UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q/A
                                 AMENDMENT NO. 1

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


                  For the quarterly period ended June 30, 2003

                         Commission File Number: 1-15863

                             ----------------------

                                 IA GLOBAL, INC.
             (Exact name of Registrant as specified in its charter)

                             ----------------------

                    DELAWARE                            13-4037641
         (State or other jurisdiction of              (IRS Employer
         incorporation or organization)             Identification No.)


                        533 AIRPORT BOULEVARD, SUITE 400
                              BURLINGAME, CA 94010
                    (Address of principal executive offices)

                  Registrant's telephone number: (650) 685-2403

                             ----------------------

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 [ ]

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2). Yes [ ] No [X]

         As of August 1, 2003 there were issued and outstanding 65,130,889
shares of the Registrant's Common Stock.

<PAGE>
                                 IA GLOBAL, INC.

                                    FORM 10-Q

                                TABLE OF CONTENTS

                                                                            Page
PART I.                                                                     ----

     Item 1.   Financial Statements............................................3

               Consolidated Balance Sheet......................................3

               Consolidated Statements of Operations...........................4

               Consolidated Statement of Cash Flows............................5

               Notes to Consolidated Financial Statements......................6

     Item 2.   Management's Discussion and Analysis of Financial
               Condition and Results of Operations............................18

     Item 3.   Quantitative and Qualitative Disclosures About
               Market Risk....................................................35

     Item 4.   Controls and Procedures........................................36

PART II.

     Item 1.   Legal Proceedings..............................................36

     Item 2.   Changes in Securities and Use of Proceeds......................36

     Item 3.   Defaults Upon Senior Securities................................37

     Item 4.   Submission of Matters to a Vote of Security Holders... ........37

     Item 5.   Other Information..............................................37

     Item 6.   Exhibits and Reports on Form 8-K...............................37

Signatures....................................................................39


                                        2
<PAGE>
                          PART I--FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

                         IA GLOBAL, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEET

                                                      June 30,     December 31,
                                                        2003           2002
                                                    ------------   ------------
                                                     (unaudited)     (audited)
                                     ASSETS

CURRENT ASSETS:
  Cash and cash equivalents ......................  $  2,139,355   $    444,383
  Accounts receivable - trade ....................       372,263              -
  Deferred license fee ...........................       106,692              -
  Other current assets ...........................       179,750              -
                                                    ------------   ------------
    Total current assets .........................     2,798,060        444,383

EQUIPMENT, NET ...................................       350,488            812

OTHER ASSETS
  Software development costs, net ................       129,255              -
  Intangible assets, net .........................       951,201              -
  Other assets ...................................             -          5,477
                                                    ------------   ------------

                                                    $  4,229,004   $    450,672
                                                    ============   ============

               LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIENCY)

CURRENT LIABILITIES:
  Accounts payable - trade .......................  $    326,252   $    246,353
  Accrued liabilities ............................       284,439         31,000
  Loan payable - related party ...................       834,534      1,063,857
  Deferred revenue ...............................     1,069,626              -
  Short term loan - related party ................       454,175              -
  Income taxes payable ...........................        17,582              -
                                                    ------------   ------------
    Total current liabilities ....................     2,986,608      1,341,210
                                                    ------------   ------------

STOCKHOLDER'S EQUITY (DEFICIENCY):
  Series B Preferred stock, $.01 par value,
    5,000 shares authorized, 1,158 and
    -0- issued and outstanding, respectively
    (liquidation value $1,158,000) ...............            12              -
  Common stock, $.01 par value,
    75,000,000 shares authorized,
    65,130,889 and 51,797,556, issued and
    outstanding, respectively ....................       651,309        517,976
  Paid in capital ................................    23,046,297     19,744,331
  Accumulated deficit ............................   (22,407,838)   (21,022,845)
  Unearned compensation expense ..................             -        (80,000)
  Treasury stock .................................       (50,000)       (50,000)
  Unrealized foreign exchange gain ...............         2,616              -
                                                    ------------   ------------
    Total stockholder's equity (deficiency) ......     1,242,396       (890,538)
                                                    ------------   ------------

                                                    $  4,229,004   $    450,672
                                                    ============   ============

                 See notes to consolidated financial statements.

                                        3
<PAGE>
<TABLE>
                                    IA GLOBAL, INC. AND SUBSIDIARY
                                 CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>

                                            Three Months Ended June 30,    Six Months Ended June 30,
                                                2003           2002           2003           2002
                                            ------------   ------------   ------------   ------------
                                             (unaudited)    (unaudited)    (unaudited)    (unaudited)
<S>                                         <C>            <C>            <C>            <C>
REVENUE ..................................  $     99,164   $     88,546   $    105,018   $    226,046

COST OF SALES ............................       190,871         23,817        299,922         58,721
                                            ------------   ------------   ------------   ------------

GROSS PROFIT (LOSS).......................       (91,707)        64,729       (194,904)       167,325
                                            ------------   ------------   ------------   ------------

EXPENSES
  Selling, general and administrative ....       579,845        325,024        971,466        597,289
                                            ------------   ------------   ------------   ------------
    Total expenses .......................       579,845        325,024        971,466        597,289
                                            ------------   ------------   ------------   ------------

OPERATING LOSS ...........................      (671,552)      (260,295)    (1,166,370)      (429,964)
                                            ------------   ------------   ------------   ------------

OTHER INCOME (EXPENSE):
  Interest income ........................           642              -          1,697              -
  Interest expense .......................      (117,068)             -       (196,139)             -
  Other income (expense) .................       (19,207)             -        (23,849)            33
                                            ------------   ------------   ------------   ------------
    Total other income (expense) .........      (135,633)             -       (218,291)            33
                                            ------------   ------------   ------------   ------------

LOSS BEFORE INCOME TAXES .................      (807,185)      (260,295)    (1,384,661)      (429,931)

INCOME TAXES .............................             -              -            332              -
                                            ------------   ------------   ------------   ------------

NET LOSS .................................      (807,185)      (260,295)    (1,384,993)      (429,931)

Other comprehensive income, net of tax:
  Foreign currency translation adjustments         2,805              -          2,616              -
                                            ------------   ------------   ------------   ------------

Comprehensive loss .......................  $   (804,380)  $   (260,295)  $ (1,382,377)  $   (429,931)
                                            ============   ============   ============   ============

Per share of Common
  Basic net income (loss) per share ......  $      (0.02)  $      (0.01)  $      (0.03)  $      (0.01)
                                            ============   ============   ============   ============
  Diluted net income (loss) per share ....  $      (0.02)  $      (0.01)  $      (0.03)  $      (0.01)
                                            ============   ============   ============   ============
  Weighted average shares of common
         stock outstanding ...............    51,797,556     29,672,556     51,797,556     29,672,556
  Weighted average shares of common stock
         and common equivalent shares
         outstanding .....................    51,797,556     29,672,556     51,797,556     29,672,556

                            See notes to consolidated financial statements.

                                                   4
</TABLE>
<PAGE>
                         IA GLOBAL, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENT OF CASH FLOWS

                                                       Six Months Ended June 30,
                                                       -------------------------
                                                           2003         2002
                                                        -----------   ---------
                                                        (unaudited)  (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .............................................  $(1,384,993)  $(429,931)
Adjustments to reconcile net loss to net cash used
  in operating activites:
Depreciation & amortization ..........................      285,380      48,228
Amortization of beneficial conversion feature ........       98,796           -
Equity based compensation ............................       80,000     122,894
Accounts receivable - trade ..........................     (372,263)          -
Other current assets .................................            -         376
Deferred license fee .................................     (144,383)          -
Accounts payable .....................................       79,900      13,455
Accrued liabilities ..................................      347,949      (9,648)
Income taxes payable - foreign .......................       17,582           -
Deferred revenue .....................................    1,069,626     (25,000)
                                                        -----------   ---------

NET CASH PROVIDED BY (USED IN) OPERATIONS ............       77,594    (279,626)
                                                        -----------   ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of capital expenditures ....................     (376,842)          -
Other assets .........................................        5,476           -
Purchase of intangibles ..............................   (1,299,966)          -
                                                        -----------   ---------

NET CASH USED IN INVESTING ACTIVITIES ................   (1,671,332)          -
                                                        -----------   ---------

CASH PROVIDED BY FINANCING ACTIVITIES:
Proceeds from loan payable - related party ...........    1,288,710     267,253
Proceeds from sale of stock ..........................    2,000,000           -
                                                        -----------   ---------

NET CASH PROVIDED BY FINANCING ACTIVITIES ............    3,288,710     267,253
                                                        -----------   ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .    1,694,972     (12,373)

CASH AND CASH EQUIVALENTS, beginning of the period ...      444,383      18,380
                                                        -----------   ---------

CASH AND CASH EQUIVALENTS, end of the period .........  $ 2,139,355   $   6,007
                                                        ===========   =========


Supplemental disclosures of cash flow information:
  Interest paid ......................................  $         -   $       -
  Taxes paid .........................................            -           -

Non-cash financing activities:
  Conversion of debt to equity .......................  $ 1,158,367   $       -

                See notes to consolidated financial statements.

                                        5
<PAGE>
                        IA Global, Inc. and Subsidiaries
                   Notes to consolidated financial statements

1. BASIS OF PRESENTATION:

The accompanying unaudited financial statements of IA Global, Inc. (the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
prepare them for inclusion as part of the Form 10Q. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The financial
statements for the periods ended June 30, 2003 and 2002 are unaudited and
include all adjustments necessary to a fair statement of the results of
operations for the periods then ended. All such adjustments are of a normal
recurring nature. The results of the Company's operations for any interim period
are not necessarily indicative of the results of the Company's operations for a
full fiscal year. For further information, refer to the financial statements and
footnotes thereto included in the Company's annual report on Form 10-K filed
with the Securities and Exchange Commission for the year ended December 31,
2002.

2. GOING CONCERN:

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. The Company has suffered recurring operating losses and at June 30,
2003, has negative working capital of approximately $189,000. Unless the
Company raises additional investment, there is substantial doubt about the
Company's ability to continue as a going concern. The Company is seeking
additional funding. Our major shareholder has indicated a willingness to support
the Company in its financing efforts. However, there can be no assurance that
the Company will be able to secure additional funding, or that if such funding
is available, whether the terms or conditions would be acceptable to the
Company.

3. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES:

PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of the Company and its majority and wholly-owned subsidiaries.
Intercompany items and transactions have been eliminated in consolidation.

CASH AND CASH EQUIVALENTS - The Company classifies highly liquid temporary
investments with an original maturity of three months or less when purchased as
cash equivalents.

PROPERTY AND EQUIPMENT - Property and equipment represent machinery, equipment
and software which are stated at cost less accumulated depreciation.
Depreciation of machinery and equipments is computed by the declining method
over the estimated useful lives of the related assets (approximately 3 - 15
years). Software developed or obtained for internal use is depreciated using the
straight-line method over the estimated useful life of the software, generally
not in excess of five years.

INTANGIBLE ASSETS / INTELLECTUAL PROPERTY - The Company is amortizing the
intangible assets and intellectual property acquired in conection with the
acquisition of iAccele Co. Ltd. ("iAccele") over twenty-four months on a
straight - line basis

LONG - LIVED ASSETS - The Company reviews its long-lived assets for impairment
when changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Long-lived assets under certain circumstances are reported
at the lower of carrying amount or fair value. Assets to be disposed of and
assets not expected to provide any future service potential to the Company are
recorded at the lower of carrying amount or fair value less cost to sell.

                                        6
<PAGE>

SOFTWARE DEVELOPMENT COSTS - The Company capitalizes software development costs
upon the establishment of technological feasibility, subject to net realizable
value considerations. These costs are included in the balance sheet in property
and equipment. Capitalization ends when the product is available for general
release. Capitalized software development costs are amortized over 24 months
using the higher of the straight line method or the ratio of current gross
revenues to the total of the current and expected future revenues of the
product. Costs capitalized comprise costs to adopt licensed internet
acceleration software to the Japanese market.

SOFTWARE REVENUE AND COST RECOGNITION - The Company's revenue recognition
policies are in accordance with Statement of Position ("SOP") 97-2, Software
Revenue Recognition, as amended, and Staff Accounting Bulletin No. 101, Revenue
Recognition.

The Company sells its software and provides support service on a subscription
basis through Value Added Resellers ("VARs"), Internet Service Providers
("ISPs") or directly to end-users. They purchase either 13 months/12 months/6
months/3 months/ or 30 days license products, and receive a copy of the iAccele
software and full access to the acceleration server maintained by the Company.
Revenues are recognized ratably over the license period upon delivery of the
software to the end user, by the VAR, ISP or the Company. The revenue
recognition process does not begin until the end user has possession of the
software and activated the use of such software, hence no revenue is recorded by
delivering software to the VAR or ISP.

The VAR's have prepaid for some of the licensed products. The Company has
recorded a receivable for all of the licensed products sold to the VAR's with an
related deferred revenue amount until such time the licensed product is
delivered and activated by the end user. The receivables have been reduced to
reflect the prepayments made by the VAR's. Upon confirmation, via an activation
request, of the licensed product(s) delivered to the end user, the revenue
recognition process begins and the related sale(s) are amortized as revenues
over the term of the licensed product sold.

