UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB

       FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

[X]   ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES  EXCHANGE
      ACT OF 1934 FOR THE FISCAL YEAR ENDED JULY 31, 2003

[     ]  Transition  report  pursuant  to section 13 or 15(d) of the  Securities
      Exchange  Act of  1934  for  the  transition  period  from  __________  to
      ___________

                        COMMISSION FILE NUMBER 000-30151

                              PROGINET CORPORATION

   (Exact name of small business issuer as specified in its charter)

<TABLE>
<CAPTION>
                Delaware                                                11-3264929
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<S>                                                                 <C>
(State or other jurisdiction of incorporation or organization)       (I.R.S.  employer
                                                                     identification no.)

200 Garden City Plaza, Garden City, New York                               11530
--------------------------------------------                               -----
 (Address of principal executive offices)                                (Zip Code)

Issuer's telephone number, including area code  (516) 535-3600
                                                --------------

Securities registered pursuant to Section 12(b) of the Exchange Act:   None
                                                                       ----

Securities registered pursuant to Section 12(g) of the Exchange Act:   Common Stock
                                                                       ------------
</TABLE>

                               Title of each class
                               -------------------

Indicate by check mark whether the issuer: (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 issuer 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 if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-B is not contained  herein,  and will not be contained,  to the
best of  issuer's  knowledge,  in  definitive  proxy or  information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB._ X__

Issuer's revenues for its most recent fiscal year $5,386,921.

The  aggregate  market value of the voting stock (based on the closing  price of
such stock on the OTC Bulletin Board) held by non-affiliates of the issuer as of
August 15, 2003 was approximately $3,549,975.  All officers and directors of the
issuer have been deemed, solely for the purpose of the foregoing calculation, to
be "affiliates" of the issuer.

There were 13,148,054 shares of Common Stock outstanding at August 15, 2003.

Documents  Incorporated  by  Reference  - Proxy  Statement  for the 2003  Annual
     Meeting of  Stockholders-  incorporated  by reference into Part III of this
     Form 10-KSB.

Transitional Small Business Disclosure Format:

Yes     No  X
    ---    ---
<PAGE>

                                TABLE OF CONTENTS

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<CAPTION>
                                                                                                               Page
                                                                                                               ----
                                     PART I

<S>                                                                                                              <C>
Item 1.      Description of Business..............................................................................1

Item 2.      Description of Property..............................................................................6

Item 3.      Legal Proceedings....................................................................................6

Item 4.      Submission of Matters to a Vote of Security Holders..................................................6

                                     PART II

Item 5.      Market for Common Equity and Related Stockholder Matters.............................................7

Item 6.      Management's Discussion and Analysis or Plan of Operation............................................8

Item 7.      Financial Statements................................................................................13

Item 8.      Changes in and Disagreements With Accountants on Accounting and Financial Disclosure................32

Item 8A.     Controls and Procedures.............................................................................32


                                    PART III

Item 9.      Directors, Executive Officers, Promoters and Control Persons, Compliance with Section 16 (a) of the
             Exchange Act. ......................................................................................33

Item 10.     Executive Compensation..............................................................................33

Item 11.     Security Ownership of Certain Beneficial Owners and Management......................................33

Item 12.     Certain Relationships and Related Transactions......................................................33

Item 13.     Exhibits and Reports on Form 8-K....................................................................34

             Signatures..........................................................................................35
</TABLE>


                                       i
<PAGE>
                                     PART I

ITEM 1.       DESCRIPTION OF BUSINESS

Proginet  Corporation  ("Proginet"  or "the  Company")  is a  global  enterprise
software  company.   Proginet's   software  solutions  allow  our  customers  to
effectively and securely  manage their security  passwords and data within their
information  technology  (IT) systems,  which span most business  sectors of the
economy.  The Company's  products can be used on all major  hardware  platforms,
operating  systems  and  application  development  environments  for  enterprise
computing. The Company maintains a philosophy of internally developing products,
coupled with the acquisition of key technology,  the integration of the two, and
the  establishment  of a network  of  strategic  alliances  with key  technology
partners.  The Company  sells its products in the U.S.  through its direct sales
force and  internationally  through  distributors.  The  Company  also sells its
products through Original  Equipment  Manufacturer  (OEM) partners in the United
States, Europe, South America, Asia and Australia. The Company's stock is traded
on the OTC Bulletin Board under the symbol PRGF.

GENERAL DEVELOPMENT OF THE BUSINESS

Proginet was incorporated in New York in 1985 as The Teleprocessing  Connection,
Inc (TCI) and changed its name in 1990 to Proginet Corp. In 1995, Proginet Corp.
merged with a Delaware corporation and became Proginet Corporation.

PRODUCTS

The  following  is a  brief  description  of the  principal  products  currently
marketed by Proginet.  Proginet  has  designed its products  with an emphasis on
security,  reliability, ease of deployment and use, and strong ROI's. Proginet's
goal is to protect its customers'  investments in numerous  networking  hardware
and  software,  and  to  provide  its  customers  with  flexibility  for  future
investments in standards based technology and Internet technology.

Proginet's  enterprise  file  transfer  technology  allows  users to send  their
information over internal networks and the Internet, confident that no one other
than the  intended  recipient  can read or receive the  information.  Proginet's
information  movement  software is  currently  being used by some of the largest
corporations in the world.  Proginet offers seven software  solutions for moving
information between computers.  The Secure Internet File Transfer product (SIFT)
was  introduced  to the  market in July 2003,  as  standards  based web  service
technology  to  address  the B2B  data  transfer  requirements  of  hundreds  of
thousands of companies.  Thus, SIFT is designed  specifically  for Internet file
transfer and the other six are designed for internal network file transfers.

Proginet  currently  offers the following  products in the information  movement
space:

      o     SIFT,  or Secure  Internet  File  Transfer,  is a Web  Service  that
            provides  connectivity  with business  partners or consumers needing
            secure file data exchange over the Internet using open protocols. As
            a web service,  SIFT supports HTTPS,  SOAP,  UDDI, WSDL, and Struts.
            For encryption,  SIFT supports SSL, AES and DES. For  authentication
            and  non-repudiation,  SIFT supports X509 Digital  Certificates  and
            hacking

      o     CyberFusion provides secure reliable information movement across the
            large enterprise  internal  networks.  This product includes some of
            the  strongest  encryption  available  including  DES,  Triple  DES,
            Blowfish and Blowfish Long,  along with extensive  features to allow
            for the automation of information movement needs.

      o     Fusion FTMS manages  high-speed file transfers between OS/390 hosts,
            LAN servers, and desktops, throughout an enterprise environment.

      o     TransAccess   is  a  data  access  and   middleware   solution   for
            cross-platform data retrieval,  update, and transaction  processing.
            TransAccess enables enterprise-wide  distributed applications across
            an extensive range of computing platforms.

      o     Network  Navigator  is a  batch  file  transfer  capability  between
            client/server and MVS environments.


                                       1
<PAGE>

      o     Proginet also provides a version of IND$FILE,  called IND$FILE Plus.
            While the Time  Sharing  Option (TSO)  version of IND$FILE,  sold by
            IBM, is already the industry  standard for exchanging  files between
            personal  computers  and  IBM  mainframes,  Proginet's  VTAM - based
            IND$FILE Plus provides added value and security to all IBM mainframe
            users.

      o     TCS(TM) is a peer-to-peer file transfer solution for the enterprise.
            TCS  allows  end users and  Information  Technology  staff to easily
            transfer,  access,  and manage  data across an  enterprise  network,
            regardless of location,  file type or protocol. TCS file transfer is
            flexible,   secure,  centrally  managed  and  scalable,  and  offers
            complete platform  protocol and Application  Program Interface (API)
            support for MVS,  OS/2,  Netware,  UNIX and all versions of Windows.
            For those  customers  who do not  require the fully  automated  file
            transfer   capabilities   of   CyberFusion,   TCS  is  an  excellent
            alternative, at a lower price point.

Proginet's  password  management  technology  addresses the problem of "too many
passwords"  that  affects   individual  users  from  small  to  large  corporate
enterprises.  Individual  users may have many  passwords to access the different
systems in a typical  environment.  Often they resort to writing  passwords on a
"Post-It". Such practices cause enterprises to have an exposure when users write
the  password  down or choose  simple  passwords  that are  easier to  remember.
Another  consequence  develops when users create complex  passwords for improved
security and then forget their passwords, creating a significant burden for help
desk personnel.

SecurPass,  with its password  synchronization  technology,  password management
features,   and  extendable   application  program  interfaces  (APIs),   allows
enterprises  to gain control over users'  passwords.  By utilizing  the password
management and password  synchronization  technology in SecurPass, a company can
specify the rules for creating a password,  and have those rules  enforced among
all  of the  security  systems  throughout  the  company.  The  capabilities  in
SecurPass allow a user to specify one password, and have that password allow the
user to gain  access to all of the  systems  needed.  When a password  is reset,
SecurPass  propagates the password  change  throughout the environment to ensure
that all passwords are secure and in-sync.

In 2003,  Proginet  introduced  a new version of the  SecurPass  Reset  product,
providing improved performance capabilities. These improvements reduce both cost
and time delay in accessing systems.

Proginet  believes that enterprises can simplify and consolidate  their security
administration  functions  using  SecurPass  Sync and Reset,  as a first step to
regaining and keeping control over their information technology environments.

STRATEGY

Proginet's strategy continues to be to develop market relevant security software
applications  that are standards based  technology  applications for information
movement and password management.  Proginet implements its strategy by investing
in a highly qualified and motivated research and development team, that produces
and  brings  to market  unique  and  creative  products  geared to the  security
software  requirements of large, medium and most recently small enterprises with
the  introduction  of our SIFT product.  Such technology  includes  security and
management features to assure secure access to systems and reliable transfers.

Proginet is a  significant  vendor  providing  secure  enterprise  file transfer
software to the Financial Services and Healthcare Industries worldwide and other
enterprises, which benefit from our technologies. Proginet's technology provides
comprehensive  features and  capabilities  to assure  compliance  with all laws,
regulations  and standards  appropriate  for these  industries - generating cost
effective,  efficient,  scalable,  reliable and secure  infrastructure  to move,
manage, protect and secure these enterprises' most important asset - their data.

The driving  force behind  Proginet's  strategy is the absolute  dedication  and
commitment  to  fully  utilize  Proginet's  expertise,   background,   and  core
competencies  in the  critical  area of security  related to data  movement  and
control.  These competencies resulted in Proginet's  development of the Security
and Information Exchange  Architecture for the Global Enterprise (SIEA) Model in
2002.  This model is one of the most  comprehensive  data  movement and security

                                       2
<PAGE>

models ever introduced in the software industry - in the instant access world of
the Internet.  In 2003, the Company  continued the  implementation of this model
with the introduction of SIFT, the next major component of the SIEA strategy.

The SIEA model  offers a  technology  "road map" and  provides a master  control
system  for data with a "Data  Wall" of  protection  to secure and  protect  the
access to and movement of enterprise data - anywhere,  anytime and anyhow - with
industry standards for compliance and control.

Proginet's  roadmap  provides  a  logical  and  orderly  migration  path  -  and
evolutionary approach - to building and managing a total infrastructure for data
movement.  The roadmap  also  defines the  deployment  strategies  and phases of
deployment required to achieve a secure data integration environment.

The  SIEA  Model   capitalizes  on  Proginet's   position  as,  a  multi-vendor,
multi-protocol,   multi-standards  software  innovator.  Proginet  provides  the
standardized  integration of disparate  architectures,  to empower large complex
enterprises  to  seamlessly  integrate  their myriad of computing  platforms and
applications for a totally open and standards based  infrastructure.  The global
enterprise  must have a  standard  infrastructure  that can be  modified  and/or
changed as its business  requirements  evolve and change.  The  constraints  and
restrictions  of the old  "legacy"  approach or the  "uncontrolled"  distributed
approach will not suffice in today's, anytime, anywhere, anyway environment.

