<PAGE>


                            UNITED STATES SECURITIES
                             AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

[_]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 2004

                                       OR

[X]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM JANUARY 1, 2004 TO
         JUNE 30, 2004

                                    000-33099
                 -----------------------------------------------
                            (Commission File Number)

                           STELLAR TECHNOLOGIES, INC.
--------------------------------------------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

            COLORADO                                     84-1553046
-------------------------------             ------------------------------------
(State or other jurisdiction of             (IRS Employer Identification Number)
 Incorporation of organization)

         5633 STRAND BOULEVARD
              SUITE 318
            NAPLES, FLORIDA                               34110
----------------------------------------    ------------------------------------
(Address of Principal Executive Offices)                (Zip Code)

                                 (239) 596-8655
            --------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

            Title of Each Class             Name of Exchange on which Registered
----------------------------------------    ------------------------------------
Common Stock, $0.001 par value per share                    None

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the 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____

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will 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. ____

         State issuer's revenues for the six month period ended June 30, 2004:
$109,374


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         The aggregate market value of the voting common equity held by
non-affiliates of the issuer based on the closing sale price of the issuer's
common stock as reported on the OTC Bulletin Board on October 12, 2004 was
$60,490,585. The information provided shall in no way be construed as an
admission that any person whose holdings are excluded from the figure is an
affiliate or that any person whose holdings are included in the figure is not an
affiliate, and any such admission is hereby disclaimed.

         As of October 12, 2004, 26,426,636 shares of the issuer's common stock
were outstanding.

         Transitional Small Business Disclosure Formats (check one):

         Yes ___   No _X_


DOCUMENTS INCORPORATED BY REFERENCE

         None.


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<TABLE>
<CAPTION>
                                              TABLE OF CONTENTS

                                                                                                            PAGE
                                                   PART I
<S>             <C>                                                                                         <C>
Item 1.        Description of Business ...................................................................     1
Item 2.        Description of Properties .................................................................    26
Item 3.        Legal Proceedings .........................................................................    26
Item 4.        Submission of Matters to a Vote of Security Holders .......................................    26

                                                   PART II
Item 5.        Market for Registrant's Common Equity and Related Stockholder Matters .....................    27
Item 6.        Management's Discussion and Analysis of Financial Condition and Results of Operations .....    29
Item 7.        Financial Statements ......................................................................    39
Item 8.        Changes in Disagreements with Accountants on Accounting and Financial Disclosures .........    39
Item 8A.       Controls and Procedures ...................................................................    40
Item 8B.       Other Information .........................................................................    40

                                                  PART III
Item 9.        Directors, Executive Officers, Promoters and Control Persons; Compliance with
                    Section 16(a) of the Exchange Act of the Registrant ..................................    41
Item 10.       Executive Compensation ....................................................................    44
Item 11.       Security Ownership of Certain Beneficial Owners and Management ............................    46
Item 12.       Certain Relationships and Related Transactions ............................................    47
Item 13.       Exhibits and Reports on Form 8-K ..........................................................    48
Item 14.       Principal Accountant Fees and Services ....................................................    53
Financial Statements .....................................................................................   F-1
Signatures ...............................................................................................    54
</TABLE>

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                    PRIVATE SECURITIES LITIGATION REFORM ACT

         The information contained in this Annual Report on Form 10-KSB and in
other public statements by the Company and Company officers or directors
includes or may contain certain forward-looking statements. The words "may,"
"will," "expect," "anticipate," "believe," "continue," "estimate," "project,"
"intend," the negative of such terms or similar expressions used in this Report
are intended to identify forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
U.S. Securities Exchange of 1934, as amended. Such forward-looking statements
are made based on management's beliefs, as well as assumptions made by, and
information currently available to, management pursuant to the "safe-harbor"
provisions of the Private Securities Litigation Reform Act of 1995. Such
statements are not guarantees of future performance or events and are subject to
known and unknown risks and uncertainties that could cause the Company's actual
results, events or financial positions to differ materially from those included
within the forward-looking statements. You should also know that such statements
are not guarantees of future performance and are subject to risks, uncertainties
and assumptions. Many of these risks and uncertainties are set forth under the
caption "RISK FACTORS" in Item I of this Report. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date made and the Company undertakes no obligation to disclose any revision
to these forward-looking statements to reflect events or circumstances after the
date made or to reflect the occurrence of unanticipated events.

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

         We were incorporated on July 20, 2000 as a Colorado corporation. We
were initially engaged in the business of providing photography and digital
services to organizations in the travel industry. We exited the travel industry
in April 2002.

         During the quarter ended December 31, 2002, we announced our intention
to engage in the business of acquiring, exploring and developing natural gas and
oil properties. Our plan was to acquire ownership interests in properties
located in Louisiana as well as other traditional oil producing states in the
southwestern United States. In furtherance of this plan, we purchased an
aggregate three percent (3%) limited partnership interest in Louisiana Shelf
Partners, L.P. ("Louisiana Shelf"), a Delaware limited partnership that owns oil
and gas leasehold interests in Cameron Parish, Louisiana and certain seismic
data related thereto in offshore oil fields. In September 2003, we disposed of
all of our oil and gas interests and exited the oil and gas business.

         On January 15, 2004, we acquired Stellar Venture Partners, LLC, a
Georgia limited liability company ("Stellar Venture Partners"), by merging a
wholly-owned subsidiary of ours with and into Stellar Venture Partners, with
Stellar Venture Partners remaining as the surviving entity and becoming our
wholly-owned subsidiary. At the effective time of the merger, we issued
18,000,001 shares of our common stock to the membership interest holders of
Stellar

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Venture Partners, LLC, representing, on a fully diluted basis, approximately
seventy-four percent (74%) of the then issued and outstanding shares of our
common stock. Mark A. Bush resigned as our sole officer and director, and
Richard A. Schmidt was appointed to serve as our Chairman and Chief Executive
Officer. As a result of the merger, we entered the employee Internet management
("EIM") industry.

         On July 14, 2004, we acquired all of the issued and outstanding capital
stock of CompuSven, Inc., a Florida corporation ("CompuSven"). Upon completion
of this acquisition CompuSven became a wholly owned subsidiary of the Company.
CompuSven provides e-mail migration, e-mail data and directory management
software and related services.

OVERVIEW

         We provide EIM products that enable businesses, government agencies,
schools and other organizations to monitor, analyze, and evaluate online reports
displaying how their employees use computing resources, including Internet
access and instant messaging. Our primary product offering consists of our
Stellar IM 3.1 Web Service Edition and our Stellar IM Enterprise Edition which
we refer to collectively in this report as our Stellar Internet Monitoring
("SIM") solutions. We also provide related e-mail migration, e-mail data and
directory management software and related services with our Stellar E-mail
shuttle solution.

         Our flexible software applications operate in conjunction with a
centralized database to monitor, archive, and warn of policy violations for web
surfing and instant messaging. Our SIM solutions enable businesses to rapidly
implement and configure Internet access policies for specific groups, user types
and individuals within an organization. Our flexible and easy-to-use solutions
capture information on Internet usage and store it on our remote secured servers
or optionally on the client's site. We monitor employees' Internet activity
without restricting the employees' access to web sites. We then consolidate and
review Internet traffic information with sophisticated rule-based systems for
compliance with policies established by our customers. Business managers are
then notified when a violation has occurred, and have the option of running a
detailed graphical report displaying the aggregate Internet activity for the
employees monitored. Our products are easy to deploy and use, and have minimal
impact on an organization's information technology department. In addition, our
products require minimal additional hardware, and can grow with our customers as
they expand and support a broad range of network platforms, including proxy
servers, firewalls and other network appliances and software.

INDUSTRY BACKGROUND

         As a highly flexible network capable of carrying almost any type of
digital traffic, the Internet continues to evolve as a critical business tool
and an important communications and commerce platform for enterprises worldwide.
As part of their overall business strategies, many organizations are using the
Internet to utilize business applications that are accessed over their corporate
networks. Companies utilize the Internet to optimize their extended supply
chains, automate their sales forces, track shipments and communicate with
employees, customers, partners and suppliers. Due to the efficiencies,
cost-savings and competitive advantages that can

                                       2
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be gained by leveraging the Internet, many businesses are continuing to build
out their computer networks and information technology infrastructure. In order
to accommodate a significant number of simultaneous users and the increasing
volume of data transfer associated with enterprise Internet use, many
organizations continue to make substantial investments in wide-bandwidth
connections such as dedicated T-1 lines, enabling high-speed Internet access.

         The Internet has also become a highly popular consumer medium for
communication, entertainment, information and commerce. Market research firm
International Data Corporation ("IDC") has projected that the number of
corporate Internet users worldwide will grow to more than one (1) billion by
2004. This rapid adoption of the Internet has been accompanied by remarkable
growth in the number of consumer-oriented content and commerce websites and by
an expanding assortment of web-based consumer services and applications.
Internet users today have the ability to communicate through e-mail and instant
messaging, retrieve news and information from numerous Internet sources,
download music, movies and other high-bandwidth content, share files over
peer-to-peer networks, make online purchases of goods and services ranging from
books to airline tickets, and generally access a broad range of non-business
content and commerce websites. As the rapid evolution of Internet technology and
web content continues, the amount and types of data, as well as the way people
access it, has increased, creating growing challenges for employers.

         Internet access in the workplace is fast, convenient and essentially
free to employees. In general, employees enjoy quicker and relatively
unrestricted Internet access from their work desktop computers. As a result,
many employees use their employers' computing resources for recreational "web
surfing," peer-to-peer file sharing, downloading of high-bandwidth content,
instant messaging and other personal matters during business hours. However,
this unmanaged non-business use of company computing and network resources,
including Internet access, can result in increased risk and cost to the
employer, including lost employee productivity, increased network bandwidth
consumption, increased network security risks, and potential legal liability.
Additionally, an employee's use of websites that offer free software downloads,
pirated software and peer-to-peer applications may introduce spyware and other
malicious code to the employee's desktop and to the corporate network, placing
valuable corporate data at risk. In recent years, the rapid rise in the use of
instant messaging and peer-to-peer file sharing in the workplace has created new
conduits for viruses and malicious code that bypass traditional network security
measures. All of these factors can contribute to higher costs for companies that
make computing and network resources available to their employees.

         Traditionally, employers have attempted to mitigate the legal
liability, productivity and bandwidth waste risks through written policies
governing acceptable employee use of computing resources, and protect against
security risks with a combination of external firewalls and anti-virus software.
With the growth in multi-media content, the proliferation of blended viruses and
the rapid increase in employee use of instant messaging and peer-to-peer file
sharing, employers are finding that these measures are increasingly inadequate.
Written Internet access and software application use policies are easily
ignored, difficult to enforce and often require manual review of log files,
which is both cumbersome and time-consuming. Because this method of enforcement
does not proactively curtail undesirable Internet and software application
usage, employers are forced to take potentially costly disciplinary actions
after the fact. Firewalls can

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provide protections against external threats such as hacking, but do little to
prevent employees from accessing unauthorized data from within an organization.
Anti-virus software provides protection from e-mail borne viruses, but does not
prevent the possible theft or corruption of corporate data by spyware and offers
only limited protection against viruses that proliferate via peer-to-peer
networks and instant messaging.

         To address these problems, businesses are recognizing the need for a
proactive approach to managing employee use of the Internet and computing
resources, as well as the need to layer security and policy enforcement measures
across multiple network access points, including the Internet gateway, the
internal network infrastructure and employees' desktops. In the past, many
businesses have sought products that enable them to proactively manage their
employees' Internet access through filtering of URLs. Early Internet filtering
software for the enterprise was largely derived from products that were
originally developed to help parents prevent their children from accessing adult
content at home or in schools, and used keyword matching and dynamic page review
to block content. These products, and other more recent products, are limited to
filtering of website URLs and do not address the evolving nature of Internet use
with the accompanying rise in the use of instant messaging and peer-to-peer file
sharing. Additionally, they typically lack the ability to meet the needs of
growing organizations, cannot operate on multiple network platforms, do not
provide the flexibility required by management and can be labor-intensive to
deploy, consuming valuable information technology resources. Moreover, these
applications generally do not operate in conjunction with a comprehensive
database that is consistently refreshed and as effective.

         Workplace management of non-business-related use of computing resources
and Internet access is becoming an increasingly important priority for
organizations because of its impact on employee productivity, network bandwidth
consumption, network and data security and potential legal liability. IDC
estimates that between 30 and 40 percent of all internet use in the workplace is
not related to business and that the EIM market will grow to $750 million by the
end of 2004. Given the necessity of corporate Internet access and consumers'
continuing adoption of the web as a mass communication, entertainment,
information and commerce medium, we believe there is a significant opportunity
for an EIM solution that effectively addresses the needs of businesses to manage
employee usage of the computing environment, including Internet access and
desktop application use. Additionally, although the web and e-mail are the
primary drivers of Internet traffic today, the rapid emergence of
Internet-enabled applications creates the need for software that applies
management policies to file types, applications and protocols, as well as web
pages, at multiple points on the network. Software tools are needed to implement
policy-based bandwidth management and regulation of applications such as instant
messaging, peer-to-peer file exchange tools, interactive games and desktop
software applications. These solutions must also be adaptable enough to mange
new applications and technologies as they are developed.

         Most recently, certain of our closest competitors have been offering
software applications that enable managers to select the types of Internet
content and applications they wish to allow, block or continue employee access
to, based on the database categories they have defined. The software
applications are loaded onto the customers' servers and are monitored by the
customers' information technology ("IT") staff. Their software applications
categorize websites in a URL database, and then classify them into different
categories to enable organizations to

                                       4
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determine the types of Internet content that are appropriate for their workplace
culture. Their software applications allow managers to permit or deny Internet
access based on the employee, type of user, time of day, amount of personal
surfing time and type of content being accessed.

EMPLOYEE INTERNET MANAGEMENT SOLUTIONS

         Our software applications enable businesses to monitor employee access
to websites and instant messaging which does not require unreliable lists or
proprietary databases without restricting the employees' access to web sites.
Our SIM web based solutions capture information on Internet usage and store it
on our remote secured servers that we maintain, rather than requiring that
customers load the applications onto their servers and maintain it. We then
consolidate and review Internet traffic information with sophisticated
rule-based systems for compliance based on the policies that businesses have
implemented. Business managers are then notified when a violation has occurred,
and have the option of running a detailed graphical report displaying the
aggregate Internet activity for the employees monitored. Our products are easy
to deploy and use, and have minimal impact on an organization's information
technology department. In addition, our products require minimal hardware as a
hosted solution, can grow with our customers as they expand and support a broad
range of network platforms, including proxy servers, firewalls and other network
appliances and software.

         The principal benefits of our products include:

         Enhanced Network and Data Security. Our SIM solutions add an additional
layer of protection to an organization's network and data security by monitoring
employee access to security-risk web sites such as those containing malicious
mobile code or spyware. This allows an organization to proactively reduce the
risk of malicious mobile code attacks - such as web-based worms, viruses, Visual
Basic scripts and more - and prevent back-channel communication of important
corporate or personal data by spyware programs.

         Increased Employee Productivity. Our software gives businesses the
ability to more effectively manage employees' use of corporate computing
resources, including website activity and instant messaging, thereby reducing
non-productive use of these assets by employees. Our SIM solutions enable
organizations to identify the pattern and scope of employees' Internet use, and
to manage access to non-business related content and applications such as
instant messaging. In addition, our software allows managers to monitor employee
use of the Internet based on the employee, type of user, time of day, amount of
personal surfing time and type of content being accessed, without denying the
employee's access to the Internet.

