 from a
private placement of unregistered restricted common stock. The Company
historically has generated sufficient cash flow to support its operations mainly
from issuances of debt and equity securities. The Company anticipates additional
issuances of debt and/or equity. The viability of the Company is dependant upon
future revenues and additional issuances of equity.



Estimates



The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.



Fair Value of Financial Instruments



The carrying amounts of financial instruments including cash
and cash equivalents, accounts receivable, prepaid expenses, accounts payable
and accrued expenses, approximate fair value due to the relatively short
maturity of these instruments. The estimated fair value amounts have been
determined by the Company using available market information and the appropriate
valuation methodologies. Considerable judgment is necessarily required in the
interpreting of market data to develop the estimates of fair value, and,
accordingly, the estimates are not necessarily indicative of the amounts that
the Company could realize in a current market exchange.



Cash and Cash Equivalents



For purposes of the statement of cash flows, the Company
considers highly liquid temporary cash investments with an original maturity of
three months or less to be cash equivalents.



Page 6

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2003 AND 2002



Note 1 - Summary of Significant Accounting Policies
(continued)



Inventories



The Company uses a cost system which approximates the first-in,
first-out method. Inventories are valued at the lower of cost or market.



Property and Equipment



Property and equipment are stated at cost, less accumulated
depreciation. Depreciation and amortization are computed by the straight-line
method over their estimated useful lives. Repairs and maintenance are charged
against operations as incurred.



Revenue Recognition



The Company recognizes product system sales upon shipment and
acceptance by the customer. Component parts and software sales are recognized
upon shipment to the customer.



Income Taxes



Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the bases of assets and
liabilities for financial and income tax reporting. The deferred tax assets and
liabilities represent the future tax return consequences of those differences,
which will either be taxable or deductible when the assets and liabilities are
recovered or settled.



Deferred taxes also are recognized for operating losses that
are available to offset future federal income taxes. The Company accounts for
investment tax credits using the flow-through method, and thus reduces income
tax expense in the year the related assets are placed in service.



Advertising



The Company follows the policy of charging the costs of
advertising to expense as incurred.



Research and Development Costs



Research and development costs are charged to expense when
incurred.



Warranty Expense



The Company records warranty expense as incurred and does not
make a provision as shipments are made. Such expense has not been
significant.











Page 7

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2003 AND 2002



Note 1 - Summary of Significant Accounting Policies
(continued)



Impairment of Long-Lived Assets



The Financial Accounting Standards Board has issued Statement
No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of" (FASB 121), which the Company has adopted effective
April 1, 1996. FASB No. 121 requires that long-lived assets and certain
identifiable intangibles held and used by the Company be reviewed for possible
impairment whenever events or changes in circumstance indicate that the carrying
amount of an asset may not be recoverable. FASB No. 121 also requires that
long-lived assets and certain identifiable intangibles held for sale be reported
at the lower of carrying amount of fair value less cost to sell. The Company
determined that no impairment loss need be recognized for the applicable
assets.



Stock-Based Compensation



The Company accounts for stock options as prescribed by
Accounting Principles Board ("APB") Opinion No. 25 and includes pro forma
information in the stock-based compensation footnote, as permitted by Financial
Accounting Standards Board ("FASB") Statement No. 123, Accounting for
Stock-Based Compensation ("SFAS 123"). Accordingly, no compensation cost is
recognized for stock options granted in 2003 and 2002 since the option exercise
price is not less than the market price of the underlying stock on the date of
grant. In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting
For Certain Transactions Involving Stock-an interpretation of APB Opinion No.
25" ("FIN 44"). FIN 44 clarifies the application of APB No. 25 and among other
issues clarifies the definition of an employee for purposes of applying APB
Opinion No. 25. The Company adopted FIN 44 in the first quarter of 2001 with no
material effect on the Companys financial position, results of operations or
cash flows.