Since the advent of the mini-computer,  where  organizations  began distributing
their data processing and their data, the enterprise model has become incredibly
more complex.  Security,  data  integrity,  reliability,  scalability,  disaster
recovery,  and so many other issues have made it increasingly more difficult for
organizations to keep up with their customer demands and regulatory obligations.
Achieving a reasonable  profitability  and return on  investments is a much more
difficult challenge.

Proginet's  SIEA  Model  addresses  all of the major  requirements  of the large
global  enterprises  which  have  worldwide-distributed  information  processing
configurations  and with the  introduction  of SIFT the Company's  technology is
deployable  and beneficial for  dramatically  expanded  marketplace of small and
medium  companies as well. The SIEA Model provides for major  functionality  for
data  movement and  security  through  Proginet  software.  Proginet's  software
architecture also provides for standards  compliance and deployment and provides
for full integration to the extensive  software tools and applications  deployed
or to be  deployed  throughout  the  global  enterprises.  The SIEA  Model as it
continues to be developed is a superior solution for all size enterprises.

SALES AND MARKETING

Proginet's sales strategy is comprised of four sales models: direct sales in the
U.S.; indirect sales in the U.S. through  distributors;  indirect  international
sales through  distribution  partners in over 30 countries around the world; and
alliances  with  partners  who  integrate   Proginet's   technology  with  their
technology  and  sell the  combined  product(s).  This  last  model is  commonly
referred to as OEM.

The direct sales model includes a direct telemarketing and sales force comprised
of Proginet employees. The direct sales model covers the entire sales cycle from
lead generation through trial evaluation  process,  typically 60 to 150 days, to
the  signing  of a  software  license  agreement.  Proginet  estimates  that the
"typical" sales cycle averages about 120 days and Proginet closes  approximately
two-thirds  of trials  started.  The indirect  U.S.  sales model is built on the
premise that business  connections and knowledge in various vertical markets can
be beneficial in establishing business relationships and closing sales faster in
instances  where  Proginet  did not  have a  presence.  Therefore,  Proginet  is
continuing to extend the indirect channels program used  internationally  to the
U.S. domestic sales process.

The indirect international sales model is built on the premise that presence and
knowledge  in local  markets is  paramount to  establishing  necessary  business
relationships  and  closing  sales.  Therefore,   distributor  partnerships  are
established  in local  markets  (countries)  and  Proginet  commits  significant
resources to train and support  distributors to sell Proginet  software in their
countries.  The  distributors'  role is to act as agents,  make the  marketplace
aware of Proginet's  technology  and explain how the  technology  can be used in
their business environments.  Proginet supports the distributors with authorized
assistance and support,  customer installations and training whenever necessary.
Distributors are typically  compensated at a commission rate of 25% to 50% based
upon their level of effort, resources assigned, and commitment to closing sales.

                                       3
<PAGE>

The OEM sales model is based on the ability of an outside  software company with
complementary  technology to sell,  install and support  Proginet's  technology.
These  OEMs  incorporate  Proginet's  technology  to provide  services  to other
customers.  The OEM  arrangements  include a  commission  structure  similar  to
distributors  and also include  specific fixed pricing for the number of "users"
the product is licensed for.

All of Proginet's  sales are dependent on visibility in the  marketplace and the
market's  acceptance of Proginet's  products.  As such, the  relationships  with
technology partners such as IBM, Microsoft,  HP and others,  which give Proginet
visibility on their  websites,  continue to benefit both the direct and indirect
sales  model.  In both  models,  while there is no  contractual  obligation  for
website coverage,  this visibility  provides leads and references to prospective
customers who could benefit from Proginet's  products and their integration into
our partner's technology.  The Company, however, does not maintain statistics on
the amount of revenues attributable to such leads.

Proginet's marketing strategy is centered on communicating the Company's product
solutions  to the  marketplace.  It is  focused  in  three  primary  categories:
targeted vertical marketing, product management and marketing communications.

Targeted  vertical   marketing   identifies   specific  vertical  markets  where
Proginet's  products  are most  beneficial  to  create  the  greatest  number of
opportunities  and then  develops  positioning,  programs and materials to reach
these customers and support sales activities.

Product  management's  function is to translate  customer  requirements,  market
requirements and competitive differentiators into product development plans, and
to work with the development team through product completion. Product management
is also  responsible  for  training  the  Company  on  product  information  and
strategy.

Marketing  communications  is a  comprehensive  program  to  deliver  Proginet's
message to identified  audiences.  These methods  include trade press  coverage,
trade show attendance,  industry conference  participation,  developing industry
analyst  relationships,  targeted direct mail campaigns and through our internet
website.  Our website is an important part of our sales lead generation program,
and as such,  we  continue  to invest  in  improving  our  website  content  and
promoting the website in search engines and paid online advertising.

CUSTOMERS

Proginet has  established  a worldwide  user base of more than 600  companies in
over 30  countries  engaged in the  financial,  telecommunications,  healthcare,
government,  and other industry sectors. No one customer represented 10% or more
of Proginet's revenues during the past two fiscal years.

SUPPLIERS

Proginet  is not reliant on any  particular  supplier  for any of its  operating
needs. Any products required can be purchased from a number of sources.

EMPLOYEES

As of July 31,  2003,  Proginet had 39 full-time  salaried  employees  and three
consultants on retainer.  The Company  believes its relations with its employees
are satisfactory.

COMPETITION

The enterprise  management software business is highly competitive.  Many of our
competitors including IBM, Computer Associates,  Sterling Commerce and Valicert,
as well as  large  computer  manufacturers  such  as Sun  and  HP,  have  longer
operating  histories,  larger  customer  bases,  greater brand  recognition  and
significantly greater financial,  marketing and other resources.  Certain of our
competitors may devote greater resources to marketing and promotional campaigns,
adopt more aggressive  pricing policies and devote  substantially more resources
to web  site  and  systems  development.  If our  competitors  are able to offer
products  and  services  on more  favorable  terms,  we may  experience  reduced
operating  margins,  loss of market share and a diminished brand  franchise.  We
cannot  assure you that we will  compete  successfully  against  our current and
future competitors. Competitive pressures created by any one of our competitors,
or by our competitors collectively,  could have a material adverse effect on our
business, prospects, financial condition and results of operations.


                                       4
<PAGE>

We believe  that the key criteria  considered  by  potential  purchasers  of our
products are as follows: the operational advantages and cost savings provided by
our products;  product  quality and  capability;  product price and the terms on
which the product is  licensed;  ease of  integration  of the  product  with the
purchaser's  existing systems;  ease of product installation and use; quality of
support and product documentation; and the experience and financial stability of
our company.

GOVERNMENT REGULATION

Proginet has received  authorization from the United States Commerce  Department
to export strong  encryption that will ensure the security of critical  business
information   transferred   worldwide   via  the   Internet.   Other  than  this
authorization, the Company is not subject to direct regulation by any government
agency, other than regulations applicable to businesses in general.

INTELLECTUAL PROPERTY

Proginet  does not possess any  patents.  Proginet  relies on a  combination  of
trademark,  copyright and trade secret laws to protect its  proprietary  rights.
Proginet has registered the trademarks IND$File, TCS, CyberFusion, SecurPass and
TransAccess in the United States. These trademarks are considered significant in
the protection of the Company's technology. The Company believes that its source
code and its  product  designs  are best  protected  by the  Company's  Employee
Confidential  Information and Non-Competition  Agreements entered into with each
of its employees.  In addition,  Proginet owns most of the Internet domain names
for its products.

RESEARCH AND DEVELOPMENT ACTIVITIES

During the years  ended July 31,  2003 and 2002,  Proginet  spent  $151,284  and
$246,968, respectively, on research and development activities.


                                       5
<PAGE>

ITEM 2.       DESCRIPTION OF PROPERTY

Proginet  maintains its headquarters at 200 Garden City Plaza,  Garden City, New
York, 11530 where a all employees are located. This lease expires January 2006.


ITEM 3.       LEGAL PROCEEDINGS

The  Company is  involved in various  claims and legal  actions in the  ordinary
course of  business.  It is the opinion of  Management  that the outcome of such
litigation  will not have a material  adverse effect on the Company's  financial
condition and results of operations.

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

None.


                                       6
<PAGE>

                                     PART II

ITEM 5.       MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

In September 2000, Proginet common stock began trading on the OTC Bulletin Board
("OTC-BB") under the symbol PRGF.

Proginet's  common  stock was also  listed  on the TSX  Venture  Exchange  ("TSX
Venture"),  under the symbol PRF.U, until the Company voluntarily  delisted from
the TSX Venture on April 1, 2003.

The following table shows the high and low bid information,  in U.S. dollars, of
Proginet's  common  stock on the  OTC-BB  for each  quarter  within the last two
fiscal years:

        Quarter Ended                      High        Low
        -------------                      ----        ---
        July 31, 2003                      $0.42       $0.20
        April 30, 2003                     $0.24       $0.12
        January 31, 2003                   $0.30       $0.11
        October 31, 2002                   $0.25       $0.11
        July 31, 2002                      $0.36       $0.13
        April 30, 2002                     $0.40       $0.22
        January 31, 2002                   $0.43       $0.22
        October 31, 2001                   $0.48       $0.14

The following table shows the high and low bid information,  in U.S. dollars, of
Proginet's common stock on the TSX Venture for each quarter for fiscal year 2001
and for the period from August 1, 2002  through  April 1, 2003 (when the Company
voluntarily delisted from the TSX Venture).

        Quarter Ended                       High        Low
        -------------                       ----        ---
        July 31, 2003                       $ -         $ -
        April 30, 2003                      $0.24       $0.15
        January 31, 2003                    $0.24       $0.15
        October 31, 2002                    $0.31       $0.13
        July 31, 2002                       $0.29       $0.11
        April 30, 2002                      $0.55       $0.20
        January 31, 2002                    $0.45       $0.25
        October 31, 2001                    $0.30       $0.11

Proginet's stock is held by approximately three hundred holders of record.

DIVIDENDS

Proginet has not paid dividends and does not anticipate  paying dividends in the
foreseeable  future. The Board of Directors intends to retain earnings,  if any,
to finance  growth.  Accordingly,  any payment of  dividends  by Proginet in the
future will depend upon the need for working capital and the financial condition
of the Company at the time.


                                       7
<PAGE>

ITEM 6.       MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

GENERAL

You should read the  following  discussion  in  conjunction  with our  financial
statements and the notes thereto included  elsewhere  herein.  All statements in
this Form 10-KSB related to Proginet's ongoing financial operations and expected
future results  constitute  forward-looking  statements.  The actual results may
differ materially from those anticipated or expressed in such statements.

USE OF ESTIMATES AND CRITICAL ACCOUNTING POLICIES

 In preparing our  financial  statements,  we make  estimates,  assumptions  and
judgments  that can have a  significant  impact  on our  revenues,  income  from
operations,  and net  income,  as well as on the value of certain  assets on our
balance sheet.  We believe that there are several  accounting  policies that are
critical to an understanding of our historical and future performance,  as these
policies  affect the reported  amounts of revenues,  expenses,  and  significant
estimates  and  judgments  applied by  management.  While  there are a number of
accounting policies,  methods and estimates affecting our financial  statements,
areas  that  are  particularly   significant  include  revenue  recognition  and
capitalized  software  development costs. These policies are described in detail
below.  In  addition,  please  refer  to  Note 1 to the  accompanying  financial
statements for further discussion of our accounting policies.