As detailed more fully in Note 9, the Company has a license agreement to use
certain internet acceleration technology which forms the basis of the iAccele
software service. The Company pays a license fee for each customer purchasing
this product. Fees paid under this license are capitalized as deferred license
fee and amortized to cost of sales over the life of the product period from the
month of selling and receiving the cash from the customers, to the expiration
month of the product life span.

FOREIGN CURRENCY TRANSLATION - Foreign entities whose functional currency is the
local currency translate net assets at the end of period rates and income and
expense accounts at average exchange rates for the three month period.
Adjustments resulting from these translations are reflected in the consolidated
balance sheet under unrealized foreign currency exchange and the statement of
operations under other comprehensive income, net of tax: foreign currency
translation adjustments, respectively.

ADVERTISING COSTS - Advertising costs are expensed as incurred.

USE OF ESTIMATES - The preparation of financial statements in conformity with
U.S. GAAP 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 Company's financial instruments,
including accounts receivable and accounts payable are carried at cost, which
approximates fair value due to the relatively short maturity of those
instruments.

                                        7
<PAGE>

STOCK BASED COMPENSATION PLANS - The Company accounts for its stock-based
compensation plans under Accounting Principles Board Opinion 25, (APB 25)
Accounting for Stock Issued to Employees and the related interpretation, for
which no compensation cost is recorded in the statement of operations for the
estimated fair value of stock options issued with an exercise price equal to the
fair value of the common stock on the date of grant. Statement of Financial
Accounting Standards No. 123 (SFAS 123) Accounting for Stock-Based Compensation,
as amended by Statement of Financial Accounting Standards No. 148 (SFAS 148)
Accounting for Stock-Based Compensation - Transition and Disclosure, requires
that companies, which do not elect to account for stock-based compensation as
prescribed by this statement, to disclose the pro-forma effects on earnings and
earnings per share as if SFAS 123 has been adopted.

If the Company applied the recognition provisions of SFAS 123 using the
Black-Scholes option pricing model, the resulting pro-forma net income (loss)
available to common shareholders, and pro-forma net income (loss) available to
common shareholders per share would be as follows:
<TABLE>
<CAPTION>
                                             For the three months ending     For the six months ending
                                                      June 30,                        June 30,
                                              -------------------------     ---------------------------
                                                 2003           2002           2003             2002
                                              ---------     -----------     -----------     -----------
<S>                                           <C>           <C>             <C>             <C>
Net loss available to common
    shareholders, as reported ............    $(804,380)    $  (260,295)    $(1,382,377)    $  (429,931)

Deduct: total stock-based employee
    compensation determined under fair
    value based method for all awards, net
    of related tax effects ...............       (2,474)              -        (106,846)              -
                                              ---------     -----------     -----------     -----------

Pro-forma net loss available to common
    shareholders .........................    $(806,854)    $  (260,295)    $(1,489,223)    $  (429,931)
                                              =========     ===========     ===========     ===========

Earnings per share:
    Basic- as reported ...................    $   (0.02)    $     (0.01)    $     (0.03)    $     (0.01)
    Basic- pro-forma .....................    $   (0.02)    $     (0.01)    $     (0.03)    $     (0.01)

</TABLE>

The above stock-based employee compensation expense has been determined
utilizing a fair value method, the Black-Scholes option-pricing model.

The Company has recorded no compensation expense for stock options granted to
employees during the three and six months ended June 30, 2003 and 2002.

In accordance with SFAS 123, the fair value of each option grant has been
estimated as of the date of the grant using the Black-Scholes option pricing
model with the following weighted average assumptions:

                                                   For the Six Months
                                                      Ended June 30,
                                                   ------------------
                                                   2003          2002
                                                   ----          ----
         Risk free interest rate ..........        3.75%         4.08%
         Expected life ....................        10 yrs      10 years
         Dividend rate ....................        0.00%         0.00%
         Expected volatility ..............         65%           75%


                                        8
<PAGE>

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - FASB Interpretation ("FIN") No. 45:
In November 2002, the FASB issued FIN No. 45, "Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees and
Indebtedness of Others," an interpretation of SFAS Nos. 5, 57 and 107, and
rescission of FIN No. 34,"Disclosure of Indirect Guarantees of Indebtedness of
Others." FIN No. 45 elaborates on the disclosures to be made by the guarantor in
its interim and annual financial statements about its obligations under certain
guarantees that it has issued. It also requires that a guarantor recognize, at
the inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee. The initial recognition and measurement
provisions of this interpretation are applicable on a prospective basis to
guarantees issued or modified after March 31, 2002; while, the provisions of the
disclosure requirements are effective for financial statements of interim or
annual periods ending after December 15, 2002. The adoption of such
interpretation on January 1, 2003 did not have a material impact on the
Company's results of operations, financial position or cash flows.

FIN No. 46: In January 2003, the FASB issued FIN No. 46, "Consolidation of
Variable Interest Entities," an interpretation of Accounting Research Bulletin
No. 51. FIN No. 46 requires that variable interest entities be consolidated by a
company if that company is subject to a majority of the risk of loss from the
variable interest entity's activities or is entitled to receive a majority of
the entity's residual returns or both. FIN No. 46 also requires disclosures
about variable interest entities that companies are not required to consolidate
but in which a company has a significant variable interest. The consolidation
requirements of FIN No. 46 will apply immediately to variable interest entities
created after January 31, 2003. The consolidation requirements will apply to
entities established prior to January 31, 2003 in the first fiscal year or
interim period beginning after June 15, 2003. The disclosure requirements will
apply in all financial statements issued after January 31, 2003. The Company has
adopted the provisions of FIN No. 46, and such provisions have not had a
material effect on its results of operation, financial position or the related
financial statement disclosures.

In April 2003, the FASB issued Statements of Financial Accounting Standards No.
149 ("SFAS No. 149"), an amendment to SFAS No. 133. SFAS No. 149 clarifies under
what circumstances a contract with initial investments meets the characteristics
of a derivative and when a derivative contains a financing component. This SFAS
is effective for contracts entered into or modified after June 30, 2003.

ACCOUNTING FOR FINANCIAL INSTRUMENTS - In May 2003, the FASB issued Statements
of Financial Accounting Standards No. 150 ("SFAS No. 150") "Accounting for
Certain Financial Instruments with Characteristics of Both Liabilities and
Equity". SFAS No. 150 established standards for how an issuer classifies and
measures in its statement of financial position certain financial instruments
with characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances) because that financial instrument embodies an
obligation of the issuer. This SFAS is effective for financial instruments
entered into or modified after May 31, 2003 and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. It is to be
implemented by reporting the cumulative effect of a change in accounting
principle for financial instruments created before the issuance date of SFAS
No.150 and still existing at the beginning of the interim period of adoption.
Restatement is not permitted. The adoption of SFAS No. 150 will not have a
material effect on the financial statements of the Company.

INCOME TAXES - Income taxes are accounted for in accordance with SFAS No. 109,
Accounting for Income Taxes, which requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets and

                                        9
<PAGE>

liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Valuation allowances are established when
necessary to reduce deferred tax assets to the amounts expected to be realized.
Income tax expense is the tax payable for the period and the change during the
period in deferred tax assets and liabilities.

4. RISK OF CONCENTRATION

Significant Distributor - The Company's largest distributor is a VAR that
accounted for 78% of accounts receivable and deferred revenue for the six-month
period ending June 30, 2003. A second VAR accounted for a further 19% for the
same six-month period. The Company anticipates that significant distributor
concentration will continue for the foreseeable future.

5. EQUIPMENT

During the three months ended June 30, 2003, iAccele purchased 300 computers for
an aggregate purchase price of approximately $ 300,000. iAccele is leasing all
of these computers to ForeignTV Co. Ltd., a Japanese limited liability company
("ForeignTV"), for a term of 2 years for aggregate lease payments over the term
of the lease of $600,000. The Company previously held a minority ownership in
ForeignTV, but sold its interest in 2002. IAJ, a principal stockholder of the
Company, currently owns approximately 66% of the outstanding shares of
ForeignTV. The terms of the leases are as follows;

      o  Lease 1 dated June 10, 2003 for 100 computers. The monthly rental is
         950,000 Yen or approximately $8,000 per month.

      o  Lease 2 dated June 20, 2003 for 200 computers. The monthly rental is
         1,900,000 Yen or approximately $17,000 per month.

      o  The rental period for each lease is for 2 years.

      o  The lease contract shall be automatically extended for six months if
         ForeignTV does not object at least one month prior to the contract's
         termination date.

      o  These computers are to be returned to the Company upon termination of
         the leases.

In accordance with SFAS 141, these leases were not recorded as a financing
lease, because these leasing transactions are between related parties under
common control. As a result, revenues are not being recognized on any cash
receipts. In addition, since the lessee of these computers is not sufficienty
capitalized, the Company's ability to collect the lease payments is not certain.

These computers are being depreciated over three years.

On August 1, 2003, iAccele entered into a transaction with ForeignTV for the
leasing of an additional 300 computers for a monthly rental is 2,850,000 Yen or
approximately $25,000 per month. The terms of the lease are similar to the
earlier leases discussed above.

                                       10
<PAGE>

6. INTANGIBLE ASSETS

Included in intangible assets are the following;

      o  Software development costs, net of accumulated amortization, of
         $129,255.

      o  Intellectual property of $951,201, net of accumulated amortization of
         $219,510. The intellectual property resulted from the net difference in
         assets and liabilities acquired from the Company acquiring a 76.9%
         equity interest in a privately held Japanese corporation, iAccele,
         engaged in the business of providing an internet data transmission
         acceleration service that targets narrowband users. The Company
         financed this acquisition by borrowing 100 million Japanese Yen, or
         about $830,000, from a related party, and assumded the indebtedness of
         iAccele. The identifiable components of the intellectual property are
         the unpatented technology acquired, the license agreement for the
         acceleration software technology, an increased valuation of the
         acquired software being sold and customer relationships.

         All of the intellectual property / intangibles assets are being
         amortized over twenty-four months. The amortization period of
         twenty-four months was chosen based on management's best estimate of
         the useful lives of these acquired intellectual property / intangibles
         assets due to the following factors: market obsolescence, technological
         advances with computer hardware, competition and changes in the medium
         of distribution of such software. The amortization expense recorded
         since the acquisition date was $85,000. The estimated future
         amortization expense for these intellectual property / intangible
         assets will be $48,750 per month or $585,000 per year until they have
         been fully amortized in February, 2005.

7. INCOME TAXES

The Company is not able to determine whether it is more likely than not that the
deferred tax assets will be realized. As a result, the Company has provided a
100% valuation allowance against the net deferred tax assets.

8. RELATIONSHIPS WITH INTER ASSET JAPAN

Inter Asset Japan LBO No. 1 Fund ("IAJ LBO Fund"), PBAA Fund Ltd. ("PBAA"),
Terra Firma Fund Ltd. ("Terra Firma") and Inter Asset Japan Co. Ltd. ("IAJ" and
together with IAJ LBO Fund, PBAA, and Terra Firma, our "Controlling
Stockholders") collectively hold approximately 82.6% of the common shares of the
Company. Our Controlling Stockholders (other than IAJ which was not a
stockholder at the time) stated in a Schedule 13D filed with the Securities and
Exchange Commission ("SEC") on July 17, 2003, and have subsequently confirmed
orally, that they may be deemed to constitute a "group" for the purposes of Rule
13d-3 under the Securities Exchange Act of 1934 (the "Exchange Act"). Mr. Alan
Margerison, our Director, President and Chief Executive Officer, currently
serves as the Chairman of IAJ, and together with his business partner, Mr.
Hiroki Isobe, they control each of our Controlling Stockholders.

The following table provides details on the affiliated parties owned or
controlled by each of the Company's controlling stockholders and certain other
entities, as of June 30, 2003, that are relevant for purposes of understanding
the related party transactions that have taken place:

                                       11
<PAGE>

         Inter Asset Japan LBO No. 1 Fund owns:

                           ForeignTV Japan Co., Ltd...........66.7%

                           InfoshowerX Co., Ltd...............42.7%

                           IA Global, Inc.....................37.6%

         PBAA Fund Ltd. owns:

                           IA Global, Inc.....................29.4%

         Terra Firma Fund Ltd. owns:

                           IA Global, Inc.....................15.6%

         IA Global, Inc.

                           iAccele Co., Ltd...................76.9%


         InfoshowerX Co., Ltd.

                           iAccele Co., Ltd......... .........23.1%

Conversion of Preferred A Shares

On September 30, 2002, IAJ consummated a series of related transactions pursuant
to which IAJ, together with its affiliates, became the majority stockholder of
the Company. As of such date, IAJ converted 1,000 shares of Series A convertible
preferred stock (the "Series A Preferred Stock") for 20,000,000 shares of common
stock (the "Conversion Shares"). IAJ had acquired the Series A Preferred Stock
on October 30, 2001, in a private transaction for an aggregate consideration of
$1,000,000. No additional consideration was due from or paid by IAJ for the
exercise of its right to convert the Series A Preferred Stock into Conversion
Shares.

