SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

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

                        FOR YEAR ENDED DECEMBER 31, 2003

                               ZEROS & ONES, INC.
                             ---------------------
             (Exact Name of Registrant as specified in its Charter)

                        COMMERCIAL LABOR MANAGEMENT, INC.
                       ----------------------------------
                  (Former Name: Change Effective July 1, 1999)

              NEVADA                                          88-0241079
  -------------------------------                         ------------------
  (State or other Jurisdiction of                           I.R.S.Employer
  Incorporation or Organization                           Identification No.)

              1299 Ocean Avenue, Suite 900 - Santa Monica, CA 90401
            --------------------------------------------------------
              (Address of Principal Executive Offices)(Zip Code)

       Registrant's Telephone Number, Including Area Code: (310) 496-3006

     Indicate  by check mark  whether the  Registrant  (i) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant  was required to file such reports) and (ii) has been subject to such
filing requirements for the past 90 days.

                     Yes                                        No
                      X
                    -----                                      -----

<PAGE>
                                ARMANDO C. IBARRA
                          CERTIFIED PUBLIC ACCOUNTANTS
                          (A Professional Corporation)


Armando C. Ibarra, C.P.A.                           Members of the
                                                    California Society of
Armando Ibarra, Jr., C.P.A.                         Certified Public Accountants


To the Board of Directors of
Zeros & Ones, Inc.



                          INDEPENDENT AUDITORS' REPORT


We have  audited the  accompanying  balance  sheets of Zeros & Ones,  Inc. as of
December 31, 2003 and 2002 and the related statements of operations,  changes in
stockholders'  equity and cash flows for the years then ended.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our 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 consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of Zeros & Ones, Inc.
as of December 31, 2003 and 2002, and the results of their  operations and their
cash flows for the years then ended in  conformity  with  accounting  principles
generally accepted in the United States of America.



/s/Armando C. Ibarra
----------------------------
Armando C. Ibarra, CPA-APC

April 14, 2004
Chula Vista, California


                                       2
<PAGE>
<TABLE>
<CAPTION>
                    ZEROS & ONES, INC. AND SUBSIDIARIES
                        Consolidated Balance Sheets




<S>                                                                           <C>                      <C>
                                                                                    As of                    As of
                                                                                December 31,             December 31,
                                                                                    2003                     2002
                                                                              ------------------       ------------------


                                  ASSETS

      Current Assets
            Cash                                                                $        21,637        $         281,471
            Trade accounts receivable - net of allowance for doubtful accounts          147,736                  653,861
            Prepaid income taxes                                                          5,000                   10,000
            Deferred tax benefit                                                        122,254                  122,254
                                                                              ------------------       ------------------
      Total Current Assets                                                              296,627                1,067,586

      Property & Equipment - Net of Accumulated Depreciation &
          Amortization                                                                  417,708                  406,890

      Other Assets
            Intangible assets - net of accumulated amortization                       4,583,189                3,833,684
            Other assets                                                                226,019                  126,120
            Workers' comp. premium                                                       23,090                   23,090
            Workers' comp. deposit                                                    1,422,932                  996,689
            Workers' comp. claims                                                       214,174                  214,174
            Rent deposit                                                                  5,625                    5,625
            Other deposits                                                                1,685                    1,685
                                                                              ------------------       ------------------
      Total Other Assets                                                              6,476,714                5,201,067

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

            TOTAL ASSETS                                                        $     7,191,049        $       6,675,543
                                                                              ==================       ==================
</TABLE>









       See Auditors' Report and Notes to Consolidated Financial Statements

                                       3
<PAGE>
<TABLE>
<CAPTION>
                    ZEROS & ONES, INC. AND SUBSIDIARIES
                        Consolidated Balance Sheets
                                  (continued)


                 LIABILITIES & STOCKHOLDERS' EQUITY / (DEFICIT)



<S>                                                                           <C>                      <C>
                                                                                    As of                    As of
                                                                                December 31,             December 31,
                                                                                    2003                     2002
                                                                              ------------------       ------------------
      Current Liabilities
            Accounts payable and accrued expenses                               $       244,021        $         538,012
            Accrued payroll and vacation                                                      -                        -
            Payroll taxes payable                                                             -                  185,876
            Employee benefits payable                                                         -                   33,573
            Security deposits                                                                 -                  420,000
            Short term notes for workers' comp. deposits                                      -                1,363,359
            Convertible notes                                                            50,000                   25,000
            Lines of credit                                                                   -                  187,114
            Credit cards payable                                                              -                   36,281
            Deferred stock option compensation                                                -                  400,300
            Due to officer                                                              214,145                  129,145
            Current portion of obligations under capitalized leases                           -                   44,817
                                                                              ------------------       ------------------
      Total Current Liabilities                                                         508,166                3,363,477

      Long-Term Liabilities
            Client workers' comp. deposits                                                    -                   78,792
            Obligations under capitalized leases, less current maturities                     -                    9,249
                                                                              ------------------       ------------------

      Total Long-Term Liabilities                                                             -                   88,041
                                                                              ------------------       ------------------
      TOTAL LIABILITIES                                                                 508,166                3,451,518

      STOCKHOLDERS' EQUITY / (DEFICIT)
           Preferred stock, ($.001 par value, 2,000,000 shares authorized;
            none issued and outstanding)                                                      -                        -
           Common stock, ($.001 par value, 100,000,000 shares authorized;
           87,819,858 and 48,511,858 shares issued and outstanding as of
            December 31, 2003 and December 31, 2002, respectively)                       87,820                   48,512
           Paid-in capital                                                              190,000               20,886,872
           Accumulated deficit during development stage                             (17,638,138)             (17,638,138)
           Retained earnings / (deficit)                                               (257,827)                (257,827)
                                                                              ------------------       ------------------

      Total Stockholders' Equity / (Deficit)                                        (17,618,145)               3,039,419
                                                                              ------------------       ------------------
             TOTAL LIABILITIES &
                                  STOCKHOLDERS' EQUITY / (DEFICIT)              $   (17,109,979)       $       6,575,937
                                                                              ==================       ==================
</TABLE>
       See Auditors' Report and Notes to Consolidated Financial Statements

                                       4
<PAGE>
<TABLE>
<CAPTION>

                       ZEROS & ONES, INC. AND SUBSIDIARIES
                      Consolidated Statements of Operations


<S>                                                  <C>                     <C>
                                                        Year Ended              Year Ended
                                                       December 31,            December 31,
                                                           2003                    2002
                                                     -----------------       -----------------



     Revenues                                        $      9,980,272        $     46,652,291
     Cost of sales                                         (9,646,053)            (44,533,259)
                                                     -----------------       -----------------

     Gross Profit                                             334,219               2,119,032

     Research & development expense                            75,000                       -
     General & administrative expenses                        490,769               2,239,162
                                                     -----------------       -----------------

     Total Expenses                                           565,769               2,239,162

     Other Income / (Expenses)

     Miscellaneous income                                           -                       -
     Finance charges                                          (21,285)                (63,028)
     Interest expense                                          (4,992)                (12,317)
                                                     -----------------       -----------------

     Total Other Income / (Expenses)                          (26,277)                (75,345)
                                                     -----------------       -----------------

     Net Income / (Loss) Before Taxes                        (257,827)               (195,475)

     Income Tax Benefit (Provision)                                 -                 122,254
                                                     -----------------       -----------------

     Net Income / (Loss)                                     (257,827)                (73,221)
                                                     =================       =================


     Basic earnings / (loss) per share               $          (0.01)       $          (0.00)
                                                     =================       =================