In  addition  to the  estimates  and  assumptions  that  we use to  prepare  our
historical  financial  statements,  we monitor  our sales  pipeline  in order to
estimate the timing and amount of future revenues.  If we are unable to properly
estimate  the timing  and amount of  revenues,  our future  operations  could be
significantly  impacted.  Our  sales  pipeline  may not  consistently  relate to
revenues in a  particular  period,  as the data upon which the  assumptions  and
estimates were made by management may change. For example,  the current economic
slowdown has resulted in reduced information technology spending that has caused
customers  to delay and  reduce  purchasing  decisions.  Accordingly,  it may be
harder to close  contracts  with  customers,  the size of the  transactions  may
decrease,  and many of our license  contracts  are pushed to the very end of the
quarter,  making it difficult for us to forecast  revenues for the quarter,  and
adjust  spending to respond to variations in revenue  growth during the quarter,
all of which may adversely affect our business,  financial condition and results
of operations.

REVENUE RECOGNITION

We recognize  revenue in accordance  with  Statement of Position,  or SOP, 97-2,
"Software  Revenue  Recognition,"  and  SOP  98-9,  "Modification  of SOP  97-2,
Software  Revenue  Recognition,   with  Respect  to  Certain  Transactions."  We
recognize  license  revenues  when  all  of  the  following  criteria  are  met:
persuasive  evidence of an arrangement exists, the fee is fixed or determinable,
collectibility  is  probable,  delivery  of the  product  has  occurred  and the
customer has accepted the product  (including  the  expiration  of an acceptance
period) if the terms of the  contract  include  an  acceptance  requirement.  In
instances when any of the criteria are not met, we will either defer recognition
of the software  license revenue until the criteria are met or we will recognize
the software  license revenue on the ratable basis, as required by SOPs 97-2 and
98-9. We generally utilize written contracts as the means to establish the terms
and  conditions  by which our  products,  support and  services  are sold to our
customers.

We  consider a  non-cancelable  agreement  signed by us and the  customer  to be
evidence  of  an  arrangement.  Delivery  is  considered  to  occur  when  media
containing  the  licensed  programs  is  provided  to a common  carrier,  or the
customer is given electronic  access to the licensed  software.  Our typical end
user license agreements do not contain acceptance  clauses.  We consider the fee
to be fixed or  determinable  if the fee is not subject to refund or adjustment.
If the fee is not fixed or  determinable,  we  recognize  revenue as the amounts
become due and payable.  Probability  of collection is based upon our assessment
of the customer's  financial  condition  through review of its current financial
statements or credit  reports.  Collection is deemed  probable if we expect that
the  customer  will be able to pay  amounts  under the  arrangement  as payments
become due. For follow-on sales to existing customers,  prior payment history is
also used to evaluate probability of collection. If we determine that collection
is not  probable,  we defer the revenue  and  recognize  the  revenue  upon cash
collection.


                                       8
<PAGE>

Revenues from license and maintenance transactions that include extended payment
terms are  generally  recognized in the same manner as those  requiring  current
payment.  We have an  established  business  practice  of  offering  installment
contracts to customers  and have a history of  successfully  enforcing  original
payment terms without making concessions.  Further,  the payment obligations are
unrelated  to product  implementation  or any other  post-transaction  activity.
Revenues from sales through agents,  distributors  and resellers are recorded at
the gross amount charged based on the economic risks and ongoing product support
responsibilities we assume.

When our software  licenses  contain multiple  elements,  we allocate revenue to
each element based on the relative fair values of the elements. Multiple element
arrangements generally include post-contract support (PCS or support),  software
products, and in some cases, service. Revenue from multiple-element arrangements
is allocated to undelivered  elements of the arrangement,  such as PCS, based on
the relative fair values of the elements  specific to us. Our  determination  of
fair  value  of  each  element  in   multi-element   arrangements  is  based  on
vendor-specific  objective evidence,  which is generally  determined by sales of
the same  element or service to third  parties or by reference to a renewal rate
specified in the related arrangement.

Where   vendor-specific   objective  evidence  of  fair  value  exists  for  all
undelivered  elements,  but  evidence  does not exist for one or more  delivered
elements, we account for the delivered elements in accordance with the "Residual
Method" prescribed by SOP 98-9. Under the residual method, the fair value of the
undelivered  elements is deferred and the remaining  portion of the  arrangement
fee is  recognized  as revenue.  In most cases,  the bundled  multiple  elements
include  PCS and the  software  product.  In such  cases,  when  vendor-specific
objective  evidence  of fair value  exists for all of the  undelivered  elements
(most commonly PCS), the residual amount is recognized as revenue and the PCS is
recognized ratably over the PCS term, which is typically 12 months.

A customer  typically prepays  maintenance  revenues for the first 12 months and
the related maintenance revenues are recognized ratably monthly over the term of
the maintenance  contract,  which is generally 12 months.  Maintenance contracts
include the right to unspecified upgrades on a when-and-if  available basis, and
ongoing support.

Deferred  revenues include amounts received from customers for which revenue has
not yet been  recognized  that  generally  results  from  deferred  maintenance,
consulting or training  services not yet rendered and license  revenue  deferred
until all  requirements  under SOP 97-2 are met.  Deferred revenue is recognized
upon  delivery  of  our  products,   as  services  are  rendered,  or  as  other
requirements requiring deferral under SOP 97-2 are satisfied.

Based on our  interpretation  of SOP  97-2 and SOP  98-9,  we  believe  that our
current  sales  contract  terms and  business  arrangements  have been  properly
reported.  However,  the  American  Institute of  Certified  Public  Accountants
("AICPA")  and its Software  Revenue  Recognition  Task Force  continue to issue
interpretations and guidance for applying the relevant standards to a wide range
of sales  contract  terms and business  arrangements  that are  prevalent in the
software  industry.  Also, the Securities  and Exchange  Commission  ("SEC") has
issued Staff  Accounting  Bulletin No. 101,  "Revenue  Recognition  in Financial
Statements,"  which provides  guidance related to revenue  recognition  based on
interpretations  and practices  followed by the SEC. Future  interpretations  of
existing accounting  standards or changes in our business practices could result
in future changes in our revenue accounting  policies that could have a material
adverse effect on our business, financial condition and results of operations.

CAPITALIZED SOFTWARE DEVELOPMENT COSTS

We capitalize our software development costs when the projects under development
reach  technological  feasibility  as defined by Financial  Accounting  Standard
("FAS") No. 86, and amortize  these costs over the  products'  estimated  useful
lives.  Under FAS No. 86, we evaluate  our  capitalized  software  costs at each
balance sheet date to determine if the unamortized  balance related to any given
product  exceeds the estimated net  realizable  value of that product.  Any such
excess is written  off  through  accelerated  amortization  in the quarter it is
identified.  Determining net realizable  value as defined by FAS No. 86 requires
that we  estimate  future cash flows to be  generated  by the  products  and use
judgment in quantifying the appropriate amount to write off, if any. Actual cash
flows and amounts  realized  from the  software  products  could differ from our
estimates.  Also,  any future changes to our product  portfolio  could result in
significant   research  and  development  expenses  related  to  software  asset
write-offs.



                                       9
<PAGE>

FISCAL PERIODS ENDED JULY 31, 2003 AND JULY 31, 2002

Total  revenues  for the  year  ended  July 31,  2003  amounted  to  $5,386,921,
representing  an  decrease  of  $1,198,792,  or 18.2%  compared  to  revenues of
$6,585,713  for the year ended July 31, 2002.  During Fiscal 2003 and 2002,  the
Company  did not  enter  into any  software  sales.  Software  license  revenues
decreased  by  $1,319,045,  or 46.3%,  to  $1,528,840.  The decrease in software
license  revenues  compared  to the prior  year was  primarily  due to  weakened
economic conditions which have resulted in a reduction in information technology
spending by many of our potential customers.  Additionally,  tighter budgets and
higher  required  approval  levels have caused  customers  to enter into smaller
transactions  in terms of dollar value,  as well as  contributed to longer sales
cycles in fiscal 2003 compared to fiscal 2002.

Software maintenance fees and other increased by $120,253, or 3.2% to $3,858,081
compared to fiscal 2002 of $3,737,828. The increase in software maintenance fees
and other is principally attributable to an increase in other revenues amounting
to $144,934 offset by a decrease in software  maintenance  fees of $24,681.  The
increase in other revenues is primarily attributable to minimum royalty payments
from an OEM partner  established  in May 2002,  which  amounted to $203,600  and
$68,000  in  fiscal  2003 and  2002,  respectively.  The  decrease  in  software
maintenance  fees is  related  to a  one-time  adjustment  in  April  2002,  for
maintenance  revenue due from the acquisition of certain software  products from
SureFire Commerce,  and customer  maintenance contract  cancellations  primarily
associated with this product line.

Operating  expenses  decreased  to  $5,941,666  from  $6,400,737,  a decrease of
$459,071,  or 7.2%, in fiscal 2003  compared to fiscal 2002.  This decrease is a
combined  result of a 3%  decrease  or  $45,104 in costs of  software  sales and
licenses, a 53.5% increase or $218,981 in costs of maintenance fees and other, a
27.6%  decrease  or  $326,525  in  commissions,  a 38.7%  decrease or $95,684 in
research and  development,  a 10.1% decrease or $87,644 in selling and marketing
and a 5.7% decrease or $123,095 in general and administrative expenses. Costs of
software  sales  and  licenses  (which  principally  includes   amortization  of
capitalized  software costs)  decreased due to the full  amortization of certain
capitalized  projects in fiscal 2002,  which was greater  than the  amortization
costs of the  capitalized  projects  that became  generally  available in fiscal
2003.  The increase in costs of  maintenance  fees and other (which  principally
consists of technical support payroll), is due to an increased allocation and an
increase  in payroll  and payroll  related  expenses  to support  the  Company's
customer  base and  installed  products.  The  decrease  in  commission  expense
compared to the prior year is due to a decrease in our software sales  primarily
arising  from  difficult  economic  worldwide  conditions   experienced  in  the
information technology market. The decrease in research and development expenses
is attributable to increased resources  allocated to capitalizable  projects and
remaining  resources being allocated to support the Company's  customer base and
installed   products   during   fiscal   2003.   The  decrease  in  general  and
administrative  expenses  compared  to the prior  year is due to a  decrease  in
profit  related  expenses  incurred in the prior year such as profit sharing and
discretionary  compensation  and a decrease in  depreciation  expense for assets
that were fully depreciated in fiscal 2002.

Interest  income  amounted  to  $4,369  and  $11,638  in  fiscal  2003 and 2002,
respectively.  This decrease is primarily due to lower interest income generated
from lower average cash and cash equivalents  balance as well as a lower rate of
return in fiscal 2003.

The Company reported a net loss of $550,376 for 2003 compared to a net income of
$196,614 for 2002.

LIQUIDITY AND CAPITAL RESOURCES

At July  31,  2003,  the  Company  had a cash  and cash  equivalent  balance  of
$1,176,627 and a working  capital  deficit of $62,173  compared to $1,060,231 of
cash and cash  equivalents  and working  capital  deficit of $85,297 at July 31,
2002. The working capital  deficit  remained  consistent  compared to prior year
principally  due to the stability of the Company's  maintenance  revenue and its
associated cash receipts.

Operating activities provided cash of $1,380,490 and $1,671,841 at July 31, 2003
and 2002,  respectively.  The  decrease  of  $291,351  in net cash  provided  by
operating  activities is primarily due to the net loss generated for fiscal 2003
and a decrease in deferred revenue due to the timing of maintenance billing cash


                                       10
<PAGE>

receipts  offset by a decrease in trade and  installment  receivables due to the
collection  of   installment   payments  and  the  decrease  in  software  sales
experienced  by the Company in fiscal 2003.  Investing  activities  used cash of
$1,255,144 and $1,262,978 for the years ended July 2003 and 2002,  respectively.
The slight  decrease  in  investing  activities  is  principally  due to a final
payment for the acquisition of computer software products from SureFire Commerce
during  fiscal  2002  offset  by  a  slight  increase  in  capitalized  software
development  costs due to the Company's new product launch of SIFT in the fourth
quarter of fiscal 2003. Financing activities used net cash of $8,950 as compared
to using net cash of $153,715 in fiscal 2002 representing a decrease of $144,765
primarily due to a decrease in the purchase of treasury stock in fiscal 2003.