         Conservation of IT Resources. We believe our SIM solutions allow
organizations to reduce bandwidth consumption by managing personal Internet use
and access to websites, in particular those that may contain bandwidth-intensive
content, such as streaming audio and video, MP3 music files, multi-player games
and other new media. Reducing the bandwidth consumed by non-business-related
Internet traffic allows an organization to use its network more efficiently and
effectively, and helps ensure that bandwidth is available for mission-critical
business applications such as voice-over-IP. In addition, by monitoring access
to bandwidth-intensive content, organizations are able to save valuable network
storage from being cluttered

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with MP3s, images and other files. This avoids costs arising from the need to
buy additional networking equipment or storage servers.

         Reduced Exposure to Potential Legal Liabilities. Our SIM solutions
support organizations' efforts to reduce exposure to legal liability resulting
from the improper use of the Internet in the workplace. By implementing our
products in conjunction with an overall corporate Internet usage policy,
organizations can proactively curtail access to objectionable Internet content
such as adult entertainment, illegal activities, hate and racism.

         In addition to the above benefits, our SIM solutions include several
analysis and reporting capabilities to provide managers and IT administrators
with multiple options for identifying, analyzing and reporting on Internet and
activity and the risks associated with employee computing. These options include
a full-featured reporting engine with pre-defined and customizable report
templates, a real-time analyzer that provides a current view of network activity
and browser-based reporting tools that allow non-technical managers to view
Internet and application use data. In addition, our SIM solutions are designed
to have minimal impact on network performance by eliminating the need for
customers to install our applications on their servers and maintain them. Our
SIM solutions may be used on a broad range of network platforms, and work with
popular proxy servers, firewalls, cache engines, switches and routers.

PRODUCTS AND SERVICES

         Our SIM solutions are comprised of two (2) different product offerings,
each tailored to a different customer target group. These product offerings
consist of Stellar IM 3.1 Web Service Edition and Stellar IM Enterprise Edition.
A description of each of these products is provided below.

Stellar IM 3.1 Web Service Edition

         Stellar IM 3.1 Web Service Edition is geared towards small to medium
sized organizations of no more than approximately 2,000 employees. Stellar IM
3.1 Web Service Edition is a web-based product that provides organizations with
the ability to utilize monitoring and reporting technology without the capital
and manpower expenditures necessary to run in-house solutions. Stellar IM Web
Service Edition requires only a small application to run at a customer's site
while the "work" is performed on SIM servers, utilizing SIM's manpower and
network bandwidth to process the data. Users simply logon via a secure web site
to view their data using real-time reports.

         Monitoring both web browsing and instant messaging conversations,
Stellar IM 3.1 Web Service Edition is a robust monitoring tool that provides
management with the information that they need, when they need it in real time.
E-mail alert notification is one of the many features available within Stellar
IM 3.1 Web Service Edition, providing management with a break-down of people and
computers that have violated the organization's Internet usage policy.

         Stellar IM 3.1 Web Service Edition offers a wide range of functions and
key features including:

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         o        web-based reporting that eliminates the need for IT
                  professionals to generate reports for managers, thus allowing
                  them to concentrate on their core responsibilities;

         o        secure, real-time reports that can be viewed online from any
                  authorized computer in the world, giving management the
                  ability to view company activity while out of the office;

         o        data storage, processing and reporting that is performed on
                  SIM's servers, saving organizations expenditures on IT
                  resources and equipment costs; and

         o        alert notifications that provide managers with automated
                  e-mails that contain a list of violations by their employees.

         Stellar IM 3.1 Web Service Edition monitors, reports and alerts on web
browsing and instant messaging conversations for all major instant messaging
protocols, including AOL, Yahoo and MSN. Activity can be viewed for employees
and departments via real-time reports while alerts can be created to flag web
sites and instant messaging words or phrases that managers deem inappropriate.
Alert setup is unique to each organization and can be altered by an
organization's managers as needed. Stellar IM 3.1 Web Service Edition also
offers instant messaging archiving for businesses that are required to record
and store their messages.

Stellar IM Enterprise Edition

         Stellar IM Enterprise Edition is geared towards businesses that have
fully equipped data centers and Oracle certified staff members. Stellar IM
Enterprise Edition is a state-of-the-art enterprise solution that provides IT
staff with full control of our SIM database, security and employee access to
information. It provides managers with quick, reliable reporting on employees'
use of the Internet rather than restricting access to useful websites.
Comprehensive activity reports can be generated from the collected data and used
to develop and enforce Internet usage policies as well as reward productive
employees. The enterprise solution provides IT staff with the in-house
capabilities to fully manage our Stellar IM database.

         Stellar IM Enterprise Edition and Web Services Edition offer a wide
range of functions and key features, including:

System Features

         o        the use of a high-speed, secure, industry standard Oracle
                  database;

         o        Secure encrypted information transfer;

         o        a centrally monitored application service provider
                  environment;

         o        accessibility via a web browser over the Internet from
                  anywhere in the world through secure socket layer ("SSL")
                  connections to our servers;

         o        multiple logons for each organization, each with their own
                  security access restrictions; and

         o        support for multiple languages.

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Monitoring

         o        monitoring of Internet usage on every computer in an
                  organization;

         o        monitoring of web browsing and instant messaging for
                  compliance with human resource Internet usage policies;

         o        consolidation and review of monitored data for compliance
                  based on policies the organization has implemented; and

         o        Access to the monitored information through a standard
                  SSL-enabled web browser.

Alerts

         Alerts may be used to help monitor activity on an exception basis so
that managers don't have to sift through tedious logs to determine if or when
employees have broken the organization's Internet usage policy. Managers can
receive detailed information about each violation, including:

         o        which user visited which web site;

         o        information about the web sites visited;

         o        alerts if a violation of the organization's Internet usage
                  policy occurs;

         o        drill down viewing of violations;

         o        ability to sort violations by alert type and date range; and

         o        e-mail notification of any alerts.

Secure Reporting

         o        enterprise-wide reporting based on the corporate organization
                  hierarchy;

         o        departmental level management reports, including text and
                  graphical reports, reports by physical location and reports by
                  organizational level;

         o        secure distribution of reports and alerts to department
                  managers with security at every level to ensure that mangers
                  can only access their direct employees' usage;

         o        conversion of hits and time spent online to a cost based on an
                  employee's hourly wage; and

         o        enhanced customized alert categories to allow managers to be
                  notified via e-mail of specific violations in their
                  department.

         Upon an organization's selection of either our Stellar IM 3.1 Web
Service Edition or our Stellar IM Enterprise Edition, a monitoring program is
installed on one (1) computer on the organization's network. The program
monitors the Internet traffic that the organization wants to monitor, filters
the information, encrypts the information, then sends small summary information
packets of all Internet usage by the organization's employees to our servers.
The data is collected and stored in our database behind our firewall. The data
is then available for managers

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of the organization to view through our secure applications by means of a
standard SSL-enabled browser.

         To be able to use our SIM solutions, an organization must meet the
following minimum system specifications:

         o        Operating system: Windows NT, Windows 2000 or Windows 2003;

         o        Central processing unit: Pentium II 300 megahertz or greater
                  recommended;

         o        Memory: 128 megabytes of RAM or greater recommended; and

         o        Internet browser: For certain services, Microsoft Internet
                  Explorer 5.0 or greater.

In addition, the organization must have an internal computer network and
constant access to the Internet.

Stellar E-Mail Shuttle

         The Stellar E-Mail Shuttle(TM) is an e-mail migration and coexistence
product that provides e-mail migration and data synchronization between e-mail
systems, known as Anywhere2Anywhere(TM) technology. The e-mail systems supported
by the Stellar E-Mail Shuttle(TM) include: Microsoft(R) Exchange Server/Outlook,
Lotus(R) Domino/Notes, Novell GroupWise(R) and any IMAP4 e-mail system. The
Stellar E-Mail Shuttle(TM) migrates and/or synchronizes inboxes, public folders
and directories, calendars, bulletin boards, conferences, to-do lists, and
groups. Its modular design includes extractor and loader components which allow
migration from multiple systems at any one time from a single management console
called Launchpad(TM)

TECHNOLOGY

         Our SIM solutions comprise a server-based system designed to function
in networks of virtually any size and configuration. Our SIM solutions are
composed of a system of analyzing, reporting and managing applications
integrated in a proprietary central policy engine. We use a process of automated
content assessment and classification with manual verification to gather and
classify new websites and applications for our databases. Our automated search
technology uses Java-based tools and proprietary algorithmic classification
systems to automatically search the Internet to identify and catalog websites.
We have designed our products to run on multiple network platforms and in
multiple locations. Our SIM solutions integrate with major firewalls, proxy
servers, caching engines, network switches and routers.

 STRATEGY

         Our strategy is to maintain and strengthen our position in the market
for EIM products and services. Key components of our strategy include the
following:

         Increase Sales to Existing Customers. Many of our customers are
organizations with hundreds or thousands of Internet-enabled employees. In most
cases, these customers initially deploy our SIM solutions in one or two internal
departments and pay licensing fees based only

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<PAGE>

on the number of Internet users in those departments. We believe that there is a
large opportunity to sell our existing customers licenses for additional
Internet users within their organizations. We intend to aggressively pursue
renewals of existing licenses and enterprise-wide deployment of our SIM
solutions within our existing customer base.

         Aggressively Leverage Indirect Sales Channels. We currently have
relationships with over 30 value-added resellers that focus on the U.S. market.
Our indirect sales channels accounted for more than 10% of our licensing revenue
for the year ended December 31, 2003. We intend to increase these channels
through our Stellar Partner Channel Program and, accordingly, expect that the
percentage of our total sales derived from our indirect channels will increase
significantly in the future. We also plan to improve the productivity of our
existing value-added resellers through lead development, marketing support,
sales assistance and training. We intend to aggressively leverage and expand our
indirect sales changes in both the domestic and international markets, through
recruitment programs and our Stellar Partner Channel Program.

         Expand Our Customer Base. Our products have been deployed in more than
100 major organizations worldwide. We believe our large installed based of
customers provides our products with market credibility, and we intend to
leverage this credibility to further our market penetration. To address
opportunities abroad, we intend to continue to increase the number of
international resellers participating in our Stellar Partner Channel Program.
Given the relatively higher costs of Internet access in many foreign markets, we
believe that the need to mange employee Internet use will be cost-driven.

         Expand Our SIM Solutions Product Offering. We intend to continuously
develop and update our software and database in order to keep current with the
evolution of EIM technology. We plan to offer our customers enhanced reporting
and management applications for our SIM Solutions and intend to provide
additional software features that address additional categories of worker
productivity and enterprise bandwidth consumption. Our next generation EIM
solution, which we expect to be available during the fourth calendar quarter,
will combine a blocking component with our existing monitoring and archiving
services for Internet browsing, instant messaging and e-mail. We believe this
will be the only solution to provide all such services in a single offering. We
also intend to acquire additional EIM technologies complementary to our SIM
solutions to expand the breadth of our product offering.

         Develop and Maintain Leading EIM Processes and Technologies. We intend
to continue developing proprietary processes and technologies that give us what
we believe is a distinct advantage over our competitors. We believe our
competitive advantage will lie in the ability of our SIM solutions to enable
organizations to monitor employee access to websites, without restricting the
employees' access to web sites, as well as the ability of our SIM solutions to
capture information on Internet usage and store it on our remote secured servers
that we maintain, rather than requiring customers to load the applications onto
their servers and maintain it themselves. We intend to continue to develop
software and technology that will facilitate the integration of our products
with the systems of our customers and Internet infrastructure providers. We
believe that this will enable us to offer our products to a broader customer
base than our competitors.

                                       10
<PAGE>

         Work Closely With Internet Infrastructure Providers. We intend to
continue to work closely with Internet infrastructure providers and to continue
to modify our software to integrate with these providers' products. We also
intend to continue to work with these providers to migrate our software
applications deeper into the network infrastructure, from proxy servers,
firewalls and cache engines, to network routers. In addition, we plan to
continue to sponsor co-marketing programs with these companies to associate our
SIM solutions with their established brands so as to further enhance our market
position.

SALES, MARKETING AND DISTRIBUTION

         We sell our products and services through direct channels and through
indirect channels comprising a network of more than 30 value-added resellers.
Our channel sales efforts are coordinated worldwide through a sales team of
seven (7) individuals. Our customers generally enter into licensing agreements
with us that are typically 12, 24 or 36 months in duration and for a fixed
number of users. We promptly invoice customers for the full amount of their
license at the time the license is activated. Payment is due generally within 30
days of the invoice for the full term of the license.

         Our marketing strategy is to raise awareness of the potential risks
associated with unmanaged employee use of corporate computing resources,
generate qualified sales leads for our channel partners and increase recognition
of SIM as a provider of EIM solutions. Our marketing efforts are targeted toward
business executives, including information technology professionals, chief
executives, upper-level management and human resource personnel. We actively
manage our public relations programs, communicating directly with technology
professionals and the media in an effort to promote greater awareness for the
growing problems caused by employee misuse of the Internet and other computing
resources at work. We also provide potential customers and channel partners with
free trials of our SIM solutions, typically for 30-day periods. Our additional
marketing initiatives include:

         o        advertising online and in high-technology magazines,
                  management journals and other business-oriented periodicals;

         o        participating in and sponsoring trade shows and industry
                  events;

         o        hosting regional and international seminars, webinars and
                  training sessions for our sales organization and reseller
                  partners, as well as customers and prospects;

         o        participating in cooperative marketing efforts with our
                  Internet infrastructure partners including web link exchanges,
                  joint press announcements, joint trade show activities,
                  channel marketing campaigns, road shows and seminars;

         o        conducting speaking engagements on topics of interest to our
                  customers and prospects;

         o        using our website to communicate with our indirect sales
                  channels, and provide product and company information to
                  interested parties; and

                                       11
<PAGE>

         o        providing and distributing soft- and hard-copy materials on
                  our company, products, solutions, technologies, partnerships
                  and benefits.

         Our strategic vision is to build long-term partnerships with our
customers that help our customers maximize the success of their businesses. In
furtherance of this, we have designed and implemented the Stellar Partner
Channel Program to allow our reseller and partner channel to be an increasing
source of sales of our SIM solutions to our customers. The purpose of this
program is to reward our service partners for both the initial sale of our SIM
solutions to a customer and the monthly recurring revenue streams generated by
such customer's continued use of our SIM solutions. We believe that this
provides a valuable incentive to our reseller partners to market our products
and services to their customer base.

         Our service provider network is comprised of managed security, network
and human resource companies that work with us towards delivering quality,
online service solutions to our customers. Our reseller partner network consists
of resellers worldwide that resell our SIM solutions to their customer base. We
provide our reseller partners with a compensation model that enables them to
earn monthly annuity income from us. We also provide our reseller partners with
numerous benefits designed to incentivize them to present our SIM solutions to
their customer base, including:

         o        discounted in-house use of our SIM solutions and free
                  technical support for in-house use of our SIM solutions;

         o        sales and marketing support, including sales tools such as
                  white papers, Internet usage audit reports, Internet abuse
                  fact sheets, brochures and other materials designed to assist
                  them in selling our SIM solutions;

         o        access to our regional partner managers to assist our
                  resellers in qualifying leads, sales calls, conference calls,
                  volume pricing and other support in presenting our SIM
                  solutions to potential customers; and

         o        access to marketing opportunities in advertising, trade shows
                  and similar media where our SIM solutions can provide
                  visibility for our partners.

CUSTOMERS

         Our more than 100 customers range in size from companies with as few as
100 employees to Global 1000 companies, and include government agencies and
educational institutions. For the six months ended June 30, 2004, with the
exception of one (1) customer which accounted for 14% of our total revenues,
none of our customers accounted for more than ten percent (10%) of our total
revenues.

