3:



SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-KSB/A

(Amendment No. 2)



|[X] | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934    
|--- | ----------------------------------------------------------------------------------------
|    |                                                                                         
|    | For the Fiscal Year Ended March 31, 2002                                                
|    |                                                                                         
|[ ] | 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: (516) 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

Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.



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



Check if 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 28, 2002, Registrant had 20,945,885 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 $10,241,250 (based on the last sale price reported on Nasdaq's
over-the-counter market on such date).



Transitional Small Business Disclosure Format (check one):



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





EXPLANATORY NOTE

This Amendment No. 2 to Cyber Digital, Inc.s Annual Report on Form 10KSB for
the year ended March 31, 2002 is being filed in order to amend the number of
shares of common stock issued and outstanding which were overstated by 225,909.
These shares were deemed to have been issued for services, that were in fact,
not issued and will not be issued. The financial statements as previously filed
on Form 10KSB filed on July 16, 2002, as amended by form 10KSB/A filed on August
14, 2002, pages F-1 to F-16, are hereby replaced in their entirety.



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 24, 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 24, 2003
|                                            |                                                                                                                      |              
|/s/ Dale A. Johnson
      Dale A. Johnson   | Controller and Treasurer
      (Principal Accounting Officer)                                                        | June 24, 2003
|                                            |                                                                                                                      |              
|/s/ Jack P. Dorfman
      Jack P. Dorfman   | Director                                                                                                             | June 24, 2003
|                                            |                                                                                                                      |              
|/s/ Jatinder Wadhwa
      Jatinder Wadhwa   | Director                                                                                                             | June 24, 2003
|                                            |                                                                                                                      |              
|/s/ Terry Jones
      Terry Jones           | Director                                                                                                             | June 24, 2003
|                                            |                                                                                                                      |              
|/s/ Andrew Van Etten
      Andrew Van Etten | Director                                                                                                             | June 24, 2003



























CYBER DIGITAL, INC.



FINANCIAL STATEMENTS





























|                            | TABLE OF CONTENTS                                       |         
|--------------------------- | ------------------------------------------------------- | --------
|                            |                                                         | Page No.
|Independent Auditors Report |                                                         | F-1     
|Financial Statements        |                                                         |         
|                            | Balance Sheets                                          |         
|                            | Statements of Operations                                |         
|                            | Statements of Changes in Shareholders' Equity (Deficit) |         
|                            | Statements of Cash Flows                                |         
|                            | Notes to Financial Statements                           |         
|                            |                                                         |         













































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 .

CERTIFIED PUBLIC ACCOUNTANTS

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.



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)





F-1







|                                                    | CYBER DIGITAL, INC.                                               |                                                 
|--------------------------------------------------- | ----------------------------------------------------------------- | ------------------------------------------------
|                                                    | BALANCE SHEETS                                                    |                                                 
|                                                    | March 31, 2002 and 2001                                           |                                                 
|                                                    |                                                                   |                                                 
|                                                    |                                                                   | 2002                                            
|ASSETS                                              |                                                                   |                                                 
|                                                    |                                                                   |                                                 
|Current Assets                                      |                                                                   |                                                 
|                                                    | Cash and cash equivalents                                         | $                                               
|                                                    | Accounts receivable, net                                          |                                                 
|                                                    | Inventories                                                       |                                                 
|                                                    | Prepaid and other current assets                                  |                                                 
|                                                    |                                                                   |                                                 
|                                                    | Total Current Assets                                              |                                                 
|                                                    |                                                                   |                                                 
|Property and Equipment, net                         |                                                                   | 56,887                                          
|                                                    |                                                                   |                                                 
|Other Assets                                        |                                                                   | 26,374                                          
|                                                    |                                                                   |                                                 
|TOTAL ASSETS                                        | $                                                                 | 754,047                                         
|                                                    |                                                                   |                                                 
|LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)      |                                                                   |                                                 
|                                                    |                                                                   |                                                 
|Current Liabilities                                 |                                                                   |                                                 
|                                                    | Accounts payable, accrued expenses, and taxes                     | $                                               
|                                                    | Officer note payable                                              |                                                 
|                                                    |                                                                   |                                                 
|                                                    | Total Current Liabilities                                         |                                                 
|                                                    |                                                                   |                                                 
|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 20,650,352 and 20,197,348
|                                                    |                                                                   | shares at March 31, 2002 and 2001, respectively 
|                                                    | Additional paid-in-capital                                        |                                                 
|                                                    | Accumulated deficit                                               |                                                 
|                                                    |                                                                   |                                                 
|                                                    | Total Shareholders' Equity (Deficit)                              |                                                 
|                                                    |                                                                   |                                                 
|TOTAL LIABILITIES AND SHAREHOLDERS'
    EQUITY      | $                                                                 | 754,047                                         
|                                                    |                                                                   |                                                 
|                                                    |                                                                   |                                                 
|                                                    |                                                                   |                                                 
|                                                    |                                                                   |                                                 
|                                                    |                                                                   |                                                 
|                                                    |                                                                   |                                                 
|                                                    |                                                                   |                                                 
|                                                    |                                                                   |                                                 
|                                                    |                                                                   |                                                 
|                                                    |                                                                   |                                                 
|                                                    |                                                                   |                                                 
|See accompanying notes to financial
    statements.
|                                                    |                                                                   |                                                 
|F-2                                                