On January  12,  2000,  Proginet  established  a line of credit in the amount of
$100,000 with a bank. The interest rate is variable, based on prime plus 1%. The
line of credit expires on September 30, 2004, at which time, the Company intends
to renew this line of credit.  As of July 31, 2003, the Company has not borrowed
against this line of credit.

In May 2001, the Company  established an additional line of credit in the amount
of $350,000 with another bank. In April 2003,  this line of credit was increased
to $500,000.  The interest rate is variable  based on the bank's prime rate plus
1/2%. The line of credit is collateralized by accounts receivable of the Company
and expires May 31, 2004,  at which time the Company  intends to renew this line
of credit.  As of July 31, 2003, the Company has not borrowed  against this line
of credit.

The  Company  believes  that its  present  cash and cash  equivalents,  the cash
generated from operations and amounts available under its present line of credit
agreements  will be  sufficient  to meet its cash  needs  for at least  the next
twelve months.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2002, the Financial Accounting Standards Board ("FASB") issued Financial
Accounting Standard ("FAS") No. 146,  "Accounting for Costs Associated with Exit
or Disposal  Activities",  which  addresses  accounting  for  restructuring  and
similar costs. FAS No. 146 supersedes previous accounting guidance,  principally
Emerging  Issues Task Force  ("EITF")  Issue No. 94-3. FAS No. 146 requires that
the  liability  for  costs  associated  with  an exit or  disposal  activity  be
recognized when the liability is incurred. FAS No. 146 also establishes that the
liability should  initially be measured and recorded at fair value.  Accordingly
FAS No. 146 may affect the timing of recognizing future  restructuring  costs as
well  as the  amount  recognized.  FAS 146 is  effective  for  exit or  disposal
activities  that are initiated  after December 31, 2002. The adoption of FAS No.
146 did not have a material  impact on the  Company's  results of  operations or
financial position.

In November  2002,  the EITF  reached a consensus  on Issue No. 00-21 ("EITF No.
00-21"),  "Revenue  Arrangements  with  Multiple  Deliverables".  EITF No. 00-21
provides  guidance on how to account for certain  arrangements  that involve the
delivery or  performance  of multiple  products,  services  and/or rights to use
assets.  The  provisions  of EITF No.  00-21 will apply to revenue  arrangements
entered  into in  fiscal  periods  beginning  after  June 15,  2003.  Management
believes that the adoption of EITF No. 00-21 will not have a significant  impact
on its results of operations or financial position.

In November 2002, FASB Interpretation 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees,  Including  Indirect  Guarantees of Indebtedness of
Others"  ("FIN 45"),  was issued.  FIN 45  requires a guarantor  entity,  at the
inception  of  a  guarantee  covered  by  the  measurement   provisions  of  the
interpretation,  to  record a  liability  for the fair  value of the  obligation
undertaken in issuing the guarantee.  FIN 45 applies prospectively to guarantees
the Company issues or modifies  subsequent to December 31, 2002, but has certain
disclosure  requirements  effective for interim and annual  periods ending after
December  15,  2002.  The Company  does not  anticipate  that FIN 45 will have a
material impact on its financial position, results of operations and cash flows.


                                       11
<PAGE>

In  December  2002,  the FASB issued FAS No. 148,  "Accounting  for  Stock-Based
Compensation-Transition  and  Disclosure,  an amendment of FAS No. 123." FAS No.
148 amends FAS No. 123,  "Accounting for Stock-Based  Compensation,"  to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, FAS No.
148  amends the  disclosure  requirements  of FAS No.  123 to require  prominent
disclosures in both annual and interim financial  statements about the method of
accounting for stock-based  employee  compensation  and the effect of the method
used on reported results. The provisions of FAS No. 148 are effective for fiscal
years ended after December 15, 2002. The Company  currently plans to continue to
apply the intrinsic-value  based method to account for the stock options and has
complied with the new disclosure  requirements  beginning with its quarter ended
April 30, 2003.

In  January  2003,   the  FASB  issued  FASB   Interpretation   46  ("FIN  46"),
"Consolidation of Variable Interest Entities".  FIN 46 clarifies the application
of Accounting  Research  Bulletin 51,  Consolidated  Financial  Statements,  for
certain  entities that do not have  sufficient  equity at risk for the entity to
finance its activities  without additional  subordinated  financial support from
other parties or in which equity investors do not have the  characteristics of a
controlling financial interest ("variable interest entities"). Variable interest
entities within the scope of FIN 46 will be required to be consolidated by their
primary  beneficiary.  The primary  beneficiary of a variable interest entity is
determined  to be the party that  absorbs a majority  of the  entity's  expected
losses,  receives a majority of its expected  returns,  or both.  FIN 46 applies
immediately to variable interest entities created after January 31, 2003, and to
variable interest entities in which an enterprise obtains an interest after that
date. It applies in the first fiscal year or interim period beginning after June
15, 2003, to variable  interest entities in which an enterprise holds a variable
interest  that it acquired  before  February 1, 2003.  The Company is  currently
evaluating the impact, if any, of FIN 46 on its financial  position,  results of
operations and cash flows.

In April 2003,  the FASB  issued FAS No. 149,  "Amendment  of  Statement  133 on
Derivative  Instruments  and Hedging  Activities,"  which  amends and  clarifies
financial accounting and reporting for derivative instruments, including certain
derivative  instruments  embedded in other contracts and for hedging  activities
under FAS 133. FAS 149 is effective for contracts entered into or modified after
June 30, 2003 except for the  provisions  that were cleared by the FASB in prior
pronouncements.  Management  believes  that the adoption of FAS No. 149 will not
have a material impact on its results of operations or financial position.

In May 2003,  the FASB issued FAS No.  150,  "Accounting  for Certain  Financial
Instruments with Characteristics of both Liabilities and Equity". This statement
establishes standards for how an issuer classifies and measures in its statement
of financial position certain financial instruments with characteristics of both
liabilities and equity. In accordance with the standard,  financial  instruments
that  embody  obligations  for the  issuer  are  required  to be  classified  as
liabilities.  FAS No. 150 is effective for financial instruments entered into or
modified after May 31, 2003,  and otherwise  shall be effective at the beginning
of the first interim period beginning after June 15, 2003.  Management  believes
that  the  adoption  of FAS No.  150  will not  have a  material  impact  on its
financial position.


                                       12
<PAGE>


ITEM 7.       FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                         Page
                                                                                         ----
<S>                                                                                       <C>
Reports of Independent Certified Public Accountants ......................................14
Balance Sheets as of July 31, 2003 and 2002 ..............................................16
Statements of Operations for the years ended July 31, 2003 and 2002 ......................17
Statements  of  Stockholders'  Equity for the years  ended July 31, 2003
and 2002. ................................................................................18
Statements of Cash Flows for the years ended July 31, 2003 and 2002 ......................19
Notes to Financial Statements ............................................................20
</TABLE>


                                       13
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



Board of Directors and Stockholders
    PROGINET CORPORATION


We have audited the  accompanying  balance sheet of Proginet  Corporation  as of
July 31, 2003, and the related  statements of operations,  stockholders'  equity
and cash  flows for the year then  ended.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Proginet Corporation as of July
31, 2003, and the results of its operations and its cash flows for the year then
ended in conformity with accounting  principles generally accepted in the United
States of America.



BDO SEIDMAN LLP


Melville, New York
August 29, 2003

                                       14
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



Board of Directors and Stockholders
    PROGINET CORPORATION


We have audited the  accompanying  balance sheet of Proginet  Corporation  as of
July 31, 2002, and the related  statements of operations,  stockholders'  equity
and cash  flows for the year then  ended.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Proginet Corporation as of July
31, 2002, and the results of its operations and its cash flows for the year then
ended in conformity with accounting  principles generally accepted in the United
States of America.



GRANT THORNTON LLP


Melville, New York
August 27, 2002


                                       15
<PAGE>



                                               PROGINET CORPORATION
                                                  Balance Sheets

<TABLE>
<CAPTION>
                                                                                           July 31,
                  ASSETS                                                              2003           2002
                                                                                 ------------    ------------
<S>                                                                              <C>             <C>
Current assets
          Cash and cash equivalents                                              $  1,176,627    $  1,060,231
          Trade and installment accounts receivable, net                              543,632         807,897
          Prepaid expenses                                                             31,078          40,299
                               Total current assets                                 1,751,337       1,908,427

Installment accounts receivable, due after one year                                         -         303,833
Property and equipment, net                                                           128,810         175,142
Capitalized software development costs, net                                         3,898,364       3,811,959
Purchased software, net                                                               741,568       1,071,160
Other assets                                                                           32,262          44,733
                                                                                 ------------    ------------
                                                                                 $  6,552,341    $  7,315,254
                                                                                 ============    ============
          LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities
          Accounts payable and accrued expenses                                  $    290,189    $    376,248
          Current portion of obligation under capital lease                             9,094           7,965
          Deferred revenue                                                          1,514,227       1,609,511
                                                                                 ------------    ------------
                               Total current liabilities                            1,813,510       1,993,724
                                                                                 ------------    ------------

Deferred rent                                                                          95,208         117,451
Long term obligation under capital lease                                                6,522          15,617
                                                                                 ------------    ------------
                                                                                    1,915,240       2,126,792
                                                                                 ------------    ------------
Stockholders' equity
          Preferred stock, $.01 par value, 10,000,000 shares authorized,                    -               -
                   none issued
          Common stock, $.001 par value, 40,000,000 shares authorized,
               14,251,058 shares issued in 2003 and 2002, respectively                 14,251          14,251
          Additional paid-in capital                                               11,849,358      11,849,358
          Treasury stock, 1,103,004 and 1,098,504 shares, at cost, in 2003 and
                2002, respectively                                                   (531,023)       (530,038)
          Accumulated deficit                                                      (6,695,485)     (6,145,109)
                                                                                 ------------    ------------
                               Total stockholders' equity                           4,637,101       5,188,462
                                                                                 ------------    ------------
                                                                                 $  6,552,341    $  7,315,254
                                                                                 ============    ============
</TABLE>


The accompanying notes are an integral part of these financial statements.



                                       16
<PAGE>

                              PROGINET CORPORATION
                            Statements of Operations
<TABLE>
<CAPTION>
                                                                July 31,
                                                          2003            2002
                                                       ----------      ----------
<S>                                                  <C>             <C>
Revenues
        Software sales and licenses                  $  1,528,840    $  2,847,885
        Software maintenance fees and other             3,858,081       3,737,828
                                                       ----------      ----------
                                                        5,386,921       6,585,713
                                                       ----------      ----------

Operating expenses
        Costs of software sales and licenses            1,479,431       1,524,535
        Costs of maintenance fees and other               628,338         409,357
        Commissions                                       857,960       1,184,485
        Research and development                          151,284         246,968
        Selling and marketing                             783,238         870,882
        General and administrative                      2,041,415       2,164,510
                                                       ----------      ----------
                                                        5,941,666       6,400,737
                                                       ----------      ----------

(Loss) income from operations                            (554,745)        184,976

Other income
        Interest income                                     4,369          11,638
                                                       ----------      ----------

Net (loss) income                                    $   (550,376)   $    196,614
                                                       ==========      ==========

Basic and diluted (loss) income per common share     $       (.04)   $        .01
                                                       ==========      ==========

Weighted average common shares outstanding - basic     13,149,546      13,311,623
                                                       ==========      ==========


Weighted average common shares outstanding - diluted   13,149,546      13,453,356
                                                       ==========      ==========
</TABLE>


The accompanying notes are an integral part of these financial statements.