Recent Accounting Pronouncements



In July 2001, the FASB issued SFAS No. 141, "Business
Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets". SFAS No.
141 provides new guidance on the accounting for a business combination at the
date a business combination is completed. Specifically, it requires use of the
purchase method of accounting for all business combinations initiated after June
30, 2001, thereby eliminating use of the pooling-of-interest method. SFAS No.
142 establishes new guidance on how to account for goodwill and intangible
assets after a business combination is completed. Among other things, it
requires that goodwill and certain other intangible assets will no longer be
amortized and will be tested for impairment at least annually and written down
only when impaired. This statement will apply to existing goodwill and
intangible assets, beginning with fiscal years starting after December 15, 2001.
Early adoption of the statement will be permitted for companies with a fiscal
year beginning after March 15, 2001, for which the first quarter financial
statements have not been issued.

In June 2001, the FASB issued SFAS no. 143, "Accounting for
Asset Retirement Obligations". SFAS No. 143 provides new guidance on the
accounting for legal obligations associated with the retirement of long-lived
assets that result from the acquisition, construction, development and the
normal operation of a long-lived asset. This statement will apply to all
financial statements issued for fiscal years beginning after June 15, 2002.





Page 8

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2003 AND 2002



Note 1 - Summary of Significant Accounting Policies
(continued)



In August 2001, the FASB issued SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 provides new
guidance on the accounting for the disposal of long-lived assets. The statement
states that a long-lived asset to be abandoned, exchanged for a similar
productive asset, distributed to owners in a spinoff to be held and used until
its disposal. This statement will apply to all financial statements issued for
fiscal years beginning after December 15, 2001.



The Company is currently evaluating these statements but does
not expect that they will have a material impact on the Companys financial
position, results of operations, or cash flows.



Concentration of Credit Risk



The Company places most of temporary cash investments with
financial institutions and may exceed the FDIC limit. The Company has not
experienced any losses to date resulting from this policy.



Earnings (Loss) Per Share



Effective for the Company's financial statements for the year
ended March 31, 1998, the Company adopted SFAS No. 128, "Earnings per Share,"
which replaces the presentation of primary earnings per share ("EPS") and fully
diluted EPS with a presentation of basic EPS and diluted EPS, respectively.
Basic EPS excludes dilution and is computed by dividing earnings available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Similar to fully diluted EPS, diluted EPS assumes conversion of
the convertible preferred stock, the elimination of the related preferred stock
dividend requirement, and the issuance of common stock for all other potentially
dilutive equivalent shares outstanding.



Note 2 - Inventories



Inventories consist of the following at March 31:





|               |   | 2003    |   | 2002   
|-------------- | - | ------- | - | -------
|Raw materials  | $ | 515,918 | $ | 554,915
|Finished goods |   | 66,657  |   | 67,202 
|               | $ | 582,575 | $ | 622,117



Note 3 - Property and Equipment



Major classes of property and equipment consist of the
following at March 31:



|                               |   | 2003    |   | 2002    | Useful Lives
|------------------------------ | - | ------- | - | ------- | ------------
|Machinery and equipment        | $ | 337,973 | $ | 337,973 | 5 years     
|Furniture and fixtures         |   | 64,355  |   | 64,355  | 7 years     
|Leasehold improvements         |   | 4,786   |   | 4,786   | Lease term  
|                               |   | 407,114 |   | 407,114 |             
|Less: Accumulated depreciation |   | 393,656 |   | 350,227 |             
|                               | $ | 13,458  | $ | 56,887  |             

Page 9

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2003 AND 2002



Note 4 - Other Assets



Other assets consist of various security deposits.



Note 5  Officer Loan Payable



During the 2002 fiscal year the Company issued a promissory
note to its Chief Executive Officer, J.C Chatpar, in the amount of $325,000. The
note is secured by all assets of the Company. The note was due on March 11, 2003
with interest accrued at 10%. Overdue principal and, to the extent permitted by
applicable law, overdue interest shall bear interest at the applicable rate plus
2% per annum and shall be payable upon demand.