|                                                     | CYBER DIGITAL, INC.                          |                                        
|---------------------------------------------------- | -------------------------------------------- | ---------------------------------------
|                                                     | STATEMENTS OF OPERATIONS                     |                                        
|                                                     | March 31, 2002 and 2001                      |                                        
|                                                     |                                              |                                        
|                                                     |                                              | 2002                                   
|                                                     |                                              |                                        
|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             |                                        
|                                                     | Other income                                 |                                        
|                                                     |                                              |                                        
|                                                     |                                              | Total Other Income                     
|                                                     |                                              |                                        
|                                                     |                                              | Loss before Income Taxes               
|                                                     |                                              |                                        
|Provision for Income Taxes                           |                                              | 380                                    
|                                                     |                                              |                                        
|                                                     |                                              | Net Loss                               
|                                                     |                                              |                                        
|                                                     |                                              | Preferred Stock Dividend               
|                                                     |                                              |                                        
|                                                     |                                              | Income Available to Common Shareholders
|                                                     |                                              |                                        
|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 |                                              | 20,308,448                             
|                                                     |                                              |                                        
|                                                     |                                              |                                        
|                                                     |                                              |                                        
|                                                     |                                              |                                        
|                                                     |                                              |                                        
|                                                     |                                              |                                        
|                                                     |                                              |                                        
|                                                     |                                              |                                        
|                                                     |                                              |                                        
|See accompanying notes to financial
    statements. 
|                                                     |                                              |                                        
|F-3                                                 













|                                                   |                                                               | CYBER DIGITAL, INC. |              |        
|-------------------------------------------------- | ------------------------------------------------------------- | ------------------- | ------------ | -------
|                                                   | STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
      (DEFICIT) |                    
|                                                   | Years ended March 31, 2002 and 2001                           |                    
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   | Preferred Stock                                               |                     |              |        
|                                                   | Series C                                                      | Series D-1          | Common Stock | Paid in
|                                                   | Shares Amount                                                 | Shares Amount       | Shares       | Amount 
|                                                   |                                                               |                     |              |        
|Balance at March 31, 2000                          | 310                                                           | $ 16                | 851          | $ 43   
|                                                   |                                                               |                     |              |        
|Preferred stock Series D-1 stock dividend          |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|Conversion of Series D-1 Preferred Stock           |                                                               |                     | (279)        | (14)   
|                                                   |                                                               |                     |              |        
|Preferred stock Series D-1 cash dividend           |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|Redemption of Series D-1 Preferred Stock           |                                                               |                     | (572)        | (29)   
|                                                   |                                                               |                     |              |        
|Exercise of stock options                          |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|Issuance of Common Stock                           |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|Net Loss                                           |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|Balance at March 31, 2001                          | 310                                                           | $ 16                | -0-          | $ -0-  
|                                                   |                                                               |                     |              |        
|Issuance of Common Stock                           |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|Net Loss                                           |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|Balance at March 31, 2002                          | 310                                                           | $ 16                | -0-          | $ -0-  
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|                                                   |                                                               |                     |              |        
|See accompanying notes to financial
    statements
|                                                   |                                                               |                     |              |        
|F-4                                               