                                       17
<PAGE>

                              PROGINET CORPORATION
                       Statements of Stockholders' Equity
                       Years ended July 31, 2003 and 2002

<TABLE>
<CAPTION>
                                                                               Additional
                                                                                paid- in
                                                   Common stock                 capital
                                          --------------------------------    -------------
                                             Shares            Amount
                                          -------------     --------------
<S>                                         <C>          <C>               <C>
Balance - August 1, 2001                    14,251,058   $         14,251  $    11,809,799

Purchase of treasury stock

Warrants granted for services                                                       25,175

Stock options granted for services                                                  14,384

Net income
                                          -------------     --------------    -------------
Balance - July 31, 2002                     14,251,058             14,251       11,849,358



Purchase of treasury stock

Net loss
                                          -------------     --------------    -------------

Balance - July 31, 2003                     14,251,058   $         14,251  $    11,849,358
                                          =============     ==============    =============
</TABLE>


<TABLE>
<CAPTION>
                                                                Accum-
                                              Treasury          ulated
                                                stock           deficit           TOTAL
                                             ------------    --------------    ------------


<S>                                       <C>             <C>               <C>
Balance - August 1, 2001                  $    (415,856)  $    (6,341,723)  $    5,066,471

Purchase of treasury stock                     (114,182)                         (114,182)

Warrants granted for services                                                       25,175

Stock options granted for services                                                  14,384

Net income                                                         196,614         196,614
                                             ------------    --------------    ------------
Balance - July 31, 2002                        (530,038)       (6,145,109)       5,188,462

                                                   (985)                             (985)

Purchase of treasury stock

Net loss                                                         (550,376)       (550,376)
                                             ------------    --------------    ------------

Balance - July 31, 2003                   $    (531,023)  $    (6,695,485)  $    4,637,101
                                             ============    ==============    ============
</TABLE>


The accompanying notes are an integral part of these financial statements.


                                       18
<PAGE>

                              PROGINET CORPORATION

                            Statements of Cash Flows


<TABLE>
<CAPTION>
                                                                         Year ended July 31,
                                                                         2003          2002
                                                                    -----------    -----------
<S>                                                                <C>             <C>
Cash flows from operating activities
      Net (loss) income                                             $  (550,376)   $   196,614
      Adjustments to reconcile net (loss) income to cash
      provided by operating activities
          Depreciation and amortization                               1,544,663      1,754,099
          (Recovery of)  provision  for bad debt  allowance,             (3,123)        33,008
          net
          Deferred maintenance revenue                                  (95,284)       190,067
          Deferred rent                                                 (22,243)       (16,341)
          Stock options and warrants issued for services                      -         39,559
          Changes in operating assets and liabilities
               Trade and installment accounts receivable,               267,388       (250,852)
               net
               Prepaid expenses and other current assets                  9,221         (5,677)
               Installment account receivable                           303,833       (303,833)
               Other assets                                              12,471          3,220
               Accounts payable and accrued expenses                    (86,060)        31,977
                                                                    -----------    -----------

                        Net cash provided by operating activities     1,380,490      1,671,841


Cash flows from investing activities
          Purchased software                                                  -        (60,000)
          Capitalized software development costs                     (1,236,243)    (1,168,435)
          Purchase of property and equipment                            (18,901)       (34,543)
                                                                    -----------    -----------

               Net cash used in investing activities                 (1,255,144)    (1,262,978)

Cash flows from financing activities
          Repayment of notes payable                                          -        (37,251)
          Purchase of treasury stock                                       (985)      (114,182)
          Principal payments under capital lease obligation              (7,965)        (2,282)
                                                                    -----------    -----------

               Net cash used in financing activities                     (8,950)      (153,715)

Net increase in cash and cash equivalents                               116,396        255,148

Cash and cash equivalents at beginning of the year                    1,060,231        805,083
                                                                    -----------    -----------

Cash and cash equivalents at end of the year                        $ 1,176,627    $ 1,060,231
                                                                    ===========    ===========
</TABLE>



The accompanying notes are an integral part of these financial statements.


                                       19
<PAGE>

                              PROGINET CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2003 AND 2002


(1)           NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         NATURE OF BUSINESS
Proginet  Corporation  ("Proginet"  or "the  Company")  is a  global  enterprise
software  company.   Proginet's   software  solutions  allow  our  customers  to
effectively and securely  manage their security  passwords and data within their
information  technology  (IT) systems,  which span most business  sectors of the
economy.  The Company's  products can be used on all major  hardware  platforms,
operating  systems  and  application  development  environments  for  enterprise
computing. The Company maintains a philosophy of internally developing products,
coupled with the acquisition of key technology,  the integration of the two, and
the  establishment  of a network  of  strategic  alliances  with key  technology
partners.  The Company  sells its products in the U.S.  through its direct sales
force and  internationally  through  distributors.  The  Company  also sells its
products through Original  Equipment  Manufacturer  (OEM) partners in the United
States, Europe, South America, Asia and Australia.

         GENERAL ACCEPTED ACCOUNTING PRINCIPLES
The  financial  statements  have been  prepared in  accordance  with  accounting
principles  generally  accepted  in the United  States of America  ("US  GAAP").
Differences  between  reporting these financial  statements under US GAAP versus
accounting principles generally accepted in Canada are not material.

         REVENUE RECOGNITION
We recognize  revenue in accordance  with  Statement of Position,  or SOP, 97-2,
"Software  Revenue  Recognition,"  and  SOP  98-9,  "Modification  of SOP  97-2,
Software  Revenue  Recognition,   with  Respect  to  Certain  Transactions."  We
recognize  license  revenues  when  all  of  the  following  criteria  are  met:
persuasive  evidence of an arrangement exists, the fee is fixed or determinable,
collectibility  is  probable,  delivery  of the  product  has  occurred  and the
customer has accepted the product  (including  the  expiration  of an acceptance
period) if the terms of the  contract  include  an  acceptance  requirement.  In
instances when any of the criteria are not met, we will either defer recognition
of the software  license revenue until the criteria are met or we will recognize
the software  license revenue on the ratable basis, as required by SOPs 97-2 and
98-9. We generally utilize written contracts as the means to establish the terms
and  conditions  by which our  products,  support and  services  are sold to our
customers.

We  consider a  non-cancelable  agreement  signed by us and the  customer  to be
evidence  of  an  arrangement.  Delivery  is  considered  to  occur  when  media
containing  the  licensed  programs  is  provided  to a common  carrier,  or the
customer is given electronic  access to the licensed  software.  Our typical end
user license agreements do not contain acceptance  clauses.  We consider the fee
to be fixed or  determinable  if the fee is not subject to refund or adjustment.
If the fee is not fixed or  determinable,  we  recognize  revenue as the amounts
become due and payable.  Probability  of collection is based upon our assessment
of the customer's  financial  condition  through review of its current financial
statements or credit  reports.  Collection is deemed  probable if we expect that
the  customer  will be able to pay  amounts  under the  arrangement  as payments
become due. For follow-on sales to existing customers,  prior payment history is
also used to evaluate probability of collection. If we determine that collection
is not  probable,  we defer the revenue  and  recognize  the  revenue  upon cash
collection.

Revenues from license and maintenance transactions that include extended payment
terms are  generally  recognized in the same manner as those  requiring  current
payment.  We have an  established  business  practice  of  offering  installment
contracts to customers  and have a history of  successfully  enforcing  original
payment terms without making concessions.  Further,  the payment obligations are
unrelated  to product  implementation  or any other  post-transaction  activity.
Revenues from sales through agents,  distributors  and resellers are recorded at
the gross amount charged based on the economic risks and ongoing product support
responsibilities we assume.


                                       20
<PAGE>

                              PROGINET CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2003 AND 2002

When our software  licenses  contain multiple  elements,  we allocate revenue to
each element based on the relative fair values of the elements. Multiple element
arrangements generally include post-contract support (PCS or support),  software
products, and in some cases, service. Revenue from multiple-element arrangements
is allocated to undelivered  elements of the arrangement,  such as PCS, based on
the relative fair values of the elements  specific to us. Our  determination  of
fair  value  of  each  element  in   multi-element   arrangements  is  based  on
vendor-specific  objective evidence,  which is generally  determined by sales of
the same  element or service to third  parties or by reference to a renewal rate
specified in the related arrangement.

Where   vendor-specific   objective  evidence  of  fair  value  exists  for  all
undelivered  elements,  but  evidence  does not exist for one or more  delivered
elements, we account for the delivered elements in accordance with the "Residual
Method" prescribed by SOP 98-9. Under the residual method, the fair value of the
undelivered  elements is deferred and the remaining  portion of the  arrangement
fee is  recognized  as revenue.  In most cases,  the bundled  multiple  elements
include  PCS and the  software  product.  In such  cases,  when  vendor-specific
objective  evidence  of fair value  exists for all of the  undelivered  elements
(most commonly PCS), the residual amount is recognized as revenue and the PCS is
recognized ratably over the PCS term, which is typically 12 months.

A customer typically prepays  maintenance  revenues and the related  maintenance
revenues  are  recognized  ratably  monthly  over  the  term of the  maintenance
contract, which is generally 12 months.  Maintenance contracts include the right
to unspecified upgrades on a when-and-if available basis, and ongoing support.

Deferred  revenues include amounts received from customers for which revenue has
not yet been  recognized  that  generally  results  from  deferred  maintenance,
consulting or training  services not yet rendered and license  revenue  deferred
until all  requirements  under SOP 97-2 are met.  Deferred revenue is recognized
upon  delivery  of  our  products,   as  services  are  rendered,  or  as  other
requirements requiring deferral under SOP 97-2 are satisfied.

In February and July 2002, the Company entered into software license  agreements
with customers amounting to approximately  $509,000 and $205,000,  respectively.
The agreements  provide for installment  payments through July 2004. At July 31,
2003, the outstanding  balance related to these agreements  amounted to $303,834
and was  included  in trade  and  installment  accounts  receivable,  net in the
accompanying balance sheets.

         ACCOUNTS RECEIVABLE
The Company  continually  reviews accounts for collectibility and establishes an
allowance  for  doubtful  accounts.  As of July 31, 2003 and 2002,  there was an
allowance for doubtful accounts of $10,000 and $40,000, respectively.

         PROPERTY AND EQUIPMENT
Property and  equipment  are stated at cost less  accumulated  depreciation  and
amortization.  Depreciation  is provided using a  straight-line  method over the
assets' useful lives, ranging from three to five years.  Leasehold  improvements
are  amortized  over the  lesser of the  economic  life of the  asset,  which is
generally five years, or the lease term. Accelerated methods of depreciation are
used for tax purposes.  Property and equipment is retired from the balance sheet
when fully depreciated.

         INCOME TAXES
Deferred  tax  assets  and   liabilities  are  recognized  for  the  future  tax
consequences  attributable  to  differences  between the tax bases of assets and
liabilities and their financial  reporting amounts based on enacted tax laws and
statutory  tax rates  expected to apply to taxable  income in the years in which
those temporary  differences are expected to be recovered or settled. The effect
on deferred taxes of a change in tax rates is recognized in income in the period
that includes the enactment  date.  Valuation  allowances are  established  when
necessary to reduce deferred tax assets to the amount more likely than not to be
realized.

         FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of the Company's financial  instruments,  consisting of cash and
cash equivalents,  trade and installment accounts  receivable,  accounts payable
and accrued expenses, and deferred revenues approximate their carrying values in
the  financial   statements   because  of  the  short-term   maturity  of  these
instruments.

                                       21
<PAGE>

                              PROGINET CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2003 AND 2002

         LONG-LIVED ASSETS
The Company  reviews  long-lived  assets such as plant and equipment and certain
identifiable  intangibles  to be held and  used or  disposed  of for  impairment
whenever events or changes in circumstances indicate that the carrying amount of
an  asset  may  not be  recoverable.  If the  sum of the  expected  cash  flows,
undiscounted  and  without  interest,  is less than the  carrying  amount of the
asset,  an  impairment  loss is  recognized  as the amount by which the carrying
amount of the asset exceeds its fair value.