In connection with these transactions, Jonathan Braun, the Company's President
and Chief Executive Officer at that time, resigned as a director of the Company
effective September 30, 2002. On October 18, 2002, Mr. Braun resigned as the
President and Chief Executive Officer. Mr. Braun's resignation was not the
result of any disagreement with the Company on any matter relating to the
Company's operations, policies or practices. Immediately following Mr. Braun's
resignation as President and Chief Executive Officer, the Board of Directors
elected Alan Margerison to serve as one of the Company's directors and appointed
Mr. Margerison to serve as President and Chief Executive Officer.

Debt to Preferred B Shares Conversion

The Company owed David Badner, a stockholder and a former consultant of the
Company, $563,857 as of September 25, 2002 pursuant to a convertible promissory
note dated May 31, 2002 (the "Convertible Promissory Note"). The Company has
been informed by IAJ that as of September 25, 2002, IAJ LBO Fund, our largest
stockholder, acquired the Convertible Promissory Note from Mr. Badner. The
interest rate under the Convertible Promissory Note was 10% per annum.

During the three months ended December 31, 2002, IAJ LBO Fund loaned the Company
an additional $500,000 under the Convertible Promissory Note, thereby increasing
the principal amount to $1,063,857. The proceeds from this additional loan were
used for working capital purposes.

                                       12
<PAGE>

The Convertible Promissory Note was convertible into the Company's Series B
convertible preferred stock. Each share of Series B convertible preferred stock
is convertible into 10,000 shares of the Company's common stock. On June 30,
2003, IAJ LBO Fund converted the principal amount of the Convertible Promissory
Note, as well as approximately $95,000 of accrued interest thereon, into 1,158
shares of the Company's Series B convertible preferred stock. The 1,158 shares
of Series B Convertible Preferred Stock are convertible into 11,580,000 shares
of Common Stock, subject to approval by the Company's shareholders of an
amendment to the Company's Certificate of Incorporation increasing its
authorized common stock to at least 100,000,000 shares.

Acquisition of iAccele Co., Ltd.

On February 10, 2003, the Company acquired a 76.9% equity interest in iAccele
Co., Ltd., a privately held Japanese corporation engaged in the business of
providing an Internet data transmission acceleration service that targets
narrowband users, as well as broadband users, for 100.0 million Japanese Yen, or
approximately $830,000 based on the Japanese Yen/US dollar exchange rate on that
date.

iAccele is engaged in the business of providing an Internet data transmission
acceleration service. Its main product offering is named after the company,
iAccele. This service allows narrow band users, as well as broadband users, to
accelerate their access to the Internet, enabling them to increase the speed of
downloading and uploading data from their local machine to the Internet. This
speeds up web browsing and network services and accelerates email services.
There is no need for the user to change his network provider connection. The
iAccele product is based on a repeat subscriber business model. Subscribers to
the service sign up for a 3 month or 1 year license, which provides them with a
copy of the iAccele software and full access to the acceleration server.

In order to finance this purchase, the Company borrowed 100.0 million Japanese
Yen from PBAA. The principal amount of this loan, together with interest thereon
at 4.50% per annum, is due and payable on January 31, 2004. The Company may
defer payment of the principal amount of this loan, but not accrued interest,
for one additional year with the consent of PBAA. The Company may prepay all or
specified minimum portions of this loan at any time after March 31, 2003 upon
payment of certain prepayment penalties.

If this loan is not repaid by January 31, 2004, PBAA will be afforded the right
to convert any portion of the then unpaid principal amount of the loan, as well
as any then accrued but unpaid interest thereon, into shares of the Company's
common stock at a per share conversion price equal to the Japanese Yen
equivalent of 80% of the average of the US dollar closing price of the common
stock on the American Stock Exchange in the 20 consecutive trading days
immediately prior to the date upon which PBAA gave the Company notice of
conversion, or, if the common stock is not then traded on the American Stock
Exchange, the closing bid price for the common stock as reported by the Nasdaq
Stock Market or such other primary exchange or stock bulletin board on which the
common stock is then traded. By way of illustration, had such conversion
occurred on February 10, 2003, PBAA would have received 7,335,145 shares of
common stock which, when added to those shares currently beneficially owned by
PBAA and its affiliates would increase their collective ownership of the
Company's common stock to approximately 78.9%.

iAccele used 70.0 million of the 100.0 million Japanese Yen that it received
from the Company to partially repay a contractual obligation of 150.0 million
Japanese Yen, since reduced by iAccele's payment of 30.0 million Japanese Yen,
that it owes to InfoShowerX, a Japanese public company, which was incurred by
iAccele in connection with a December 2002 reorganization by which iAccele,
previously an unincorporated operating division of InfoShowerX, acquired the
division's assets from InfoShowerX and became a stand-alone corporation. iAccele

                                       13
<PAGE>

was required to repay this contractual obligation to InfoShowerX in its entirety
by the end of April 2003. Further, 42.0 million Japanese Yen was paid by iAccele
between February 10, 2003 and June 30, 2003 and the balance of 8.0 million
Japanese Yen in August 2003. InfoShowerX has agreed to indemnify the Company for
any damages that may result from representations and warranties made to the
Company by iAccele to acquire the Company's equity interest thereon.

IAJ and its affiliates own an aggregate of 42.7% and Hiroshi Kubori, who became
a director of the Company after the acquisition and functions as CEO of iAccele,
owns approximately 5% of the capital stock of InfoShowerX. InfoShowerX owns the
balance of the capital stock of iAccele, or 23.1%.

InfoShowerX had indebtedness owed to IAJ. A portion of the payments that
InfoShowerX received from iAccele, noted above, were used to repay some of its
indebtedness to IAJ and its affiliates.

Pursuant to a one-year outsourcing agreement, dated as of December 20, 2002,
iAccele had provided business services to InfoShowerX and InfoShowerX had
provided technology services and office space to iAccele. A new agreement was
signed between the two companies for the term April 1, 2003 to July 31, 2003.

The primary factors that resulted in $1,178,000 being allocated to the
intangibles for the purchase of iAccele is due to the Company acquiring $348,000
of potential liabilities in excess of the $569,000 of identifiable assets in
addition to the $830,000 of cash paid at closing. Although the Company acquired
76.9% of iAccele there can be no assurance the minority interest holder would
ever pay their portion of any cash shortfalls. See Note 6 for further
discussion.

The results of operations of iAccele are included in the Consolidated Statements
of Operations for the period February 11, 2003 to June 30, 2003.

The pro-forma financial data on the iAccele acquisition is as follows:

                                      As Reported                 Pro-Forma
                                   Six Months Ended            Six Months Ended
                                     June 30, 2003              June 30, 2003
                                   ----------------            ----------------
Revenues ..........................   $ 105,018                  $   109,326
Loss before extraordinary items ...    (700,716)                  (1,154,468)
Net loss ..........................    (700,716)                  (1,154,468)
Loss per common share .............       (0.01)                       (0.02)

There are no material, nonrecurring items included in the reported above
pro-forma results.

During the three months ended June 30, 2003, iAccele purchased 300 computers for
an aggregate purchase price of approximately $300,000. iAccele is leasing all of
these computers to ForeignTV for a term of 2 years for aggregate lease payments
over the term of the lease of $600,000. We previously held a minority ownership
in ForeignTV but this was sold in 2002. IAJ, a principal stockholder of the
Company, currently owns approximately 66% of the outstanding shares of
ForeignTV.

The details of the lease are as follows. There are two leases; one for 200
computers and one for 100 computers. The rental period for each lease is for 2
years. The lease contract shall be automatically extended for six months if
ForeignTV Japan does not object at least one month prior to the contract
termination date. The monthly rental for 200 computers is 1,900,000 Yen or
approximately $17,000. The monthly rental for the remaining 100 computers is
950,000 Yen or approximately $ 8,000. These computers are to be returned to the
Company upon termination of the leases.

                                       14
<PAGE>

During the quarter ended June 30, 2003, iAccele borrowed 52,500,000 Yen, or
approximately $454,000, from IAJ. This financing was made in four separate
advances. These advances bear interest at rates ranging from 3.5% to 6.7% per
annum. These advances matured during the following dates: 5,500,000 Yen or
approximately $45,000 on July 25, 2003, 7,000,000 Yen, or approximately $62,000,
on July 27, 2003, 10,000,000 Yen, or approximately $89,000, on August 1, 2003
and 30,000,000 Yen, or approximately $258,000, on December 1, 2003. The Company
repaid 18,500,000 Yen, or approximately $160,000, on July 25, 2003. The
remaining 4,000,000 Yen which was due on August 1, 2003 was deferred with a new
note that is payable at the end of calendar year 2003. Therefore, the total
outstanding amount to IAJ due in December, 2003 under the new note, which
accrues interest at 3.5% per annum, is 34,000,000 Yen, or approximately
$290,000.

On August 1, 2003, iAccele entered into a transaction with ForeignTV for the
leasing of an additional 300 computers for a monthly rental is 2,850,000 Yen or
approximately $25,000 per month. The terms of the lease are similar to the
earlier leases discussed above.

$2.0M Financing

On June 30, 2003, the Company agreed to sell to PBAA, 13,333,333 shares of
common stock at an average price of $0.15 per share, for a total of $2.0
million, representing an approximate 25% discount to the trailing five-day
average closing price of our common stock ending June 15, 2003, the date PBAA
made its investment commitment. As PBAA's purchase price per share was at a
discount to market, the Company's stockholders will be asked to ratify and
approve this transaction, as required by the applicable rules of the American
Stock Exchange at the Company's forthcoming 2003 annual meeting of its
stockholders.

Acquisition of Fan Club Entertainment Co., Ltd.

On August 5, 2003, the Company executed a Share Purchase Agreement to acquire
from Cyber Holdings Co., Ltd. ("Cyber Holdings") a 67% equity interest in Fan
Club, a privately-held Japanese company. Fan Club will provide advertising,
merchandising, publishing, website and data management services to Cyberbred
Co., Ltd., ("Cyberbred"). The purchase price for the Company's equity interest
in Fan Club is 134,000,000 Japanese Yen, or $1,112,960 (based on the Japanese
Yen/US dollar exchange rate on August 5, 2003), as well as 350,000 shares of the
Company's common stock issued at $0.472 per share, which is the average closing
price for the five days prior to closing. The terms of the Share Purchase
Agreement require Cyber Holdings to transfer the rights under the Marvel
agreement (described below) to Fan Club within five months or make its best
efforts to fully cooperate in any commercially reasonable arrangement designed
to provide the benefit of the Marvel agreement to Fan Club. The Company used its
working capital to fund the cash portion of the purchase price.

The Share Purchase Agreement provides that the Company will receive 67% equity
interest or 268,000 shares in Fan Club. Cyber Holdings, which already held
20,000 shares in Fan Club, following the share purchase will have a 33% equity
interest in Fan Club by paying 56 million Japanese Yen to Fan Club for an
additional 112,000 shares. Cyber Holdings' obligation has not been paid to date.

On June 4, 2003, Cyberbred signed a five year agreement with Marvel Enterprises,
Inc. ("Marvel Enterprises") and Marvel Characters, Inc.("Marvel Characters" and
collecitvely with Marvel Enterprises, "Marvel") to manage their fan club in
Japan. The Marvel Characters hold the rights to well known characters such as
Spider Man, The Hulk, X-Men, Daredevil, Captain America, The Punisher and many
others. Cyberbred currently holds the rights to manage the Universal Studio fan
club in Japan.

On July 28, 2003, Fan Club signed a Subcontract Agreement with Cyberbred to
exclusively manage the entire Marvel Fan Club in Japan in accordance with the
agreement between Cyberbred and Marvel that is discussed above. This Subcontract
Agreement expires May 31, 2008, and is cancelable under certain conditions. The

                                       15
<PAGE>

134,000,000 Yen payment was advanced to Cyberbred in late July, 2003 to fund the
100,000,000 Yen payment to Marvel under this agreement and to provide working
capital for Fan Club. There were no repayment requirements.

Mr. Kazunori Ito, CEO of Fan Club, has been CEO of both Cyberbred and Cyber
Holdings. As of June 30, 2003, Mr. Ito owned equity interests of 41.9% in
Cyberbred and 100% in Cyber Holdings.

There was no prior material relationship between the Company (and any of its
affiliates) and Fan Club. However, an affiliate of IAJ LBO Fund, the Company's
largest stockholder, owned approximately 27% of the equity in Cyberbred.

The Company currently is not a party to the agreement between Cyberbred and
Marvel. However, this contract is material to the Company since the Company
would be materially adversely affected by a termination of the relationship
between Cyberbred and Marvel. The Company cannot make any assurances about the
relationship between Cyberbred and Marvel.

9. COMMITMENT

The Company assumed a license agreement for the non-exclusive use of certain
internet acceleration technology from InfoshowerX as part of the iAccele
acquisition. This technology forms the basis of the Company's only product
offering, and was originally licensed by InfoshowerX in July 2002. The license
agreement is renewable annually and requires fixed royalties in the amount of
approximately $13 per twelve month license sold during the period. The Company
must pay the royalties within twenty days after the Company has collected from
its customers. The Company has incurred approximately $140,000 and $180,000
under this license agreement for the three and six months ended June 30, 2003.

10. SEGMENT INFORMATION

The Company's newly acquired subsidiary operates fully in Japan and under a
single segment. The Company has no current business in the United States other
than paying professional fees associated with being a U.S. taxpayer and publicly
held in the U.S. The general administrative expenses of the parent company were
approximately $123,000 and $348,000 for the three and six months ended June 30,
2003.