|                                                    | CYBER DIGITAL, INC.                                                               |                                                 
|--------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------
|                                                    | STATEMENTS OF CASH FLOWS                                                          |                                                 
|                                                    | Years ended March 31, 2002 and 2001                                               |                                                 
|                                                    |                                                                                   |                                                 
|                                                    |                                                                                   | 2002                                            
|                                                    |                                                                                   |                                                 
|Cash Flows from Operating Activities                |                                                                                   |                                                 
|                                                    | Net loss                                                                          | $                                               
|                                                    | Adjustments to reconcile net loss to net cash used in operating
      activities: |                                                 
|                                                    |                                                                                   | Depreciation                                    
|                                                    |                                                                                   | 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    
|                                                    |                                                                                   |                                                 
|                                                    |                                                                                   | Net Cash Used in Operating Activities           
|                                                    |                                                                                   |                                                 
|Cash Flows from Investing Activities                |                                                                                   |                                                 
|                                                    | Purchase of equipment                                                             |                                                 
|                                                    | Proceeds from sale of equipment                                                   |                                                 
|                                                    |                                                                                   |                                                 
|                                                    |                                                                                   | Net Cash Used in Investing Activities           
|                                                    |                                                                                   |                                                 
|Cash Flows from Financing Activities                |                                                                                   |                                                 
|                                                    | Issuance of common stock                                                          |                                                 
|                                                    | Exercise of common stock options                                                  |                                                 
|                                                    | Redemption of preferred stock                                                     |                                                 
|                                                    | Preferred stock dividend                                                          |                                                 
|                                                    | Proceeds from officer loan                                                        |                                                 
|                                                    |                                                                                   |                                                 
|                                                    |                                                                                   | Net Cash Provided (Used) by Financing Activities
|                                                    |                                                                                   |                                                 
|                                                    |                                                                                   | Net Decrease in Cash and Cash Equivalents       
|                                                    |                                                                                   |                                                 
|Cash and Cash Equivalents at Beginning of Period    |                                                                                   | 80,611                                          
|                                                    |                                                                                   |                                                 
|                                                    |                                                                                   | Cash and Cash Equivalents at End of Period      
|                                                    |                                                                                   |                                                 
|                                                    |                                                                                   |                                                 
|Supplemental Disclosures of Cash Flow Information   |                                                                                   |                                                 
|                                                    | Cash paid during the period for:                                                  |                                                 
|                                                    |                                                                                   | Income taxes                                    
|                                                    |                                                                                   |                                                 
|                                                    |                                                                                   |                                                 
|                                                    |                                                                                   |                                                 
|                                                    |                                                                                   |                                                 
|                                                    |                                                                                   |                                                 
|                                                    |                                                                                   |                                                 
|                                                    |                                                                                   |                                                 
|See accompanying notes to financial
    statements.
|                                                   
|F-5.                                               







CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

March 31, 2002 and 2001



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, 2002, the Company had an accumulated deficit of $(18,202,817) and a
shareholders' deficit of $(263,164). The decrease in equity from March 31, 2001
to March 31, 2002 is due mainly to a net operating loss during the fiscal year
ended March 31, 2002. The Company received advances of $325,000 from its Chief
Operating Officer and issued common stock of approximately $210,000 from an
equity line of credit (Note 6). 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.

F-6

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

March 31, 2002 and 2001



Note 1 - Summary of Significant Accounting Policies
(continued)



Accounts Receivable



Accounts receivable are presented net of a zero allowance for
doubtful accounts at March 31, 2002 and 2001. The allowance is based on prior
experience and managements evaluation of the collectibility of accounts
receivable. Management believes that the allowance is adequate. However,
additions to the allowance may be necessary based on changes in economic
conditions.