         Some of our key customers include the following:

         o        Char-Broil - W.C. Bradley Holding Company;

         o        Central DePage Healthcare;

         o        Comtech Telecommunications Corp.;

                                       12
<PAGE>

         o        Cook County Government, Chicago, Illinois;

         o        Shutts & Bowen, LLP

         o        Coconut Grove Bank.

         o        Institute of International Education

         o        Miller Tabak; and

         o        Inventions Submission Corporation

CUSTOMER SERVICE, TRAINING AND SUPPORT

         We believe that superior customer support is critical to retaining and
expanding our customer base. Our technical support group provides dependable and
timely resolution of customer technical inquiries and is available to customers
by telephone, e-mail and over the web, and our training services group delivers
education, training and pre-sales support to our customers. We also offer online
training to our customers and resellers to provide them with the knowledge and
skills to successfully deploy, use and maintain our products. Our customer
service team is responsible for handling general customer inquires, answering
questions about the ordering process, updating and maintaining customer account
information. In addition, our customer service team proactively updates
customers on a variety of topics, including release dates of new products and
updates to existing products.

COMPETITION

         The market for our products is fragmented, highly and increasingly
competitive, quickly evolving and subject to rapid technological change.
Increased competition may result in reduced market acceptance of our products,
pricing pressure and reduced gross margins, any of which could seriously harm
our business. Competitors vary in size and in scope and breadth of the products
and services they offer. Our current principal competitors include:

         o        companies offering network filtering products, such as
                  Websense, SurfControl, Tumbleweed, Secure Computing, Symantec,
                  8e6 Technologies, Webwasher, Elron and Cerberian;

         o        companies offering network reporting products, such as NetIQ
                  and Wavecrest Computing; and

         o        companies integrating URL filtering into specialized security
                  appliances, such as SonicWALL and Internet Security Systems.

         We also face current and potential competition from vendors of Internet
servers, operating systems and networking hardware, many of which now or may in
the future develop and/or bundle EIM or other competitive products with their
offerings. We compete against and expect increased competition from anti-virus
software developers, traditional network management software developers and web
management service providers. We may face new competition from companies
offering quality of service solutions, such a Packeteer; companies

                                       13
<PAGE>

with a direct presence on computer desktops, such as Microsoft; and companies
offering desktop management solutions, such as Altiris.

         Many of our current and potential competitors have longer operating
histories and significantly greater financial, technical, marketing or other
resources than we do. They may have significantly greater name recognition,
established marketing relationships and access to a larger installed base of
customers. In addition, current and potential competitors have established or
may establish cooperative relationships among themselves or with third parties
to increase the functionality of their products to address customer needs.
Accordingly, new competitors or alliances among competitors may emerge and
rapidly acquire significant market share.

         We believe that the principal competitive factors in the market for our
products include:

         o        a product's ability to scale and support the requirements of
                  complex networks;

         o        the robustness of the solution, allowing management of
                  emerging software and Internet applications, protocols and
                  URLs;

         o        the use of a large and professionally maintained database;

         o        the breadth of the product offering;

         o        the depth of the product's monitoring, reporting and analysis
                  capabilities; and

         o        the price at which the products are offered to customers.

INTELLECTUAL PROPERTY RIGHTS

         Our intellectual property rights are important to our business. We rely
upon confidentiality procedures and contractual provisions to protect our
proprietary technology and our SIM brand. Our general policy is to enter into
confidentiality agreements with our employees and consultants, and nondisclosure
agreements with all other parties to whom we disclose confidential information.

         We do not have any trademark registrations for our SIM brand or patents
relating to our proprietary technologies, nor do we have any applications for
such rights pending. We intend to apply for legal protection for certain of our
intellectual property in the future. However, we can provide no assurance that
we will receive such legal protection or that, if received, such legal
protection will be adequate to protect our intellectual property rights.

RESEARCH AND DEVELOPMENT

         We have invested significant time and resources in creating a
structured process for undertaking product and database development projects.
Members of our research and development department are involved with database
production, software development, validation and testing, documentation and
research. They work as part of cross-disciplined teams designed to provide a
framework for defining and addressing the activities required to bring product
concepts and development projects to market successfully. Research and


                                       14
<PAGE>

development expenses totaled $55,507 for the six months ended June 30, 2004. We
incurred $29,224 research and development expenses for the six months ended June
30, 2003.

EMPLOYEES

         As of October 12, 2004, we had 21 employees. Of this number, 19 were
full-time employees and 2 were a part-time employee. None of our employees are
represented by a labor union, and we have never experienced a work stoppage. We
believe that our relations with our employees are good.

                                  RISK FACTORS

         An investment in our common stock involves a high degree of risk. You
should carefully consider the following risk factors in addition to other
information in this Annual Report on Form 10-KSB before purchasing our common
stock. The risks and uncertainties described below are those that we currently
deem to be material and that we believe are specific to our company and our
industry. In addition to these risks, our business may be subject to risks
currently unknown to us. If any of these or other risks actually occurs, our
business may be adversely affected, the trading price of our common stock may
decline and you may lose all or part of your investment.

                       RISKS ASSOCIATED WITH OUR BUSINESS

WE ARE A DEVELOPMENT-STAGE COMPANY WITH AN UNPROVEN BUSINESS MODEL, WHICH MAKES
IT DIFFICULT FOR US TO EVALUATE OUR CURRENT BUSINESS AND FUTURE PROSPECTS.

         We have only a limited operating history upon which to base an
evaluation of our current business and future prospects. We have only been
offering our employee Internet management ("EIM") applications since 2001. As a
result, the revenue and income potential of our business and our market are
unproven. In addition, we have very limited historical data with respect to
sales of our Stellar Internet Monitoring ("SIM") solutions because we sell our
SIM solutions under licensing agreements generally ranging in duration from 12
to 36 months and have been licensing our SIM solutions for less than three (3)
years. Because of our limited operating history and because the market for EIM
products is relatively new and rapidly evolving, we have limited insight into
trends that may emerge and affect our business. We may make errors in predicting
and reacting to relevant business trends, which could harm our business.

         Before purchasing our common stock, you should consider an investment
in our common stock in light of the risks, uncertainties and difficulties
frequently encountered by early-stage companies in new and rapidly evolving
markets such as ours, including those described herein. We may not be able to
successfully address any or all of these risks. Failure to adequately address
such risks could cause our business, financial condition and results of
operations to suffer.

                                       15
<PAGE>


WE HAVE A HISTORY OF LOSSES AND, BECAUSE WE EXPECT OUR OPERATING EXPENSES TO
INCREASE IN THE FUTURE, WE DO NOT EXPECT TO BECOME PROFITABLE IN THE NEAR TERM,
IF EVER.

         We have experienced net losses in each fiscal quarter since our
inception and as of June 30, 2004, we had an accumulated deficit of
approximately $6.5 million. We incurred net losses to common shareholders of
approximately $3.3 million during the six months ended June 30, 2004,
approximately $1 million during the year ended December 31, 2003, and
approximately $1.7 million during the year ended December 31, 2002. We expect to
continue to incur significant net losses for the foreseeable future. We also
expect our operating expenses to continue to increase as we:

         o        expand our domestic and international selling and marketing
                  activities;

         o        increase our research and development efforts to upgrade our
                  existing SIM solutions and develop new products and
                  technologies;

         o        upgrade our operational and financial systems, procedures and
                  controls;

         o        hire additional personnel, including additional engineers and
                  other technical staff; and

         o        fulfill our responsibilities associated with being a public
                  company.

WE MAY NEED TO RAISE ADDITIONAL FUNDS IN THE FUTURE, WHICH FUNDS MAY NOT BE
AVAILABLE OR, IF AVAILABLE, MAY NOT BE AVAILABLE ON ACCEPTABLE TERMS.

         We expect that our operating expenses will continue to increase over
the next 12 months. In addition, we may experience a material decrease in
liquidity due to unforeseen capital requirements or other events and
uncertainties. As a result, we may need to raise additional funds, and such
funds may not be available on favorable terms, if at all. If we cannot raise
funds on acceptable terms, we may not be able to develop or enhance our software
applications, execute on our business plan, take advantage of future
opportunities or respond to competitive pressures or unanticipated requirements.
This may seriously harm our business, financial condition and results of
operations.

OUR FUTURE SUCCESS DEPENDS ON OUR EXISTING CUSTOMERS RENEWING AND PURCHASING
ADDITIONAL LICENSES OF OUR SIM SOLUTIONS.

         Our future success depends on our ability to achieve substantial
revenue from customer renewals for licenses of our SIM solutions. Licenses for
our SIM solutions typically have durations of 12, 24 or 36 months, and our
customers have no obligation to renew such licenses upon expiration. As a
result, we may be unable to generate significant revenue from renewals. In order
to maintain our revenue, we must be successful in renewing our license
agreements.

         Our future success also depends on our ability to license additional
services or product offerings to existing customers. As a result, to increase
our revenue, we must obtain greater penetration of our existing customers to
obtain greater coverage of their workforces.

WE MUST DEVELOP AND EXPAND OUR INDIRECT SALES CHANNELS TO INCREASE REVENUE AND
IMPROVE OUR OPERATING RESULTS.

                                       16
<PAGE>

         We currently sell our products both directly and indirectly. We intend,
however, to rely increasingly on our indirect sales channels. We depend on our
indirect sales channels, including value-added resellers, distributors and
Internet service providers, to offer our SIM solutions to a larger customer base
than we can reach through our direct sales efforts. We will need to expand our
existing relationships and enter into new relationships in order to increase our
current and future market share and revenue. We cannot assure you that we will
be able to maintain and expand our existing relationships or enter into new
relationships, or that any new relationships will be available on commercially
reasonable terms. If we are unable to maintain and expand our existing
relationships or enter into new relationships, we may lose customer
introductions and co-marketing benefits and our operating results may suffer.

OUR INCREASING RELIANCE ON INDIRECT SALES CHANNELS COULD RESULT IN REDUCED
REVENUE GROWTH BECAUSE WE HAVE LITTLE CONTROL OVER OUR VALUE-ADDED RESELLERS,
DISTRIBUTORS AND ORIGINAL EQUIPMENT MANUFACTURERS.

         We anticipate that sales from our various indirect sales channels,
including value-added resellers, distributors, providers of managed Internet
services and others, will account for a larger percentage of our total revenue
in future periods. None of these parties is obligated to continue selling our
products or to make any purchases from us. Our ability to generate increased
revenue depends significantly upon the ability and willingness of our indirect
sales channels to market and sell our products to organizations worldwide. If
they are unsuccessful in their efforts or are unwilling or unable to market and
sell our new product offerings, our operating results may suffer. We cannot
control the level of effort these parties expend or the extent to which any of
them will be successful in marketing and selling our products. A number of our
value-added resellers and distributors have been adversely affected by the
global economic downturn and we believe that their financial difficulties may
negatively impact their ability to sell and market our SIM solutions. Some of
our indirect sales channels also market and sell products that compete with our
SIM solutions or may decide to do so in the future. We may not be able to
prevent these parties from devoting greater resources to support our
competitors' products and reducing or eliminating their efforts to sell our SIM
solutions.

BECAUSE WE EXPECT TO DERIVE SUBSTANTIALLY ALL OF OUR FUTURE REVENUE FROM
LICENSING FEES FOR OUR SIM SOLUTIONS, ANY FAILURE OF THIS PRODUCT TO SATISFY
CUSTOMER DEMANDS OR TO ACHIEVE MEANINGFUL MARKET ACCEPTANCE MAY SERIOUSLY HARM
OUR BUSINESS.

         Substantially all of our revenue come from licensing fees for our SIM
solutions, and we expect this trend to continue for the foreseeable future. If,
for any reason, revenues from the licensing of our SIM solutions decline or do
not grow as rapidly as we anticipate, our operating results and our business may
be significantly impaired. If our SIM solutions fail to meet the needs of our
target customers, or if they do not compare favorably in price and performance
to competing products, our growth may be limited. We cannot assure you that our
SIM solutions will achieve any meaningful market acceptance. Our future
financial performance also will depend, in part, on our ability to diversify our
offerings by successfully developing, introducing and gaining customer
acceptance of new products and enhanced versions of our SIM solutions. We cannot
assure you that we will be successful in achieving market acceptance of any new

                                       17
<PAGE>

products that we develop or of enhanced versions of our SIM solutions. Any
failure or delay in diversifying our existing offering could harm our business,
financial condition and results of operations.

WE MAY NOT BE ABLE TO DEVELOP ACCEPTABLE NEW PRODUCTS OR ENHANCEMENTS TO OUR
EXISTING PRODUCTS AT A RATE REQUIRED BY OUR RAPIDLY CHANGING MARKET.

         Our future success depends on our ability to develop new products or
enhancements to our existing products that keep pace with rapid technological
developments and that address the changing needs of our customers. Although our
SIM solutions are designed to operate with a variety of network hardware and
software platforms, we will need to continuously modify and enhance our SIM
solutions to keep pace with changes in Internet-related hardware, software,
communication, browser and database technologies. We may not be successful in
either developing such products or timely introducing them to the market. In
addition, uncertainties about the timing and nature of new network platforms or
technologies, or modifications to existing platforms or technology, could
increase our research and development expenses. The failure of our products to
operate effectively with the existing and future network platforms and
technologies may limit or reduce the market for our products, result in customer
dissatisfaction and seriously harm our business, financial condition and results
of operations.

FAILURE OF OUR PRODUCTS TO WORK PROPERLY COULD IMPACT SALES, INCREASE COSTS, AND
CREATE RISKS OF POTENTIAL NEGATIVE PUBLICITY AND LEGAL LIABILITY.

         Because our products are complex and are deployed in a wide variety of
complex network environments, they may have errors or defects that users
identify after deployment, which could harm our reputation and our business. In
addition, products as complex as ours frequently contain undetected errors when
first introduced or when new versions or enhancements are released. We have from
time to time found errors in versions of our SIM solutions and we may find such
errors in the future. The occurrence of errors could adversely affect licenses
of our products, divert the attention of engineering personnel from our product
development efforts and cause significant customer relations problems. In
addition, given that EIM technology generally, and our SIM solutions
specifically, have yet to gain widespread acceptance in the market, any delays
would likely have a more detrimental impact on our business than if we operated
in a more established industry.

         In addition, because customers rely on our SIM solutions to manage
employee behavior, any significant defects or error in our products may result
in negative publicity or legal claims. Negative publicity or legal claims could
seriously harm our business, results of operations and financial condition. In
addition, our SIM solutions' capability to report Internet data retrieval
requests and software application execution requests along with the workstations
from which they originated may result in negative publicity or legal claims
based on potential privacy violations.

OUR FAILURE TO ADEQUATELY PROTECT OUR PROPRIETARY TECHNOLOGY AND STELLAR BRAND
COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS.

                                       18
<PAGE>

         Intellectual property is important to our success. We generally rely
upon confidentiality procedures and contractual provisions to protect our
proprietary technology and our SIM brand, and we intend to apply for legal
protection for certain of our intellectual property in the future. Any such
legal protection we obtain may be challenged by others or invalidated through
administrative process or litigation. Furthermore, legal standards relating to
the validity, enforceability and scope of protection of intellectual property
rights are uncertain, and adequate legal protection of our intellectual property
may not be available to us in every country in which we intend to sell our
products. The laws of some foreign countries may not be as protective of
intellectual property rights as United States laws, and their mechanisms for
enforcement of intellectual property rights may be inadequate. As a result, our
means of protecting our proprietary technology and brands may be inadequate.
Furthermore, despite our efforts, we may be unable to prevent third parties from
infringing upon or misappropriating our intellectual property. Any such
infringement or misappropriation could have a material adverse effect on our
business, financial condition and results of operations.

WE MAY BE SUED BY THIRD PARTIES FOR ALLEGED INFRINGEMENT OF THEIR PROPRIETARY
RIGHTS.

         The software and Internet industries are characterized by the existence
of a large number of patents, trademarks and copyrights, and by frequent
litigation based on allegations of patent infringement or other violations of
intellectual property rights. As the number of entrants into our market
increases, the possibility of an intellectual property claim against us grows.
Our technologies and products may not be able to withstand any third-party
claims or rights against their use. Any intellectual property claims, with or
without merit, could be time-consuming and expensive to litigate or settle, and
could divert management attention from the execution of our business plan.