     Weighted average number of
       common shares outstanding                           48,511,858              40,511,858
                                                     =================       =================
</TABLE>

       See Auditors' Report and Notes to Consolidated Financial Statements

                                       5
<PAGE>
<TABLE>
<CAPTION>

                                                ZEROS & ONES, INC. AND SUBSIDIARIES
                                     Statement of Changes in Stockholders' Equity / (Deficit)
                                          From January 1, 1999 through December 31, 2003
--------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>        <C>       <C>     <C>        <C>        <C>        <C>             <C>     <C>
                                                                                                  Accumulated
                                     Common Stock      Preferred Stock   Additional  Receivable    Deficit      Retained   Total
                                   Shares     Amount   Shares   Amount   Paid - in     from        During       Earnings
                                                                          Capital   Stockholder   Development   (Deficit)
                                                                                                   Stage
---------------------------------------------------------------------------------------------------------------------------------

 Balance at  January 1, 1999      7,038,000  $ 55,000  605,180 $ 6,051,800 $  247,932       $ - $ (6,117,654)      $ -  $ 237,078

 Shares issued to shareholders    2,663,823         -        -           -          -         -            -         -          -
 of CLMI

 Shares issued for cash                   -         -  252,128   2,521,284          -         -            -         -  2,521,284

 Shares issued for assets
 purchased at
 transferor's basis                 660,000         -        -           -    421,957  (292,300)           -         -    129,657

 Exchange of preferred stock
 to common stock at
 exchange ratio                   8,773,878 8,573,084 (857,308) (8,573,084)         -         -            -         -          -

 Shares issued for services         122,724        61        -           -    191,870         -            -         -    191,931

 Shares issued for deferred
 offering cost                      150,000        50        -           -    257,950         -            -         -    258,000

 Shares issued for private
 placement                          122,727        41        -           -    179,959         -            -         -    180,000

 Exercise of warrants                92,883        31        -           -     92,852         -            -         -     92,883

 Cancellation of shares          (2,120,541)        -        -           -          -         -            -         -          -

 Net loss,  December 31, 1999             -         -        -           -          -         -   (3,578,711)        - (3,578,711)
---------------------------------------------------------------------------------------------------------------------------------
 Balance,  December 31, 1999     17,503,494 8,628,267        -           -  1,392,520  (292,300)  (9,696,365)        -     32,122
=================================================================================================================================

 Net proceeds from private
 placement and warrants           5,988,568     5,974        -           -  6,949,555         -            -         -  6,955,529

 Payments on receivable
 from stockholder                         -         -        -           -          -   202,500            -         -    202,500

 Write off of receivable
 from stockholder                         -         -        -           -          -    89,800            -         -     89,800

 Shares issued for offering
 services related
 to private placement               148,128       148        -           -    118,852         -            -         -    119,000

 Shares issued for services
 rendered                            55,000        55        -           -     90,145         -            -         -     90,200

 Allocation of par value to
 additional paid-in capital               -(8,610,749)       -           -  8,610,749         -            -         -          -

 Net loss,  December 31, 2000             -         -        -           -          -         -   (4,682,218)        - (4,682,218)
---------------------------------------------------------------------------------------------------------------------------------
 Balance,  December 31, 2000     23,695,190    23,695        -           - 17,161,821         -  (14,378,583)        -  2,806,933
=================================================================================================================================

 Shares issued for services          33,410        33        -           -     14,093         -           -          -     14,126

 Shares issued for services          90,000        90        -           -     24,173         -           -          -     24,263

 Shares issued for employee
 compensation                         3,000         3        -           -      1,425         -           -          -      1,428

 Exercise of warrants                80,258        81        -           -     24,570         -           -          -     24,651

 Options granted for services             -         -        -           -      2,400         -           -          -      2,400

 Exercise of warrants                10,000        10        -           -        (10)        -           -          -          -

 Shares issued for services         600,000       600        -           -     82,400         -           -          -     83,000

 Net loss,  December 31, 2001             -         -        -           -          -         -  (3,259,555)         - (3,259,555)
---------------------------------------------------------------------------------------------------------------------------------
 Balance,  December 31, 2001     24,511,858    24,512        -           - 17,310,872         - (17,638,138)             (302,754)
=================================================================================================================================
</TABLE>
      See Auditors' Report and Notes to Consolidated Financial Statements

                                       6
<PAGE>
<TABLE>
<CAPTION>

                                                ZEROS & ONES, INC. AND SUBSIDIARIES
                                  Statement of Changes in Stockholders' Equity / (Deficit) (cont'd)
                                          From January 1, 1999 through December 31, 2003
--------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>        <C>       <C>     <C>        <C>        <C>        <C>             <C>     <C>
                                                                                                  Accumulated
                                     Common Stock      Preferred Stock   Additional  Receivable    Deficit      Retained   Total
                                   Shares     Amount   Shares   Amount   Paid - in     from        During       Earnings
                                                                          Capital   Stockholder   Development   (Deficit)
                                                                                                   Stage
---------------------------------------------------------------------------------------------------------------------------------

 Shares issued for
 JEG acquisition                 24,000,000    24,000        -           -  3,576,000         -           -          -  3,600,000

 Net loss,  December 31, 2002             -         -        -           -          -         -           -   (257,827)  (257,827)
---------------------------------------------------------------------------------------------------------------------------------
 Balance,  December 31, 2002     48,511,858  $ 48,512        -      $    -$20,886,872       $ - $(17,638,138)$(257,827)$3,039,419
=================================================================================================================================
 Shares returned from JEG       (24,000,000)  (24,000)       -           -          -         -           -          -    (24,000)

 Shares issued for Allied
 Boston LOC Collateral           63,308,000    63,000        -           -          -         -           -          -     63,000

 Allocation of par value
 to additional paid in capital            -    50,000        -           -     50,000         -           -          -          -

 Net loss,  December 31, 2003             -         -        -           -          -         -           -          -          -
---------------------------------------------------------------------------------------------------------------------------------
 Balance,  December 31, 2003     87,819,858  $ 37,512        -      $    -$20,936,872       $ - $(17,638,138)$(257,827)$   39,000
=================================================================================================================================

</TABLE>
      See Auditors' Report and Notes to Consolidated Financial Statements

                                       7

<PAGE>
<TABLE>
<CAPTION>
              ZEROS & ONES, INC. AND SUBSIDIARIES
             Consolidated Statements of Cash Flows


<S>                                                                <C>                       <C>
                                                                      Year Ended                Year Ended
                                                                     December 31,              December 31,
                                                                         2003                      2002
                                                                   -----------------         -----------------

   CASH FLOWS FROM OPERATING ACTIVITIES

        Net loss                                                   $       (257,827)         $       (257,827)
        Depreciation expense                                                  4,700                   108,638
        Stock issued for services                                                 -                         -
        Loss on abandonment of leasehold                                          -                         -
        Loss on retirement of property & equipment                                -                         -
        (Increase)/Decrease in trade accounts receivable                    506,125                   506,125
        (Increase)/Decrease in employee advances - related party                  -                         -
        (Increase)/Decrease in prepaid expenses                               5,000                     5,000
        (Increase)/Decrease in prepaid income taxes                               -                         -
        (Increase)/Decrease in deferred tax benefit                               -                         -
        (Increase)/Decrease in workers' comp. premium                             -                         -
        (Increase)/Decrease in workers' comp. deposit                      (426,243)                 (426,243)
        (Increase)/Decrease in workers' comp. claims                              -                         -
        (Increase)/Decrease in rent deposit                                       -                         -
        (Increase)/Decrease in other deposits                                     -                         -
        Increase/(Decrease) in accounts payable & accrued exp.               76,314                  (293,991)
        Increase/(Decrease) in accrued payroll & vacation                         -                         -
        Increase/(Decrease) in payroll taxes payable                        511,281                  (185,876)
        Increase/(Decrease) in employee benefits payable                    584,808                   (33,573)
        Increase/(Decrease) in security deposits                                  -                   420,000
        Increase/(Decrease) in short term notes for workers' comp. deposits (90,189)               (1,363,359)
        Increase/(Decrease) in convertible notes                                  -                    25,000
        Increase/(Decrease) in client workers' comp. deposits                     -                   (78,792)
        Increase/(Decrease) in deferred rent                                      -                         -
        Increase/(Decrease) in deferred stock compensation                 (400,300)                 (400,300)
        Increase/(Decrease) in unearned revenue                                   -                         -
                                                                   -----------------         -----------------
        Net cash provided / (used) by operating activities                  513,669                (1,975,198)