11. RECLASSIFICATIONS

Certain reclassifications have been made to the prior period financial
statements in order to conform with the 2003 presentation.

12. STOCKHOLDER'S EQUITY

During the six months ended June 30, 2003, the following equity events occurred;

The beneficial conversion rights for the loan from Inter Asset Japan LBO Fund
was recorded at $277,311 as a contribution to capital and the related
amortization recorded as interest expense over twelve months.

On February 3, 2003, we entered into an employment agreement with Alan
Margerison to serve, for a term of three years, as our President and Chief
Executive Officer at a annual base salary of $60,000 and eligibility to receive
compensation, including options, at the discretion of our compensation
committee. Mr. Margerison currently spends approximately 30 hours per week on
company matters. On February 3, 2003, we entered into an employment agreement
with Satoru Hirai to serve, for a term of three years, as our Chief Operating
Officer and Chief Financial Officer at a annual base salary of $91,200 and
eligibility to receive compensation, including options, at the discretion of our
Compensation Committee. This agreement was amended on May 21, 2003 and the
annual base salary was increased to $120,000. Mr. Hirai currently spends
approximately 30 hours per week on company matters. These employment agreements
also contain provisions for confidentiality for the term of each agreement and
thereafter. Each employment agreement also provides for a severance payment in

                                       16
<PAGE>

the amount of 25% of the executive's annual base salary in the event that the
employee is terminated by us without cause.

On February 5, 2003, the Company granted 1,500,000 Incentive Stock Options at
$.08 per Share to two executives of the Company, exercisable immediately and
expiring on January 23, 2013.

In April 2003, the board of directors voted to amend the conversion price for
the 1,678,433 warrants outstanding from the Company's initial public offering
from an exercise price of $9.00 per share to an exercise price of $3.50 per
share.

On June 15, 2003, the Company granted 4,975,000 stock options with an exercise
price of $.20 per share. Four million five hundred thousand of the stock options
were issued to the directors and officers of the Company, and these options vest
over three years. Four hundred and seventy-five thousand options are performance
based stock options. As of June 30, 2003, none of the performance based stock
options had been earned and consequently, none had been issued. The term of
these 4,975,000 stock options is ten years.

On June 15, 2003, the Board of Directors, subject to shareholder approval at the
forthcoming 2003 annual meeting of shareholders, approved an increase in the
number of shares available for grant under the 1999 and 2000 stock options plans
from 1,500,000 to 11,500,000 shares.

On June 30, 2003, the Company agreed to sell to PBAA, 13,333,333 shares of its
common stock at an average price of $0.15 per share, for a total of $2.0
million, representing an approximate 25% discount to the trailing five-day
average closing price of the Company's common stock ending June 15, 2003, the
date PBAA made its investment commitment. As PBAA's purchase price per share was
at a discount to market, the Company's stockholders will be asked to ratify and
approve this transaction, as required by the applicable rules of the American
Stock Exchange at the Company's forthcoming 2003 annual meeting of its
stockholders.

On June 30, 2003, IAJ LBO Fund converted the principal amount of the Convertible
Promissory Note, as well as approximately $95,000 of accrued interest thereon,
into 1,158 shares of the Company's Series B convertible preferred stock. The
1,158 shares of Series B Convertible Preferred Stock are convertible into
11,580,000 shares of common stock, subject to approval by the Company's
shareholders of an amendment to the Company's Certificate of Incorporation
increasing its authorized common stock to at least 100,000,000 shares.

13. SUBSEQUENT EVENT

On August 1, 2003, iAccele entered into a transaction with ForeignTV for the
leasing of an additional 300 computers for a monthly rental is 2,850,000 Yen or
approximately $25,000 per month. The terms of the lease are similar to the
earlier lease discussed in Note 5, above.

On July 31, 2003, the Company signed a Letter of Intent with London Wall
Investment Pty. Ltd., a privately held Australian corporation, whereby the
Company would acquire a 50% equity stake in a newly formed company to be called,
iAccele Australia Pty Ltd for nominal value ("iAccele Australia"). The Company
would also provide iAccele Australia with an unsecured loan of AUD$50,000,
approximately $35,000 based on the Australian /US dollar exchange rate on that
date, for operating costs of the business. The loan is repayable out of the
profits of the newly formed company with a ninety day period for notice and
after the expiration of one year, based on sufficient surplus profits. The loan
does not provide for interest until the newly formed company exceeds
pre-determined profit targets. The Company used its working capital to fund the
cash portion of the purchase price. If the transaction is consummated, iAccele
Australia would be a sales and marketing operation for the iAccele product
initially in Australia and New Zealand, subject to signing a license agreement
with iAccele. Consummation of the proposed acquisition is further subject to the
preparation and execution of a definitive purchase agreement and customary

                                       17
<PAGE>

closing conditions. There can be no assurance given that this transaction will
be consummated.

On August 5, 2003, the Company executed a Share Purchase Agreement to acquire
from Cyber Holdings a 67% equity interest in Fan Club, a privately-held Japanese
company. Fan Club will provide advertising, merchandising, publishing, website
and data management services to Cyberbred. The purchase price for the Company's
equity interest in Fan Club is 134,000,000 Japanese Yen, or $1,112,960 (based on
the Japanese Yen/US dollar exchange rate on August 5, 2003), as well as 350,000
shares of the Company's common stock issued at $.472 per share, which is the
average closing price for the five days prior to closing. The Share Purchase
Agreement requires Cyber Holdings to transfer the rights under the Marvel
agreement (described in Note 8 above) to Fan Club within five months or make its
best efforts to fully cooperate in any commercially reasonable arrangement
designed to provide the benefit of the Marvel agreement to Fan Club. The Company
used its working capital to fund the cash portion of the purchase price.

The Company had cash of approximately $2.14 million and current liabilities of
approximately $3.0 million at June 30, 2003. Subsequent to this there were
additional cash payments through August 15, 2003, including (i) an advanced
payment to Fan Club Entertainment, (ii) capital expenditures by iAccele as per
the computer leasing transaction discussed above, (iii) the partial repayment of
liabilities by iAccele, and (iv) the payment of contractual fees by iAccele.
Taking into consideration these additional cash payments, the Company had a cash
position of approximately $500,000 as of August 14, 2003.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

INTRODUCTION

We commenced our operations in April 1999 under the name ForeignTV.com, Inc. Our
website on the Internet simulated a single TV network, which distributed
location-specific programming using streaming video technology. We then expanded
our website to provide streaming audio and video content over six Internet
"television" networks, which in the aggregate hosted over 100 distinct channels
targeted to various market segments and niches. In December 1999, we changed our
name to Medium4.com, Inc., to reflect the diversification of our programming and
to underscore the Internet's role as the fourth medium for television
broadcasting, after cable, satellite and traditional television transmission.

During 2001, we refocused our business model to de-emphasize the offering of
thematic video-on-demand networks in favor of a single network of special
interest, continuously streaming broadband entertainment channels, using a
previously unavailable technology called Simulated Live Stream, or SLS. In 2002
and 2003, we further revised our business plan to expand into other areas of
media technology. We are shifting our revenue model from broadband entertainment
channels and revenues derived from advertising, to a renewed focus on developing
media technology products and services and on licensing revenues.

We had total revenues in 2002 of $406,000, which was from license fees. We do
not expect these license fees to recur in 2003. Our current business plan
assumes that we will not derive any significant revenues during the first half
of 2003. Due to our limited operating history, in particular, under our new
business model, it is very difficult to predict our revenues beyond the first
half of 2003.

We have incurred net losses of $1.5 million, $6.2 million and $9.5 million for
the years ended December 31, 2002, 2001 and 2000. We have generated very little
revenue during the last three years. Our losses have been financed primarily by
the sale of equity in our company and through the issuance of equity for
services. We expect our net losses to continue, and possibly to increase, for
the foreseeable future.

In order to remain a going concern will require additional financing until such

                                       18
<PAGE>

time as sufficient cash flows are generated from operations. We expect to incur
operating losses through 2003 and we will need to obtain substantial additional
financing in order to continue and expand our operations and to meet our cash
flow needs. We do not know if additional financing, in excess of what is
currently anticipated, will be available to us on commercially reasonable terms,
or at all. Moreover, if we raise additional capital through borrowing or other
debt financing, we would incur substantial interest expense. Sales of additional
equity securities will dilute on a pro rata basis the percentage ownership of
all holders of common stock. If we do raise more equity capital in the future,
it is likely that it will result in substantial dilution to our present
stockholders. Any inability to obtain additional financing will materially
adversely affect us, including possibly requiring us to significantly curtail or
cease business operations.

On February 10, 2003, we acquired a 76.9% equity interest in iAccele, a
privately held Japanese corporation engaged in the business of providing an
Internet data transmission acceleration service that targets narrowband users,
as well as broadband users, for 100.0 million Japanese Yen, or approximately
$830,000 based on the Japanese Yen/US dollar exchange rate on that date. The
acquisition of iAccele is a key component to our strategy of shifting our
revenue model from broadband entertainment channels and revenues derived from
advertising to a renewed focus on developing media technology products and
services and on licensing revenues. We may develop such media technology
products and services internally, or acquire them from other parties.

On August 5, 2003, we executed a Share Purchase Agreement to acquire from Cyber
Holdings a 67% equity interest in Fan Club, a privately-held Japanese company.
Fan Club will provide advertising, merchandising, publishing, website and data
management services to Cyberbred. The purchase price for our equity interest in
Fan Club is 134,000,000 Japanese Yen, or $1,112,960 (based on the Japanese
Yen/US dollar exchange rate on August 5, 2003), as well as 350,000 shares of our
common stock issued at $.472 per share, which is the average closing price for
the five days prior to closing. The Share Purchase Agreement requires Cyber
Holdings to transfer the rights under the Marvel agreement to Fan Club within
five months or make its best efforts to fully cooperate in any commercially
reasonable arrangement designed to provide the benefit of the Marvel agreement
to Fan Club. We used our working capital to fund the cash portion of the
purchase price.

The share purchase agreement provides that the Company will receive 67% equity
interest or 268,000 shares in Fan Club. Cyber Holdings, which previously held
20,000 shares, will, following an additional purchase by paying 56 million
Japanese Yen to Fan Club for an additional 112,000 shares, have a 33% equity
interest in Fan Club. Cyber Holdings' obligation has not been paid to date.

On June 4, 2003, Cyberbred signed a five year agreement with Marvel to manage
their fan club in Japan. The Marvel Characters hold the rights to well known
characters such as Spider Man, The Hulk, X-Men, Daredevil, Captain America, and
The Punisher and many others. Cyberbred, currently holds the rights to manage
the Universal Studio fan club in Japan.

On July 28, 2003, Fan Club signed a Subcontract Agreement with Cyberbred to
exclusively manage the entire Marvel Fan Club in Japan in accordance with the
agreement between Cyberbred and Marvel that is discussed above. This Subcontract
Agreement expires May 31, 2008, and is cancelable under certain conditions. The
134,000,000 Yen was advanced to Cyberbred in late July, 2003 to fund the
100,000,000 Yen payment to Marvel under this agreement and to provide working
capital for Fan Club. There were no repayment requirements.

Mr. Kazunori Ito, CEO of Fan Club has been CEO of both Cyberbred and Cyber
Holdings. As of June 30, 2003, Mr. Ito owned equity interests of 41.9% in
Cyberbred and 100% interest in Cyber Holdings.

There was no prior material relationship between the Company (and any of our
affiliates) and Fan Club. However, an affiliate of IAJ LBO Fund, which is our
largest stockholder, owned approximately 27% of the equity in Cyberbred.

                                       19
<PAGE>

We currently are not a party to the agreement between Cyberbred and Marvel.
However, this agreement is material to the Company because we would be
materially adversely affected by a termination of the relationship between
Cyberbred and Marvel. We can make no assurances about the relationship between
Cyberbred and Marvel.

On July 31, 2003, the Company signed a Letter of Intent with London Wall
Investment Pty. Ltd., a privately held Australian corporation, whereby the
Company would acquire a 50% equity stake in a newly formed company to be called,
iAccele Australia Pty Ltd for nominal value ("iAccele Australia"). The Company
would also provide iAccele Australia with an unsecured loan of AUD$50,000,
approximately $35,000 based on the Australian /US dollar exchange rate on that
date, for operating costs of the business. The loan is repayable out of the
profits of the newly formed company with a ninety day period for notice and
after the expiration of one year, based on sufficient surplus profits. The loan
does not provide for interest until the newly formed company exceeds
pre-determined profit targets. The Company used its working capital to fund the
cash portion of the purchase price.

If the transaction is consummated, iAccele Australia would be a sales and
marketing operation for the iAccele product initially in Australia and New
Zealand, subject to signing a license agreement with iAccele. Consummation of
the proposed acquisition is further subject to the preparation and execution of
a definitive purchase agreement and customary closing conditions. There can be
no assurance given that this transaction will be consummated.

RESULTS OF OPERATIONS

The following table presents certain consolidated statement of operations
information and presentation of that data as a percentage of change from
period-to-period.