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.



F-7



CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

March 31, 2002 and 2001



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 2002 and 2001 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.





F-8

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

March 31, 2002 and 2001



Note 1 - Summary of Significant Accounting Policies



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 one
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:





|               |   | 2002    |   | 2001   
|-------------- | - | ------- | - | -------
|Raw materials  | $ | 554,915 | $ | 605,527
|Finished goods |   | 67,202  |   | 58,080 
|               | $ | 622,117 | $ | 663,607





Note 3 - Property and Equipment



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



|                               |   | 2002    |   | 2001    | Useful Lives
|------------------------------ | - | ------- | - | ------- | ------------
|Machinery and equipment        | $ | 337,973 | $ | 339,115 | 5 years     
|Furniture and fixtures         |   | 64,355  |   | 66,682  | 7 years     
|Leasehold improvements         |   | 4,786   |   | 4,786   | Lease term  
|                               |   | 407,114 |   | 410,583 |             
|Less: Accumulated depreciation |   | 350,227 |   | 283,649 |             
|                               | $ | 56,887  | $ | 126,934 |             



F-9





CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

March 31, 2002 and 2001



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 is 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.



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 year ended March 31, 2002, the Company
utilized approximately $209,000 of this equity line. As of March 31, 2002,
$1,500,000 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.





|                                           |   | 2002       |   | 2001       
|------------------------------------------ | - | ---------- | - | -----------
|Net Loss                                   | $ | (942,315)  | $ | (1,527,814)
|Dividends paid on Preferred Stock          |   | -0-        |   | (35,419)   
|Income Available to Common Shareholders    | $ | (942,315)  | $ | (1,563,233)
|Weighted Average Common Shares Outstanding |   | 20,308,448 |   | 19,517,679 
|Basic EPS                                  | $ | (.05)      | $ | (.08)      
|Diluted EPS                                | $ | (.05)      | $ | (.08)      



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 - 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.



F-10





CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

March 31, 2002 and 2001



Note 8 - Stock Option Plans (continued)



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 an 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 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, 2001  | $.75 to $10.00 | 3,833,872     
|                            | Granted        | $.40 to $.50  
|                            | Canceled       | $2.50 to $6.35
|Outstanding, March 31, 2002 |                | 8,959,859     



F-11

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

March 31, 2002 and 2001



Note 8 - Stock Option Plans (continued)



A summary of options and warrants as of March 31, 2002
follows:



|                         | Options Outstanding    | Options Exercisable                              
|------------------------ | ---------------------- | -------------------------------------------------
|Range of Exercise Prices | Outstanding at 3/31/02 | Weighted Average Remaining Contractual
      Life
|$.40 to $1.50            | $ 6,307,971            | 5.53                                             
|$2.43 to $3.00           | 1,255,000              | 6.58                                             
|$4.00 to $5.15           | 770,000                | 3.39                                             
|$5.70 to $6.00           | 601,888                | 1.63                                             
|$6.35 to $10.00          | 25,000                 | .17                                              
|                         | $ 8,959,859            | 5.23                                             



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 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,
|--------------------------- | ----------------------------
|                            | 2002                        
|Expected dividend yield     | 0.00%                       
|Expected price volatilities | 23.00%                      
|Risk-free interest rate     | 5.41%                       
|Expected life (years)       | 9.50                        



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:





|                               |             | 2002 |             | 2001
|------------------------------ | ----------- | ---- | ----------- | ----
|Weighted average fair value of |             |      |             |     
|Options granted                | $           | 0.10 | $           | 0.10
|Net Loss                       |             |      |             |     
|                               | As reported | $    | (942,315)   | $   
|                               | Pro Forma   |      | (1,081,560) |     
|Net Loss Per Share             |             |      |             |     
|                               | As reported |      |             |     
|                               | Basic       | $    | (.05)       | $   
|                               | Diluted     | $    | (.05)       | $   
|                               | Pro Forma   |      |             |     
|                               | Basic       | $    | (.05)       | $   
|                               | Diluted     | $    | (.05)       | $   



F-12

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

March 31, 2002 and 2001



Note 9 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 $67,402 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. 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.