   CASH FLOWS FROM INVESTING ACTIVITIES

        Acquisition of property and equipment                               (15,518)                 (137,715)
        Proceeds from disposal of property and equipment                          -                     4,037
        Intangible assets - net of accumulated amortization                (749,505)                 (749,505)
        Acquisition of intellectual property                                      -                         -
        Other assets                                                              -                         -
                                                                   -----------------         -----------------
        Net cash provided / (used) by investing activities                 (765,023)                 (883,183)
</TABLE>
      See Auditors' Report and Notes to Consolidated Financial Statements
<PAGE>

                                       8
<TABLE>
<CAPTION>
                       ZEROS & ONES, INC. AND SUBSIDIARIES
                  Consolidated Statements of Cash Flows, cont'd


<S>                                                                <C>                       <C>
                                                                      Year Ended                Year Ended
                                                                     December 31,              December 31,
                                                                         2003                      2002
                                                                   -----------------         -----------------
 CASH FLOWS FROM FINANCING ACTIVITIES

        Increase in due to officer                                           85,000                    93,530
        Payments on obligations under capitalized leases                    (24,775)                  (54,066)
        Proceeds from direct loans                                          190,000
        Proceeds from lines of credit                                             -                  (187,114)
        Proceeds from credit cards payables                                       -                   (36,281)
        Stock issued for acquisition of subsidiary                                -                 3,600,000
                                                                   -----------------         -----------------
        Net cash provided / (used) by financing activities                  250,225                 3,416,069
                                                                   -----------------         -----------------

       Net increase / (decrease) in cash                                 (2,608,156)                  557,688

       Cash at beginning of year                                                  -                 2,071,695
                                                                   -----------------         -----------------

       Cash at end of year                                         $         21,637          $      2,629,383
                                                                   =================         =================


   SUPPLEMENTAL DISCLOSURES OF CASH FLOW
   INFORMATION:

   Interest paid                                                   $              -          $        (26,277)
                                                                   -----------------         -----------------

   Income taxes paid                                               $              -          $          5,600
                                                                   -----------------         -----------------

   SUPPLEMENTAL SCHEDULE OF NON-CASH
   INVESTING AND FINANCING ACTIVITIES:

   Stock issued for acquisition of subsidiary                      $              -          $              -
                                                                   -----------------         -----------------

   Stock issued for services                                       $              -          $         66,868
                                                                   -----------------         -----------------
</TABLE>

       See Auditors' Report and Notes to Consolidated Financial Statements

                                       9
<PAGE>

                       ZEROS & ONES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                   Notes to Consolidated Financial Statements
                             As of December 31, 2003

NOTE 1.   HISTORY AND ORGANIZATION OF THE COMPANY

Zeros & Ones, Inc.  (formerly  Commercial  Labor  Management,  Inc.) is a Nevada
corporation  (the  "Company")  organized  October  19,  1988.  The  Company  was
originally  incorporated  in Nevada under the name Tokyo  Raiders on October 19,
1988. In 1990,  the Company  acquired  certain  rights to a pizza  franchise and
changed its name to Club USPN,  Inc. In June 1993,  the  Company  acquired  Sono
International,  Inc.  ("Sono"),  but those operations were  discontinued and the
shares of Sono were sold to the original  shareholders  of Sono.  In March 1995,
the Board approved the merger with Commercial Labor  Management,  Ltd. Which was
handled as a reverse merger, and also approved a name change to Commercial Labor
Management,  Inc.  The name change was made,  but the merger was  rescinded  and
never completed.

Effective July 1, 1999, the Company  entered into a Plan of  Reorganization  and
Asset Purchase Agreement to purchase 100% of the assets of Zeros & Ones, Inc., A
Delaware  corporation  ("ZOI-DE"),  and  Plans of  Reorganization  and  Exchange
Agreements to acquire 100% of the total issued and  outstanding  shares of stock
of (1) Quantum  arts,  Inc.("QA"),  (2) EKO  Corporation("EKO"),  (3)  Polygonal
Research  Corporation  ("PRC"),  (4) KidVision,  Inc. ("KV"), and (5) Wood Ranch
Technology  Group,  Inc.("WRTG"),  in exchange for the issuance of the Company's
common  stock plus the  issuance of a note in the amount of $300,000  payable to
the stockholder of QA for  reimbursement of expenses.  As of part of the overall
reorganization,  the Company also made an exchange offer to the  shareholders of
Pillar West Entertainment,  inc. ("PWE") to acquire 100% of the total issued and
outstanding  capital  stock  of PWE in  consideration  for the  issuance  of the
shareholders of PWE. Under the Plan of  reorganization,  QA, EKO, PRC, KV, WRTG,
PWE, and assets acquired from ZOI-DE,  referred as "the Group",  are merged into
one company and are accounted  for in a manner  similar to a pooling of interest
as if they  under  common  control.  After the  effective  date of the  business
combination of the Group and the Company, the original stockholders of the Group
own a  majority  of the  shares of  common  stock of the  Company.  The Group is
treated  as the  acquirer  in this  business  combination  under the  Accounting
Principal Board Pronouncement No. 16, paragraph 70, reverse to a reverse merger.
The business combination of the Group and the Company is accounted for under the
purchase  method in which the purchase price $207,500 cash paid and  liabilities
assumed of the Company  are  allocated  to the fair  market  value of assets and
liabilities  acquired.  The excess of the purchase price over the fair values of
the net assets acquired has been recorded as goodwill.

During  the first  quarter  of 2002,  the  Company  successfully  completed  the
acquisition of Joint Employers Group (JEG). JEG is now a wholly owned subsidiary
of the Company.  The consolidated  financial  statements include the accounts of
the Company and all of the wholly owned subsidiaries.

                                       10
<PAGE>
                       ZEROS & ONES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                   Notes to Consolidated Financial Statements
                             As of December 31, 2003

NOTE 2.   ACCOUNTING POLICIES AND PROCEDURES


a.   Business Activity

The  Company  creates  proprietary  technology  and  content-based  intellectual
property to advance the  convergence of the Internet with  television,  wireless
and  high-speed  networks.  In addition to fees  generated  from  development of
software,  content,  and other technology  products,  the Company may also, from
time to time,  receive  royalty income from sales of certain  software  products
developed for others. With the recent acquisition of Joint Employers Group (JEG)
the  Company now plans to provide  outsource  PEO  solutions  for  handling  all
aspects of human resources.


b.   Development Stage Enterprise

In prior periods the Company was  classified as a development  stage  enterprise
company  as  defined in  Statement  of  Financial  Accounting  Standards  No. 7,
"Accounting  and  Reporting  by  Development   Stage   Enterprises."  All  loses
accumulated  from the inception of Zeros & Ones, Inc.  through December 31, 2001
are  considered as part of the Company's  development  stage  activities.  As of
January  1,  2002 the  Company  is no  longer  considered  a  development  state
enterprise.


c.       Revenue Recognition

The Company  generally  recognizes  sales under  fixed-price-type  contracts  as
deliveries are made or at the completion of contractual  billing milestones that
equate to the completion of a specific component of the contract.


d.  Principles of Consolidation

The consolidated  financial  statements include the accounts of its wholly owned
subsidiaries of Quantum Arts, Inc., EKO Corporation,  Pillar West Entertainment,
Inc.  (PWE),  Polygonal  Research  Corporation,  KidVision,  Inc. and Wood Ranch
Technology Group, Inc., and Joint Employers Group. All significant  intercompany
transactions and balances have been eliminated.