(dollars in thousands)
                                        Three Months Ended June 30,
                              ------------------------------------------------
                               2003         2002     $ Variance     % Variance
                               ----         ----     ----------     ----------

Revenue ....................  $    99       $  89       $  10          11.2%
Cost of sales ..............      191          24         167         695.8%
                              -------       -----       -----         ------
Gross profit (loss) ........      (92)         65        (157)        241.5%
                              -------       -----       -----         ------
Expenses:
Selling, general and
  adminstrative expenses ...      580         325         255          78.5%
                              -------       -----       -----         ------
Total expenses .............      580         325         255          78.5%
                              -------       -----       -----         ------

Loss from operations .......     (672)       (260)       (412)        158.5%
                              -------       -----       -----         ------

Other Income (Expense):
Interest income ............        1           -           1            *
Interest expense ...........     (117)          -        (117)           *
Other income ...............      (19)          -         (19)           *
                              -------       -----       -----         ------
Total other income (expense)     (135)          -        (135)           *
                              -------       -----       -----         ------
Loss before income taxes ...     (807)       (260)       (547)        210.4%
Income taxes ...............        -           -           -            *
                              -------       -----       -----         ------
Net loss ...................  $  (807)      $(260)      $(547)        210.4%
                              =======       =====       =====         ======

                                       20
<PAGE>

(dollars in thousands)
                                          Six Months Ended June 30,
                              ------------------------------------------------
                               2003         2002     $ Variance     % Variance
                               ----         ----     ----------     ----------

Revenue ....................  $   105       $ 226       $(121)        -53.5%
Cost of sales ..............      300          59         241          408.5%
                              -------       -----       -----         ------
Gross profit (loss) ........     (195)        167        (362)        216.8%
                              -------       -----       -----         ------
Expenses:
Selling, general and
  adminstrative expenses ...      971         597         374          62.6%
                              -------       -----       -----         ------
Total expenses .............      971         597         374          62.6%
                              -------       -----       -----         ------

Loss from operations .......   (1,166)       (430)       (736)        171.2%
                              -------       -----       -----         ------

Other Income (Expense):
Interest income ............        2           -           2            *
Interest expense ...........     (196)          -        (196)           *
Other income ...............      (25)          -         (25)           *
                              -------       -----       -----         ------
Total other income (expense)     (219)          -        (219)           *
                              -------       -----       -----         ------
Loss before income taxes ...   (1,385)       (430)       (955)        222.1%
Income taxes ...............        -           -           -            *
                              -------       -----       -----         ------
Net loss ...................  $(1,385)      $(430)      $(955)        222.1%
                              =======       =====       =====         ======
* Not meaningful.

      THREE MONTHS ENDED JUNE 30, 2003 VS. THREE MONTHS ENDED JUNE 30, 2002
        SIX MONTHS ENDED JUNE 30, 2003 VS. SIX MONTHS ENDED JUNE 30, 2002

Net Revenue

Net revenue for the three month period ended June 30, 2003 increased $10,000 to
$99,000, as compared to the same period in the prior year. This increase was due
to a change in business direction. The iAccele revenue of approximately $99,000
primarily related to the amortization of deferred revenue and the sale of new
iAccele software licenses sold to value added resellers (VARs), internet service
providers (ISPs) or directly to end-users.

Net revenue for the six month period ended June 30, 2003 decreased $121,000 to
$105,000, as compared to the same period in the prior year. This increase was
due to a change in business direction. The iAccele revenue of approximately
$105,000 primarily related to the amortization of deferred revenue and the sale
of new iAccele software licenses sold to value added resellers (VARs), internet
service providers (ISPs) or directly to end-users.

As of June 30, 2003, we had deferred revenues of $1,070,000. This is an increase
of $1,070,000 from December 31, 2002. The increase in deferred revenues relates
to the VARS contracting for the delivery of iAccele software but not
distributing such software as timely as it is received from iAccele.

Revenues have been accounted for on the basis of the number of users who have
activated the software license key after they purchased the iAccele software,
rather than accruing revenues at the time the iAccele software was purchased by
the VARs. In the case of VARs, revenue is received by iAccele on a monthly
accruals base but was not recognized by us until the license key was activated

                                       21
<PAGE>

by the end user. This can lead to a significant time lag between cash being
received by us and being converted from the deferred revenue to earned revenue
in our financial reports. Further, our accounting policy records revenue on a
deferred basis whereby the revenue derived is divided evenly over the period of
the licenses validity span, currently a maximum of 13 months. Based on the
number of license keys distributed to users through VARs, as of June 30, 2003,
we have recorded an average activation rate of 10% for iAccele software.

Cost of Sales

Cost of sales for the three month period ended June 30, 2003, increased $167,000
to $191,000, as compared to the same period in the prior year. This increase was
due to license fees on iAccele software and other iAccele costs. Our production
costs for the development of original content for the three month period ended
June 30, 2003 were $0, as compared to approximately $11,000 for the same period
in the prior year.

Cost of sales for the six month period ended June 30, 2003, increased $241,000
to $300,000, as compared to the same period in the prior year. This increase was
due to license fees on iAccele software and other iAccele costs. Our production
costs for the development of original content for the six month period ended
June 30, 2003 were $0, as compared to approximately $25,000 for the same period
in the prior year.

Expenses

Selling, general and administrative expenses for the three month period ended
June 30, 2003 increased $255,000 to $580,000, as compared to the same period in
the prior year. This was due to increased operating expenses of $456,000 related
to iAccele and decreased operating expenses at the Company due to its
restructuring.

Selling, general and administrative expenses for the six month period ended June
30, 2003 increased $374,000 to $971,000, as compared to the same period in the
prior year. This was due to increased operating expenses of $623,000 related to
iAccele and decreased operating expenses at the Company due to its
restructuring.

For the current periods, the selling, general and administrative expenses
consisted primarily of employee and independent contractor expense, rent,
overhead, equipment and depreciation, amortization of identifiable intangible
assets and intellectual property, professional and consulting fees, sales and
marketing costs, and other general and administrative costs. The difference in
the current periods compared to the prior periods is primarily due to the
acquisition of iAccele on February 10, 2003 and sales and marketing expenses
related to the sale of iAccele software licenses.

Other Income (Expense)

Other expense was $135,000 for the three month period ended June 30, 2003 as
compared to $0 for the same period in the prior year. This expense was primarily
due to interest on related party loans.

Other expense was $219,000 for the six month period ended June 30, 2003 as
compared to $0 for the same period in the prior year. This expense was primarily
due to interest on related party loans.

Net Loss

Net loss was $807,000 for the three month period ended June 30, 2003 as compared
to a net loss of $260,000 for the same period in the prior year. The reasons for
the increased losses were discussed above.

Net loss was $1,385,000 for the six month period ended June 30, 2003 as compared
to a net loss of $430,000 for the same period in the prior year. The reasons for
the increased losses were discussed above.

                                       22
<PAGE>

Grant of Stock Options

In February, 2003, the Company granted 1,500,000 stock options to two executives
at an exercise price of $.08 per share, which was the market price at the grant
date. These options are exercisable immediately and have a term of ten years.

On June 15, 2003, the Company granted 4,975,000 stock options with an exercise
price of $.20 per share, which was the market price at the grant date. Four
million five hundred thousand of the stock options were issued to the directors
and officers, which vest over three years. Four hundred and seventy-five
thousand options are performance based stock options. As of June 30, 2003, none
of the performance based stock options were earned. The term of these 4,975,000
stock options granted are for a term of ten years.

We have not recorded any compensation expense for stock options granted to
employees during the three and six months ended June 30, 2002 and 2003.

Liquidity and Capital Resources

The Company had cash of approximately $2.14 million and current liabilities of
approximately $3.0 million at June 30, 2003. Subsequent to this there were
additional cash payments through August 15, 2003, including (i) an advanced
payment to Fan Club Entertainment, (ii) capital expenditures by iAccele as per
computer leasing transaction discussed above, (iii) the partial repayment of
liabilities by iAccele, and (iv) the payment of contractual fees by iAccele.
Taking into consideration these additional cash payments, the Company had a cash
position of approximately $500,000 as of August 14, 2003. For the six months
ending June 30, 2003, the Company had a net loss of $1,385,000 and expects to
incur operating losses through 2003.

At the beginning of 2003, we revised our business plan to expand into other
areas of media entertainment and technology. We have shifted the revenue model
from broadband entertainment channels and revenues derived predominantly from
licensing, to a renewed focus on developing media technology products, services
and on licensing revenues. To this end, we may develop such media entertainment
and technology products and services internally, or acquire them from other
parties.

Since inception, we have financed our operations primarily through sales of our
equity securities in our initial public offering, from several private
placements, loans and capital contributions from an affiliated person and the
issuance of securities for services rendered. Net proceeds from these sales have
totaled approximately $23.7 million as of June 30, 2003, with approximately $8.8
million raised in the initial public offering,$5.5 million raised in the private
placements, $6.8 million in equity issued for services, $1.2 million raised in
the conversion of debt and $1.3 million related to a beneficial conversion
feature. Additional funding was obtained in the form of loans from related
parties, of which approximately $1.3 million was outstanding at June 30, 2003.

In order to remain a going concern will require additional financing until such
time as sufficient cash flows are generated from operations. We expect to incur
operating losses through 2003 and we will need to obtain substantial additional
financing in order to continue and expand our operations and to meet our cash
flow needs. We do not know if additional financing, in excess of what is
currently anticipated, will be available to us on commercially reasonable terms,
or at all. Moreover, if we raise additional capital through borrowing or other
debt financing, we would incur substantial interest expense. Sales of additional
equity securities will dilute on a pro rata basis the percentage ownership of
all holders of common stock. If we do raise more equity capital in the future,
it is likely that it will result in substantial dilution to our present
stockholders. Any inability to obtain additional financing will materially
adversely affect us, including possibly requiring us to significantly curtail or
cease business operations.

                                       23
<PAGE>

Operating Activities

Net cash provided by operations for the six months ended June 30, 2003 was
$78,000. This amount was primarily related to a net loss of $1,385,000,
increases in accounts receivable of $372,000 and deferred license fee of
$144,000. This was offset by depreciation and amortization of $285,000,
amortization of equity based compensation of $80,000, amortization of beneficial
conversion feature of $99,000 and increases in accounts payable of $80,000,
accrued liabilities of $348,000 and deferred revenue of $1,070,000.

Investing Activities

Net cash used in investing activities for the six months ended June 30, 2003 was
$1,671,000. This amount related to the acquisition of $1,300,000 discussed below
and capital expenditures of $377,000.

On February 10, 2003, we acquired an approximately 76.9% equity interest in
iAccele, a privately held Japanese corporation engaged in the business of
providing an Internet data transmission acceleration service that targets
narrowband users, as well as broadband users, for 100.0 million Japanese Yen, or
approximately $830,000 based on the Japanese Yen/US dollar exchange rate on that
date.

On August 5, 2003, we executed a Share Purchase Agreement to acquire from Cyber
Holdings a 67% equity interest in Fan Club, a privately-held Japanese company.
Fan Club will provide advertising, merchandising, publishing, website and data
management services to Cyberbred. The purchase price for our equity interest in
Fan Club is 134,000,000 Japanese Yen, or $1,112,960 (based on the Japanese
Yen/US dollar exchange rate on August 5, 2003), as well as 350,000 shares of our
common stock issued at $.472 per share, which is the average closing price for
the five days prior to closing. We used our working capital to fund the cash
portion of the purchase price.

The Company purchased and subsequently leased 600 computers to an investee of
the major shareholder of the Company, ForeignTV Japan Co. Ltd., a Japanese
limited liability company ("ForeignTV"),. The InterAsset Group owns
approximately 66% of ForeignTV Japan. The Company previously held a minority
ownership in ForeignTV, but sold its interest in 2002. IAJ, a principal
stockholder of the Company, currently owns approximately 66% of the outstanding
shares of ForeignTV. These computers cost approximately $1,000 per machine or
approximately $600,000. The Company expects to receive about $1,200,000 over the
term of these leases for the equipment under lease. The terms of the leases are
as follows;

      o  Lease 1 dated June 10, 2003 for 100 computers. The monthly rental is
         950,000 Yen or approximately $8,000 per month.

      o  Lease 2 dated June 20, 2003 for 200 computers. The monthly rental is
         1,900,000 Yen or approximately $17,000 per month.

      o  Lease 3 dated August 1, 2003 for 300 computers. The monthly rental is
         2,850,000 Yen or approximately $25,000 per month.

      o  The rental period for each lease is for 2 years.

      o  The lease contract shall be automatically extended for six months if
         ForeignTV does not object at least one month prior to the contract's
         termination date.

      o  These computers are to be returned to the Company upon termination of
         the leases.

These leases were not recorded as a financing lease, because these leasing
transactions are between related parties under common control. As a result,
revenues are not being recognized on any cash receipts. In addition, since the
lessee of these computers is not sufficienty capitalized, the Company's ability

                                       24
<PAGE>

to collect the lease payments is not certain. The Company has received 3,429,749
Yen or approximately $31,000 during the quarter ending September 30, 2003 and
this amount has been booked as deferred revenue on the balance sheet.

These computers are being depreciated over three years.

Financing Activities

Net cash provided by financing activities for the six months ending June 30,
2003 was $3,289,000. This amount related to loans from related parties of
$1,289,000 and proceeds from the sale of stock to a related party of $2,000,000.