OUR SYSTEMS MAY BE VULNERABLE TO SECURITY RISKS OR SERVICE DISRUPTIONS THAT
COULD HARM OUR BUSINESS.

         Although we have taken measures to secure our systems against security
risks and other causes of disruption of electronic services, our servers are
vulnerable to physical or electronic break-ins and service disruptions, which
could lead to interruptions, delays, loss of data or the inability to process
customer requests. Such events could be very expensive to remedy, could damage
our reputation and could discourage existing and potential customers from using
our products. Any such events could substantially harm our business, results of
operations and financial condition.

IF WE ACQUIRE ADDITIONAL COMPANIES OR TECHNOLOGIES IN THE FUTURE, SUCH COMPANIES
AND TECHNOLOGIES COULD PROVE DIFFICULT TO INTEGRATE, DISRUPT OUR BUSINESS,
DILUTE STOCKHOLDER VALUE AND ADVERSELY AFFECT OUR OPERATING RESULTS.

         We intend to acquire or make investments in complementary companies,
businesses, assets and technologies in the future. We have only made one such
acquisition, and therefore, our ability to make acquisitions or investments is
unproven. Acquisitions and investments involve numerous risks, including:

         o        difficulties in integrating operations, technologies, services
                  and personnel;

                                       19
<PAGE>

         o        the diversion of financial and management resources from
                  existing operations;

         o        the risk of entering new markets;

         o        the potential loss of key employees; and

         o        the inability to generate sufficient revenue to offset
                  acquisition or investment costs.

         In addition, if we finance any acquisitions by issuing convertible debt
or equity securities, our existing stockholders may be diluted which could
affect the market price of our stock. As a result, if we fail to properly
evaluate and execute any acquisitions or investments, our business and prospects
may be seriously harmed.

OUR CONTINUED GROWTH COULD STRAIN OUR PERSONNEL AND INFRASTRUCTURE RESOURCES,
AND IF WE ARE UNABLE TO IMPLEMENT APPROPRIATE CONTROLS AND PROCEDURES TO MANAGE
OUR GROWTH, WE MAY NOT BE ABLE TO SUCCESSFULLY IMPLEMENT OUR BUSINESS PLAN.

         We continue to experience rapid growth in our operations, which has
placed, and will continue to place, a significant strain on our management,
administrative, operational and financial infrastructure. Our future success
will depend in part upon the ability of our senior management to manage growth
effectively. This will require us to hire and train additional personnel to
manage our expanding operations. In addition, we will be required to continue to
improve our operational, financial and management controls and our reporting
systems and procedures. If we fail to successfully manage our growth, we may be
unable to execute upon our business plan.

WE FACE INCREASING COMPETITION FROM MORE ESTABLISHED COMPANIES THAT HAVE
SIGNIFICANTLY GREATER RESOURCES THAN WE DO, WHICH MAY PLACE PRESSURE ON OUR
PRICING AND WHICH COULD PREVENT US FROM INCREASING REVENUE OR ATTAINING
PROFITABILITY.

         The market for our products is intensely competitive and is likely to
become even more so in the future. Our current principal competitors may offer
their products at a significantly lower price than our SIM solutions, which
could result in pricing pressures on licenses of our product and in the
commoditization of EIM products. If we are unable to maintain the current
pricing on sales of our SIM solutions or increase our pricing in the future, our
results of operations could be negatively impacted. In addition, pricing
pressures and increased competition generally could result in reduced licensing,
reduced margins or the failure of our SIM solutions to achieve or maintain more
widespread market acceptance, any of which could have a material adverse effect
on our business, financial condition and results of operations. Our current
principal competitors include:

         o        companies offering network filtering products, such as
                  Websense, SurfControl, Tumbleweed, Secure Computing, Symantec,
                  8e6 Technologies, Webwasher, Elron, and Cerberian;

         o        companies offering network reporting products, such as NetIQ
                  and Wavecrest Computing; and

                                       20
<PAGE>

         o        companies integrating URL filtering into specialized security
                  appliances, such as SonicWALL and Internet Security Systems.

We also face current and potential competition from vendors of Internet servers,
operating systems and networking hardware, many of which have developed and/or
bundle, or may in the future develop and/or bundle, EIM or other competitive
products with their products. We compete against, and expect increased
competition from, anti-virus software developers, traditional network management
software developers and web management service providers. We may face new
competition from companies offering quality of service solutions, such as
Packeteer, companies with a direct presence on computer desktops, such as
Microsoft, and companies offering desktop management solutions, such as Altiris.
If EIM functions become standard features of Internet-related hardware or
software, the demand for our SIM solutions may decrease. In addition, our own
indirect sales channels may decide to develop or sell competing products instead
of our SIM solutions. Moreover, even if our SIM solutions provide greater
functionality and are more effective than the products offered by vendors of
Internet-related hardware or software, potential customers might accept this
limited functionality in lieu of purchasing our SIM solutions.

         Many of our potential competitors enjoy substantial competitive
advantages, such as:

         o        greater name recognition and larger marketing budgets and
                  resources;

         o        established marketing relationships and access to larger
                  customer bases; and

         o        substantially greater financial, technical and other
                  resources.

As a result, they may be able to respond more quickly and effectively than we
can to new or changing opportunities, technologies, standards or customer
requirements. For all of the foregoing reasons, we may not be able to compete
successfully against our current and future competitors.

WE ARE DEPENDENT ON OUR MANAGEMENT TEAM, AND THE LOSS OF ANY KEY MEMBER OF THIS
TEAM MAY PREVENT US FROM IMPLEMENTING OUR BUSINESS PLAN IN A TIMELY MANNER.

         Our success depends largely upon the continued services of our
executive officers and other key management and development personnel. We are
also substantially dependent on the continued service of our existing
engineering personnel because of the complexity of our products and
technologies. With the exception of our President, Donald R. Innis, and Sven
James, our Chief Technical Officer, we do not have an employment agreement with
any of our officers, management or other key personnel and, therefore, they may
terminate their employment with us at any time without penalty. We do not
maintain key person life insurance policies on any of our employees. The loss of
one or more of our key employees could seriously harm our business, financial
condition or results of operations. In such an event we may be unable to recruit
personnel to replace these individuals in a timely manner, or at all, on
acceptable terms.

BECAUSE COMPETITION FOR OUR TARGET EMPLOYEES IS INTENSE, WE MAY NOT BE ABLE TO
ATTRACT AND RETAIN THE HIGHLY SKILLED EMPLOYEES THAT WE NEED TO SUPPORT OUR
PLANNED GROWTH.

                                       21
<PAGE>

         To execute our growth plan, we must attract and retain highly qualified
personnel. We need to hire additional personnel in virtually all operational
areas, including selling and marketing, research and development, operations and
technical support, customer service and administration. Competition for these
personnel remains intense, especially for engineers with high levels of
experience in designing and developing software and Internet-related products.
We may not be successful in attracting and retaining qualified personnel. We
have from time to time in the past experienced, and we expect to continue to
experience in the future, difficulty in hiring and retaining highly skilled
employees with appropriate qualifications. Many of the companies with which we
compete for experienced personnel have greater resources than we have. If we
fail to attract new personnel or retain and motivate our current personnel, our
business and future growth prospects could be severely harmed.

                       RISKS ASSOCIATED WITH OUR INDUSTRY

THE MARKET FOR OUR PRODUCTS CONTINUES TO EMERGE, AND IF WE ARE NOT SUCCESSFUL IN
PROMOTING AWARENESS OF THE NEED FOR OUR SIM SOLUTIONS AND OF OUR STELLAR BRAND,
OUR GROWTH MAY BE LIMITED.

         Based on our experience with potential customers, we believe that many
corporations do not recognize or acknowledge the existence or scope of problems
caused by employee misuse of the Internet or of their computers. In addition,
there may be a time-limited opportunity to achieve and maintain a significant
share of the market for EIM and our other products due in part to the emerging
nature of these markets and the substantial resources available to our existing
and potential competitors. If employers do not recognize or acknowledge these
problems, then the market for our SIM solutions may develop more slowly than we
expect, which could adversely affect our operating results. Developing and
maintaining awareness of our Stellar brand is critical to achieving widespread
acceptance of our existing and future products. Furthermore, we believe that the
importance of brand recognition will increase as competition in our market
develops. Successful promotion of our Stellar brand will depend largely on the
effectiveness of our marketing efforts and on our ability to develop reliable
and useful products at competitive prices. If we fail to successfully promote
our Stellar brand, or if our expenses to promote and maintain our Stellar brand
are greater than anticipated, our financial condition and results of operations
could suffer.

THE SUCCESS OF OUR BUSINESS DEPENDS UPON THE CONTINUED GROWTH AND ACCEPTANCE OF
THE INTERNET AS A BUSINESS TOOL.

         Expansion in the sales of our SIM solutions depends on the continued
acceptance of the Internet as a communications and commerce platform for
enterprises. The Internet could lose its viability as a business tool due to
delays in the development or adoption of new standard and protocols to handle
increase demands of Internet activity, security, reliability, cost, ease-of-use,
accessibility and quality of service. If the Internet does not continue to be a
widespread communications medium and commercial platform, the demand for our SIM
solutions could be significantly reduced, which could have a material adverse
effect on our business, financial condition and results of operations.

                                       22
<PAGE>

EVOLVING REGULATION OF THE INTERNET MAY AFFECT US ADVERSELY.

         As Internet commerce continues to evolve, increasing regulation by
federal, state or foreign agencies becomes more likely. Such regulation is
likely in the areas of user privacy, pricing, content and quality of products
and services. Taxation of Internet use or other charges imposed by government
agencies or by private organizations for accessing the Internet may also be
imposed. Laws and regulations applying to the solicitation, collection or
processing of personal or consumer information could affect our activities.
Furthermore, any regulation imposing fees for Internet use could result in a
decline in the use of the Internet and the validity of Internet commerce, which
could have a material adverse effect on our business, financial condition and
results of operations.

                         RISKS ASSOCIATED WITH OUR STOCK

NEW INVESTORS WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION IN THE TANGIBLE NET
BOOK VALUE OF THEIR SHARES.

         As of the date of this report, the market price of our common stock
significantly exceeds the net tangible book value of our common stock. The net
tangible book value of one share of our common as of June 30, 2004 was $0.13. As
a result, investors purchasing common stock in the market will incur substantial
dilution. In addition, we have issued warrants and options to acquire shares of
common stock at prices significantly below the current market price of our
common stock, the exercise of which will likely result in additional dilution
when and if they are exercised.

FUTURE SALES OF OUR COMMON STOCK MAY CAUSE OUR STOCK PRICE TO DECLINE.

         The sale of a large number of shares of our common stock in the market
after this offering, or the belief that such sales could occur, could cause a
drop in the market price of our common stock. We currently have 26,426,636
shares of common stock outstanding, of which 23,416,566 shares are "restricted
securities," as that term is defined in Rule 144 of the Securities Act. We
recently registered the public resale of 4,918,715 of these restricted shares We
also registered the public resale of an additional 3,289,251 shares of common
stock underlying various warrants. The shares registered in such offering will
be freely tradable without restriction or further registration under the
Securities Act, unless the shares are purchased by our affiliates.

         7,928,785 shares of our outstanding shares of common stock are freely
tradable without restriction or subject to an effective registration statement.
The remaining 18,497,851 shares of common stock continue to be restricted
securities. Of this remaining number of shares, 166,815 shares are currently
eligible for sale under Rule 144 of the Securities Act, 18,000,001 shares will
become eligible for sale under Rule 144 of the Securities Act on January 15,
2005, and 331,035 shares will become eligible for sale under Rule 144 of the
Securities Act on June 7, 2005.

         None of our directors, executive officers and other stockholders are
subject to lock-up agreements or market stand-off provisions that limit their
ability to sell common stock.

                                       23
<PAGE>

WE INTEND TO ATTEMPT TO RAISE ADDITIONAL FUNDS IN THE FUTURE, AND SUCH
ADDITIONAL FUNDING MAY BE DILUTIVE TO STOCKHOLDERS OR IMPOSE OPERATIONAL
RESTRICTIONS.

         We intend to attempt to raise additional capital in the future to help
fund our operations through sales of shares of our common stock or securities
convertible into shares of our common stock, as well as issuances of debt. Such
additional financing may be dilutive to our stockholders, and debt financing, if
available, may involve restrictive covenants which may limit our operating
flexibility. If additional capital is raised through the issuances of shares of
our common stock or securities convertible into shares of our common stock, the
percentage ownership of our stockholders will be reduced. These stockholders may
experience additional dilution in net book value per share and any additional
equity securities may have rights, preferences and privileges senior to those of
the holders of our common stock. In addition, certain of our outstanding
warrants contain provisions that provide for a downward adjustment in the
exercise price in the event that we issue shares of our common stock or
securities convertible or exerciseable into shares of our common stock at a
price less than the exercise price in effect at the time of the issuance of such
securities which could result in additional dilution to our stockholders.

THE MARKET PRICE OF OUR COMMON STOCK IS LIKELY TO BE HIGHLY VOLATILE AND SUBJECT
TO WIDE FLUCTUATIONS.

         The market price of our common stock is likely to be highly volatile
and could be subject to wide fluctuations in response to a number of factors
that are beyond our control, including:

         o        announcements of technological innovations or new products or
                  services by our competitors;

         o        demand for our SIM solutions, including fluctuations in
                  license renewals; and

         o        fluctuations in revenue from our indirect sales channels.

        In addition, the market price of our common stock could be subject to
wide fluctuations in response to:

         o        quarterly variations in our revenues and operating expenses;

         o        announcements of technological innovations or new products or
                  services by us; and

         o        our technological capabilities to accommodate the future
                  growth in our operations or those of our customers.

         In addition, the stock market has experienced significant price and
volume fluctuations that have particularly affected the market price of the
stock of many Internet-related companies, and that often have been unrelated or
disproportionate to the operating performance of these companies. Market
fluctuations such as these may seriously harm the market price of our common
stock. Further, securities class action suits have been filed against companies
following periods of market volatility in the price of their securities. If such
an action is instituted against us, we may incur substantial costs and a
diversion of management attention and resources, which would seriously harm our
business, financial condition and results of operations.

                                       24
<PAGE>

OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY, AND THESE FLUCTUATIONS MAY
CAUSE OUR STOCK PRICE TO FALL.

         Our operating results will likely vary in the future primarily as the
result of fluctuations in our billings, revenues and operating expenses. We
expect that our operating expenses will continue to increase in the future as we
expand our selling and marketing activities, increase our research and
development efforts, and hire additional personnel. If our results of operations
do not meet the expectations of current or potential investors, the price of our
common stock may decline.

BECAUSE WE RECOGNIZE REVENUE FROM LICENSING FEES FOR OUR SIM SOLUTIONS RATABLY
OVER THE TERM OF THE SUBSCRIPTION, DOWNTURNS IN SALES MAY NOT BE IMMEDIATELY
REFLECTED IN OUR REVENUE.

         We expect that nearly all of our revenue for the foreseeable future
will come from the licensing of our SIM solutions. Upon execution of a licensing
agreement, we invoice our customers for the full term of the licensing
agreement. We then recognize revenue from customers monthly over the terms of
their licensing agreements, which typically have durations of 12, 24 or 36
months. As a result, a majority of the revenue we report in each quarter is
deferred revenue from license agreements entered into and paid for during
previous quarters. Because of this financial model, the revenue we report in any
quarter or series of quarters may not be a reliable indicator of market
acceptance of our SIM solutions.

WE DO NOT INTEND TO PAY DIVIDENDS.

         We have never declared or paid any cash dividends on our common stock.
We currently intend to retain any future profits from operations to fund growth
and do not expect to pay any dividends in the foreseeable future.