                                       11
<PAGE>
                       ZEROS & ONES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                   Notes to Consolidated Financial Statements
                             As of December 31, 2003


NOTE 2.   ACCOUNTING POLICIES AND PROCEDURES (continued)


e. Property and Equipment

Property and equipment, recorded at cost, are depreciated or amortized using the
straight-line  method over the estimated  useful lives of the assets,  which are
generally three to five years.  Leasehold  improvements  are amortized using the
straight-line  method over the shorter of their  estimated  lives or lease.  The
Company  has  adopted  Statement  of  Financial  Accounting  Standards  No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of "(SFAS No. 121").  SFAS No. 121 requires that  long-lived  assets
and certain identifiable  intangibles be reviewed for impairment whenever events
or changes in  circumstances  indicate that the carrying  amount of an asset may
not be recoverable. Recoverability of asset to be held and used is measured by a
comparison  of the  carrying  amount of an asset to the  future  net cash  flows
expected  to be  generated  by the asset.  If such assets are  considered  to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amounts of the assets exceed their fair values of the assets. Assets to
be disposed of are  reported at the lower of the  carrying  amount of fair value
less cost of sell.  Adoption of this  statement  did not  materially  impact the
Company's financial position, results of operations or liquidity.


f.  Comprehensive Income

Comprehensive loss consists of net loss from operations only.


g.  Use of Estimates

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


h.  Cash Equivalents

The Company  considers  all highly liquid  investments  with a maturity of three
months or less to be cash equivalents.

                                       12
<PAGE>
                       ZEROS & ONES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                   Notes to Consolidated Financial Statements
                             As of December 31, 2003


NOTE 2.   ACCOUNTING POLICIES AND PROCEDURES (continued)


i. Net Loss per Share

All presented data reflects the retroactive  effect of the  three-for-one  stock
split on February 25, 2000.

For the period  ended  September  30,  2002,  the per share data is based on the
weighted  average  number  of  common  equivalents  shares  outstanding  and are
calculated in accordance  with the Financial  Accounting  Standards Board (FASB)
No. 128 and Staff  Accounting  Bulletin of  Securities  and Exchange  Commission
(SAB) No. 98 whereby common stock,  options or warrants to purchase common stock
or other potentially dilutive instruments issued for nominal  consideration must
be  reflected  in basic and  diluted  per share  calculation  for all periods in
manner similar to a stock split, even if anti-dilutive.


NOTE 3.  WORKERS' COMPENSATION DEPOSITS

The  Company's  subsidiary,  JEG, was  self-insured  for  workers'  compensation
purposes up to $75,000.  The Company  also  carried  third party  insurance  for
claims above this  threshold.  This third party  insurance  policy  required the
Company to  maintain  $1,400,000  in  deposits.  To help  fulfill  this  deposit
requirement the Company had to borrow funds from third parties,  these loans are
reflected in the balance sheet as short-term notes.


NOTE 4.   PROPERTY & EQUIPMENT

Depreciation expense totaled $108,638 for the year ended December 31, 2003.


NOTE 5.  INTANGIBLES

                                                           As of December 31,
                                                                 2002
                                                    ----------------------------


         Goodwill                                             $ 1,940,911
         Intellectual Property                                     20,000
         Customer List                                          2,000,000
                                                    ----------------------------


         Accumulated Amortization                                (127,227)

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

         Intangible Assets - Net                              $ 3,833,684
                                                    ============================

                                       13
<PAGE>
                       ZEROS & ONES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                   Notes to Consolidated Financial Statements
                             As of December 31, 2003



NOTE 6.  OBLIGATIONS UNDER CAPITALIZED LEASES

The Company leased computer  equipment from unrelated  parties under capitalized
leases, which were secured by the related assets.



NOTE 7.   OBLIGATIONS UNDER PROPERTY LEASE

The Company's subsidiary, JEG, entered into a lease agreement with a non-related
party to occupy  office  space on 12070  Telegraph  Road,  Suite  100,  Santa Fe
Springs,  Ca. The  commencement  date was May 1, 1999 with an  original  term of
three years and one three-year option, which JEG exercised. The Company plans to
make  this the  corporate  headquarters  and is in the  process  of  relocating.
Currently  the minimum  monthly rent is  $6,087.60,  and  management  expects to
exercise the option. Minimum rental payments per year are as follows:

         Year:                         2002             2003              2004
                                       ----             ----              ----

         Minimum rental:             $18,262          $73,056           $73,056



NOTE 8.   INCOME TAXES

For federal income tax purposes,  the Company has available a net operating loss
carryforward of approximately $17,711,359.  The net operating loss carryforwards
will expire twenty years from the date the loss was incurred.

A full valuation  allowance has been  established for the Company's net deferred
tax assets since the realization of such assets through the generation of future
taxable income is uncertain.

Under the Tax Reform  Act of 1986,  the  amount of  benefit  from net  operating
losses and tax credit carryfowards may be impaired,  or limited to, a cumulative
stock  ownership  change of  greater  than 50%,  as  defined,  over a three year
period.


                                       14

<PAGE>
                       ZEROS & ONES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                   Notes to Consolidated Financial Statements
                             As of December 31, 2003

NOTE 9.  CAPITAL STOCK

a.   Preferred stock

The  authorized  capital  stock of the  Company  includes  2,000,000  shares  of
preferred  stock,  par  value  $0.001  per  share,  none of which is  issued  or
outstanding.

b.  Common stock

During the first quarter of 2000,  pursuant to a Confidential  Private Placement
Memorandum, the Company sold 5,523,204 shares of the Company's common stock at a
purchase  price $1.46 per share and 5,523,204  warrants at an exercise  price of
$1.83  per  share.  The  Confidential  Private  Placement  was  exempt  from the
registration  provisions  of the Act  pursuant  to Section  4(2) of the Act,  as
transactions  by an issuer not involving  any public  offering.  The  securities
issued pursuant to the Confidential Private Placement were restricted securities
as defined in Rule 144. The offering  generated gross proceeds of  approximately
$8,100,000  subject to various offering costs.  Additionally,  150,000 shares of
the Company's common stock were issued for services  rendered in connection with
this confidential private placement.  An additional 180,300 warrants exercisable
until  March  31,  2005 at a price  of  $1.83  per  share  and  77,200  warrants
exercisable  until March 31, 2001 at a price of $5.00 per share, were issued for
services rendered in connection with this confidential  private placement during
2000.

During  February  2000,  the Company  amended its Articles of  Incorporation  to
provide for an increase in the number of  authorized  shares of common  stock to
100,000,000  par value $.001.  The Company also declared a  three-for-one  stock
split.  The stock  split was  effective  on  February  2000.  In July 2000,  the
Company's Board of Directors  authorized the adoption of the 2000 Employee Stock
Incentive  Plan  (the  "Plan").  Under  the Plan,  the  Company  may grant up to
4,500,000  stock  options to purchase  up to  4,500,000  share of the  Company's
common stock.