F-13



CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

March 31, 2002 and 2001



Note 9  Convertible, Cumulative and Participating Preferred
Stock (continued)



During the fiscal years ended March 31, 2002 and 2001, pursuant
to an optional conversion of Series D-1 preferred stock, zero shares and 279
shares, respectively, were converted into zero and 179,811 shares, respectively,
of common stock.



During the fiscal years ended March 31, 2002 and 2001, the
Company paid stock dividends in the amount of $0 and $11,600 to the Series D-1
preferred stockholders who converted their Series D-1 preferred stock. This
dividend was paid through the issuance of zero and 7,477, respectively, shares
of the Companys common stock. During the fiscal year ended March 31, 2001,
pursuant to an optional redemption feature of Series D-1 preferred stock, the
Company redeemed 572 shares of its Series D-1 preferred stock. The Company paid
a cash dividend of $23,819 on these 572 shares.



Note 10 - Income Taxes



The Company has net operating loss carryforwards for tax
purposes amounting to approximately $10 million that may be offset against
future taxable income which expire through 2015. 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. The change in the deferred tax asset (as well as the valuation
account) was approximately $376,000 for the fiscal year ended March 31,
2002.



The Company was subject to capital based taxes for New York
State for the years ended March 31, 2002 and 2001.



Note 11 - 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:





F-14

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

March 31, 2002 and 2001



Note 11 - Commitments and Contingencies











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. Cause is defined
as willful misconduct by the executive or the conviction of a felony, the
Chairman shall receive his regular salary until the end of the month in which
such termination occurs. 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 Hauppague, 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 $69,600 and 59,125 for the years ended March 31, 2002 and 2001,
respectively.



Effective December 1, 1999, the Company commenced a
noncancelable operating lease that expires on November 30, 2004 with respect to
the Companys offices in Woburn, Massachusetts. Rent expense was $14,304 and
$11,648 for the years ended March 31, 2002 and 2001,
respectively.



Effective December 31, 1999, the Company commenced a
noncancelable license agreement that expires on November 30, 2004 to install its
telecommunications equipment in buildings in Woburn, Massachusetts. The monthly
license fee of $2,600 is subject to various discounts if the Company meets
certain criteria. The expense for the license agreement was zero and $31,227 for
the years ended March 31, 2002 and 2001, respectively.

The Company also has noncancelable operating leases for
vehicles. The monthly rental on the vehicles is $803. The amount charged to
expense was $9,672 and $9,912 for the years ended March 31, 2002 and 2001,
respectively.



Future minimum rentals are as follows:





|For years ending March 31, 2003 | $ 85,046 
|------------------------------- | ---------
|2004                            | 85,703   
|2005                            | 12,151   
|                                | $ 182,900



F-15

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

March 31, 2002 and 2001



Note 11 - Commitments and Contingencies (continued)



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.
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 agreement with Cummings Properties, LLC. 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.



Note 12 - 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, 2002 and 2001.

During the fiscal year ended March 31, 2001, 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, 2002 and 2001.



Note 13  Previously Issued Audit Report



The original audit report dated June 21, 2002, contained a
scope restriction due to the fact that our auditors were unable to perform
certain audit procedures related to the valuation of inventory. Subsequent to
the original issue of the report, the Company was able to supply audit
documentation which enabled the auditors to satisfy themselves as to the
valuation of inventory. Total assets, liabilities, shareholders deficit and net
loss at, and for the year ended March 31, 2002 remain unchanged from the
originally issued report.

F-16

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

March 31, 2002 and 2001



Note 14 Previously Issued Audit Report



The original audit report dated June 21, 2002, and the amended
audit report dated August 14, 2002, contained an overstatement of equity and an
understatement of liabilities. The Company deemed to issue shares for services
but the shares were, in fact, not issued and will not be issued. Total assets,
liabilities, shareholders deficit and net loss at, and for the year ended March
31, 2002, have been restated to reflect this change.

















































































F-17