During the 2003 fiscal year the Company received additional
advances from J.C. Chatpar in the amount of $41,600. These additional advances
bear the same interest rate as the promissory note, are unsecured and are due on
demand. Interest expense for the years ended March 31, 2003 and 2002 was $34,992
and $1,729 respectively.



Note 6 Line of Credit



During July 2001, the Company secured a $6,000,000 equity line
of credit. The line allows for the Company to take advances a maximum of
twenty-four times during the thirty month term of the agreement. The line
expires in December 2003. The maximum amount of each draw down is $250,000. The
available credit decreases by $250,000 after each draw down period, which is
approximately every six weeks. For the years ended March 31, 2003 and 2002, the
Company utilized approximately $413,000 and $209,000, respectively, of this
equity line. As of March 31, 2003, $4,000,000 has expired on the line.



Note 7 - Earnings (Loss) Per Share



Earnings per share ("EPS") has been computed and presented pursuant to the
provisions of Statement of Financial Accounting Standards No. 128, Earnings per
Share.



|                                           |   | 2003       |   | 2002      
|------------------------------------------ | - | ---------- | - | ----------
|Net Loss                                   | $ | (758,848)  | $ | (942,315) 
|Dividends paid on Preferred Stock          |   | 0          |   | 0         
|Income Available to Common Shareholders    | $ | (758,848)  | $ | (942,315) 
|Weighted Average Common Shares Outstanding |   | 21,278,473 |   | 20,308,448
|Basic EPS                                  | $ | (.04)      | $ | (.05)     
|Diluted EPS                                | $ | (.04)      | $ | (.05)     



Diluted earnings per share does not include any stock warrants,
options, or convertible preferred stock as the inclusion of these items would be
antidilutive to earnings per share.



Note 8  Common Stock Transactions



During the years ended March 31, 2003 and 2002 the Company issued 842,934 and
453,004 shares of common stock under the equity line of credit.





Page 10

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2003 AND 2002





Note 8  Common Stock Transactions (continued)



In December 2002, the Company issued 500,000 shares and 100,000
warrants to purchase shares of restricted unregistered common stock in a private
placement for gross proceeds of $100,000.



During the year ended March 31, 2003 the Company issued 5,001
shares of restricted unregistered common stock to various vendors for providing
services.



In April 2002 the Company retired 20,000 shares of common stock
that were issued for services that were not performed.



Note 9 - Stock Option Plans



The Companys Board of Directors adopted, on November 7, 1997,
the 1997 Stock Incentive Plan (the "1997 Plan"). The 1997 plan is a successor to
the 1993 plan, which has been terminated. Under the terms of the 1997 Plan,
850,999 shares were reserved for issuance to officers, directors, other
employees and consultants meeting certain qualifications. During March 2001, the
1997 plan was amended to increase the number of shares reserved for issuance
from 850,999 to 2,850,999. Under the 1997 Plan, incentive stock options are
granted at 100% of fair market value on the date of grant. The right to exercise
the options accrues equally on each of the first, second, third and fourth
anniversaries of the date of grant. Options granted under the plan expire on the
day before the tenth anniversary of the plan.

Pursuant to the 1997 Plan, incentive stock options,
nonqualified stock options, restricted stock and stock appreciation rights may
be granted to such officers, directors, and employees of the Company, and to
such consultants to the Company and such other persons or entities, as the Stock
Option Committee of the Board of Directors (the "Committee") shall select. All
incentive stock options ("ISO"), which may be granted only to employees and
which provide certain tax advantages to the optionee, must have an exercise
price of at least 100 percent of the fair market value of a share of common
stock on the date the option is granted. No ISOs will be exercisable more than
10 years after the date of grant. ISOs granted to ten percent shareholders must
have an exercise price of at least 110 percent of fair market value and may not
be exercisable after the expiration of five years from grant. The exercise price
and the term of nonqualified stock options will be determined by the Committee
at the time of grant.