The Company  reallocated  $8,610,749 between common stock and paid in capital to
reflect the par value of shares outstanding as of December 31, 2000.

During  2001 a total of 527,420  warrants  were  issued for  services  provided,
300,000 of which were exercised  prior to December 31, 2001. On January 31, 2002
the Company issued  24,000,000 shares of its common stock for 100% of the common
stock of Joint Employers Group.

As of  December  31,  2002 the Company  had  48,511,858  shares of common  stock
outstanding. As of December 31, 2003 the Company had 87,819,858 shares of common
stock  outstanding.  However,  the Company has obtained a Writ of  Possession in
Superior  Court of California  entitling it to possession of 63,308,000 - shares
to be returned and subsequently cancelled by the Company.


                                       15
<PAGE>
                       ZEROS & ONES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                   Notes to Consolidated Financial Statements
                             As of December 31, 2003


NOTE 10.  STOCK OPTIONS

In July 2000,  the Company's  Board of directors  authorized the adoption of the
2000 Employee Stock Incentive Plan (the "Plan"). The Company's 2000 nonqualified
stock option plan permits the grant of stock options to any employee or director
of the Company.  Under the terms of the plan 4,500,000 shares are authorized for
issuance upon exercise of options.  Under the  nonqualified  plan,  options have
been  granted  with an  exercise  price  equal to the fair  market  value of the
Company's  stock on the date of the grant and expire  ten years  after the grant
date.  Vesting is over a four-year  period  commencing  with the employees' hire
date,  with  portions  of a grant  becoming  exercisable  at one year  after the
vesting  start date and then  one-thirty-sixth  (1/36) per month to complete the
four year vesting.

The  Company  has  elected to apply APB  Opinion  No. 25 in  accounting  for the
non-qualified  stock option  plan.  Therefore,  the Company  does not  recognize
compensation  expense for the fixed stock options  because the exercise price of
the  option  equals  the fair  value of the stock on the  effective  date of the
grant. Currently outstanding options are accounted for as variable options under
APB Opinion No. 25. Expense is recognized at the end of each fiscal period based
on the  difference  between  market  price at that time and the option  exercise
price over the  vesting  period of the  options.  The Company did not record any
expense for the year ended December 31, 2002. No additional  options were issued
for the year ended December 31, 2002.

NOTE 11.  LITIGATION

The Company is plaintiff  against  defendant Allied Boston Group,  First Global,
Inc., Allied Boston International,  and their affiliates (Allied Boston Group et
al), which failed to release $2 million  dollars on a  fully-executed  Letter of
Credit (ID# 031402/1273)  delivered by Zeros & Ones and JEG jointly. The Company
obtained  an Order  For Writ of  Possession  in  Superior  Court of the State of
California for return of all collateral shares issued. The Company seeks further
damages against defendant Allied Boston et al.

In May 2002, the longstanding  litigation  between Paul Frank  Industries,  Inc.
("PFI") and Zeros & Ones, Inc. ("Z&O") came to a conclusion. Both parties agreed
to resolve their claims against each other on mutually  agreeable  terms.  Under
the terms of the settlement, which is confidential,  PFI has been making certain
agreed payments over the course of 18 months, and after those payments have been
completed,  the parties have agreed that the entire  lawsuit will be  dismissed.
This has now occurred.

The  remaining  legal  matter  between  Steve  Schklair  and Zeros & Ones,  Inc.
concerning  equipment  leases was  scheduled to be continued in October of 2003.

                                       16
<PAGE>
                       ZEROS & ONES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                   Notes to Consolidated Financial Statements
                             As of December 31, 2003

Both  plaintiff and defendant  were present and appeared in court when the judge
ordered an additional  continuance  to February of 2004.  Since,  the matter has
been again extended to June of 2004.

NOTE 12.   GOING CONCERN

The Company's  financial  statements are prepared  using the generally  accepted
accounting  principles  applicable to a going concern,  which  contemplates  the
realization  of assets and  liquidation  of  liabilities in the normal course of
business.  However,  the Company has minimal current source of revenue.  Without
realization  of  additional  capital,  it would be  unlikely  for the company to
continue as a going concern.  Management is currently seeking additional capital
through a variety of initiatives.


NOTE 13.  DEVELOPMENT STAGE

In subsequent  years the Company was  classified as a development  stage company
based on accounting  guidelines.  However,  on January 31, 2002 Company acquired
Joint Employers Group,  which has had a history of significant  revenues.  As of
January 1, 2002 the Company will no longer be classified as a development  stage
company.


NOTE 14. SUBSEQUENT EVENT

March 31,  2003 the  merger  with Joint  Employers  Group was  rescinded.  Thus,
subsequent reports will not include the operations of Joint Employers Group.

                                       17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION

CAUTIONARY STATEMENTS

This Form 10-KSB contains  financial  projections,  synergy  estimates and other
"forward-looking  statements"  as that term is used in federal  securities  laws
about Zeros & Ones,  Inc.'s ("ZROS" or the "Company",  or "Division")  financial
condition,  results of operations and business.  These statements include, among
others:

-  statements  concerning  the  benefits  that ZROS expects will result from its
business  activities  and  certain  transactions  ZROS  has  completed,  such as
increased  revenues,  decreased  expenses and avoided expenses and expenditures;
and

- statements  of ZROS's  expectations,  beliefs,  future  plans and  strategies,
anticipated  developments and other matters that are not historical facts. These
statements may be made expressly in this Form 10-KSB. You can find many of these
statements by looking for words such as  "believes,"  "expects,"  "anticipates,"
"estimates,"  "opines," or similar  expressions used in this Form 10-KSB.  These
forward-looking  statements  are  subject  to  numerous  assumptions,  risks and
uncertainties  that may cause ZROS's actual  results to be materially  different
from any future results  expressed or implied by ZROS in those  statements.  The
most  important  facts that could  prevent ZROS from  achieving its stated goals
include, but are not limited to, the following:

     (a) volatility and/or decline of ZROS's stock price;

     (b) potential fluctuation in quarterly results;

     (c)  barriers  to  raising  the  additional  capital  or to  obtaining  the
financing needed to implement its full business plans;

     (d) changes in demand for ZROS's products and services;

     (e) rapid and significant changes in technology and markets;

     (f) litigation with and/or legal claims/allegations by outside parties;

ZROS is a  development  stage company that has incurred  operating  losses since
inception.  There is no assurance  that the Company's  research and  development
projects will result in commercially successful products or services, or whether
patents will be granted for any of them.  There is no assurance that the Company
will ever be profitable,  the Company may not be able to  successfully  develop,
manage or market its  products  and  services,  the  Company  may not be able to
attract or retain qualified executives and technology  personnel,  the Company's
products and services may become obsolete,  government regulation may hinder the
Company's  business,  additional  dilution in outstanding stock ownership may be
incurred due to the issuance of more shares,  warrants and stock options, or the
exercise of

                                       18
<PAGE>

outstanding  warrants  and  stock  options,  and  other  risks  inherent  in the
Company's   businesses.   Because  the  statements  are  subject  to  risks  and
uncertainties,  actual  results may differ  materially  from those  expressed or
implied by the forward-looking  statements. ZROS cautions you not to place undue
reliance on the statements, which speak only as of the date of this Form 10-KSB.
The  cautionary  statements  contained or referred to in this section  should be
considered in connection  with any  subsequent  written or oral  forward-looking
statements  that ZROS or persons  acting on its behalf may issue.  ZROS does not
undertake  any  obligation  to  review  or  confirm  analysts'  expectations  or
estimates or to release publicly any revisions to any forward-looking statements
to  reflect  events or  circumstances  after the date of this Form  10-KSB or to
reflect the occurrence of unanticipated events. CURRENT OVERVIEW

OUR TENTH YEAR:  Remembering the Future

2003 can best be  described  as the year that Zeros & Ones  returned to its core
business and reactivated  the inroads it had  established  particularly in 1998,
1999, and 2000. The tech market "awakened from its slumber" and re-energized the
Company,  particularly  in the  area of  wireless  and its  flagship  technology
initiative ThunderCloud.  This also involved reactivating a core management team
that is  dedicated to the tasks  associated  with a world class  technology  and
entertainment developer.