         APPLICABLE SEC RULES GOVERNING THE TRADING OF "PENNY STOCKS" LIMITS THE
TRADING AND LIQUIDITY OF OUR COMMON STOCK WHICH MAY AFFECT THE TRADING PRICE OF
OUR COMMON STOCK.

Our common stock currently trades on the OTC Bulletin Board. Since our common
stock continues to trade below $5.00 per share, our common stock is considered a
"penny stock" and is subject to SEC rules and regulations which impose
limitations upon the manner in which our shares can be publicly traded. These
regulations require the delivery, prior to any transaction involving a penny
stock, of a disclosure schedule explaining the penny stock market and the
associated risks. Under these regulations, certain brokers who recommend such
securities to persons other than established customers or certain accredited
investors must make a special written suitability determination regarding such a
purchaser and receive such purchaser's written agreement to a transaction prior
to sale. These regulations may have the effect of limiting the trading activity
of our common stock and reducing the liquidity of an investment in our common
stock.

                                       25
<PAGE>

ITEM 2. DESCRIPTION OF PROPERTY

         Our corporate headquarters and principal offices are located at 5633
Strand Boulevard, Suite 318, Naples, Florida 34110, where we lease approximately
1,500 square feet of space on a month to month basis for payment of
approximately $2,200. We lease additional office space at 10621 Airport Road #3,
Naples, Florida 34109, where we lease approximately 1,900 square feet of space
for a monthly rent payment of approximately $2,600. This lease expires in
December 2006. CompuSven, our wholly owned subsidiary, leases office space
located at 3200 Bailey Lane, Suite 99, Naples, Florida 34105 for a monthly rent
payment of approximately $4,200. This lease expires June 30, 2006. We believe
that our office space is adequate to support our current operations and that
adequate additional space is available to support our operations over the next
12 months.

ITEM 3. LEGAL PROCEEDINGS

         We are not currently a party to any material legal proceedings. We may
from time to time become involved in litigation relating to claims arising in
the ordinary course of our business.

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

         None.

                                       26
<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         MARKET INFORMATION

         Our common stock currently trades on the OTC Bulletin Board under the
symbol "SLLR". The following table sets forth the range of high and low bid
prices for shares of our common stock on the OTC Bulletin Board for the periods
indicated, as reported by Nasdaq. These quotations represent inter-dealer
prices, without retail mark-up, markdown or commission, and may not represent
actual transactions.

         Fiscal Year Ended June 30, 2004           High             Low
         -------------------------------          ------          ------
         Quarter ended June 30, 2004              $ 4.00          $ 2.65
         Quarter ended March 31, 2004               6.00            1.12
         Quarter ended December 31, 2003            1.60            1.00
         Quarter ended September 30, 2003           4.80            0.88

         Fiscal Year Ended June 30, 2003           High             Low
         -------------------------------          ------          ------
         Quarter ended June 30, 2003              $ 7.00          $ 4.80
         Quarter ended March 31, 2003              12.00            7.00
         Quarter ended December 31, 2002           13.20            4.84
         Quarter ended September 30, 2002          16.40            5.20


         The last price of the Company's common stock as reported on the OTC
Bulletin Board on October 12, 2004, was $2.65 per share.

HOLDERS
         As of October 12, 2004, the number of stockholders of record of our
common stock was seventy five (75). Based on broker inquiry conducted in
connection with the distribution of proxy solicitation materials in connection
with our special meeting of shareholders on March 11, 2004, we believe that
there are approximately 1,600 beneficial owners of our common stock.

DIVIDENDS

         We have not paid any cash dividends on our common stock to date, nor do
we intend to pay any cash dividends on our common stock in the foreseeable
future. We intend to retain future earnings, if any, to finance the operation
and development of our business.

                                       27
<PAGE>

RECENT SALES OF UNREGISTERED SECURITIES

SINCE MAY 24, 2004, THE DATE OF OUR LAST QUARTERLY REPORT ON FORM 10-QSB, WE
HAVE ISSUED AND SOLD THE FOLLOWING SECURITIES WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"):

         1. On June 8, 2004, we issued convertible promissory notes
("Convertible Notes"), Series A Warrants to purchase 1,200,000 shares of common
stock (the "Series A Warrants") and Series B Warrants to purchase 1,200,000
shares of common stock (the "Series B Warrants") to a small group of accredited
investors in consideration for cash proceeds of $1,500,000. The principal amount
of the Convertible Notes and all accrued interest due thereunder were
convertible into shares of our common stock at an initial conversion price of
$2.50 per share. On July 12, 2004, the effective date of our registration
statement on Form SB-2, the Convertible Notes were automatically converted into
an aggregate of 601,155 shares of our common stock. Each Series A Warrant is
exercisable into one (1) share of our common stock at an initial exercise price
of $2.50 per share, and each Series B Warrant is exercisable into one (1) share
of our common stock at an initial exercise price of $3.50 per share. In
connection with the issuance of these securities, we paid a commission of
$120,000 to a registered broker-dealer. We issued these securities to a limited
number of accredited investors in a private offering exempt from the
registration requirements of the Securities Act pursuant to Section 4(2) of the
Securities Act and/or Rule 506 promulgated thereunder without engaging in any
advertising or general solicitation of any kind.

         2. On June 8, 2004, we issued warrants to acquire 300,000 shares of our
common stock to FEQ Investments, Inc. as partial payment for general financial
advisory services provided to us. The FEQ Warrants are exerciseable into shares
of our common stock at an exercise price of $3.25 per share commencing on
January 1, 2005, and expire on June 4, 2009. These securities were issued to one
accredited investor in a private placement transaction exempt from the
registration requirements of the Securities Act pursuant to Section 4(2) of the
Securities Act directly by us without engaging in any advertising or general
solicitation of any kind and without payment of underwriting discounts or
commissions to any person.

         3. On June 7, 2004, we issued 331,035 shares of our common stock to one
accredited investor in consideration for the waiver of dissenters' rights
obtained in connection with our acquisition of Stellar Venture Partners. These
securities were issued to one accredited investor in a private placement
transaction exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) of the Securities Act directly by us without engaging
in any advertising or general solicitation of any kind and without payment of
underwriting discounts or commissions to any person.

         4. On July 14, 2004, we acquired 100% of the capital stock of
CompuSven, Inc., a Florida corporation ("CompuSven"). In partial payment of the
purchase price, we issued 43,353 shares of common stock to Mr. James, the sole
stockholder of CompuSven, and to Email Technologies, Inc., a Florida
corporation, pursuant to an existing agreement with CompuSven. These securities
were issued to two accredited investors in a private placement transaction
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) of the Securities Act

                                       28
<PAGE>

directly by us without engaging in any advertising or general solicitation of
any kind and without payment of underwriting discounts or commissions to any
person.

         5. On July 22, 2004, we issued 22,750 shares of our common stock to one
accredited investor upon exercise of outstanding warrants issued to such
investor. These shares were issued in a cashless exercise in accordance with the
terms of the warrants. These securities were issued to one accredited investor
in a private placement transaction exempt from the registration requirements of
the Securities Act pursuant to Section 4(2) of the Securities Act directly by us
without engaging in any advertising or general solicitation of any kind and
without payment of underwriting discounts or commissions to any person.

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

         This Management's Discussion and Analysis of Financial Condition and
Results of Operations and other parts of this Annual Report on Form 10-KSB
contain forward-looking statements that involve risks and uncertainties. All
forward-looking statements included in this Annual Report on Form 10-KSB are
based on information available to us on the date hereof, and we assume no
obligation to update any such forward-looking statements. Our actual results may
differ materially from those anticipated in these forward-looking statements as
a result of a number of factors, including those set forth under the caption
"Risk Factors" on page 15 of this Annual Report on Form 10-KSB and elsewhere in
this Annual Report on Form 10-KSB. The following should be read in conjunction
with our audited financial statements contained elsewhere in this Annual Report
on Form 10-KSB. BACKGROUND

         On January 15, 2004 (the "Effective Date"), pursuant to an Agreement
and Plan of Merger dated December 16, 2003 (as amended to date, the "Merger
Agreement") by and among us, International Travel CD's Acquisition Corp., a
Delaware corporation and our then wholly-owned subsidiary, Stellar Venture
Partners, LLC, a Georgia limited liability company ("Stellar Venture Partners"),
and MAS Services, Inc., a Florida corporation, we acquired Stellar Venture
Partners by merging International Travel CD's Acquisition Corp. with and into
Stellar Venture Partners, with Stellar Venture Partners remaining as the
surviving entity and becoming our wholly-owned subsidiary.

         Pursuant to the terms of the Merger Agreement, at the Effective Date,
we issued 18,000,001 shares of our common stock, $.001 par value per share, to
the membership interest holders of Stellar Venture Partners, representing, on a
fully diluted basis, approximately seventy-four percent (74%) of the then issued
and outstanding shares of our common stock. Pursuant to the terms of the Merger
Agreement, at the Effective Date, Mark A. Bush resigned as our sole officer and
director, and Richard A. Schmidt was appointed to serve as our sole director,
Chief Executive Officer, Treasurer and Secretary.

         As a result of (i) the percentage of the shares of common stock
acquired under the Merger Agreement by the membership interest holders of
Stellar Venture Partners, and (ii) the resignation of Mark A. Bush as our sole
officer and director and the appointment of Richard A.

                                       29
<PAGE>

Schmidt as our successor officer and director, the Merger may be deemed to have
involved a change in control of us.

         After completing the acquisition of Stellar Venture Partners, we called
and convened a special meeting of our stockholders on March 15, 2004 to consider
and approve proposals to: (i) amend our articles of incorporation to change our
name from "International Travel CD's, Inc." to "Stellar Technologies, Inc.,"
change the par value of our common stock and preferred stock from no par value
per share to $.001 par value per share, and explicitly set forth our right to
indemnify our directors and hold our directors harmless from certain liabilities
for actions taken on our behalf to the fullest extent permitted under the
Colorado Business Corporation Act; and (ii) effect a reverse split of all of our
issued and outstanding shares of common stock at a ratio of one-for-four,
resulting in our stockholders receiving one share of common stock for every four
shares of common stock owned as of the record date of the meeting. Each of these
proposals was approved at the special meeting and became effective on March 11,
2004.

         On July 14, 2004, we acquired all of the issued and outstanding capital
stock of CompuSven, Inc., a Florida corporation ("CompuSven"). Upon completion
of this acquisition, CompuSven became a wholly owned subsidiary of the Company.
The acquisition was completed pursuant to a Stock Purchase Agreement with Sven
James, the sole stockholder of CompuSven. The total purchase price consisted of
$889,985, of which $869,379 was paid at closing and 43,353 shares of the
Company's common stock. Of this amount, $773,900 and 36,850 shares of Common
Stock were issued to Mr. James, and pursuant to an existing agreement between
CompuSven and Email Technologies, Inc., a Florida corporation, the balance of
the purchase price was issued to Email Technologies.

OVERVIEW

         As a result of our acquisition of Stellar Venture Partners, we entered
the employee Internet management ("EIM") market. Upon completion of our
acquisition of CompuSven we now provide related e-mail migration, e-mail data
and directory management software and related services with our Stellar E-mail
shuttle solution The EIM market involves the provision of traditional Internet
access control and management services, but with added management and
productivity-enhancing functionality. International Data Corporation, a market
research firm ("IDC"), estimates that the EIM market will grow to $750 million
by the end of 2004. The projected growth of this market may be attributable in
part to the growing importance of protecting an organization's assets from being
illegally distributed or acquired by its employees by means of the Internet and
keeping control over information technology expenditures, while maintaining high
employee morale and productivity.

         We believe that organizations want a cost-effective answer to Internet
abuse that provides them with individual user monitoring data as well as
organization-wide monitoring and analysis by department. Based on our internal
research, we believe that approximately eighty percent (80%) of the
organizations comprising the potential EIM market have taken little or no action
to monitor Internet use by their employees, and that the remaining twenty
percent (20%) of such organizations implementing EIM technology are, for the
most part, using outdated and ineffective technology.

                                       30
<PAGE>

         We provide organizations with next-generation technology that we
believe is far more effective at monitoring employee Internet use than the
technologies currently being used for this purpose. Our next-generation
technology consists of an innovative web-based Internet monitoring application
that allows organizations to monitor Internet usage by employees and prevent
Internet abuse. Our applications provide organizations of any size with the
security of knowing how its Internet connections are being used without the need
to purchase new hardware or software, and provide organizations with detailed
reports describing which web sites are being visited, what instant messages are
being sent and received, which employees were involved, and what time the
actions took place.

         Our research and development activities are focused on the enhancement
of our current SIM solutions and on the development of next-generation
technologies in the EIM market. We anticipate that the majority of our research
and development efforts will be devoted to the internal development of
complimentary technologies that we intend to acquire from external sources, and
that the remainder of such efforts will be devoted to the internal development
of our own proprietary technologies. In that regard, we are developing our next
generation EIM solution, which will add a blocking component to our existing
Internet, instant messaging and e-mail monitoring and archiving capabilities. We
believe this will be the most comprehensive solution available.

         We intend to acquire additional technologies that we believe are
complimentary to either our existing technologies or technologies that we are
developing or may attempt to develop in the future. In addition to acquisitions
of complimentary technologies described above, we may, from time to time,
explore possible acquisitions of companies, businesses or assets that we believe
are complementary to our business.

         Having completed the acquisition of CompuSven and its established
customer and revenue base, and increased our direct sales force, we expect
material increases in revenue during the next 12 months. The market for our
products and services is large and continues to grow. Sustained spending on
technology, continued emphasis on employee efficiency and growing awareness of
and compliance with regulatory and reporting requirements by employers are all
key external conditions which may affect our ability to execute our business
plan. In order to maximize the market opportunities available to us, we need to
increase our visibility to potential customers and continue to enhance the
quality of our products and services to meet the demands of our customers and
offerings of our competitors. We continue to focus a substantial amount of our
resources to achieve visibility and develop superior solutions. Our ability to
succeed on these initiatives is critical to our ability to successfully execute
our business plan.

COMPARISON OF THE SIX MONTH PERIODS ENDED JUNE 30, 2004 AND JUNE 30, 2003
(UNAUDITED)

         In connection with the merger of the Company and Stellar Venture
Partners, the former members of Stellar Venture Partners received approximately
74% of the then issued and outstanding shares of common stock of the Company on
a fully diluted basis. As a result, under the United States General Accepted
Accounting Principles ("GAAP"), Stellar Venture Partners

                                       31
<PAGE>

is treated as the accounting acquirer and the operations and financial
statements of Stellar Venture Partners prior to the Merger have become those of
the Company.

         Prior to the Merger, Stellar Venture Partners had a fiscal year end of
December 31, while the Company had and continues to maintain a fiscal year end
of June 30. As a result, Stellar Venture Partners has changed its fiscal year
end to June 30 in order to match that of the Company. The audited financial
statements of the Company appearing elsewhere herein and discussed below relate
to the transition period commencing January 1, 2004 and ending June 30, 2004.
For comparison purposes, a condensed consolidated statement of operations for
the six months ended June 30, 2004 and a condensed consolidated balance sheet as
of June 30, 2004 are included in Note 16 to our audited financial statements
contained elsewhere in this report.

Revenues

         Revenues consist entirely of licensing fees that we receive upon the
sale of our SIM solutions. Revenues increased $34,081 or 45% to $109,374 for the
six month period ended June 30, 2004 from $75,293 for the six month period ended
June 30, 2003. The increase was primarily a result of increased licensing
revenues received from new customers. Approximately 20% of revenues recognized
for the six months ended June 30, 2004 was derived from licenses to first-time
customers who initially purchased 12, 24 or 36 month licenses of our SIM
solutions in 2004. The remaining 80% of revenues was generated from existing
customers. We expect growth in revenues for future periods to exceed growth in
revenues for past periods as we continue to focus substantial resources on sales
and marketing efforts in order to generate licensing revenues from existing and
new customers. We also expect CompuSven, which we acquired in July 2004, to
generate incremental revenue for us.