In order to finance the purchase of iAccele, we borrowed 100.0 million Japanese
Yen, or approximately $830,000 based on the Japanese Yen/US dollar exchange rate
on that Date, from PBAA Fund Ltd., a British Virgin Islands limited liability
company. The principal amount of this loan, together with interest thereon at
4.50% per annum, is due and payable on January 31, 2004. We may defer payment of
the principal amount of this loan, but not accrued interest, for one additional
year with the consent of PBAA. We may prepay all or specified minimum portions
of this loan at any time after March 31, 2003 upon payment of certain prepayment
penalties.

If this loan is not repaid by January 31, 2004, PBAA will be afforded the right
to convert any portion of the then unpaid principal amount of the loan, as well
as any then accrued but unpaid interest thereon, into shares of our common stock
at a per share conversion price equal to the Japanese Yen equivalent of 80% of
the average of the US dollar closing price of our common stock on the American
Stock Exchange in the 20 consecutive trading days immediately prior to the date
upon which PBAA gave us notice of conversion, or, if our common stock is not
then traded on the American Stock Exchange, the closing bid price for our common
stock as reported by the Nasdaq Stock Market or such other primary exchange or
stock bulletin board on which our common stock is then traded. By way of
illustration, had such conversion occurred on February 10, 2003, PBAA would have
received 7,335,145 shares of our common stock which, when added to those shares
currently beneficially owned by PBAA and its affiliates would increase their
collective ownership of our common stock to approximately 78.9%.

iAccele used 70.0 million of the 100.0 million Japanese Yen that it received
from the Company to partially repay a contractual obligation of 150.0 million
Japanese Yen, since reduced by iAccele's payment of 30.0 million Japanese Yen,
that it owes to InfoShowerX, a Japanese public company, which was incurred by
iAccele in connection with a December 2002 reorganization by which iAccele,
previously an unincorporated operating division of InfoShowerX, acquired the
division's assets from InfoShowerX and became a stand-alone corporation. iAccele
was required to repay this contractual obligation to InfoShowerX in its entirety
by the end of April 2003. Further, 42.0 million Japanese Yen was paid by iAccele
between February 10, 2003 and June 30, 2003 and the balance of 8.0 million
Japanese Yen in August 2003.

During the quarter ended June 30, 2003, iAccele borrowed 52,500,000 Yen, or
approximately $454,000, from IAJ. This financing was made in four separate
advances. These advances bear interest at rates ranging from 3.5% to 6.7% per
annum. These advances matured during the following dates: 5,500,000 Yen or
approximately $45,000 on July 25, 2003, 7,000,000 Yen, or approximately $62,000,
on July 27, 2003, 10,000,000 Yen, or approximately $89,000, on August 1, 2003
and 30,000,000 Yen, or approximately $258,000, on December 1, 2003. The Company
repaid 18,500,000 Yen, or approximately $160,000, on July 25, 2003. The
remaining 4,000,000 Yen which was due on August 1, 2003 was deferred with a new
note until the end of 2003. Therefore, the total outstanding amount to IAJ due
in December, 2003 and bearing interest at 3.5% per annum is 34,000,000 Yen, or
approximately $ 290,000.

On June 30, 2003, the Company agreed to sell to PBAA, 13,333,333 shares of
common stock at an average price of $0.15 per share, for a total of $2.0
million, representing an approximate 25% discount to the trailing five-day
average closing price of our common stock ending June 15, 2003, the date PBAA

                                       25
<PAGE>

made its investment commitment. As PBAA's purchase price per share was at a
discount to market, the Company's stockholders will be asked to ratify and
approve this transaction, as required by the applicable rules of the American
Stock Exchange at the Company's forthcoming 2003 annual meeting of its
stockholders.

The Company had cash of approximately $2.14 million and current liabilities of
approximately $3.0 million at June 30, 2003. Subsequent to this there were
additional cash payments through August 15, 2003, including (i) an advanced
payment to Fan Club Entertainment, (ii) capital expenditures by iAccele as per
computer leasing transaction discussed above, (iii) the partial repayment of
liabilities by iAccele, and (iv) the payment of contractual fees by iAccele.
Taking into consideration these additional cash payments, the Company had a cash
position of approximately $500,000 as of August 14, 2003. For the six months
ending June 30, 2003, the Company had a net loss of $1,385,000 and expects to
incur operating losses through 2003.

We will need to obtain additional financing in order to continue our current
operations, including the cash flow needs of iAccele, and to acquire businesses.
Any inability to obtain additional financing will materially adversely affect
us, including possibly requiring us to significantly curtail or cease business
operations. Our major shareholder has indicated a willingness to support the
Company in its financing efforts. However, there can be no assurance that the
Company will be able to secure additional funding, or that if such funding is
available, whether the terms or conditions would be acceptable to the Company,
from our major shareholder or otherwise.

Moreover, if we raise additional capital through borrowing or other debt
financing, we will incur substantial interest expense. Sales of additional
equity securities will dilute on a pro rata basis the percentage ownership of
all holders of common stock. If we raise more capital through equity financing
in the future, it is likely that it will result in substantial dilution to our
present stockholders.

Other Material Commitments. The Company's contractual cash obligations as of
June 30, 2003, are summarized in the table below.
<TABLE>
<CAPTION>
                                                         Less Than                           Greater Than
 Contractual Cash Obligations                Total        1 Year     1-3 Years   3-5 Years     5 Years
 ----------------------------              ----------   ----------   ---------   ---------   ------------
<S>                                        <C>          <C>             <C>         <C>          <C>
 Operating leases ......................   $    1,000   $    1,000      $ -         $ -          $ -
 Capital lease obligations .............            -            -        -           -            -
 Long term debt repayment ..............    1,288,709    1,288,709        -           -            -
 Capital expenditures ..................      300,000      300,000        -           -            -
 Acquisitions ..........................    1,147,960    1,147,960
</TABLE>

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States
of America. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amount of assets and
liabilities, revenues and expenses, and related disclosure on contingent assets
and liabilities at the date of our financial statements. Actual results may
differ from these estimates under different assumptions and conditions.

Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties, and potentially result in materially
different results under different assumptions and conditions. We believe that
our critical aFccounting policies are limited to those described below. For a
detailed discussion on the application of these and other accounting policies
see our note 3 to our consolidated financial statements.

                                       26
<PAGE>

REVENUE RECOGNITION

The Company's revenue recognition policies are in accordance with Statement of
Position ("SOP") 97-2, Software Revenue Recognition, as amended, and Staff
Accounting Bulletin No. 101, Revenue Recognition.

The Company sells its software and provides support service on a subscription
basis through Value Added Resellers ("VARs"), Internet Service Providers
("ISPs") or directly to end-users. They purchase either 13 months/12 months/6
months/3 months/ or 30 days license products, and receive a copy of the iAccele
software and full access to the acceleration server maintained by the Company.
Revenues are recognized ratably over the license period upon delivery of the
software to the end user.

As detailed more fully in Note 9, the Company has a license agreement to use
certain internet acceleration technology which forms the basis of the iAccele
software service. The Company pays a license fee for each customer purchasing
this product. Fees paid under this license are capitalized as deferred license
fee and amortized to cost of sales over the life of the product period from the
month of selling and receiving the cash from the customers to the expiration
month of the product life span.

LONG-LIVED ASSETS (INCLUDING TANGIBLE AND INTANGIBLE ASSETS)

The determination of the value of such intangible assets requires management to
make estimates and assumptions that affect our consolidated financial
statements. We assess potential impairment to the intangible and tangible assets
on a quarterly basis or when evidence that events or changes in circumstances
indicate that the carrying amount of an asset may not be recovered. Our
judgments regarding the existence of impairment indicators and future cash flows
related to these assets are based on operational performance of our business,
market conditions and other factors. Future events could cause us conclude that
impairment indicators exist and that other tangible or intangible assets is
impaired.

ACCOUNTING FOR INCOME TAXES

As part of the process of preparing our consolidated financial statements, we
are required to estimate our income taxes. Management judgment is required in
determining our provision of our deferred tax asset. We recorded a valuation for
the full deferred tax asset from our net operating losses carried forward due to
us not demonstrating any consistent profitable operations. In the event that the
actual results differ from these estimates or we adjust these estimates in
future periods, we may need to adjust such valuation recorded.

FOREIGN CURRENCY TRANSLATION

The Company is exposed to foreign currency risks due to the acquisition of
iAccele Co. Ltd., a Japanese company, on February 10, 2003. This acquisition was
financed by a 100.0 million Japanese Yen loan, or approximately $830,000 based
on the Japanese Yen/US dollar exchange rate on that date.

In addition, during the quarter ended June 30, 2003, iAccele borrowed 52,500,000
Yen, or approximately $454,000, from IAJ. This financing was made in four
separate advances. These advances bear interest at rates ranging from 3.5% to
6.7% per annum. These advances matured during the following dates: 5,500,000 Yen
or approximately $45,000 on July 25, 2003, 7,000,000 Yen, or approximately
$62,000, on July 27, 2003, 10,000,000 Yen, or approximately $89,000, on August
1, 2003 and 30,000,000 Yen, or approximately $258,000, on December 1, 2003. The
Company repaid 18,500,000 Yen, or approximately $160,000, on July 25, 2003. The
remaining 4,000,000 Yen which was due on August 1, 2003 was deferred with a new
note until the end of 2003. Therefore, the total outstanding amount to IAJ due
in December, 2003 and bearing interest at 3.5% per annum is 34,000,000 Yen, or
approximately $ 290,000.

                                       27
<PAGE>

The company does not trade in hedging instruments or "other than trading"
instruments and we are exposed to foreign currency exchange risks.

RECENT ACCOUNTING PRONOUNCEMENTS

FASB Interpretation ("FIN") No. 45: In November 2002, the FASB issued FIN No.
45, "Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees and Indebtedness of Others," an interpretation of SFAS Nos.
5, 57 and 107, and rescission of FIN No. 34,"Disclosure of Indirect Guarantees
of Indebtedness of Others." FIN No. 45 elaborates on the disclosures to be made
by the guarantor in its interim and annual financial statements about its
obligations under certain guarantees that it has issued. It also requires that a
guarantor recognize, at the inception of a guarantee, a liability for the fair
value of the obligation undertaken in issuing the guarantee. The initial
recognition and measurement provisions of this interpretation are applicable on
a prospective basis to guarantees issued or modified after March 31, 2002;
while, the provisions of the disclosure requirements are effective for financial
statements of interim or annual periods ending after December 15, 2002. The
adoption of such interpretation on January 1, 2003 did not have a material
impact on the Company's results of operations, financial position or cash flows.

FIN No. 46: In January 2003, the FASB issued FIN No. 46, "Consolidation of
Variable Interest Entities," an interpretation of Accounting Research Bulletin
No. 51. FIN No. 46 requires that variable interest entities be consolidated by a
company if that company is subject to a majority of the risk of loss from the
variable interest entity's activities or is entitled to receive a majority of
the entity's residual returns or both. FIN No. 46 also requires disclosures
about variable interest entities that companies are not required to consolidate
but in which a company has a significant variable interest. The consolidation
requirements of FIN No. 46 will apply immediately to variable interest entities
created after January 31, 2003. The consolidation requirements will apply to
entities established prior to January 31, 2003 in the first fiscal year or
interim period beginning after June 15, 2003. The disclosure requirements will
apply in all financial statements issued after January 31, 2003. The Company has
adopted the provisions of FIN No. 46, such provisions have not had a material
effect on its results of operation, financial position or the related financial
statement disclosures.

In April 2003, the FASB issued Statements of Financial Accounting Standards No.
149 ("SFAS No. 149"), an amendment to SFAS No. 133. SFAS No. 149 clarifies under
what circumstances a contract with initial investments meets the characteristics
of a derivative and when a derivative contains a financing component. This SFAS
is effective for contracts entered into or modified after June 30, 2003.

Accounting for Financial Instruments - In May 2003, the FASB issued Statements
of Financial Accounting Standards No. 150 ("SFAS No. 150") "Accounting for
Certain Financial Instruments with Characteristics of Both Liabilities and
Equity". SFAS No. 150 established standards for how an issuer classifies and
measures in its statement of financial position certain financial instruments
with characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances) because that financial instrument embodies an
obligation of the issuer. This SFAS is effective for financial instruments
entered into or modified after May 31, 2003 and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. It is to be
implemented by reporting the cumulative effect of a change in accounting
principle for financial instruments created before the issuance date of SFAS
No.150 and still existing at the beginning of the interim period of adoption.
Restatement is not permitted. The adoption of SFAS No. 150 will not have a
material effect on the financial statements.

FACTORS THAT MAY AFFECT FUTURE RESULTS

The following factors, in addition to the other information contained in this
report, should be considered carefully in evaluating us and our prospects. This
report (including without limitation the following factors that may affect

                                       28
<PAGE>

operating results) contains forward-looking statements (within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934) regarding us and our business, financial condition,
results of operations and prospects. Words such as "expects," "anticipates,"
"intends," "plans," "believes," "seeks," "estimates" and similar expressions or
variations of such words are intended to identify forward-looking statements,
but are not the exclusive means of identifying forward-looking statements in
this report. Additionally, statements concerning future matters such as the
development of new products, enhancements or technologies, possible changes in
legislation and other statements regarding matters that are not historical are
forward-looking statements.