         RESEARCH AND DEVELOPMENT COSTS AND CAPITALIZED SOFTWARE DEVELOPMENT
         COSTS
Research and  development  costs  consist of salaries and other costs related to
the  development  and  enhancement  of  computer  software  programs.   Software
development   costs  are   capitalized   upon  the   establishment   of  product
technological  feasibility until the product is available for general release to
the public.  The  establishment  of  technological  feasibility  and the ongoing
assessment of recoverability of capitalized  software  development costs require
considerable  judgment by management with respect to certain factors  including,
but not limited to, the timing of technological feasibility,  anticipated future
gross  revenues,  estimated  economic  life and changes in software and hardware
technologies.  Software  development  costs  not  capitalized  are  expensed  as
research and development.

Amortization  of  capitalized  software  development  costs  is  provided  on  a
product-by-product  basis at the greater of the amount  computed using the ratio
of current gross revenues for a product to the total of current and  anticipated
future gross revenues or the straight-line  method over the remaining  estimated
economic life of the product.

Amortization  commences once a product becomes  available for sale to customers.
Generally,  an  original  estimated  economic  life of five years is assigned to
capitalized software  development costs.  Capitalized software development costs
were net of  accumulated  amortization  of $3,940,270 and $3,645,458 at July 31,
2003 and 2002, respectively.  Capitalized software development costs are retired
from the balance sheet when fully amortized.

          (LOSS) EARNINGS PER SHARE
Basic (loss)  income per common share ("EPS") is computed by dividing net (loss)
income by the weighted  average number of common shares  outstanding and diluted
EPS reflects the  potential  dilution  that could occur if  securities  or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock.

The  following  table sets forth the  computation  of basic and  diluted  (loss)
income per share:

                                               Year ended
                                                July 31,
                                      ----------------------------
                                          2003            2002
                                      ------------    ------------
Numerator
     Net (loss) income                $   (550,376)   $    196,614
                                      ============    ============

Denominator
     Weighted average number
       of common shares (basic)         13,149,546      13,311,623
                                      ------------    ------------

     Effect of dilutive securities:
        Stock options                            -         141,733
                                      ------------    ------------

     Weighted average number
       of common shares (diluted)       13,149,546      13,453,356
                                      ============    ============

Basic and diluted (loss) income
       per share                      $      (0.04)   $       0.01
                                      ============    ============


                                       22
<PAGE>

                              PROGINET CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2003 AND 2002

Potential  common  shares of 1,763,500  and 2,110,700 at July 31, 2003 and 2002,
respectively, issueable upon exercise of stock options and warrants are excluded
in computing  basic and diluted net (loss)  income per share for fiscal 2003 and
2002, as their effects would be antidilutive.

               STOCK OPTIONS AND STOCK BASED COMPENSATION
We account  for our  employee  stock  option  plans  under the  recognition  and
measurement  principles  of APB  Option  No. 25,  "Accounting  for Stock  Issued
Employees,  and Related  Interpretations".  No stock-based  compensation cost is
reflected in net (loss)  income for these plans,  as all options  granted  under
these plans had an exercise  price equal to the market  value of the  underlying
common stock on the date of grant. The following table illustrates the effect on
net (loss)  income and (loss)  income per share if we had applied the fair value
recognition  provisions of FASB  Statement No 123,  "Accounting  for Stock Based
Compensation", to stock based compensation:

<TABLE>
<CAPTION>
                                                             2003                        2002
                                                        ------------------         -----------------

<S>                                                     <C>                <C>
         Net (loss) income, as reported                 $       (550,376)  $                196,614

         Deduct: Total stock-based employee
         compensation expense determined under fair
         value based method for all awards                       (71,908)                   (170,943)
                                                        ------------------         -----------------

         Net (loss) income, as adjusted                 $       (622,284)       $            25,671
                                                        ------------------         -----------------
         (Loss) income per share:
               Basic and diluted-as reported            $           (.04)       $               .01
               Basic and diluted-as adjusted            $           (.05)       $               .00
</TABLE>


The per share weighted average fair value of stock options granted during fiscal
2003 and 2002 was $.19 and $.20,  respectively,  on the dates of grant using the
Black-Scholes   option-pricing   model  with  the  following   weighted  average
assumptions:  expected  dividend yield of 0% for fiscal 2003 and 2002; risk free
interest rate of 3.175% and 4.2% in fiscal 2003 and 2002, respectively, expected
stock  volatility  of 116%  and  104% in 2003  and  2002,  respectively,  and an
expected  option  life  of  approximately  five  years  for  both  years.  These
assumptions  are used for these  calculations  only and they do not  necessarily
represent an indication of management's expectations of future developments.


          USE OF ESTIMATES
The  preparation  of financial  statements in  conformity  with US 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.

          STATEMENT OF CASH FLOWS AND LIQUIDITY
The Company  considers  all highly  liquid debt  instruments  with a maturity of
three  months  or less at the  time of  purchase  to be cash  equivalents.  Cash
equivalents,  amounting  to  $718,674  and  $694,074  at July 31, 2003 and 2002,
respectively,  consisted of a liquid reserve  mutual fund. No interest  payments
were made during the years  ended July 31,  2003 and 2002.  There were no income
taxes paid  during the years ended July 31,  2003 and 2002.  Equipment  acquired
under capital lease was $25,864 in fiscal 2002.

The  Company  believes  that its  present  cash and cash  equivalents,  the cash
generated from operations and amounts available under its present line of credit
agreements  will be  sufficient  to meet its cash  needs  for at least  the next
twelve months.


                                       23
<PAGE>

                              PROGINET CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2003 AND 2002

         RECENT ACCOUNTING PRONOUNCEMENTS

In June 2002, the Financial Accounting Standards Board ("FASB") issued Financial
Accounting Standard ("FAS") No. 146,  "Accounting for Costs Associated with Exit
or Disposal  Activities",  which  addresses  accounting  for  restructuring  and
similar costs. FAS No. 146 supersedes previous accounting guidance,  principally
Emerging  Issues Task Force  ("EITF")  Issue No. 94-3. FAS No. 146 requires that
the  liability  for  costs  associated  with  an exit or  disposal  activity  be
recognized when the liability is incurred. FAS No. 146 also establishes that the
liability should  initially be measured and recorded at fair value.  Accordingly
FAS No. 146 may affect the timing of recognizing future  restructuring  costs as
well  as the  amount  recognized.  FAS 146 is  effective  for  exit or  disposal
activities  that are initiated  after December 31, 2002. The adoption of FAS No.
146 did not have a material  impact on the  Company's  results of  operations or
financial position.

In November  2002,  the EITF  reached a consensus  on Issue No. 00-21 ("EITF No.
00-21"),  Revenue  Arrangements  with  Multiple  Deliverables.  EITF  No.  00-21
provides  guidance on how to account for certain  arrangements  that involve the
delivery or  performance  of multiple  products,  services  and/or rights to use
assets.  The  provisions  of EITF No.  00-21 will apply to revenue  arrangements
entered  into in  fiscal  periods  beginning  after  June 15,  2003.  Management
believes that the adoption of EITF No. 00-21 will not have a significant  impact
on its results of operations or financial position.

In November 2002, FASB Interpretation 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees,  Including  Indirect  Guarantees of Indebtedness of
Others"  ("FIN 45"),  was issued.  FIN 45  requires a guarantor  entity,  at the
inception  of  a  guarantee  covered  by  the  measurement   provisions  of  the
interpretation,  to  record a  liability  for the fair  value of the  obligation
undertaken in issuing the guarantee.  FIN 45 applies prospectively to guarantees
the Company issues or modifies  subsequent to December 31,  2002,but has certain
disclosure  requirements  effective for interim and annual  periods ending after
December  15,  2002.  The Company  does not  anticipate  that FIN 45 will have a
material impact on its financial position, results of operations and cash flows.

In  December  2002,  the FASB issued FAS No. 148,  "Accounting  for  Stock-Based
Compensation-Transition  and  Disclosure,  an amendment of FAS No. 123." FAS No.
148 amends FAS No. 123,  "Accounting for Stock-Based  Compensation,"  to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, FAS No.
148  amends the  disclosure  requirements  of FAS No.  123 to require  prominent
disclosures in both annual and interim financial  statements about the method of
accounting for stock-based  employee  compensation  and the effect of the method
used on reported results. The provisions of FAS No. 148 are effective for fiscal
years ended after December 15, 2002. The Company  currently plans to continue to
apply the intrinsic-value  based method to account for the stock options and has
complied with the new disclosure  requirements  beginning with its quarter ended
April 30, 2003.

In  January  2003,   the  FASB  issued  FASB   Interpretation   46  ("FIN  46"),
"Consolidation of Variable Interest Entities".  FIN 46 clarifies the application
of Accounting  Research  Bulletin 51,  Consolidated  Financial  Statements,  for
certain  entities that do not have  sufficient  equity at risk for the entity to
finance its activities  without additional  subordinated  financial support from
other parties or in which equity investors do not have the  characteristics of a
controlling financial interest ("variable interest entities"). Variable interest
entities within the scope of FIN 46 will be required to be consolidated by their
primary  beneficiary.  The primary  beneficiary of a variable interest entity is
determined  to be the party that  absorbs a majority  of the  entity's  expected
losses,  receives a majority of its expected  returns,  or both.  FIN 46 applies
immediately to variable interest entities created after January 31, 2003, and to
variable interest entities in which an enterprise obtains an interest after that
date. It applies in the first fiscal year or interim period beginning after June
15, 2003, to variable  interest entities in which an enterprise holds a variable
interest  that it acquired  before  February 1, 2003.  The Company is  currently
evaluating the impact, if any, of FIN 46 on its financial  position,  results of
operations and cash flows.


                                       24
<PAGE>

                              PROGINET CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2003 AND 2002


In April 2003,  the FASB  issued FAS No. 149,  "Amendment  of  Statement  133 on
Derivative  Instruments  and Hedging  Activities,"  which  amends and  clarifies
financial accounting and reporting for derivative instruments, including certain
derivative  instruments  embedded in other contracts and for hedging  activities
under FAS 133. FAS 149 is effective for contracts entered into or modified after
June 30, 2003 except for the  provisions  that were cleared by the FASB in prior
pronouncements.  Management  believes  that the adoption of FAS No. 149 will not
have a material impact on its results of operations or financial position.


In May 2003,  the FASB issued FAS No.  150,  "Accounting  for Certain  Financial
Instruments with Characteristics of both Liabilities and Equity". This statement
establishes standards for how an issuer classifies and measures in its statement
of financial position certain financial instruments with characteristics of both
liabilities and equity. In accordance with the standard,  financial  instruments
that  embody  obligations  for the  issuer  are  required  to be  classified  as
liabilities.  FAS No. 150 is effective for financial instruments entered into or
modified after May 31, 2003,  and otherwise  shall be effective at the beginning
of the first interim period beginning after June 15, 2003.  Management  believes
that  the  adoption  of FAS No.  150  will not  have a  material  impact  on its
financial position.

         RECLASSIFICATIONS

Certain prior years' balances have been reclassified to conform with the current
years' presentation.

(2)         ACQUISITIONS

On November 1, 2000, Proginet  Corporation  entered into a definitive  agreement
whereby Proginet  acquired certain software  products (assets) from, and entered
into  an  e-commerce   consulting   agreement  with,   SureFire   Commerce  Inc.
("SureFire").  The Company  received an  existing  software  product and assumed
maintenance  contracts  with  deferred  revenue  of  $214,000  on  the  date  of
acquisition. The initial purchase price, aggregating $1,500,000,  consisted of a
$100,000  initial payment with future payments of $700,000 each payable in sixty
and  one  hundred  and  fifty  days  subsequent  to the  effective  date  of the
agreement.  Each future  payment was reduced by an equal portion of the deferred
revenue  amount  upon  payment.  SureFire  maintained  a security  interest  and
continuing lien on all existing customer agreements acquired until final payment
of the purchase price. An additional  payment of up to $250,000 was payable,  of
which  $100,000  had been  accrued  for at July 31, 2001 as  purchased  software
payable. In April 2002, a final net payment of $60,000 was made to SureFire. The
total cost of the acquired product line and technology was $1,647,946, which was
recorded as purchased  software and is being amortized over a five-year  period.
Amortization expense charged to operations was $329,592 in fiscal 2003 and 2002.
Accumulated  amortization  at July 31, 2003 and 2002,  amounted to $906,378  and
$576,786, respectively.