Stock appreciation rights ("SARS") may be granted independently
or in connection with all or any part of any option granted under the 1997 Plan,
either at the time of grant of the option or at any time thereafter. The holder
of a SAR has the right to receive from the Company, in cash or in shares as the
Committee shall determine, an amount equal to the excess of the fair market
value of the shares covered by the SAR at the date of exercise over the exercise
price set at the date of grant of the SAR. At the request of the holder of an
option, the committee may at its discretion substitute for the exercise of the
option, compensation (in cash or in shares) in an amount equal to or less than
the excess of the fair market value of the shares covered by the option at the
request date over the exercise price set at the grant of the option.



A restricted stock award, entitling the recipient to acquire
shares of common stock for a purchase price at least equal to par value may be
granted to such persons and in such amounts and subject to such terms and
conditions



Page 11

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2003 AND 2002





Note 9 - Stock Option Plans (continued)



as the Committee may determine. Shares of restricted stock may
not be sold, assigned, transferred, pledged or otherwise encumbered or disposed
of except as specified in the 1997 Plan or the written agreement governing the
grant. The Committee, at the time of grant, will specify the date or dates on
which the nontransferability of the restricted stock shall lapse. During the 90
days following the termination of the grantee's employment for any reason, the
Company has the right to require the return of any shares to which restrictions
on transferability apply, in exchange for which the Company shall repay to the
grantee any amount paid by the grantee for such shares.



Unless sooner terminated by the Board, the provisions of the
1997 Plan regarding the grant of ISOs shall terminate on the tenth anniversary
of the adoption of the 1997 Plan by the Board. No ISOs shall thereafter be
granted under the Plan, but all ISOs granted theretofore shall remain in effect
in accordance with their terms.



In addition to these plans, the Company has issued
non-qualified stock options and warrants upon the approval by the Board of
Directors. Such options and warrants are granted at 100% of fair market value on
the date of the grant. Information with respect to non-qualified stock options
and warrants are summarized as follows:





|                            | Price           | Shares         
|--------------------------- | --------------- | ---------------
|Outstanding, April 1, 2002  | $ .75 to $10.00 | 8,959,859      
|                            | Canceled        | $3.00 to $10.00
|                            | Granted         | $ .15 to $ .40 
|Outstanding, March 31, 2003 |                 | 9,230,068      





A summary of options and warrants as of March 31, 2003 follows:



|                         | Options Outstanding    | Options Exercisable                        
|------------------------ | ---------------------- | -------------------------------------------
|Range of Exercise Prices | Outstanding at 3/31/03 | Weighted Average Remaining Contractual Life
|$ .15 to $1.50           | $ 516,568              | 4.70                                       
|$ .40 to $1.50           | 6,370,000              | 4.50                                       
|$2.43 to $3.00           | 1,230,000              | 5.72                                       
|$4.00 to $5.15           | 760,000                | 2.27                                       
|$5.70 to $6.00           | 353,500                | 1.38                                       
|                         | $ 9,230,068            | 4.37                                       



In October 1995, the Financial Accounting Standards Board
issued Statement No. 123 "Accounting for Stock-Based Compensation" ("FASB 123"),
which is effective for the Companys year beginning April 1, 1996. As permitted
under FASB 123, the Company has elected not to adopt the fair value based method
of accounting for its stock-based compensation plans, but will continue to
account for such compensation under the provisions of Accounting Principles
Board Opinion No. 25. Pro forma information regarding net income and earnings
per share is required by FASB 123, and has been determined as if the Company had
accounted



Page 12

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2003 AND 2002





Note 9 - Stock Option Plans (continued)



for its stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using the Black-Scholes option pricing model.