Forward-looking statements in this report reflect the good faith judgment of our
management and the statements are based on facts and factors as we currently
know them. Forward-looking statements are subject to risks and uncertainties and
actual results and outcomes may differ materially from the results and outcomes
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences in results and outcomes include, but are not
limited to, those discussed below and in "Management's Discussion and Analysis
of Financial Condition and Results of Operations" as well as those discussed
elsewhere in this report. Readers are urged not to place undue reliance on these
forward-looking statements which speak only as of the date of this report. We
undertake no obligation to revise or update any forward-looking statements in
order to reflect any event or circumstance that may arise after the date of the
report.

- WE HAVE A LIMITED OPERATING HISTORY

We have a limited operating history on which to base an evaluation of our
business and prospects, having only commenced our initial business operations in
April 1999. In addition, we anticipate shifting our revenue model from broadband
entertainment channels and revenues derived from advertising, to a renewed focus
on developing media technology products and services and on licensing revenues.
Our prospects must be considered in light of the risks, difficulties and
uncertainties frequently encountered by companies in an early stage of
development, particularly companies in new and rapidly evolving markets such as
the market for media technology products and services as well as Internet
broadcasting.

As we have such a limited history of operations, investors will be unable to
assess our future operating performance or our future financial results or
condition by comparing these criteria against their past or present equivalents.

- WE HAVE EXTREMELY LIMITED CASH FLOW

Our business requires substantial capital to continue operations. At the present
time, we have not generated material revenues from operations. To date, our cash
flow has primarily come from intermittent sales of our securities and from loans
from an affiliated person. We also have minimal cash on hand. We can give no
assurance our cash flow will be sufficient to allow us to continue our
operations at present levels, if at all.

- WE EXPECT TO INCUR SIGNIFICANT LOSSES FOR THE FORESEEABLE FUTURE

We have only recently recognized material revenues from services or advertising
and we have experienced net losses since inception. We expect to incur
significant losses on both a quarterly and an annual basis for the foreseeable
future. There can be no assurance that we will ever achieve profitability.

- WE WILL NEED SIGNIFICANT ADDITIONAL FINANCING TO SUPPORT OUR OPERATIONS AND
  ACQUIRE BUSINESSES

We will require substantial additional financing in order to be able to continue
operations beyond the third quarter of 2003, including the cash flow needs of
iAccele and to acquire businesses. Our major shareholder has indicated a
willingness to support the Company in its financing efforts. However, we have no

                                       29
<PAGE>

current definitive arrangements with respect to additional financing and there
can be no assurance that any such financing will be available to us on
commercially reasonable terms, or at all. Moreover, if we raise additional
capital through borrowing or other debt financing, we may incur substantial
interest expense. Sales of additional equity securities will result in
substantial pro rata dilution to our present stockholders. Our inability to
obtain additional financing will materially adversely affect us, including
possibly requiring us to significantly curtail operations or to cease operations
altogether. Technological stock in general have recently experienced significant
downturns on the financial markets, and the trend is expected to continue
indefinitely. Negative investor sentiment for technology stocks will adversely
affect our ability to secure additional financing.

- OUR COMMON STOCK COULD BE DELISTED FROM THE AMERICAN STOCK EXCHANGE ("AMEX")

The price and volume at which our stock has recently traded on the American
Stock Exchange does not meet its criteria for continued listing. Although the
AMEX has not officially communicated any intention to us to delist our stock, if
our stock were to be delisted, it would materially affect the ability of an
investor to dispose of their shares of our stock, and further reduce the
liquidity of their investment. In addition, delisting could affect the Company's
ability to obtain financing to support operations and acquisitions.

- WE ARE SUBJECT TO COMPETITIVE PRESSURES

While we are not aware of any organization that is providing the complete suite
of services under the same business model we are utilizing, in general, we face
competition from other providers of services to entities that provide Internet
data transmission acceleration service. Certain of our competitors may be able
to devote greater resources to marketing, adopt more aggressive pricing policies
and devote substantially more resources to developing their services and
products. We may be unable to compete successfully against current and future
competitors, and competitive pressures may have a material adverse effect on our
business. Further, as a strategic response to changes in the competitive
environment, we may from time to time make certain pricing, service or marketing
decisions or acquisitions that could have a material adverse effect on our
business, prospects, financial condition and results of operations.

In addition to the foregoing, some of our key customers or potential customers
might decide to build their own Internet data transmission acceleration service.
Although this has not been the industry trend over the past year, if this were
to happen, the Company might be adversely impacted thereby.

- WE ARE DEPENDENT ON A LIMITED NUMBER OF MAJOR CUSTOMERS AND A DECREASE IN
  ORDERS FROM ANY MAJOR CUSTOMER COULD DECREASE OUR REVENUES.

The Company's largest distributor is a VAR that accounted for 78% of accounts
receivable and deferred revenue for the six-month period ending June 30, 2003. A
second VAR accounted for a further 19% for the same six-month period. The
Company anticipates that significant distributor concentration will continue for
the foreseeable future.

There can be no assurance regarding the amount or timing of purchases by any
customer in any future period and business fluctuations affecting our customers
have affected and will continue to affect our business. Our success is dependent
upon our ability to broaden our customer base and to obtain orders from
additional original equipment manufacturers to increase our level of sales. None
of our customers has a written agreement with us that obligates them to purchase
additional products. If one or more of our major customers decide not to
purchase additional products or cancels orders previously placed, our net sales
could decrease, which could have a material adverse effect on our business,
financial condition and results of operations.

- WE WILL BE UNABLE TO ATTRACT VIEWERS TO OUR NETWORKS AND THEIR CHANNELS IF THE
  PUBLIC REJECTS STREAMING TECHNOLOGY

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<PAGE>

Our success will depend upon market acceptance of streaming technology as an
alternative to broadcast television. Without streaming technology, viewers would
not be able to initiate playback of our programming until such programming is
downloaded in its entirety, resulting in significant waiting times. The
acceptance of streaming technology will depend upon a number of factors,
including market acceptance of streaming players such as Microsoft's Windows
Media Player (TM), Real Networks' Real Player(TM), and Medium4.com Player,
technological improvements to the Internet infrastructure to allow for improved
video and audio quality and a reduction in Internet usage congestion. In
addition, Internet congestion may interrupt audio and video streams, resulting
in user dissatisfaction. Our prospects will be adversely affected if streaming
media technology fails to achieve or maintain broad acceptance.

- WE ARE DEPENDENT ON PROVIDERS OF BROADBAND AND HIGH SPEED INTERNET ACCESS

We rely on providers of broadband and high speed Internet access to facilitate
the viewing of our SLS channels. Because our Medium4.com Player, which is the
software used to play the SLS channels, can only play SLS channels using high
speed Internet access, without such access viewers would not be able to download
our SLS programming. If providers of broadband and high speed Internet access do
not sustain existing operations, or fail to maintain current access speeds, our
ability to provide streaming video will be adversely affected.

- WE MAY NOT BE ABLE TO PROTECT OUR PROPRIETARY RIGHTS

We regard our copyrights, trade secrets, trademarks, patents, and similar
intellectual property as significant to our growth and success. We rely upon a
combination of copyright and trademark laws, trade secret protection,
confidentiality and non-disclosure agreements and contractual provisions with
our employees and with third parties to establish and protect our proprietary
rights. We have applied for federal trademark protection for our networks and
other channels and brands and intend to apply for federal trademark protection
for other marks and names used in our business. Legal standards relating to the
validity, enforceability and scope of protection of certain proprietary rights
in Internet-related industries are uncertain and still evolving. We are unable
to assure investors as to the future viability or value of any of our
proprietary rights or those of other companies within the industry. We are also
unable to assure investors that the steps taken by us to protect our proprietary
rights will be adequate. Furthermore, we can give no assurance that our business
activities will not infringe upon the proprietary rights of others, or that
other parties will not assert infringement claims against us.

- GOVERNMENT REGULATION OF THE INTERNET COULD HARM OUR BUSINESS

There are few laws or regulations directly applicable to the Internet. For
example, the Digital Millennium Copyright Act, enacted into law in 1998,
protects certain qualifying online service providers from copyright infringement
liability, the Internet Tax Freedom Act, also enacted in 1998, placed a three
year moratorium on new state and local taxes on Internet access and commerce,
and under the Communications Decency Act, an Internet service provider will not
be treated as the publisher or speaker of any information provided by another
information content provider. The appeal of the Internet makes it likely,
however, that state, national or international laws may be implemented in the
future covering such issues as user privacy, defamatory speech, copyright
infringement, pricing and characteristics and quality of products and services.
Any new law or regulation may have the effect of limiting the use of the
Internet and its growth as a new medium to communicate could harm our business.

We currently do not collect sales or other taxes with respect to the sale of
services or products in states and countries where we believe we are not
required to do so. One or more states or countries have sought to impose sales
or other tax obligations on companies that engage in online commerce within
their jurisdictions. A successful assertion by one or more states or countries
that we should collect sales or other taxes on products and services, or remit
payment of sales or other taxes for prior periods, could adversely affect our
business.

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<PAGE>

The Child Online Protection Act of 1998 imposes criminal penalties and civil
liability on anyone engaged in the business of selling or transferring material
that is harmful to minors, by means of the Internet, without restricting access
to this type of material by underage persons. Numerous states have adopted or
are currently considering similar types of legislation. The imposition upon us
of potential liability for broadcasting content that is harmful to minors could
require us to implement measures to reduce exposure to liability, which may
require the expenditure of substantial resources, or to discontinue various
content offerings. Further, the costs of defending against any claims and
potential adverse outcomes of these claims could have a material adverse effect
on our business.

- WE ARE DEPENDENT ON CERTAIN THIRD PARTY PROVIDERS

Our future success depends upon our ability to aggregate and deliver compelling
content over the Internet. We rely exclusively on third party content providers,
such as television stations and networks, businesses and other organizations,
film producers and distributors, and record labels for compelling and
entertaining content. Our ability to maintain and build relationships with
content providers is critical to our success. Although many of our agreements
with third party content providers are for initial terms of more than one year,
such agreements may not be renewed or may be terminated prior to the expiration
of their terms if we do not fulfill our contractual obligations. Our inability
to secure licenses from content providers or the termination of a significant
number of content provider agreements would decrease the availability of content
that we can offer users. Such inability or termination may result in decreased
traffic on our websites and, as a result, decreased advertising revenue, which
could adversely affect our business.

We also rely on certain technologies we license from third parties. There can be
no assurance these third-party technology licenses will continue to be available
to us on commercially reasonable terms. The loss of such technology could
require us to obtain substitute technology of lower quality or performance
standards or at greater cost, which could harm our business. However, other than
our trademarks and service marks, we do not believe that the loss of any one of
our intellectual property rights would materially harm our business.

The Company assumed a license agreement for the non-exclusive use of certain
internet acceleration technology from InfoshowerX as part of the iAccele
acquisition. This technology forms the basis of the Company's only product
offering, and was originally licensed by InfoshowerX in July 2002. The license
agreement is renewable annually and requires fixed royalties in the amount of
approximately $13 per twelve month license sold during the period. The Company
must pay the royalties within twenty days after the Company has collected from
its customers. The Company has incurred approximately $180,000 under this
license agreement for the quarter ended June 30, 2003. There can be no assurance
this third-party technology licenses will continue to be available to us on
commercially reasonable terms. The loss of such technology could require us to
obtain substitute technology of lower quality or performance standards or at
greater cost, which could harm our business.

- THE COMPANY IS EXPOSED TO LEGAL CLAIMS

The Company has been, currently is, or in the future may be involved in legal
proceedings or claims. Such claims are detailed in Part 1, Item 3, Legal
Proceedings. Such claims, whether with or without merit, could be time-consuming
and expensive to defend and could divert management's time and attention. There
can be no guarantee that the Company will be successful in resolving such
claims.

- WE REVISED OUR BUSINESS PLAN

At the beginning of 2003, we revised our business plan to expand into other
areas of media entertainment and technology. We have shifted the revenue model
from broadband entertainment channels and revenues derived predominantly from
advertising, to a renewed focus on developing media technology products and

                                       32
<PAGE>

services, and on generating licensing revenues. To this end, we may develop such
media entertainment and technology products and services internally, or acquire
them from other parties.

- WE ARE DEPENDENT ON KEY PERSONNEL

Our success depends to a significant degree upon the continued contributions of
key management and other personnel, some of whom could be difficult to replace.
We do not maintain key man life insurance covering our officers. Our success
will depend on the performance of our officers, our ability to retain and
motivate our officers, our ability to integrate new officers into our operations
and the ability of all personnel to work together effectively as a team. Our
failure to retain and recruit officers and other key personnel could have a
material adverse effect on our business, financial condition and results of
operations.

- THE MARKET PRICE OF OUR COMMON STOCK MAY BE VOLATILE

The market price of our common stock has been and is likely in the future to be
highly volatile. Our common stock price may fluctuate significantly in response
to factors such as:

      -  Quarterly variations in our operating results,

      -  Announcements of technological innovations,

      -  New product introductions by us or our competitors,

      -  Competitive activities,

      -  Announcements by us regarding significant acquisitions, strategic
         relationships, capital expenditure commitments, liquidity and our AMEX
         listing,

      -  Additions or departures of key personnel,

      -  Issuance of convertible or equity securities for general or merger and
         acquisition purposes,

      -  Issuance of debt or convertible debt for general or merger and
         acquisition purposes,

      -  General market and economic conditions,

      -  Defending significant litigation, and

      -  Exchange gains and losses.