                                       25
<PAGE>

                              PROGINET CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2003 AND 2002


(3)           PROPERTY AND EQUIPMENT

Property and equipment consist of the following at July 31:

<TABLE>
<CAPTION>
                                                                                    2003            2002
                                                                                -------------    -----------
<S>                                                                            <C>            <C>
                         Computer and other equipment                          $     376,245  $     887,566
                         Furniture and fixtures                                        4,798         77,466
                         Leasehold improvements                                       77,342         77,342
                                                                                -------------    -----------
                                                                                     458,385      1,042,374
                         Less accumulated depreciation
                                 and amortization                                  (329,575)      (867,232)
                                                                                -------------    -----------

                                                                               $     128,810  $     175,142
                                                                                =============    ===========
</TABLE>

Included in computer and other  equipment  at July 31, 2003 are assets  recorded
under capitalized a lease amounting to $25,864, net of accumulated  depreciation
of $6,465.

Depreciation and amortization expense for the years ended July 31, 2003 and 2002
was $65,233 and $150,283, respectively.

(4)           CREDIT LINES

On January  12,  2000,  Proginet  established  a line of credit in the amount of
$100,000 with a bank. The interest rate is variable, based on prime plus 1%. The
line of credit expires on September 30, 2004, at which time the Company  intends
to renew this line of credit.  As of July 31, 2003, the Company has not borrowed
against this line of credit.

In May 2001, the Company  established an additional line of credit in the amount
of $350,000 with another bank. In April 2003,  this line of credit was increased
to $500,000.  The interest rate is variable  based on the bank's prime rate plus
1/2%. The line of credit is collateralized by accounts receivable of the Company
and expires May 31, 2004,  at which time the Company  intends to renew this line
of credit.  As of July 31, 2003, the Company has not borrowed  against this line
of credit.

(5)           RELATED PARTY TRANSACTIONS

During  fiscal 1999,  Joseph T. Mohen,  the founder of Proginet,  resigned as an
officer of the Company and entered  into an  employment  agreement  as "Chief of
Strategic Alliances" expiring September 30, 1999, after which time Mr. Mohen was
no longer  associated  with the Company.  At such time, Mr. Mohen agreed to sell
750,000  shares of Proginet  common  stock to the Company for $.31 a share,  the
market price of the stock at the time such  agreement  was  consummated.  Of the
$232,500  purchase  price,  $50,000 was paid on the date of the  agreement.  The
remainder was paid over a 36-month period through March 2002.


                                       26
<PAGE>

                              PROGINET CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2003 AND 2002




(6)           INCOME TAXES

There was no current or deferred  tax expense  (benefit)  recorded  for the year
ended July 31, 2003 and 2002.  The  Company's  2002  provision  for income taxes
reflects the utilization of net operating loss (NOL) carry forwards of which the
tax benefit  had not been  previously  recorded  due to the  establishment  of a
valuation allowance. The following is a reconciliation of the tax provision with
the amount  obtained by applying the statutory  U.S.  Federal income tax rate to
the income (loss) before income taxes:

<TABLE>
<CAPTION>
                                                                             2003        2002
                                                                          ---------    ---------
<S>                                                                       <C>          <C>
Expense (benefit) at statutory rate                                       $(187,000)   $  67,000
Increases (reductions) in taxes due to:
     Nondeductible expenses                                                   1,000        2,000
     State tax expense, net of federal benefit                                    -       14,000
     Change in valuation allowance and utilization of NOL carryforwards     186,000      (83,000)
                                                                          ---------    ---------
Income tax provision                                                      $       -    $       -
                                                                          =========    =========
</TABLE>


At July 31, 2003, the Company had available Federal NOL carry forwards amounting
to  $8,310,000  and  research  and  development  tax credit  carry  forwards  of
$332,000, which expire in fiscal years 2007 through 2023. Under current tax law,
utilization  of net operating  losses will be restricted if an ownership  change
were to occur.  In  addition,  their use is  limited to future  earnings  of the
Company.


                                       27
<PAGE>

                              PROGINET CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2003 AND 2002

For  income tax  purposes  for the year ended July 31,  2003,  the  Company  was
required to change to the accrual method of accounting,  previously, the Company
utilized the cash method of accounting  for revenues and expenses.  The types of
temporary differences, which represent items that are reflected in the financial
statements and the tax return at different times that give rise to a significant
portion of the deferred tax asset  (liability) and their approximate tax effects
are as follows:

<TABLE>
<CAPTION>
                                                             2003                2002
                                                       ---------------      --------------
<S>                                                   <C>                   <C>
Deferred tax assets
       Net operating loss carryforward             $        3,009,000  $        2,847,000
       Accounts payable and other                             108,000             144,000
       Deferred revenue                                       620,000             659,000
       Deferred contract costs                                 16,000              31,000
       Purchased software                                     566,000             512,000
       Property and equipment                                  17,000              28,000
       Research and development carryforward                  332,000             332,000
       Unbilled rent                                           40,000              48,000
                                                       ---------------      --------------
Gross deferred tax asset                                    4,708,000           4,601,000
Valuation allowance                                       (2,754,000)         (2,568,000)
                                                       ---------------      --------------
                 Deferred tax asset                         1,954,000           2,033,000

Deferred tax liabilities
       Capitalized software development costs               1,596,000           1,561,000
       Accounts receivable                                    346,000             455,000
       Prepaid expenses                                        12,000              17,000
                                                       ---------------      --------------
                        Deferred tax liability              1,954,000           2,033,000
                                                       ---------------      --------------
                 Net deferred tax asset            $                -  $                -
                                                       ===============      ==============
</TABLE>

At July 31,  2003 and 2002,  the  Company  has  provided a  valuation  allowance
against its net deferred tax assets as the Company does not believe  realization
is more likely than not in light of the  Company's  operating  results in recent
years.

(7)           TREASURY STOCK

In  September  2002,  the Board of  Directors  authorized  the purchase of up to
1,000,000 shares of Proginet common stock under a stock repurchase program.  The
repurchase  program  commenced on October 9, 2002 and was to continue  until the
earlier  of (i) the date on which  1,000,000  shares of common  stock  have been
acquired or (ii) October 8, 2003.  The purchases  were to be made by the Company
from  time  to  time  on the  TSX  Venture  Exchange  ("TSX")  at the  Company's
discretion and are dependent on market conditions. On April 1, 2003, the Company
voluntarily  delisted from the TSX. This action  terminated the stock repurchase
program  authorized by the Board of Directors in September  2002. For the period
from  October 9, 2002 through  April 1, 2003,  4,500 shares of common stock were
purchased  pursuant  to this stock  repurchase  program.  Immediately  following
delisting from the TSX Exchange,  the Company commenced another stock repurchase
program (the  "Program") for the purchase of up to 1,000,000  shares of Proginet
common stock.  The purchases will be made from time to time on the OTC-BB at the
Company's discretion and are dependent on market conditions and SEC regulations.
As of April  30,  2003,  no  shares of common  stock  were  purchased  under the
Program.


                                       28
<PAGE>

                              PROGINET CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2003 AND 2002

(8)           STOCK PURCHASE WARRANTS

In the first  quarter of fiscal 2000,  Proginet  entered into an agreement  with
Mallory Factor Inc.  ("MFI") whereby MFI will provide  guidance and support on a
"Strategic  Corporate and Communications  Counseling Program" for Proginet.  The
terms of the entire  agreement  were  approved by the TSX Venture  Exchange  and
provided for granting of up to 500,000  warrants  exercisable at a price of $.54
per share depending upon achievement of pre-determined  goals. The first 150,000
warrants vested upon  regulatory  approval of the agreement and the next 100,000
vested upon Proginet's  stock price reaching $1.25.  The next 250,000 would have
vested, if and only if, two criteria were satisfied:  (i) Proginet's achievement
of a listing  on the  United  States  OTC:BB  and (ii)  Proginet's  stock  price
reaching established thresholds.

On December 28,  2001,  the Company  amended the MFI  agreement.  The  amendment
required the exchange of the remaining  250,000 unvested warrants (the "original
warrants"), exercisable at $.54 per share for 125,000 fully vested warrants (the
"exchanged  warrants")  exercisable at $.22,  which  represented the fair market
value of the  Company's  common stock on the date of the  amendment.  A non-cash
charge to  operations  amounting  to $25,175  (as  determined  by  Black-Scholes
pricing  model) was  recorded  by the  Company  for the year ended July 31, 2002
relating to the amendment. As of July 31, 2003, 375,000 warrants are outstanding
under the MFI  Agreement,  as amended,  and expire on various  dates  commencing
October 2004 through December 2006.

(9)           STOCK OPTION PLANS

Under the 1997 Stock  Option  Plan and 1995  Equity  Incentive  Plan (the "prior
Plans"),  as amended,  the Company had reserved an aggregate of 2,000,000 shares
of common stock for grants to  employees,  directors  and  consultants.  In June
2000,  the Board of  Directors  authorized  the increase of the number of shares
reserved  under the 1997 Stock Option Plan to 2,500,000.  In October  2000,  the
Board of  Directors  approved the 2000 Stock Option Plan (the "2000 Plan") which
limits  the  aggregate  number of shares  available  under the 2000 Plan and the
prior Plans to  2,500,000.  At the  Company's  Annual  Stockholders'  Meeting on
November 14, 2000, the  stockholders  approved the 2000 Plan and the increase in
the number of shares  reserved  under the prior  Plans,  up to an  aggregate  of
2,500,000.  Grants  under  the  2000  Plan can be in the  form of  qualified  or
non-qualified  stock  options.  Qualified  stock options  (which are intended to
qualify as incentive  stock  options  under  Section  422A of the United  States
Internal  Revenue Code) may be awarded only to employees of the Company and must
have an  exercise  price of not less than 100% of the fair  market  value of the
Company's common stock on the grant date (110% for qualified  options granted to
any 10% or greater  stockholder  of the Company).  The 2000 Plan provides that a
committee  selected by the Board of Directors of the Company will administer the
2000 Plan and have full authority to determine the identity of the recipients of
the options  and the number of shares  subject to each  option.  The term of any
option may be fixed by the  committee but in no event shall exceed 10 years from
the date of grant.

Transactions  involving  the 2000 Plan and the prior  Plans  are  summarized  as
follows:

<TABLE>
<CAPTION>
                                             SHARES SUBJECT         EXERCISE PRICE         WEIGHTED AVERAGE
                                               TO OPTION               PER SHARE            EXERCISE PRICE
        ---------------------------------    ----------------     -------------------     --------------------
<S>                                                <C>              <C>                         <C>
        Outstanding at August 1, 2001              1,643,800        $0.25 - $1.85               $ 0.73
                                             ----------------
            Granted                                  678,000        $0.16 - $0.37               $ 0.26
            Forfeited                              (293,300)        $0.25 - $1.70               $ 0.68
                                             ----------------
        Outstanding at July 31, 2002               2,028,500        $0.16 - $1.85               $ 0.58
            Granted                                   37,000        $0.17 - $0.25               $ 0.23
            Forfeited                              (187,500)        $0.16 - $0.71               $ 0.40
                                             ----------------
        Outstanding at July 31, 2003               1,878,000        $0.16 - $1.85               $ 0.59
                                             ================
</TABLE>


                                       29
<PAGE>

                              PROGINET CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2003 AND 2002

The  following  table  summarizes   information  about  employee  stock  options
outstanding and exercisable at July 31, 2003:

<TABLE>
<CAPTION>
                                       OPTIONS OUTSTANDING                             OPTIONS EXERCISABLE
                         Number             Weighted -            Weighted           Number          Weighted -
                       outstanding      average remaining         -average        exercisable         average
                       at July 31,       contractual life         exercise        at July 31,         exercise
 Exercise prices          2003               (years)               price              2003             price
------------------    --------------    -------------------     -------------     -------------     -------------
<C>                         <C>                 <C>             <C>                    <C>          <C>
$0.16 - $0.37               622,000             9               $    0.25              530,250      $       0.24
$0.43 - $0.68               664,000             7                    0.63              639,000              0.63
$0.71 - $1.85               592,000             7                    0.91              582,000              0.91
                      --------------                                              -------------


                          1,878,000             8               $    0.60            1,751,250      $       0.61
                      ==============                                              =============
</TABLE>

All options have been granted  with  exercise  prices at the market price of the
stock at the date of the grant.