Operating Expenses

         Operating expenses consist primarily of labor costs and expense
reimbursements, selling and marketing expenses, general, administrative and
related fee expenses, and research and development expenses.

         Labor Costs and Expense Reimbursements. Labor costs and expense
reimbursements consist of all salaries, commissions, stock compensation,
benefits and related compensation that we pay to our employees. Labor costs and
expense reimbursements increased $267,202 to $559,965 for the six month period
ended June 30, 2004 from $292,763 for the six month period ended June 30, 2003.
The increase was due primarily to an increase of approximately $250,000 for
general and administrative personnel, including Richard A. Schmidt, our new
Chief Executive Officer, and Donald R. Innis, our new President, and an increase
in sales personnel expenses of approximately $19,000. We expect labor costs and
expense reimbursements to increase in the future as we continue to add more
personnel to support our expanding sales and marketing efforts and as increased
licenses result in higher overall sales commission expenses.

         Marketing. Marketing expenses consist of costs related to production of
marketing brochures, trade shows, direct mailing programs, advertising,
promotions, travel, customer support, public relations and investor relations.
Marketing expenses increased $84,256 to

                                       32
<PAGE>

$116,045 for the six month period ended June 30, 2004 from $31,789 for the six
month period ended June 30, 2003. The increase was primarily due to increased
expenses associated with marketing campaigns and the promotion of our SIM
solutions and increased public relations costs incurred as a result of our
becoming a public company. We expect marketing expenses to increase in the
future as we continue to expand our marketing efforts and promote our SIM
solutions and related e-mail migration, e-mail data and directory management
software and related services.

         General, Administrative and Related Expenses. General, administrative
and related expenses consist of management fees paid to related parties,
professional fees, general and administrative expenses, and office rents.
General, administrative and related expenses increased $474,162 to $660,482 for
the six months ended June 30, 2004 from $186,320 for the six months ended June
30, 2003. The increase resulted primarily from an increase of $27,750 in
management fees paid to related parties associated with the accelerated
expensing of management fees paid to MAS Services, Inc. due to the cancellation
of our management fee agreement with it, an increase in professional fees of
$353,755 associated with our year-end audits, significant business transactions
that we completed in 2004 and compliance with SEC public reporting and corporate
governance requirements and an increase of $82,506 in general and administrative
fees related to travel and the overall growth of our business. We expect
general, administrative and related fee expenses to increase in future periods
as a result of increased costs associated with growth in our operations and
increased professional fees associated with any acquisitions of businesses or
technologies that we may make in furtherance of our acquisition strategy and our
compliance with SEC public reporting and corporate governance requirements.

         Research and Development. Research and development expenses consist
primarily of costs associated with the development of new products and services
and the enhancement of our existing SIM solutions. Research and development
expenses increased $26,283 to $55,507 for the six month period ended June 30,
2004 from $ 29,224 for he six month period ended June 30, 2003. The increase was
primarily a result of increased costs associated with the development of new
products and services and the enhancement of our existing SIM solutions. We
expect research and development expenses to increase in the future as we pursue
future product and service development, enhance our existing SIM solutions and
e-mail migration, data and directory management solutions and enter into
arrangements with additional technology partners.

         Loan Impairment. Our $350,000 note receivable from LSP Exploration, LLC
("LSP") matured in September 2004, and we have not been able to collect the
amount owed to us. In connection with the preparation of the financial
statements included in this report, we concluded that LSP does not have the
ability to repay us the amount they owe us at this time and have, therefore,
impaired the entire balance owed to us, including interest receivable as of June
30, 2004, in the amount of $354,949. Since we have impaired the entire balance,
we will not incur any further losses related to this note in future periods.
Should we collect this note or any portion thereof in the future, we would
record the amount received as other income. We do not expect this impairment to
result in any future cash expenditures.

                                       33
<PAGE>

Other Income (expense)

         Other income (expense) consists of investor losses, interest and money
market dividends, gains in trading securities and interest expense.

         Interest Expense. Interest expense increased to $62,874 for the six
months ended June 30, 2004. We did not pay any interest expense during the six
months ended June 30, 2003. The interest expense consisted of $50,284 from the
partial amortization of the debt discount associated with the warrants we issued
with the $1.5 million in convertible notes and $10,000 from the partial
amortization of loan fees that we paid to broker/dealers in connection with the
note offering. In July 2004, we will expense the remaining debt discounts and
beneficial conversion discounts we incurred in connection with the $1.5 million
convertible note offering as the notes were converted into common stock upon the
effective date of the registration statement covering the public resale of the
common stock underlying the notes. Accordingly, in July 2004, we will record
approximately $1.45 million of additional interest expense as the result of the
acceleration.

         Gains in Trading Securities. Gains in trading securities consists of
gains on the sale of securities held for investment. Gains in trading securities
increased $134,988 to $138,393 for the six months ended June 30, 2004 from
$3,405 for the six months ended June 30, 2003. We believe the increase was due
primarily to improved stock market conditions and the performance of the
underlying companies in which we invested. We do not expect to make any
additional material investments in investment securities in the future, as we
intend to focus our operations exclusively in the EIM and related e-mail
migration, data and directory management markets. For this reason, we do not
expect to realize any material gains in trading securities in the future.

Preferred Stock Dividend

         We incurred a one-time charge for a preferred stock dividend in the
amount of $1,767,750 for the six months ended June 30, 2004. The recognition of
this preferred stock dividend resulted from the beneficial conversion feature
associated with our issuance of 2,357,000 shares of our Series A Convertible
Preferred Stock that, in effect, were convertible at a price less than market
price on the date of issuance, and warrants to acquire up to 589,251 shares of
our common stock in a private offering that we completed in February 2004. We do
not expect to record any additional charges for preferred stock dividends in the
foreseeable future.

COMPARISON OF YEARS ENDED DECEMBER 31, 2003 AND 2002

         At December 31, 2003, we owned 100% of the outstanding voting interests
in each of the subsidiaries through which we currently operate and our
consolidated financial statements included the revenue and various operating
expenses of these subsidiaries. At December 31, 2002, we owned only 50% of the
outstanding voting interests in such subsidiaries. Under United States Generally
Accepted Accounting Principles ("GAAP"), a company that does not own more than
50% of the outstanding voting interests at the end of the applicable year is
required to report its net share of such revenues and operating expenses in a
separate account in the

                                       34
<PAGE>

company's statement of operations. As a result, the revenues and operating
expenses of the subsidiaries through which we currently operate are not included
in our various consolidated revenue and operating expense accounts for the year
ended December 31, 2002 and instead, have been recorded on a net basis under the
line item "Investee losses" appearing under the caption "Other income (expense)"
in our consolidated statement of operations for such year.

         As a result of the foregoing, we believe that our consolidated revenues
and operating expenses for the year ended December 31, 2003 are not comparable
to our consolidated revenues and operating expenses for the year ended December
31, 2002, and therefore, any differences between our consolidated revenues and
operating expenses for such years should not be relied upon as an indication of
our future results of operations or performance.

Revenue

         We generated revenues of $173,711 for the year ended December 31, 2003.
We did not generate any revenues for the year ended December 31, 2002. The
increase of $173,711 was due entirely to the inclusion of revenues of the
subsidiaries through which we operate in our investee losses rather than in our
consolidated revenues for the year ended December 31, 2002.

                                       35
<PAGE>

Operating Expenses

         Labor Costs and Expense Reimbursements. Labor costs and expense
reimbursements increased $513,441 to $547,791 for the year ended December 31,
2003 from $34,350 for the year ended December 31, 2002. The increase was due
primarily to the difference in the manner in which we reported the results of
operations for our subsidiaries for the years ended December 31, 2002 and 2003,
as noted previously.

         Selling and Marketing. Selling and marketing expenses were $93,082 for
the year ended December 31, 2003. We did not have any selling and marketing
expenses for the year ended December 31, 2002. The increase was due primarily to
the difference in the manner in which we reported the results of operations for
our subsidiaries for the years ended December 31, 2002 and 2003, as noted
previously.

         General, Administrative and Related Expenses. General, administrative
and related expenses increased $121,170, or 60.6%, to $321,083 for the year
ended December 31, 2004 from $199,913 for the year ended December 31, 2003. The
increase was due primarily to the difference in the manner in which we reported
the results of operations for our subsidiaries for the years ended December 31,
2002 and 2003, as noted previously.

         Research and Development. Research and development expenses were
$138,849 for the year ended December 31, 2003. We did not incur any research and
develop expenses during the year ended December 31, 2002. The increase was due
primarily to the difference in the manner in which we reported the results of
operations for our subsidiaries for the years ended December 31, 2002 and 2003,
as noted previously.

Impairment of Goodwill

         We determine impairment of goodwill based on the amount by which the
carrying value of the assets to which the goodwill is attributed exceeds the
fair value of such assets. We incurred a one-time charge for impairment of
goodwill in the amount of $121,595 for the year ended December 31, 2003. The
recognition of this expense was associated with our purchase of the then
remaining and outstanding 50% membership interest in Stellar Business Builders,
LLC ("Stellar Business Builders") from IO Ventures, LLC for $100,000. On the
date of the purchase, Stellar Business Builders' liabilities exceeded its assets
by $21,595. As a result, we recorded goodwill of $121,595, comprised of the
$100,000 purchase price plus the $21,595 net liability. During the fourth fiscal
quarter of 2003, we performed our annual test for goodwill impairment as
required by Statement of Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets, and determined that the full $121,595 of goodwill
should be recorded as an impairment charge.

Gains in Trading Securities

         Gains in trading securities were $88,780 for the year ended December
31, 2003 compared to losses of $172,978 for the year ended December 31, 2002. We
believe the gains on sales of securities of $88,780 resulted primarily from
improved stock market conditions and the

                                       36
<PAGE>

performance of the underlying companies in which we invested.

LIQUIDITY AND CAPITAL RESOURCES

         Since our inception, we have funded our operations primarily through
private sales of equity securities and the use of short-term and long-term debt.
As of June 30, 2004, we had a cash balance of $3,036,682.

         Net cash used in operating activities was $841,854 for the six months
ended June 30, 2004 and was used primarily to fund our net loss.

         Net cash used in investing activities was $134,745 during the six
months ended June 30, 2004 which consisted of $109,086 of checks issued in
excess of funds acquired upon the merger with the Company and $25,659 of fixed
asset additions.

         Net cash provided by financing activities was $3,588,561 during the six
months ended June 30, 2004 which consisted primarily of $320,000 from the sale
of shares of our common stock, $1,767,750 from sales of units comprised of
shares of our Series A Convertible Preferred Stock and warrants to acquire
common stock and $1,500,000 from the sale of convertible promissory notes. The
foregoing amounts were offset by $128,749 of offering costs incurred in
connection with the foregoing financings.

         Our working capital at June 30, 2004 was $2,472,803, compared to
$579,314 at December 31, 2003. The $1,893,438 increase in working capital was
due primarily to increases in cash of $2,611,962, accounts receivable of
$126,430 and prepaid expenses and other assets of $146,409. These amounts were
partially offset by an increase in convertible notes payable of $493,084, a
decrease in marketable securities of $244,300, an increase in accounts payable
and accrued expenses of $158,353 and an increase in deferred revenues of
$93,329.

         Our primary sources of financing over the past twelve (12) months are
set forth below.

         In November 2003, prior to completing the merger with us, Stellar
Venture Partners, LLC completed a private offering of its equity securities for
aggregate cash proceeds of $1,000,000.

         On January 12, 2004, we issued 250,000 shares of common stock to RAM
Trading, Ltd., a Cayman Islands exempt company, in exchange for cash
consideration of $320,000.

         On February 29, 2004, we completed a private offering of 2,357,000
shares of Series A Convertible Preferred Stock and warrants to acquire 589,250
shares of common stock, for aggregate cash consideration of $1,767,750. These
securities were sold in units comprised of one (1) share of Series A Convertible
Preferred Stock and one (1) warrant. The units were sold at a purchase price of
$.75 per unit. Each share of Series A Convertible Preferred Stock was
convertible into one-half (1/2) of a share of common stock, and each warrant was
exercisable into one-fourth (1/4) of a share of common stock at an exercise
price of $2.40 per share. On March 11, 2004, as a result of our one-for-four
reverse stock split, the mandatory conversion

                                       37
<PAGE>

feature of the Series A Convertible Preferred Stock was triggered and all such
shares were converted into shares of our common stock.

         On June 8, 2004, we issued convertible promissory notes (the
"Convertible Notes") and warrants to a small group of accredited investors for
cash consideration of $1,500,000. The Convertible Notes were issued and sold
together with the warrants at the rate of two (2) Series A Warrants ("Series A
Warrants") and two (2) Series B Warrants ("Series B Warrants") for each $2.50
principal amount of Convertible Notes purchased. The principal amount of the
Convertible Notes and all accrued interest due thereunder were convertible into
shares of our common stock at an initial conversion price of $2.50 per share.
Each Series A Warrant is exercisable into one (1) share of our common stock at
an initial exercise price of $2.50 per share and expire ninety (90) days after
the effective date of the registrations statement, and each Series B Warrant is
exercisable into one (1) share of our common stock at an initial exercise price
of $3.50 per share and expire June 7, 2009. The exercise price of the Series A
Warrants and Series B Warrants are subject to downward adjustment in the event
that we issue shares of our common stock or securities convertible into shares
of our common stock at a purchase or conversion price less than the purchase or
conversion price in effect at the time of the issuance of the Series A Warrants
and Series B Warrants.

         The Convertible Notes accrued interest at a rate of 1.98% per annum,
had a maturity date of June 7, 2005, and could be prepaid in whole at any time
at our option. The Convertible Notes also contained a mandatory conversion
feature pursuant to which the Convertible Notes automatically converted into
shares of our common stock on the date the registration statement registering
the public resale of the shares underlying the Convertible Notes, Series A
Warrants and Series B Warrants was declared effective by the SEC. On July 12,
2004, the SEC declared such registration statement effective which triggered the
mandatory conversion feature of the Convertible Notes pursuant to which the
notes were converted into 601,155 shares of our common stock.

         As of June 30, 2004, we did not have any relationships with
unconsolidated entities or financial partners, such as entities often referred
to as structured finance or special purpose entities, that had been established
for the purpose of facilitating off-balance sheet arrangements or other
contractually narrow or limited purposes. As such, we are not materially exposed
to any financing, liquidity, market or credit risk that could arise if we had
engaged in such relationships.

         The foregoing constitutes our principal sources of financing during the
past twelve (12) months. We do not currently maintain a line of credit or term
loan with any commercial bank or other financial institution. To date, our
capital needs have been principally met through the receipt of proceeds from
sales of our equity and debt securities.

         As of the date of this report, we have cash resources of approximately
$1,500,000 and currently require approximately $300,000 per month to conduct
operations. We believe that our current cash resources, expected recurring
monthly revenue and revenue from new customers, will be sufficient to sustain
our current operations for the next twelve (12) months. We intend to continue to
invest our cash in excess of current operating requirements in interest-bearing,
investment-grade securities. We intend to obtain additional cash resources
within the next

                                       38
<PAGE>

twelve (12) months through sales of debt or equity securities in order to
finance possible acquisitions of companies, businesses, assets or technologies
that we believe are complementary to our business. The sale of additional equity
or convertible debt securities would result in additional dilution to our
shareholders. The issuance of additional debt would result in increased expenses
and could subject us to covenants that may have the effect of restricting our
operations. We have not made arrangements to obtain additional financing and we
can provide no assurance that financing, if required, will be available in
amount or on terms acceptable to us, if at all. If we are unable to obtain
additional funds when they are needed or if such funds cannot be obtained on
terms favorable to us, we may be required to delay or scale back any plans we
may have to acquire such companies, businesses, assets or technologies.