The stocks of technology companies have experienced extreme price and volume
fluctuations. These fluctuations often have been unrelated or disproportionate
to the operating performance of these companies. These broad market and industry
factors may have a material adverse effect on the market price of our common
stock, regardless of our actual operating performance. Factors like this could
have a material adverse effect on our business, financial condition and results
of operations.

- OUR PRINCIPAL STOCKHOLDER HAS SUBSTANTIAL INFLUENCE OVER OUR COMPANY

As of June 30, 2003,Inter Asset Japan LBO No. 1 Fund ("IAJ LBO Fund"), PBAA Fund
Ltd. ("PBAA"),Terra Firma Fund Ltd. ("Terra Firma") and Inter Asset Japan Co.
Ltd. ("IAJ") collectively hold approximately 82.6% of our common stock. Such
entities stated in a Schedule 13D that they may be deemed to constitute a
"group" for the purposes of Rule 13d-3 under the Exchange Act. Mr. Margerison,
one of our Directors, and our President and Chief Executive Officer, currently
serves as the President of IAJ, a Japanese venture capital company.

                                       33
<PAGE>

IAJ has the ability to cause a change of control of the board of directors of
the Company by electing candidates of its choice to the board at a stockholder
meeting, and approve or disapprove any matter requiring stockholder approval,
regardless of how our other stockholders may vote. Further, under Delaware law,
IAJ has significant influence over our affairs, including the power to cause,
delay or prevent a change in control or sale of the Company, which in turn could
adversely affect the market price of our common stock.

- THE SALE OF A SIGNIFICANT NUMBER OF OUR SHARES COULD DEPRESS THE PRICE OF OUR
  STOCK.

Sales or issuances of a large number of shares of common stock in the public
market or the perception that sales may occur could cause the market price of
our common stock to decline. As of June 30, 2003, 65.1 million shares of common
stock were outstanding. Significant shares were held by our principal
stockholder and other company insiders. As an "affiliate" (as defined under Rule
144 of the Securities Act ("Rule 144") of the Company, they may only sell their
shares of common stock in the public market in compliance with the volume
limitations of Rule 144.

- WE MAY ENGAGE IN ACQUISITIONS, MERGERS, STRATEGIC ALLIANCES, JOINT VENTURES
  AND DIVESTITURES THAT COULD RESULT IN FINANCIAL RESULTS THAT ARE DIFFERENT
  THAN EXPECTED.

In the normal course of business, we may engage in discussions relating to
possible acquisitions, mergers, strategic alliances, joint ventures and
divestitures. As part of our business strategy, we completed one acquisition
during early 2003 and one acquisition in August, 2003 and invested in a joint
venture in July, 2003. Such transactions are accompanied by a number of risks,
including:

      -  Use of significant amounts of cash,

      -  Potentially dilutive issuances of equity securities on potentially
         unfavorable terms,

      -  Incurrence of debt on potentially unfavorable terms as well as
         amortization expenses related to goodwill and other intangible assets,
         and

      -  The possibility that we may pay too much cash or issue too much of our
         stock as the purchase price for an acquisition relative to the economic
         benefits that we ultimately derive from such acquisition.

The process of integrating any acquisition may create unforeseen operating
difficulties and expenditures and is itself risky. The areas where we may face
difficulties include:

      -  Diversion of management time (at both companies) during the period of
         negotiation through closing and further diversion of such time after
         closing from focus on operating the businesses to issues of integration
         and future products,

      -  Decline in employee morale and retention issues resulting from changes
         in compensation, reporting relationships, future prospects or the
         direction of the business,

      -  The need to integrate each company's accounting, management
         information, human resource and other administrative systems to permit
         effective management, and the lack of control if such integration is
         delayed or not implemented,

      -  The need to implement controls, procedures and policies appropriate for
         a larger public company at companies that prior to acquisition had been
         smaller, private companies,

                                       34
<PAGE>

      -  The need to incorporate acquired technology, content or rights into our
         products and unanticipated expenses related to such integration, and

      -  The need to successfully develop an acquired in-process technology to
         achieve the value currently capitalized as intangible assets.

From time to time, we have also engaged in discussions with candidates regarding
the potential acquisitions of our product lines, technologies and businesses. If
such divestiture does occur, we cannot be certain that our business, operating
results and financial condition will not be materially and adversely affected. A
successful divestiture depends on various factors, including our ability to:

      -  Effectively transfer liabilities, contracts, facilities and employees
         to the purchaser,

      -  Identify and separate the intellectual property to be divested from the
         intellectual property that we wish to keep, and

      -  Reduce fixed costs previously associated with the divested assets or
         business.

In addition, if customers of the divested business do not receive the same level
of service from the new owners, this may adversely affect our other businesses
to the extent that these customers also purchase other products offered by the
Company. All of these efforts require varying levels of management resources,
which may divert our attention from other business operations. Further, if
market conditions or other factors lead us to change our strategic direction, we
may not realize the expected value from such transactions.

If we do not realize the expected benefits or synergies of such transactions,
our consolidated financial position, results of operations, cash flows and stock
price could be negatively impacted.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency

The Company is exposed to foreign currency risks due to the acquisition of
iAccele on February 10, 2003. This acquisition was financed by a 100.0 million
Japanese Yen loan, or approximately $830,000 based on the Japanese Yen/US dollar
exchange rate on that date.

In addition, during the quarter ended June 30, 2003, iAccele borrowed 52,500,000
Yen, or approximately $454,000, from IAJ. This financing was made in four
separate advances. These advances bear interest at rates ranging from 3.5% to
6.7% per annum. These advances matured during the following dates: 5,500,000 Yen
or approximately $45,000 on July 25, 2003, 7,000,000 Yen, or approximately
$62,000, on July 27, 2003, 10,000,000 Yen, or approximately $89,000, on August
1, 2003 and 30,000,000 Yen, or approximately $258,000, on December 1, 2003. The
Company repaid 18,500,000 Yen, or approximately $160,000, on July 25, 2003. The
remaining 4,000,000 Yen, which was due on August 1, 2003, was deferred with a
new note until the end of 2003. Therefore, the total outstanding amount to IAJ
due in December, 2003 and bearing interest at 3.5% per annum is 34,000,000 Yen,
or approximately $290,000.

The company does not trade in hedging instruments or "other than trading"
instruments and we are exposed to foreign currency exchange risks.

Interest Rate Risk

The Company is exposed to interest rate risk due to the loan payable-related
party of approximately $1,289,000 as of June 30, 203. The Company does not trade
in hedging instruments or "other than trading" instruments and is exposed to
interest rate risks. We believe that the impact of a 10% increase or decline in
interest rates would not be material to our financial condition and results of
operations.

                                       35
<PAGE>

ITEM 4.  CONTROLS AND PROCEDURES

Our principal executive officer and principal financial officer evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2003. Based on
this evaluation, our principal executive officer and principal financial officer
concluded that, as of June 30, 2003, our disclosure controls and procedures were
effective in ensuring that (1) information to be disclosed in reports we file
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified by the rules and forms promulgated under the Exchange
Act and (2) information required to be disclosed in reports filed under the
Exchange Act is accumulated and communicated to the principal executive officer
and principal financial officer as appropriate to allow timely decisions
regarding required disclosure. There were no changes in the Company's internal
control over financial reporting that occurred during the Company's last fiscal
quarter that have materially affected or are reasonably likely to materially
affect, the Company's internal control over financial reporting.


                           PART II--OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         Not Applicable


ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         In April 2003, the board of directors voted to amend the conversion
price for the 1,678,433 warrants outstanding from the original IPO from an
exercise price of $9.00 per share to $3.50 per share.

         On June 15, 2003, the Company granted 4,975,000 stock options with an
exercise price of $.20 per share, which was the market price at the grant date.
Four million five hundred thousand of the stock options were issued to the
directors and officers, which vest over three years. Four hundred and
seventy-five thousand options are performance based stock options. As of June
30, 2003, none of the performance based stock options were earned. The term of
these 4,975,000 stock options granted are for a term of ten years.

         On June 30, 2003, we agreed to sell to PBAA, 13,333,333 shares of our
common stock at an average price of $0.15 per share, for a total of $2.0
million, representing an approximate 25% discount to the trailing five-day
average closing price of our common stock ending June 15, 2003, the date PBAA
Fund made its investment commitment. As PBAA Fund's purchase price per share was
at a discount to market, our stockholders will be asked to ratify and approve
this transaction, as required by the applicable rules of the American Stock
Exchange at the our forthcoming 2003 annual meeting of stockholders.

         On June 30, 2003, IAJ LBO Fund converted the principal amount of the
Convertible Promissory Note, as well as approximately $95,000 of accrued
interest thereon, into 1,158 shares of our Series B convertible preferred stock.
The 1,158 shares of Preferred Stock are convertible into 11,580,000 shares of
Common Stock, subject to approval by the Company's shareholders of an amendment
to the Company's Certificate of Incorporation increasing its authorized common
stock to at least 100,000,000 shares.

                                       36
<PAGE>

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not Applicable

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

         Not Applicable

ITEM 5.  OTHER INFORMATION

         Not Applicable

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         (a) EXHIBITS

         10.1     Share Purchase Agreement, dated as of August 5, 2003, between
                  IA Global, Inc. and Cyber Holdings Co., Ltd.

         10.2     Indemnification Agreement, dated as of August 5, 2003, among
                  IA Global, Inc., Cyber Holdings Co., Ltd. and Fan Club
                  Entertainment Co., Ltd.

         10.3     Certificate of Officers, dated as of August 5, 2003, among IA
                  Global, Inc., Cyber Holdings Co., Ltd. and Fan Club
                  Entertainment Co., Ltd.

         10.4     Subcontract Agreement, dated July 28, 2003, between Cyberbred
                  Co., Ltd. and Fan Club Entertainment Co., Ltd.

         10.5     Letter of Intent, dated July 31, 2003, between IA Global, Inc.
                  and London Wall Investments Pty Ltd.

         10.6     Notice of Conversion of Promissory Note, dated June 30, 2003,
                  between IA Global, Inc. and Inter Asset Japan Co. Ltd.

         10.7     Subscription Agreement, dated June 30, 2003, between IA
                  Global, Inc. and PBAA Fund Ltd.

         10.8     Amendment to Employment Agreement, dated May 21, 2003, between
                  IA Global, Inc. and Satoru Hirai.

         31.1     Section 302 Certifications

         31.2     Section 302 Certifications

         31.3     Section 302 Certifications

         32.1     Section 906 Certifications

         32.2     Section 906 Certifications

         32.3     Section 906 Certifications

                                       37
<PAGE>

         (b) REPORTS OF FORM 8-K

         During the quarter ended June 30, 2003, we filed or submitted the
following current reports on Form 8-K with the Securities and Exchange
Commission:

         Current report on Form 8-K, dated April 14, 2003, was filed on April
15, 2003. The item reported was:

      o  Item 9 - Regulation FD Disclosure, which furnished the Section 906
         certification that accompanied our quarterly report on Form 10-Q for
         the quarter ended March 31, 2003.

         An amendment to the current report on Form 8-K, dated February 25,
2003, was filed on May 16, 2003. The item reported was:

      o  Item 7 - Financial Statements and Exhibits, which filed (i) the balance
         sheet of I-accele Corp. as of December 31, 2002 and the related
         statements of operations, stockholder's deficiency and cash flows for
         the period from July 19, 2002 (inception) through December 31, 2002,
         expressed in Japanese yen and (ii) the pro forma financial information
         of IA Global, Inc. as of December 31, 200 and for the year ended
         December 31, 2002.

         Current report on Form 8-K, dated May 20, 2003, was filed on May 20,
2003. The item reported was:

      o  Item 9 - Regulation FD Disclosure, which furnished the Section 906
         certification that accompanied our quarterly report on Form 10-Q for
         the quarter ended March 31, 2003.

         Current report on Form 8-K, dated July 7, 2003, was filed on July 10,
2003. The items reported were:

      o  Item 5 - Other Events and Required FD Disclosure, which reported the
         issuance of a press release announcing that (a) The PBAA Fund Ltd., our
         majority shareholder, had invested an additional $2.0 million into our
         company and (b) in a contemporaneous transaction, approximately $1.16
         million of outstanding convertible debt had been exchanged for Series B
         preferred stock at the predetermined conversion price.

      o  Item 7 - Financial Statements and Exhibits, which identified the
         exhibit filed with the Form 8-K.

                                       38
<PAGE>
                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.


                                       IA GLOBAL, INC.
                                       (Registrant)


Date:  February 3, 2004                By: /s/ Alan Margerison
                                           Alan Margerison,
                                           President and Chief Executive Officer
                                           (Principal Executive Officer)


Date:  February 3, 2004                By: /s/ Mark E. Scott
                                           Mark E. Scott
                                           Chief Financial Officer
                                           (Principal Financial Officer and
                                           Principal Accounting Officer)


                                       39