In fiscal 2002, the Board of Directors granted stock options to a director and a
consultant,  for executive  recruitment  services, to purchase 60,000 and 25,000
shares of common stock, respectively, at exercise prices of $.26 and $.16, which
represent the fair market value of the  underlying  common stock on the dates of
grant. A charge to operations amounting to $14,384 was recorded for these grants
for the year ended July 31, 2002.

(10)          MANAGEMENT AGREEMENTS

The Company has entered into management  continuity  agreements with certain key
employees  whereby a change of control in the  Company  occurs,  the  agreements
provide for:

         o        A lump sum payment equal to the present value of the aggregate
                  of the key employee's base compensation  (equal to the highest
                  rate of base  compensation  in effect  during  the  three-year
                  period  immediately  preceding the  termination)  for a stated
                  period  following the termination and the aggregate  amount of
                  annual bonuses (equal to the highest  aggregate amount of such
                  bonuses  that the  executive  received in any one of the three
                  years preceding the termination) that the executive would have
                  received for a stated period following the termination.

         o        Continuation at the Company's expense of all benefits to which
                  the executive was entitled prior to  termination  for a stated
                  period.


                                       30
<PAGE>

                              PROGINET CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2003 AND 2002

(11)         COMMITMENTS AND CONTINGENCIES

         LEASES
The Company leases office space under noncancelable operating leases expiring in
fiscal  2006.  The  Company  also  leases  certain  computer  equipment  under a
noncancelable capital lease expiring in fiscal 2005. The following is a schedule
of future  minimum  payments,  by year and in the  aggregate,  under the capital
lease and noncancelable  operating leases with initial or remaining terms of one
year or more at July 31, 2003:

<TABLE>
<CAPTION>
      Year ending July 31,                      Capital lease         Operating leases
---------------------------------              -----------------    ---------------------
<S>                                         <C>                  <C>
              2004                          $            10,200  $               241,000
              2005                                        7,057                  250,000
              2006                                                               152,000
                                               -----------------    ---------------------
Total minimum lease payments                $            17,257  $               643,000
                                               -----------------    ---------------------

Amounts representing interest                             1,641
                                               -----------------

Present   value  of  net   minimum   lease  $            15,616
payments ($9,094 of which is current)
                                               =================
</TABLE>


Rental  expense  charged to  operations  was $166,376 and $184,184 in the fiscal
years ended July 31, 2003 and 2002, respectively.

         LITIGATION AND CLAIMS
The  Company is  involved in various  claims and legal  actions in the  ordinary
course of  business.  It is the opinion of  Management  that the outcome of such
litigation  will not have a material  adverse effect on the Company's  financial
condition and results of operations.

(12)          CONCENTRATION OF RISKS

Revenues  for the years ended July 31, 2003 and 2002  included  sales in foreign
countries of approximately $767,992 and $1,064,345, respectively. As of July 31,
2003 and 2002, 3 different  customers  accounted for  approximately 66% and 63%,
respectively of total trade and installment  accounts  receivables.  No customer
represented 10% or more of revenues in the years ended July 31, 2003 and 2002.

(13)          RETIREMENT PLAN

The  Company  maintains  a  401(k)  savings  plan  which  covers  all  full-time
employees.  Employees  become eligible for  participation  in the plan after one
year of service and attainment of age twenty-one.  Under the plan, employees may
contribute  up to 15% of their  salary to the plan.  The Company may match up to
100%, as determined by the Board of Directors, of the employee's contribution up
to 10% of eligible  compensation.  The Company's  contributions were $52,559 and
$89,690 for the years ended July 31, 2003 and 2002, respectively.


                                       31
<PAGE>

ITEM 8.  CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON ACCOUNTING  AND
         FINANCIAL DISCLOSURE

The  Company  filed a  current  report  on Form  8-K and  Form  8-K/A  with  the
Securities  and  Exchange  Commission  on July  21,  2003  and  July  24,  2003,
respectively,  with  respect to such  Form's  Item 4,  Changes  in  Registrant's
Certifying Accountants.

ITEM 8A.      CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The management of Proginet with the  participation of Proginet's chief executive
officer  and  chief   financial   officer,   performed  an   evaluation  of  the
effectiveness  of Proginet's  disclosure  controls and procedures (as defined in
Rule  13a-15  under the  Securities  Exchange  Act of 1934) as of the end of the
period covered by this Annual Report on Form 10-KSB.  Based on that  evaluation,
Proginet's  chief executive  officer and chief financial  officer have concluded
that such disclosure controls and procedures were effective as of the end of the
period  covered by this Annual  Report on Form  10-KSB to ensure  that  material
information relating to Proginet is made known to them,  particularly during the
period for which  periodic  reports of Proginet  including this Annual Report on
Form 10-KSB are being prepared.


                                       32
<PAGE>

                                    PART III

ITEM 9.  DIRECTORS,   EXECUTIVE   OFFICERS,   PROMOTERS  AND  CONTROL   PERSONS,
         COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT.

The information  called for by this Item is set forth under the caption "Section
16(a) Beneficial Ownership Reporting  Compliance" in the Proxy Statement for the
Annual  Meeting  of  Stockholders  to be  held  on  November  25,  2003  and  is
incorporated herein by reference.

Code of Ethics

The Company has adopted a "Code of Business  Conduct and Ethics" that applies to
all Proginet employees and Board of Directors,  including  Proginet's  principal
executive officer,  principal financial officer, principal accounting officer or
controller,  or persons performing  similar  functions.  A copy of the Company's
Code of  Business  Conduct  and Ethics is  attached as an exhibit to this annual
report on Form 10-KSB.  The Company intends to post the Code of Business Conduct
and  Ethics  and  related  amendments  or  waivers,  if any,  on its  website at
www.proginet.com.  Information  contained on the Company's website is not a part
of this report. Copies of the Company's Code of Business Conduct and Ethics will
be provided  free of charge upon written  request to Proginet  Corporation,  200
Garden City Plaza,  Garden City,  New York 11530,  Attention:  Debra A. DiMaria,
CFO.

ITEM 10.      EXECUTIVE COMPENSATION

The  information  called  for by  this  Item  is set  forth  under  the  caption
"Executive  Compensation"  in the Proxy  Statement  for the  Annual  Meeting  of
Stockholders  to be held on November 25,  2003,  and is  incorporated  herein by
reference.

ITEM 11.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information called for by this Item is set forth under the caption "Security
Ownership of Certain  Beneficial  Owners and  Management" in the Proxy Statement
for the Annual  Meeting of  Stockholders  to be held on November 25, 2003 and is
incorporated herein by reference.

ITEM 12.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information  called for by this Item is set forth under the caption "Certain
Relationships  and Related  Transactions"  in the Proxy Statement for the Annual
Meeting of  Stockholders  to be held on November  25,  2003 and is  incorporated
herein by reference.


                                       33
<PAGE>


ITEM 13.      EXHIBITS AND REPORTS ON FORM 8-K

(A) EXHIBITS

Unless  otherwise noted, the exhibits below are incorporated by reference to the
Company's Registration Statement on Form 10-SB/A, filed with the SEC on July 18,
2000:

<TABLE>
<CAPTION>

EXHIBIT NO.             EXHIBIT NAME

<S>                     <C>
3(i)                    Certificate of Incorporation.
3(i)(a)                 Certificate of Amendment of Certificate of Incorporation dated December 2, 1996.
3(ii)                   Amended and Restated Bylaws of the Registrant.**
10.1                    Form of Employee Confidential Information and NonCompetition Agreement.
10.2                    Form of Confidential Information and NonCompetition Agreement For Consultants.
10.3                    Investor Relations Agreement.
10.4                    Form of Software License Agreement.
10.5                    Form of Distributor Agreement.
10.6                    Form of OEM Agreement.
10.7                    Management  Continuity  Agreement -  Kevin M. Kelly,  Chief  Executive  Officer and
                        President***
10.8                    Management  Continuity  Agreement -  Debra A. DiMaria,  Chief Financial Officer and
                        Corporate Secretary***
10.9                    Management  Continuity  Agreement - Arne  Johnson,  Senior  Vice  President  for
                        Strategic Planning & Alliances***
10.10                   Management Continuity Agreement - Thomas Bauer, Chief Technology Officer***
10.11                   Management Continuity Agreement - Kevin Bohan, Chief Information Officer***
10.12                   Independent  Directors Stock Option Plan,  amended and restated as of February 21,
                        1995.
10.13                   1995 Equity Incentive Plan, amended and restated as of December 5, 1995.
10.14                   Form of Incentive Stock Option Agreement.
10.15                   Stock Redemption  Agreement between the Company and Joseph T. Mohen, dated October
                        20, 1998.
10.16                   Consulting   Agreement  between  the  Company  and  Mallory  Factor,  Inc.,  dated
                        September 22, 1999.
10.17                   1997 Stock Option Plan, as amended and restated as of November 14, 2000
10.18                   2000 Stock Option Plan*
23                      Consent of BDO Seidman LLP***
23.1                    Consent of Grant Thornton LLP ***
31.1                    Section 302 Certification (Chief Executive Officer)***
31.2                    Section 302 Certification (Chief Financial Officer)***
32                      Section 906 Certifications***
99.1                    Code of Business Conduct and Ethics***

</TABLE>

*        Incorporated  by  reference  to the  Company's  Proxy  Statement  dated
         November 14, 2000

**       Incorporated  by reference to the Company's  Form 10-KSB filed with the
         SEC on September 18, 2002

***      Filed herewith

(B) REPORTS ON FORM 8-K

         (1)      The  Registrant  filed a Report on Form 8-K dated June 2, 2003
                  to report an event under Items 7 and 12.

         (2)      The Registrant  filed a Report on Form 8-K dated July 14, 2003
                  to report an event under Item 4.

         (3)      The  Registrant  filed a Report on form  8-K/A  dated July 14,
                  2003 to report an event under Item 7.

                                       34
<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Garden City,
State of New York, on the 17th day of September, 2003.


                                       PROGINET CORPORATION


                                       BY: /s/ Kevin M. Kelly
                                           -------------------------------------
                                           Kevin M. Kelly
                                           President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the  following  persons on behalf of the  registrant in
the capacities and on the date indicated.

<TABLE>
<CAPTION>
                NAME                                TITLE                                DATE
                ----                                -----                                ----

<S>                                   <C>                                 <C>
/s/Kevin M. Kelly
---------------------                 President, Chief Executive          September 17, 2003
Kevin M. Kelly                        Officer and Director


/s/Debra A. DiMaria                   Corporate Secretary and Chief       September 17, 2003
---------------------                 Financial and Accounting Officer
Debra A. DiMaria



/s/John C. Daily                      Chairman                            September 17, 2003
---------------------
John C. Daily



/s/ Stephen Sternbach                 Director                            September 17, 2003
---------------------
Stephen Sternbach


/s/Dr. E. Kelly Hyslop                Director                            September 17, 2003
---------------------
Dr. E. Kelly Hyslop
</TABLE>


                                       35