The following assumptions were employed to estimate the fair
value of stock options granted:





|                            | Fiscal Years Ended March 31,
|--------------------------- | ----------------------------
|                            | 2003                        
|Expected dividend yield     | 0.00%                       
|Expected price volatilities | 23.00%                      
|Risk-free interest rate     | 1.20%                       
|Expected life (years)       | 5                           





For pro forma purposes, the estimated fair value of the
Companys stock options is amortized over the options vesting period. The
Company pro forma information follows:



|                               |             | 2003 |           | 2002
|------------------------------ | ----------- | ---- | --------- | ----
|Weighted average fair value of |             |      |           |     
|Options granted                | $           | 0.01 | $         | 0.10
|Net Loss                       |             |      |           |     
|                               | As reported | $    | (758,848) | $   
|                               | Pro Forma   |      | (764,014) |     
|Net Loss Per Share             |             |      |           |     
|                               | As reported |      |           |     
|                               | Basic       | $    | (.04)     | $   
|                               | Diluted     | $    | (.04)     | $   
|                               | Pro Forma   |      |           |     
|                               | Basic       | $    | (.04)     | $   
|                               | Diluted     | $    | (.04)     | $   



Note 10  Convertible, Cumulative and Participating Preferred
Stock



In July 1999, the Company completed a private placement of its
6% Series C preferred stock. The Company sold 310 shares at $1,000 per share.
The private placement resulted in the Company receiving proceeds of $310,000. As
of March 31, 2002, there are undeclared dividends of $86,002 on the Series C
preferred stock.



The 6% Series C preferred stock is convertible into restricted
common shares at a price to be determined based upon the following:

















The Company has a right to redeem the Series C preferred stock
at a price of 120% of the original Series C issue price, plus all unpaid
dividends at the date of redemption.

Page 13

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2003 AND 2002





Note 10  Convertible, Cumulative and Participating Preferred
Stock (continued)



However, the holder has the right to block the redemption by
delivering a notice of conversion to the Company within seven (7) trading days
of the stockholders receipt of a notice of general redemption.



In September 1999, the Company completed a private placement of
its 8% Series D-1 preferred stock. The Company sold 3,000 shares at $1,000 per
share. The private placement resulted in proceeds of $2,700,000, which is net of
the stock issuance costs.



The 8% Series D-1 preferred stock is convertible into common
shares at a price to be determined based upon the following:















































After October 4, 2000, the preferred stock cannot be redeemed
by the Company.



During the fiscal years ended March 31, 2003 and 2002, the
Company did not pay dividends to the Series D-1 preferred stockholders who
converted their Series D-1 preferred stock.



Note 11 - Income Taxes



The Company has net operating loss carryforwards for tax
purposes amounting to approximately $10.6 million that may be offset against
future taxable income which expire through 2022. In addition, the Company has
investment and research and development tax credits for tax purposes amounting
to approximately $196,000 which expire through 2003.



Deferred income taxes are recognized for differences between
the bases of assets and liabilities for financial statement and income tax
purposes. The utilization of these tax attributes is contingent upon the
Company's ability to generate future taxable income and tax before the tax
attributes expire as well as Internal Revenue Code limitations. As a result, a
valuation allowance equal to the full extent of the deferred tax asset has been
established.





Page 14

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2003 and 2002



Note 11 - Income Taxes



The change in the deferred tax asset (as well as the valuation
account) was approximately $376,000 for the

fiscal year ended March 31, 2003.



Note 12 - Commitments and Contingencies



Employment Contract



On August 3, 2001, the Company renewed the employment agreement
with the Chairman. The agreement is for a three year period covering August 4,
2001 through August 3, 2004. This agreement is renewable for successive
three-year periods.



Under this employment agreement, the Company is obligated to
pay the Chairman $150,000 for the period ending August 3, 1998 with an annual
increase of 10% for each subsequent year under the terms of employment. The
Company also agrees that its Board of Directors may raise the Chairmans salary
as soon as the financial resources of the Company and other business conditions
permit. In such event, the Chairmans salary shall be comparable to that of
chief executive officers of other technology driven publicly held
companies.