In the sections that follow, we will describe the new management team and detail
some of the associated  steps  involved in taking  everything to the next level.
First, an overview of Zeros & Ones for those who are new to the company:


THIS IS ZEROS & ONES: An Overview

Founded in 1994,  Zeros & Ones has played a  meaningful  role in shaping some of
the most important trends in computing and  entertainment  over the past decade.
We are deeply  passionate  about the profound  impact  technology has on the way
people live, learn, play, transact, and communicate.

That vision grows in depth and relevance as we continue to set our sights on the
road  ahead.  Zeros  & Ones is one of the  pioneers  of the  worldwide  "digital
convergence  movement".  Fueled by recent  advances in wireless  broadband,  the
company's relentless pursuits have initiated a tidal wave of new activity around
its expanding core technology holdings and privileged access to the marketplace.
This includes a number of existing and upcoming  strategic  acquisitions  and an
expansion of its management team.

Publicly-held  (OTC-BB:  ZROS)  since  1999,  Zeros  & Ones  has  made  over  10
acquisitions and developed or obtained outright  ownership of over 75 inventions
in the areas of  wireless  interoperability,  digital  payload  delivery,  video
compression,  interactive  television,  videoconferencing,  stereoscopic 3D, and
electronic commerce.

                                       19
<PAGE>

Even during the sweeping  economic  downturn across the tech sector  surrounding
the  September  11th tragedy,  although the company was impacted  along with the
rest of the world, it has weathered the storm and made it through to being a key
player in an industry-wide resurgence. As a result, the company has a strong set
of  advocates  and has earned a trusted  role with many  strategic  partners and
shareholders  at  a  level  it  might  never  have  earned  otherwise.  This  is
quintessential to the company's returned focus on its core mission.

Additionally,  the company is now  uniquely-positioned  to take advantage of new
opportunities  caused by the recovery from the downturn - significant  reduction
in  competition,   substantial   lowering  of   implementation   costs,  a  more
readily-available  and affordable work force, and acquirable  technologies  that
are a good match for the company's unique expertise,  access, and public-vehicle
which includes a multi-million dollar tax loss carry-forward.  As a result, many
have expressed that they believe this to be a very favorable entry point.

Today,  the company is  emerging  as a prominent  figure in wireless by bringing
order,  openness,  and interoperability to an otherwise fragmented mobile world.
That's a core concept  behind the commercial  and  industrial  ramifications  of
convergence - monetizing  constant  access to the network and  delivering  value
attractors to the network.

This trend has such  potential  to our lines of  business  that the  company has
launched a long term  cross-subsidiary  product  and service  initiative  called
ThunderCloud  to deploy it to the world with maximum  firepower.

In parallel to this,  the company is making a number of  strategic  acquisitions
designed to give Zeros & Ones penetration in several key markets that will unify
as drivers to future growth,  presence, and revenues. Over the medium-term,  the
company  seeks  to  strengthen  our new  holdings,  provide  capital  to  expand
inter-company  objectives,  retain key talent,  and better protect our essential
holdings.  There are a number of existing  mechanisms  in place to achieve  this
secondary level of  capitalization  that will accelerate as we achieve the short
term aims.  Along  those  lines,  the  company  has  retained  the  services  of
investment banking and financial advisory professionals.

The company's  acquisitions are also expected to accelerate and fortify our long
term aims with  ThunderCloud.  This is  achieved  because  the  architecture  of
ThunderCloud  includes a number of elements and mechanisms  that the company was
able to negotiate to acquire  rather than need to build them from  scratch.  The
value  proposition  to the  customer  will  come from the  built-in  integration
between these products and services.

ThunderCloud  will  integrate,  interoperate,  and  add  value  in the  form  of
"convergence  capabilities" to the burgeoning wireless broadband market. It acts
as "glue"  between key  inflection-points  of how wireless  works today and will
work in the future.  ThunderCloud  provides a suite of related  technologies and
services,  including a wireless revenue share and payment acceptance  mechanism,
connecting points to empower proximity-based advertising,  mapping, and commerce
applications,   integrated   video   conferencing   services,   secure   content
distribution,  and new levels of compatibility for handheld wireless devices for
an "information - anywhere, anytime" experience.

                                       20
<PAGE>

Although the company's existing and upcoming holdings have the potential ability
to  become   self-supporting  and  commercialized   without  dependency  on  the
overarching ThunderCloud  initiative,  we believe that this level of integration
and ease-of-use  will be very compelling not only to consumers of our particular
product/service  offerings but to the entire  wireless  space in general.  It is
this role as a master integrator that we believe provides the strongest position
for the company over the long term. It will build on the  company's  legacy as a
strategic  partner to the most  important  companies  in the world and lower the
barriers to make  technology  useable by the largest number of paying  customers
possible.

Among them, Rocketstream,  also has short and medium term revenue centers in the
works.  RocketStream's  product and service offerings consist of a layered suite
of technologies,  software  development  kits,  front-end  encoding and back-end
server  solutions,   specifically   designed  to  deliver  high  quality  video,
synchronized  audio,  voice over IP,  text,  and custom  digital  payloads  over
computer networks in real-time.

RocketStream's  high speed  real-time live video streaming is ideally suited for
group-based  interactive sessions,  interactive reality television  programming,
internet-based  distance learning,  multi-player gaming systems, and multi-point
to  multi-point  video  conferencing  applications.  In a  wireless  world,  the
opportunities for fast high quality video increase in value by leaps and bounds.
The companies wish to capture those opportunities.

RocketStream is currently in discussions with major industry players to identify
and deliver  integrated  solutions in various markets.  RocketStream  also has a
hardware platform that uniquely addresses issues in relaying real-time video for
surveillance and homeland security projects.

There  are  a  myriad  of  features,  products,  and  services  associated  with
ThunderCloud.  As one example, the popularity of camera-enabled  cellular phones
and the  rampant  adoption  of  "Push-To-Talk"  features  foreshadow  a  massive
opportunity for "Push-To-View" rapid videophone-type interactions between users.
RocketStream  and ThunderCloud in concert with one another gives us a meaningful
running start to bring those kinds of solutions to market and create the "killer
app"  attractors  that will expand the wireless  markets - all the while putting
Zeros & Ones at the center of the value chain.


THE NEW MANAGEMENT TEAM: Meet the Family

2003 brought a number of new  participants  into the mix that each brought their
own direct and strategic  relationships  to help advance the company's  vision -
top  among  them,  Mark  M.  Laisure,  who  also  develops  a  number  of  other
presently-unrelated  businesses,  several  with CEO  Robert  J.  Holtz.  Laisure
officially  joined the company;  first,  as a board member and ultimately as its
President  and Vice  Chairman  of Zeros & Ones.  He also serves as a full voting
member on the Board of Directors.