CRITICAL ACCOUNTING POLICIES

         Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements and accompanying
notes, which have been prepared in accordance with accounting principals
generally accepted in the United States. The preparation of these financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. When making these estimates and
assumptions, we consider our historical experience, our knowledge of economic
and market factors and various other factors that we believe to be reasonable
under the circumstances. Actual results may differ under different estimates and
assumptions.

         The accounting estimates and assumptions discussed in this section are
those that we consider to be the most critical to an understanding of our
financial statements because they inherently involve significant judgments and
uncertainties.

Revenue Recognition

         We recognize revenue in accordance with Statement of Position 97-2,
Software Revenue Recognition ("SOP 97-2"). Significant management judgments and
estimates must be made and used in connection with the revenue recognized in any
accounting period. Specifically, in connection with each transaction involving
our products, we must evaluate whether persuasive evidence of an arrangement
exists, the product has been delivered, title and risk of lost has been
transferred to the customer, the fee is fixed or determinable, and collection of
the resulting receivable is reasonably assured. Material differences may result
in the amount and timing of recognized revenue for any period if we make
different judgments or utilize different estimates.

ITEM 7.  FINANCIAL STATEMENTS

         See Financial Statements beginning on page F-1.

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

         None.


                                       39
<PAGE>

ITEM 8A. CONTROLS AND PROCEDURES

         An evaluation of the effectiveness of our "disclosure controls and
procedures" (as such term is defined in Rules 13a-15(e) or 15d-15(e) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) was carried
out by us under the supervision and with the participation of our President
("President") and Treasurer ("Treasurer"). Based upon that evaluation, our
President and Treasurer concluded that, as of the end of the period covered by
this Annual Report, our disclosure controls and procedures were effective to
ensure that information we are required to disclose in reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission
rules and forms. There has been no change in our internal control over financial
reporting identified in connection with that evaluation that occurred during the
period covered by this Report that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.



ITEM 8B. OTHER INFORMATION

         Our $350,000 note receivable from LSP Exploration, LLC ("LSP") matured
in September 2004, and we have not been able to collect the amount owed to us.
In connection with the preparation of the financial statements included in this
report, we concluded that LSP does not have the ability to repay us the amount
they owe us at this time and have, therefore, impaired the entire balance owed
to us, including interest receivable as of June 30, 2004, in the amount of
$354,949. Since we have impaired the entire balance, we will not incur any
further losses related to this note in future periods. Should we collect this
note or any portion thereof in the future, we would record the amount received
as other income. We do not expect this impairment to result in any future cash
expenditures.



                                       40
<PAGE>

                                    PART III

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

         The following chart sets forth certain information about each director,
executive officer and significant employee of the Company.

        Name           Age                    Positions Held
        ----           ---                    --------------
Richard A. Schmidt     61     Chairman of the Board of Directors, Chief
                              Executive Officer, Treasurer and Secretary

Donald R. Innis        57     President

Sven James             45     Chief Technology Officer

         The following is a brief summary of the business experience of each of
the above-named individuals:

         Richard A. Schmidt, age 61, has served as our Chairman, Chief Executive
Officer, Treasurer and Secretary since January 2004. Mr. Schmidt was the founder
and Manager of Stellar Venture Partners, LLC from it formation on March 13, 2000
until its merger with the Company in January 2004. Since May 1995, Mr. Schmidt
has served as the President and Chairman of the Board of MAS Services, Inc., a
holding company with investments in entities involved in the publishing
industry. In his position as President of MAS Services, Inc., Mr. Schmidt is the
author of and investment strategist for the "Stellar Stock Report," an
investment advisory publication with over 13,000 paid subscribers, and is the
author of and investment strategist for the stellarstockreport.com, an Internet
financial website. Prior to founding MAS Services, Inc., Mr. Schmidt held the
position of General Manager with several Fortune 500 companies, including Evans
Products, Caterpillar Tractor Company and Echlin Manufacturing, where he
specialized in start-ups, turnarounds, mergers and acquisitions and divestiture
activities. Mr. Schmidt graduated from Bradley University in Peoria, Illinois in
1966 and has participated in advanced management curricula and executive
enhancement programs at the business schools of Roosevelt University, Ohio State
University and Harvard University.

         Donald R. Innis, age 57, has served as our President since February 2,
2004. Mr. Innis has over 25 years of senior management experience with many
Information Technology solution companies and is recognized as an expert on
encryption and data security. He served as the President of Control Break
International Corporation, a developer of data encryption software, from April
2003 to February 2004, during which time the company's revenues increased over
800% from the previous year. Beginning in 1987, Mr. Innis served as President of
Inware Corporation, a developer of enterprise software that he founded. In 1998,
Inware was acquired by Allen Systems Group ("ASG"), a provider of software to
global Fortune 1000 companies, at which time he joined ASG and served as Senior
Vice President of

                                       41
<PAGE>

Worldwide Sales and Support until April 2003. During his time at ASG, the
company's annual revenues grew from $5 million to more than $200 million.
Between 1985 and 1987, Mr. Innis served as the Chief Executive Officer of Fisher
International, a company he founded that was a pioneer in the electronic mail
and PC access control and encryption industry. Mr. Innis began his career in
technology as a computer system designer for General Motors Corporation after
receiving a Bachelor of Science degree in mathematics with a minor in economics
from Otterbein College.

         Sven James, age 45, has served as our Chief Technology Officer since
July 14, 2004 when we acquired CompuSven. Mr. James founded CompuSven in 1995
where he served as the president and chief executive officer until the
acquisition. Mr. James has over 22 years of e-mail technology and e-mail company
management experience. Prior to founding CompuSven, Mr. James was employed with
Fischer International Systems Corporation from 1985 to 1995 where he held a
number of senior management positions, including Technical Director. In his
capacity as Technical Director, Mr. James' responsibilities included designing
and developing e-mail associated software products. Prior to joining Fischer
International, Mr. James worked at Dunn and Bradstreet computing services where
he integrated e-mail and boolean based search engine technology.

BOARD OF DIRECTORS

         Richard A. Schmidt has served as our sole director since January 2004
and will serve until the next annual meeting of shareholders or until his
successor is duly elected and qualified. Directors hold office until the next
annual meeting of shareholders and the election and qualification of their
successors. Officers are elected annually by our board of directors and serve at
the discretion of the Board. We do not currently have any committees of our
board of directors.

SHAREHOLDER COMMUNICATIONS

         We have not implemented any formal procedures for shareholder
communication with our Board of Directors, including nominations for director.
Any matter intended for the Board, or for any individual member or members of
the Board, should be directed to our corporate secretary at Stellar
Technologies, Inc., 5633 Strand Boulevard, Suite No. 318, Naples, Florida 34110.
In general, all shareholder communication, including nominations for director,
delivered to the corporate secretary for forwarding to the Board will be
forwarded in accordance with the shareholder's instructions. However, the
corporate secretary reserves the right to not forward to Board members any
abusive, threatening or otherwise inappropriate materials.

AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT

         Our Board of Directors is currently comprised of one member who
currently acts as our audit committee.

         Since our inception we have generated limited revenues. In light of the
foregoing, and upon evaluating our internal controls, our Board of Directors
determined that our internal controls are adequate to insure that financial
information is recorded, processed, summarized and

                                       42
<PAGE>

reported in a timely and accurate manner in accordance with applicable rules and
regulations of the Securities and Exchange Commission. Accordingly, our Board of
Directors concluded that the benefits of retaining an individual who qualifies
as an "audit committee financial expert," as that term is defined in Item 401(e)
of Regulation S-B promulgated under the Securities Act, would be outweighed by
the costs of retaining such a person. As a result, no member of our Board of
Directors is an "audit committee financial expert."

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the U.S. Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), requires the Company's officers and directors and
persons who own greater than ten percent (10%) of the Company's common stock to
file with the Securities and Exchange Commission ("SEC") initial reports of
ownership and reports of changes in beneficial ownership of the Company's common
stock. Such officers, directors and greater than ten percent (10%) stockholders
are also required by applicable SEC rules to furnish the Company with copies of
all forms filed with the SEC pursuant to Section 16(a) of the Exchange Act.
Based solely on its review of the copies of such forms received by it, or
written representations from such persons that no other reports were required
for such persons, the Company believes that during the fiscal year ended June
30, 2004, all Section 16(a) filing requirements applicable to the Company's
officers, directors and greater than ten percent (10%) stockholders were
satisfied in a timely fashion, except that Mark A. Bush did not file a Form 3
upon his appointment as our President, Treasurer and director, and did not file
a Form 4 upon his acquisition of 350,000 shares of common stock.

CODE OF ETHICS

         We have adopted a written code of ethics that applies to our directors,
officers and employees, including our principal executive officer, principal
financial officer, principal accounting officer or controller, or persons
performing similar functions. A copy of our code of ethics is attached as
Exhibit 14.1 to this Annual Report on Form 10-KSB.

                                       43
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

         The following table provides certain summary information concerning
compensation paid to or accrued by the executive officers named below during the
fiscal years ended June 30, 2004, 2003 and 2002:

                           SUMMARY COMPENSATION TABLE

--------------------------------------------------------------------------------
                                                                    Securities
Name And                                                            Underlying
Principal Position                      Year        Salary ($)      Options (#)
--------------------------------------------------------------------------------
Richard A. Schmidt (1)                  2004         120,000            -0-
Chairman, Chief Executive Officer,
  Treasurer and Secretary
--------------------------------------------------------------------------------
Donald R. Innis (2)                     2004          76,923          242,500
President
--------------------------------------------------------------------------------
Mark A. Bush (3)                        2004           -0-               --
Former President, Treasurer
  and Secretary
                                        2003           -0-               --
--------------------------------------------------------------------------------

(1)  Richard A. Schmidt began serving as our Chairman, Chief Executive Officer,
     Treasurer and Secretary on January 15, 2004. Mr. Schmidt's annual base
     salary is $240,000.

(2)  Donald R. Innis began serving as our President on February 1, 2004,
     pursuant to an employment agreement. The terms of Mr. Innis' compensation
     arrangement with us are described below under the caption "Employment
     Agreements."

(3)  Mark A. Bush served as our President, Treasurer and Secretary from March
     26, 2003 until January 15, 2004.


                      OPTION/SAR GRANTS IN LAST FISCAL YEAR

         The following table sets forth all options granted during the fiscal
year ended June 30, 2004 to each of the named executive officers.

<TABLE>
<CAPTION>
----------------------------- ------------------ ----------------------- ---------------------- --------------------------
                                  Number of         Percent of Total
                                 Underlying       Options/SARS Granted
                                 Option/SARS         to Employee in          Exercise or Base        Expiration Date
            Name                   Granted            Fiscal Year              Price ($/Sh)
----------------------------- ------------------ ----------------------- ---------------------- --------------------------
<S>                              <C>                      <C>                    <C>                         <C>
Richard A. Schmidt                   --                    --                     --                       --
----------------------------- ------------------ ----------------------- ---------------------- --------------------------
Donald R. Innis                  242,500(1)               33%                    $1.76              February 4, 2014
----------------------------- ------------------ ----------------------- ---------------------- --------------------------
</TABLE>

(1)  The option issued to Mr. Innis becomes fully exercisable on February 4,
     2005.

                                       44
<PAGE>

                       AGGREGATED OPTION EXERCISES IN THE
                LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE

         The following table sets forth for each named executive officer,
information regarding the value of stock options held at June 30, 2004. No stock
options were exercised by any of our named executive officers during the fiscal
year ended June 30, 2004.

<TABLE>
<CAPTION>
--------------------------- ---------------------------- --------------------------------
                               Number Of Unexercised          Value Of Unexercised
                            Options At Fiscal Year-End   In-The-Money Options At Fiscal
                                   Exercisable/               Year-End Exercisable/
         Name                    Unexercisable(#)             Unexercisable($) (1)
--------------------------- ---------------------------- --------------------------------
<S>                                    <C>                           <C>
Richard A. Schmidt                     0/0                           0/0
--------------------------- ---------------------------- --------------------------------
Donald R. Innis                     0/242,500                     0/421,950
--------------------------- ---------------------------- --------------------------------
</TABLE>

(1)  The last sales price of the Company's Common Stock as reported on the OTC
     Bulletin Board on June 30, 2004 was $3.50.

EMPLOYMENT AGREEMENTS

         We have entered into a letter agreement with Donald R. Innis pursuant
to which Mr. Innis was appointed our President effective February 1, 2004. The
letter agreement provides for an annual base salary of $200,000 and, if
employment is terminated involuntarily, severance in an amount equal to the
amount of salary received by him during the three (3) most recent complete
months of employment with us. The letter agreement also provided that we would
grant Mr. Innis a stock option exercisable into that number of shares of our
common stock equal to one percent (1%) of the number of shares of our common
stock issued and outstanding on the date of grant. The letter agreement contains
no specific term of employment and may be terminated by either us or Mr. Innis
at any time with or without cause.

         On February 4, 2004, pursuant to the terms of the letter agreement, we
issued Mr. Innis an option to purchase 242,500 shares of our common stock. The
option was issued at an exercise price of $1.76, the last sales price of our
common stock as reported on the OTC Bulletin Board on the date of grant. The
option has a term of ten (10) years and vests one year from the date of grant.
The terms of the option provide that if, at any time while the option is
outstanding and unexpired, we become a party to a reorganization, merger or
consolidation in which the shares of our capital stock are converted into other
property, whether in the form of securities, cash or otherwise, then, as a part
of such transaction, the option will be exercisable into the kind and number of
shares of common stock or other securities or property otherwise receivable upon
such transaction by a holder of the number of shares of our common stock that
might have been purchased upon exercise of the option immediately prior to such
transaction.

                                       45
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth, as of October 12, 2004, information
with respect to the securities holdings of all persons that we have reason to
believe, pursuant to filings with the SEC and our stock transfer records, may be
deemed the beneficial owner of more than five percent (5%) of our common stock.
The following table also sets forth, as of such date, the beneficial ownership
of our common stock by all executive officers and directors, individually and as
a group. The beneficial owners set forth below have been determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended. Unless otherwise indicated, each person or entity named below has sole
voting and investment power with respect to all common stock beneficially owned
by that person or entity, subject to the matters set forth in the footnotes to
the table below, and has an address of 5633 Strand Boulevard, Suite 318, Naples,
Florida 34110.

             SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT

                                             Amount and Nature
Name and Address of Beneficial Owner           of Beneficial         Percentage
and Management                                 Ownership (1)        of Class (1)
------------------------------------         -----------------      ------------
Richard A. Schmidt                              3,600,000 (2)           13.6%
Chairman and Chief Executive Officer

Donald R. Innis                                   0 (3)                  0%
President

MAS Services, Inc.                              3,600,000               13.6%

All officers and directors as a group           3,600,000               13.6%
(2) persons

--------------------
(1)  This table has been prepared based on 26,426,636 shares of our common stock
     outstanding as of October 12, 2004.

(2)  Represents shares held of record by MAS Services, Inc., for which Mr.
     Schmidt has sole voting and investment power.

(3)  Does not include 242,500 shares issuable upon exercise of options subject
     to vesting.

                                       46
<PAGE>

                      EQUITY COMPENSATION PLAN INFORMATION

<TABLE>
<CAPTION>
------------------------------- ---------------------------- ---------------------------- ----------------------------
                                                                                              Number of securities
                                                                                            remaining available for
                                Number of securities to be    Weighted-average exercise      future issuance under
                                  issued upon exercise of       price of outstanding       equity compensation plans
                                 outstanding warrants and      options, warrants and         (excluding securities
                                          rights                       rights               reflected in column (a))
Plan Category                               (a)                          (b)                          (c)
------------------------------- ---------------------------- ---------------------------- ----------------------------
<S>                                        <C>                            <C>                        <C>
Equity Compensation Plans
approved by security holders                 0                     Not applicable                      0
------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity compensation plans not
approved by security holders              727,500                       $1.76                          0
------------------------------- ---------------------------- ---------------------------- ----------------------------
Total
------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>

         On February 4, 2004, pursuant to the terms of a letter agreement, we
issued Mr. Innis an option to purchase 242,500 shares of our common stock. The
option was issued at an exercise price of $1.76, the last sales price of our
common stock as reported on the OTC Bulletin Board on the date of grant. The
option has a term of ten (10) years and vests one year from the date of grant.
The terms of the option provide that if, at any time while the option is
outstanding and unexpired, we become a party to a reorganization, merger or
consolidation in which the shares of our capital stock are converted into other
property, whether in the form of securities, cash or otherwise, then, as a part
of such transaction, the option will be exercisable into the kind and number of
shares of common stock or other securities or property otherwise receivable upon
such transaction by a holder of the number of shares of our common stock that
might have been purchased upon exercise of the option immediately prior to such
transaction.