This employment agreement can terminate for one of the
following reasons: (1) disability, (2) death, (3) for cause, and (4) without
cause, change in control.



The following payout terms apply if this agreement is
terminated:











2. If the agreement terminates due to the death of the
Chairman, the agreement shall terminate immediately, except that the Chairmans
wife, if any, or otherwise his estate, shall receive the Chairmans salary until
the termination date, payments in the amount of the Chairmans base salary for a
period of six months from the date of termination and the aforementioned
royalty.



3. If the agreement terminates due to cause, the Chairman shall
receive his regular salary until the end of the month in which such termination
occurs. Cause is defined as willful misconduct by the executive or the
conviction of a felony. The Chairman must be notified at least ten days prior of
his termination.



4. If the agreement terminates due to a change in control or
without cause, the Chairman shall receive his salary until the end of the month
in which he is terminated in an amount equal to three years base salary plus
three times the prior year bonus, the aforementioned royalties and all of the
Chairmans outstanding options will be deemed immediately vested and exercisable
for a period of one year from the effective date of termination.



Operating Leases



The Company leases space under a noncancelable operating lease
in Hauppauge, New York. This lease is for a five year period and expires on
March 31, 2004. This location is the Companys executive offices and operations.
Rent expense was $65,800 and $69,600 for the years ended March 31, 2003 and
2002, respectively.

Page 15

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2003 AND 2002



Note 12 - Commitments and Contingencies (continued)

Operating Leases (continued)



The Company also has noncancelable operating leases for
vehicles and equipment. The monthly rental is $835. The amount charged to
expense was $12,956 and $9,672 for the years ended March 31, 2003 and 2002,
respectively.



Future minimum rentals are as follows:





|For years ending March 31, 2004 | $ 74,778
|------------------------------- | --------
|2005                            | 9,566   
|                                | $ 84,344





Government Regulation



The Company's operations are highly sensitive to regulations
promulgated by the United States and throughout the world in which the Company
has targeted its marketing efforts. These regulations or deregulations could
affect both the competition for the Company's product as well as the costs
associated with doing business abroad.



Pending Litigation



The Company is a defendant in an action arising from an alleged
wrongful termination of a purported agreement with Brockington Securities, Inc.
Brockington Securities, Inc. is seeking damage of $1,000,000 due to wrongful
termination of that agreement to provide investment banking services in exchange
for options to purchase shares of the Company. The Company has asserted counter
claims and intends to vigorously defend its position. The outcome and range of
damages or settlement (if any) is unknown.



Although, as of the issuance date, no legal action has
commenced against the Company or its directors by Uniworld Communications Co.,
("UCC"), a New York company, they have threatened the Company and its directors
for a possible litigation arising due to the contention that the Company refused
to remove restrictive legend on 500,000 shares of common stock of the Company
held by UCC. The Company had issued 500,000 restricted shares to UCC pursuant to
a stock option agreement. The Company believes that UCCs threatened claims, if
any, are without merit and the Company will vigorously defend its
position.



The Company is a defendant in an action arising from an alleged
improper termination of a licensing and lease agreement with Cummings
Properties, LLC. In June 2003, this action was settled. The settlement requires
the Company to pay $28,223 over 36 months. The settlement bears interest at 15%.
The Company has charged the cost of the settlement to other expense.



Note 13 - Foreign Operations



During the fiscal year ended March 31, 1998, the Company formed
a wholly owned subsidiary, Cyber Digital (India) Private Limited, under the
rules and regulations of the government of India. The subsidiary has not begun
operations and has no assets as of March 31, 2003 and 2002.



During the fiscal year ended March 31, 2002, the Company
financed a wholly owned subsidiary, Cyber Digital (Nigeria) Ltd. under the rules
and regulations of the government of Nigeria. The subsidiary has not begun
operations has no assets as of March 31, 2003 and 2002.



Page 16