Since  transitioning  to his role as an  officer  of the  Company,  Mr.  Laisure
connected his vast network of relationships and has worked hand-in-hand with Mr.
Holtz in  rapidly  re-establishing  Zeros & Ones'  role as a key  player  in the

                                       21
<PAGE>

convergence marketplace. He has fully immersed himself in the vision established
by Mr. Holtz and is actively contributing his own insights,  inroads, resources,
and relationships to help advance the business. It has been no small undertaking
understanding  the Company's ten year history and obtaining an insider's view of
exactly where each of our  technological  developments are with respect to their
uniqueness,  value  proposition,  and  readiness  for  market.  Mr.  Laisure now
presides over  operations,  funding  initiatives,  and team building between the
various working groups  currently in place and in  development.  He does so with
the assistance of Jason Simpson, who joins the Company by way of his involvement
with  FairFirst  Ventures,  of which both Laisure and Holtz are  principals  and
Laisure is the Founder.

Mr.   Holtz,   in  his   capacity   with   Zeros   &  Ones   and   through   the
acquisition-in-process  of the assets of BIONIC  Media,  Inc.,  is the  original
inventor of ThunderCloud. As the team continues to grow, others are contributing
to the sum  totality of the  ThunderCloud  offering and the overall  vision.  He
continues  as CEO and  Chairman.  He also serves as a full voting  member of the
Board of Directors.  His primary role is in setting a technological and artistic
vision  for the  Company's  initiatives,  maintaining  strategic  relationships,
negotiating key deals, and executing public market-related functions. He takes a
hands-on role with ThunderCloud and its related efforts.

Scott  Fairbairn  has  become  CTO of Zeros & Ones by way of his  capacities  in
Breakthrough   Technologies  and  Rocketstream,   Inc.,  each  of  which  is  an
acquisition-in-process  that  is  already  operating  based  on  an  acquisition
agreement in place as of Q4 of 2003. He is primarily aided by Frederic Fouassier
who heads off business development efforts across the businesses  (including the
corporate parent).

Allen  Crawford is active as a special  advisor to both Holtz and  Laisure.  His
primary  focus is on  acquisition  strategies,  development  planning,  business
affairs,  and key  legal  matters.  Mr.  Crawford  is also to  provide  business
development and creative services to a specific soon-to-be-announced endeavor in
the entertainment sector.

The Company  maintains  relationships  with key outside advisors and consultants
including investor relations, financial advisory, securities counsel, litigation
attorneys,  and other essential services.  Most of these relationships have been
in place assisting the company at various levels for several years now.  Several
have been at the company's side since its inception.

The Company has a set of new high-caliber  industry  advisors which at this time
remain  confidential.  The Company anticipates that the confidentiality of these
advisors will be lifted in the future as products and services  associated  with
their  involvement are expected to be unveiled and in accordance with individual
advisor-specific arrangements.

Several of the  Company's  new  industry  advisors  will  become  members of the
Advisory Board and one may be invited to a seat on the Board as a voting member.
George A.  Filippides  has been removed from the board.  The Company is informed
that Mr. Filippides is pursuing other interests in a different industry.  As the
Company has now returned to a technological focus, considerations are being made
in reviewing  opportunities with former board members and new advisors.  The new

                                       22
<PAGE>

management  team is  reviewing  these  considerations  and meeting  with various
candidates  for a potential  role serving the Board.  The Company will make such
addition(s) when and if deemed appropriate.

Many synergies exist between Zeros & Ones and companies that are affiliated with
Holtz and/or  Laisure.  In a number of  instances,  such  companies  are already
actively engaged in developing  inroads and  opportunities  for Zeros & Ones and
its acquisitions-in-process.

The  Company is also  actively  seeking  strategic  partnerships,  to add to its
extensive group of strategic  relationships.  Recently, the Company announced it
had formed a strategic  alliance with Typhoon  Entertainment - a  multi-faceted,
content-driven, Emmy-award winning entertainment company with operations focused
in three areas:  motion  pictures,  television and direct  response  television.
Typhoon is a key participant in a soon-to-be-announced joint endeavor with Zeros
& Ones in the  entertainment  arena for which Typhoon has granted Zeros & Ones a
number of revenue-oriented exclusive commitments.

Finally,  the Company is  developing  OEM and  Private  Label  relationships  to
round-out the  ThunderCloud  offering with existing  ready-to-go  products.  The
objective is to have a product line ready for markets and contracts within 2004.
The  primary  focus  of  these  efforts  is in  the  area  of  wireless,  ad hoc
networking, and payment processing.

A new corporate website for the company will be unveiled in May of 2004 when the
Company anticipates several key internal milestones will be achieved.

LITIGATION: Clearing the Runway for Take-Off

The Company's litigation efforts, in our opinion, are going favorably.

We are in the  midst  of an  important  process  in  our  legal  action  against
defendant Allied Boston Group, First Global, Inc., Allied Boston  International,
and their affiliates (Allied Boston Group et al).

The group  failed to release $2 million  dollars on a  fully-executed  Letter of
Credit (ID#  031402/1273)  delivered jointly by Zeros & Ones and Joint Employers
Group ("JEG"), a former  wholly-owned  subsidiary which was bought-back with the
return to the Company of 24,000,000 shares of common stock.

The Company was engaged in a strategy to release  working capital in the form of
cash and existing  letters of credit by replacing an existing reserve already in
place  between Joint  Employers  Group and one of its  insurance  carriers.  The
insurance carrier agreed to complete this transaction,  provided the replacement
is secured  through SWIFT by an  institution  that has been approved by the NAIC
(National  Association of Insurance Carriers).  Lloyd Morgan Securities provided
Zeros & Ones with a new  Standby  Letter of Credit in the amount of $2  million.
Zeros & Ones  provided  instructions  to directly  draw funds on that $2 million
instrument.  Allied  Boston  Group et al failed to perform as  specified  in its
agreement to provide funds.  Zeros & Ones,  Inc.  initiated legal action against
Allied Boston Group et al in SFSC Case No.: CGC-03-416904.

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<PAGE>

Zeros & Ones was  victorious  in  obtaining an Order For Writ of  Possession  in
Superior Court of the State of California  earlier this month. The After-Hearing
Findings   state   "Defendant   Allied   Boston  Group,   Inc.,   Allied  Boston
International,  Inc. and Lal Bhatia shall  transfer  possession  of the property
described in item 3c [fee and  collateral  restricted  stock] to the  plaintiff.
NOTICE TO DEFENDANT.  Failure to comply with any order of the court to turn over
possession  of such  property to the  plaintiff may subject you to being held in
contempt of court." They further  state,  "The written  undertaking  required by
defendant  for  redelivery  or to  stay  delivery  shall  be in  the  amount  of
$25,300,000.00."

This litigation is EXTREMELY important because it involves recovering Restricted
144-class  stock  (with  restrictive  legend in place)  which  were  pledged  as
temporary  collateral  amounting to 63,308,000  shares.  The Transfer  Agent has
already  accepted an  instruction  to freeze those shares and Zeros & Ones HAS a
valid  Superior Court Writ of Possession  Order which  authorizes the Company to
take possession of all certificates  representing  that  collateral.  Due to the
multiple  layers  of  restrictions  on those  representative  certificates,  the
Superior Court order, and the freezing at the level of Company's transfer agent,
we are  confident  that  this  matter  does not pose any  direct  threat  to the
Company's  market.  Counsel  for  the  Company's  transfer  agent  is  seriously
reviewing  the rights the  Company  may have to  directly  cancel  these  shares
considering the legal progress already in hand.

The  Company   prefers  to  reclaim   this  equity  prior  to   finalizing   the
acquisitions-in-process  in  order to give  shareholders  a net  improvement  in
shareholder  equity  when  all  of  the  existing   acquisitions-in-process  are
officially  completed.  There is almost  daily  progress  on this effort and the
Company  anticipates  that it will achieve its aims presumably prior to the next
scheduled  filing date. In such an expected event, the Company will be reporting
its recapturing of this equity in the form of an 8-K filing.

In addition to the Order For Writ of  Possession,  now in hand,  and  associated
actions,  the litigation initiated jointly by Zeros & Ones and former subsidiary
Joint Employers Group  (co-plaintiffs)  against Allied Boston Group,  Inc. et al
(defendants) continues.  The Company is seeking damages and other considerations
which, if recovered, it had intended to share equally with Joint Employers Group
("JEG").

That said, in October of 2003,  JEG defaulted on an agreement  with Zeros & Ones
related to the  wrapping  up of  business  between  the  Company  and its former
subsidiary.  In the event of such default,  Zeros & Ones is entitled to the full
damages and other  considerations which may result from the lawsuit it initiated
against  Allied Boston Group et al. The principals of JEG have been notified and
have  amicably  confirmed to the  enforceability  of this right.  The  companies
remain on friendly  terms and the  principals  understand  the Company's need to
vigorously enforce our rights and protect shareholder value.

In May 2002, the longstanding  litigation  between Paul Frank  Industries,  Inc.
("PFI") and Zeros & Ones, Inc. ("Z&O") came to a conclusion. Both parties agreed
to resolve their claims against each other on mutually  agreeable  terms.  Under
the terms of the settlement,  which is confidential,  PFI made payments over the
course of 18 months, and after those payments were completed, the parties agreed
that the entire lawsuit was dismissed.

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<PAGE>

The  remaining  legal  matter  between  Steve  Schklair  and Zeros & Ones,  Inc.
concerning  equipment  leases was  scheduled to be continued in October of 2003.
Both  plaintiff and defendant  were present and appeared in court when the judge
ordered an additional continuance to February of 2003. Since then, an additional
continuance has been put in place.  The parties are presently  scheduled to meet
with an arbitrator in June of 2004.


ZEROS & ONES TECHNOLOGIES, INC.

The  Company  believes  its  technological   developments   represent  the  most
significant  aspect of current and future  shareholder  value. To focus on those
opportunities,  Zeros & Ones Technologies, Inc. (ZOTI) was formed as a privately
held subsidiary.  On November 30, 2001, a dividend transaction  representing 10%
direct  ownership by the public  shareholders of record on September 24, 2001 of
ZROS. Zeros & Ones,  Inc., the publicly held parent company,  owns the remaining
90%.  Additional  dividend(s) will be issued directly to public  shareholders in
the future.

ZOTI is  being  prepared  for a  future  transaction  anticipated  during  2004.
Shareholders  of Record on  September  24, 2001 are advised to confirm that they
are in possession of documentation and/or certificates that confirm ownership of
their shares in ZOTI.


THUNDERCLOUD:  Every Cloud's Silver-Lining

We have  mentioned a number of times that while Wi-Fi is a huge catalyst for the
interest and viability of ThunderCloud,  its intrinsic value stems from the fact
that it goes well beyond Wi-Fi in its picture of what  Wireless  looks like.  In
fact, it is this  philosophy that is why  ThunderCloud  presents such organizing
potential to the world.

There are a number of other  technologies and mainstream  companies beyond Wi-Fi
that are part of the ThunderCloud  project effort and design including BlueTooth
wireless technology, Motorola MotoCoder, Sun's Wireless Java, Mesh Networks (MEA
- Mesh Enabled Architecture), and Microsoft XP Mobile.

Aspects  of   ThunderCloud   are   architected  to  operate  and  add  value  to
next-generation   Microsoft  .NET  framework  through  Microsoft   Corporation's
"Project Longhorn"  (particularly with it's Avalon and Indigo subsystems).  This
interconnection to part of the Zeros & Ones "Software as a Service  Initiative",
designed to migrate  the  Company's  substantial  technological  initiatives  to
Microsoft's  upcoming SOA  (Service  Oriented  Architecture),  will bring unique
levels of features and services to the wireless  market that are  proprietary to
ThunderCloud  while riding on open standards to greatly ease market  penetration
for ThunderCloud and all of its constituent subsystems.

ThunderCloud will support Mesh-Enabled  Architecture (MEA). MEA's infrastructure
meshing creates a robust and scalable network,  while client meshing enables end
users to instantly form a broadband  wireless network among themselves - with or
without the inclusion of an overarching  network  infrastructure such as a Wi-Fi
hotspot.

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<PAGE>

In fact, MeshNetworks Multi-Hopping technology can turn every client device into
a  router/repeater.  As users join the network they improve network coverage and
increase  network  throughput.  MEA  networking  is unique  in that it  supports
Continuous  Mesh  routing.  That  is,  it  supports  simultaneous  operation  of
infrastructure  and  client  meshing  while  it  also  allows  clients  to  move
seamlessly between infrastructure-based and client-based peer-to-peer networks.

This model  provides  are "ready now" method of  delivering  the  Cloud-to-Cloud
connectivity   at  the   StormChaser   layer  of   ThunderCloud.   Self-forming,
self-healing  routing  intelligence  distributes  clients between Access Points,
eliminating   bottlenecks  and  improving  overall  network   performance.   MEA
technology  also improves  network  robustness,  as clients can hop to alternate
Access Points if their current Access Point is congested or fails.  It also lets
clients form large, ad hoc peer-to-peer networks anywhere, anytime. Peer-to-peer
networking reduces the demand on network Access Points,  freeing up capacity for
other users.  All these  capabilities  create  low-cost,  seamless and simple to
deploy wireless PAN, LAN or WAN solutions.

ThunderCloud  will support RFID (Radio Frequency  Identification).  A technology
that uses tiny paper-thin  microchips  attached to an equally tiny antenna - the
chip and antenna together are called an RFID  transponder or TrackTag.  They use
radio waves to  automatically  identify  items without  needing to make physical
contact  with the item.  In  addition,  readers can detect and collect data from
multiple tags virtually at once. The reader sends out electromagnetic waves that
form a magnetic  field when they  "couple"  with the  antenna on the RFID tag. A
passive RFID tag draws power from this  magnetic  field and uses it to power the
microchip's circuits.  The chip then modulates the waves that the tag sends back
to the reader and the reader converts the new waves into digital data. Mr. Holtz
is a senior  advisor to a major RFID  provider  in the  shipping  and  logistics
industry.

VISION PREVAILS

Everything wireless - Wi-Fi, Cellular, Mesh MEA, RFID, TrackTag, Ultra-Wideband,
Bluetooth wireless technology,  and even IrDA - will be unified by ThunderCloud.
It will embrace and extend all prevailing wireless  standards.  It will create a
unifying ubiquitous application and service platform for a world without wires.

As the company continues to secure key partners,  strategic acquisition targets,
and  world  class  talent,  it is  solidifying  into a  well-engineered  team of
exceptional  people with the direction and prowess to carry out this vision in a
manner we  believe  no one else can.  The team is  gelling  and the  passion  is
growing. We are committed to getting the job done.

"It's all a wonderful  thing.  Wireless will come to mankind in its full meaning
like a hurricane  one of these days.  Some day there will  be...a  world  system
connecting all the  inhabitants on this earth to one another - not only by voice
but by sight. It is surely coming." -Nikola Tesla, October 4, 1915.

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<PAGE>
SIGNATURES

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


                  Date: April 14, 2004           By:/s/Robert J. Holtz
                                                 ---------------------------
                                                 Robert J. Holtz
                                                 Chairman of the Board,
                                                 Chief Executive Officer and
                                                 Chief Financial Officer
















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