         In addition, on February 4, 2004, we issued an aggregate of 485,000
options to various employees of the Company pursuant to individual stock option
agreements between us and each employee. Each option has an exercise price of
$1.76, has a term of ten (10) years and vests one year from the date of grant.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In August and September, 2002, we borrowed a total of $475,000 from
Endeavour International Corporation, f/k/a Continental Southern Resources, Inc.
("Endeavour"), an oil and gas exploration company, pursuant to unsecured 10%
promissory notes. On October 5, 2002, we entered into an assignment and release
agreement with Endeavour pursuant to which we assigned to Endeavour our rights
under a secured promissory note issued by an unrelated third party in full
satisfaction of the $122,500 balance that then remained payable under the notes.
At the time of the assignment and release, Gerald T. Harrington was our sole
officer and director, and Stephen

                                       47
<PAGE>

P. Harrington, who is Gerald T. Harrington's brother, was the President and
Chairman of the board of directors of Endeavour.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

          (a)  The following documents are filed as part of this Report:

               (1)  Financial statements filed as part of this Report:

                    (i)  As of and for the six months ended June 30, 2004:

                         Report of Independent Registered Public Accounting Firm

                         Consolidated Balance Sheet

                         Consolidated Statement of Operations

                         Consolidated Statement of Stockholders' Equity

                         Consolidated Statements of Cash Flows

                         Notes to Financial Statements

                    (ii) As of and for the years ended December 31, 2003 and
                         2002

                         Report of Independent Registered Public Accounting Firm

                         Consolidated Balance Sheets

                         Consolidated Statement of Operations

                         Consolidated Statement of Stockholders' Equity

                         Consolidated Statements of Cash Flows

                         Notes to Financial Statements


                                       48
<PAGE>

              (2) Exhibits filed as part of this Report:

<TABLE>
<CAPTION>
  Exhibit No.                       Exhibit                                         Method of Filing
  -----------                       -------                                         ----------------
<S>              <C>                                                                     <C>
      3.1        Articles of Incorporation                         Incorporated by reference to Exhibit 3.1 to the
                                                                   Company's Registration Statement on Form SB-2,
                                                                   Registration No. 333-54292, filed with the SEC on
                                                                   January 25, 2001 (the "Registration Statement"))

      3.2        Bylaws                                            Incorporated by reference to Exhibit 3.2 to the
                                                                   Company's Registration Statement on Form SB-2
                                                                   dated December 15, 2001

      3.3        Articles of Amendment to Articles of              Incorporated by reference to Exhibit 3.3 to the
                 Incorporation                                     Company's Quarterly Report on Form 10-QSB for the
                                                                   quarter ended December 31, 2002

      3.4        Articles of Amendment to Articles of              Incorporated by reference to Exhibit 3.3 to the
                 Incorporation                                     Company's Quarterly Report on Form 10-QSB for the
                                                                   quarter ended December 31, 2003

      3.5        Certificate of Designation for Series A           Incorporated by reference to Exhibit 3.5 to the
                 Convertible Preferred Stock                       Company's Quarterly Report on Form 10-QSB for the
                                                                   quarter ended March 31, 2004

      3.6        Amended and Restated Articles of                  Incorporated by reference to Exhibit 3.6 to the
                 Incorporation                                     Company's Quarterly Report on Form 10-QSB for the
                                                                   quarter ended March 31, 2004

      4.1        Specimen Stock Certificate                        Incorporated by reference to Exhibit 4.1 to the
                                                                   Company's Registration Statement on Form SB-2
                                                                   dated December 15, 2001

     10.1        Loan Agreement by and between the Company         Incorporated by reference to Exhibit 10.1 to the
                 and Trident Growth Fund, L.P. dated               Company's Quarterly Report on Form 10-QSB for the
                 September 17, 2002                                quarter ended March 31, 2002

     10.2        Security Agreement by and between the             Incorporated by reference to Exhibit 10.2 to the
                 Company and Trident Growth Fund, L.P. dated       Company's Quarterly Report on Form 10-QSB for the
                 September 17, 2002                                quarter ended March 31, 2002
</TABLE>

                                       49
<PAGE>
<TABLE>
<CAPTION>
  Exhibit No.                       Exhibit                                         Method of Filing
  -----------                       -------                                         ----------------
<S>              <C>                                                                     <C>
     10.3        14% Secured Convertible Note in the               Incorporated by reference to Exhibit 4.1 to the
                 principal amount of $550,000 dated September      Company's Annual Report on Form 10-KSB for the
                 17, 2002 issued to Trident Growth Fund, L.P.      year ended June 30, 2002

     10.4        Limited Partnership Agreement of Louisiana        Incorporated by reference to Exhibit 10.7 to the
                 Shelf Partners, L.P. dated December 31, 2002      Company's Quarterly Report on Form 10-QSB for the
                                                                   quarter ended March 31, 2002

     10.5        Loan Agreement by and between the Company         Incorporated by reference to Exhibit 10.3 to the
                 and Trident Growth Fund, L.P. dated January       Company's Quarterly Report on Form 10-QSB for the
                 16, 2003                                          quarter ended March 31, 2002

     10.6        Amended Security Agreement by and between         Incorporated by reference to Exhibit 10.4 to the
                 the Company and Trident Growth Fund, L.P.         Company's Quarterly Report on Form 10-QSB for the
                 dated January 16, 2003                            quarter ended March 31, 2002

     10.7        9% Secured Convertible Note in the principal      Incorporated by reference to Exhibit 4.3 to the
                 amount of $400,000 dated January 16, 2003         Company's Quarterly Report on Form 10-QSB for the
                 issued to Trident Growth Fund, L.P.               quarter ended March 31, 2002

     10.8        Warrant to purchase 100,000 shares of common      Incorporated by reference to Exhibit 10.5 to the
                 stock dated January 16, 2003 issued to            Company's Quarterly Report on Form 10-QSB for the
                 Trident Growth Fund, L.P.                         quarter ended March 31, 2002

     10.9        Warrant to purchase 25,000 shares of common       Incorporated by reference to Exhibit 10.6 to the
                 stock dated January 16, 2003 issued to            Company's Quarterly Report on Form 10-QSB for the
                 Trident Growth Fund, L.P.                         quarter ended March 31, 2002

     10.10       First Amendment and Waiver to Warrant to          Incorporated by reference to Exhibit 10.10 to the
                 purchase 100,000 shares of common stock,          Company's Quarterly Report on Form 10-QSB for the
                 dated September 9, 2003, issued to Trident        quarter ended September 30, 2003

     10.11       First Amendment and Waiver to Warrant to          Incorporated by reference to Exhibit 10.11 to the
                 purchase 25,000 shares of common stock,           Company's Quarterly Report on Form 10-QSB for the
                 dated September 9, 2003, issued to Trident        quarter ended September 30, 2003

     10.12       Warrant to purchase 200,000 shares of common      (incorporated by reference to Exhibit 10.12 to
                 stock, dated September 9, 2003, issued to         the Company's Quarterly Report on Form 10-QSB for
                 Trident                                           the quarter ended September 30, 2003
</TABLE>

                                       50
<PAGE>
<TABLE>
<CAPTION>
  Exhibit No.                       Exhibit                                         Method of Filing
  -----------                       -------                                         ----------------
<S>              <C>                                                                     <C>
     10.13       Securities Purchase Agreement by and between      (incorporated by reference to Exhibit 10.13 to
                 the Company and Trident, dated September 9,       the Company's Quarterly Report on Form 10-QSB for
                 2003                                              the quarter ended September 30, 2003

     10.14       Securities Purchase Agreement by and between      Incorporated by reference to Exhibit 10.14 to the
                 the Company and LSP Exploration, LLC, dated       Company's Quarterly Report on Form 10-QSB for the
                 September 9, 2003                                 quarter ended September 30, 2003

     10.15       3% Promissory Note in the amount of               Incorporated by reference to Exhibit 10.15 to the
                 $350,000, dated September 25, 2003, issued        Company's Quarterly Report on Form 10-QSB for the
                 to the Company by LSP Exploration, LLC            quarter ended September 30, 2003

     10.16       Amendment to Loan Agreement dated September       Incorporated by reference to Exhibit 10.16 to the
                 17, 2002 and Loan Agreement dated January         Company's Quarterly Report on Form 10-QSB for the
                 16, 2003, by and between the Company and          quarter ended September 30, 2003
                 Trident, dated September 9, 2003

     10.17       Securities Purchase Agreement, dated January      Incorporated by reference to Exhibit 10.17 to the
                 12, 2004, by and between the Company and RAM      Company's Quarterly Report on Form 10-QSB for the
                 Trading, Ltd.                                     quarter ended March 31, 2004

     10.18       Option to Purchase 242,500 shares of Common       Incorporated by reference to Exhibit 10.18 to the
                 Stock issued to Donald R. Innis                   Company's Quarterly Report on Form 10-QSB for the
                                                                   quarter ended March 31, 2004

     10.19       Restated Option to Purchase 242,500 shares        Incorporated by reference to Exhibit 10.19 to the
                 of Common Stock issued to Donald R. Innis         Company's Quarterly Report on Form 10-QSB for the
                                                                   quarter ended March 31, 2004

     10.20       Form of Warrant issued in connection with         Incorporated by reference to Exhibit 10.20 to the
                 Offering of Series A Convertible Preferred        Company's Quarterly Report on Form 10-QSB for the
                 Stock and Warrants to Acquire Shares of           quarter ended March 31, 2004
                 Common Stock

     10.21       Option Agreement, dated February 4 2004, by       Incorporated by reference to Exhibit 10.18 to the
                 and between the Company and Donald R. Innis       Company's Quarterly Report on Form 10-QSB for the
                                                                   quarter ended March 31, 2004

     10.22       Form of Securities Purchase Agreement             Incorporated by reference to Exhibit 10.17 to the
                 relating to the sale of $1.5 million              Company's Quarterly Report on Form 10-QSB for the
                 principal amount convertible notes and            quarter ended March 31, 2004
                 2,400,000 warrants
</TABLE>

                                       51
<PAGE>

<TABLE>
<CAPTION>
  Exhibit No.                       Exhibit                                         Method of Filing
  -----------                       -------                                         ----------------
<S>              <C>                                                                     <C>
     10.23       Form of Convertible Note in the aggregate         Incorporated by reference to Exhibit 10.23 to the
                 principal amount of $1.5 million                  Company's Registration Statement on Form SB-2
                                                                   filed with the Commission on June 9, 2004

     10.24       Form of Series A Warrant to purchase              Incorporated by reference to Exhibit 10.24 to the
                 1,200,000 shares of common stock                  Company's Registration Statement on Form SB-2
                                                                   filed with the Commission on June 9, 2004

     10.25       Form of Series B Warrant to purchase              Incorporated by reference to Exhibit 10.25 to the
                 1,200,000 shares of common stock                  Company's Registration Statement on Form SB-2
                                                                   filed with the Commission on June 9, 2004

     10.26       Stock Purchase Agreement, dated July 14,          Incorporated by reference to Exhibit 2.1 to the
                 2004, by and between the Company and Sven         Company's Current Report on Form 8-K filed with
                 James                                             the Commission on July 28, 2004

     14.1        Code of Ethics                                    Filed herewith

     21.1        Subsidiaries of the Company                       Filed herewith

     31.1        Certification of Chief Executive Officer of       Filed herewith
                 the Company required by Rule 13a-14(a) under
                 the Securities Exchange Act of 1934, as
                 amended

     31.2        Certification of Treasurer of the Company         Filed herewith
                 required by Rule 13a-14(a) under the
                 Securities Exchange Act of 1934, as amended

     32.1        Certification of President and Treasurer of       Filed herewith
                 the Company Pursuant to 18 USC Section 1350,
                 as Adopted Pursuant to Section 906 of the
                 Sarbanes-Oxley Act of 2002
</TABLE>

       (b) Reports on Form 8-K.

                1. On July 28, 2004 we filed a report on Form 8-K with the SEC
                under Items 2 and 7 disclosing our acquisition of CompuSven,
                Inc. on July 14, 2004.

                                       52
<PAGE>

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

      The following table presents fees for professional audit services
performed by L J Soldinger Associates, LLC for the audit of our annual financial
statements for the fiscal years ended June 30, 2004 and 2003 and fees billed for
other services rendered by L J Soldinger Associates, LLC during such years.

                          June 30, 2004         June 30, 2003

Audit Fees:                 $132,000                $10,700

Audit-Related Fees:         $133,000                $    --

Tax Fees:                   $  5,000                $    --

All Other Fees:             $     --                $    --
                           ---------                -------

Total:                      $270,000                $10,700
                           =========                =======

Audit Fees consist of fees billed for professional services rendered for the
audit of our financial statements and review of the interim financial statements
included in quarterly reports and services that are normally provided by our
independent accountants in connection with statutory and regulatory filings or
engagements.

Audit-Related Fees consist of fees billed for assurance and related services
that are reasonably related to the performance of the audit or review of our
consolidated financial statements, including services relating to audits of
acquired entities and services in connection with registration statements which
are not reported under "Audit Fees."

Tax Fees consists of fees billed for professional services for tax compliance,
tax advice and tax planning. These services include assistance regarding federal
and state tax compliance, tax audit defense, customs and duties, and mergers and
acquisitions.

All Other Fees consist of fees billed for products and services provided by the
principal accountant, other than those services described above.

AUDIT COMMITTEE PRE-APPROVAL PROCEDURES

         Our Board of Directors serves as our audit committee. Our Board of
Directors approves the engagement of our independent auditors, and meets with
our independent auditors to approve the annual scope of accounting services to
be performed and the related fee estimates. It also meets with our independent
auditors, on a quarterly basis, following completion of their quarterly reviews
and annual audit and prior to our earnings announcements, if any, to review the
results of their work. During the course of the year, our chairman has the
authority to pre-approve requests for services that were not approved in the
annual pre-approval process. The chairman reports any interim pre-approvals at
the following quarterly meeting. At each of the meetings, management and our
independent auditors update the Board of Directors with material changes to any
service engagement and related fee estimates as compared to amounts previously
approved. During the fiscal year ended June 30, 2004, all audit and non-audit
services performed by our independent accountants were pre-approved by the Board
of Directors in accordance with the foregoing procedures.



                                       53
<PAGE>


                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)




                                 C O N T E N T S



Financial Statements as of June 30, 2004 and
for the Six Months Then Ended                                            Page(s)
-----------------------------------------------------------------------  -------
Report of Independent Registered Public Accounting Firm                     F-1

Consolidated Balance Sheet                                                  F-2

Consolidated Statements of Operations                                       F-3

Consolidated Statement of Changes in Stockholders' Equity                   F-4

Consolidated Statements of Cash Flows                                       F-5

Notes to Consolidated Financial Statements                                  F-6

Financial Statements as of and for the Years Ended
December 31, 2003 and 2002
-----------------------------------------------------------------------


Report of Independent Registered Public Accounting Firm                     F-24

Consolidated Balance Sheets                                                 F-25

Consolidated Statements of Operations                                       F-26

Consolidated Statement of Changes in Stockholders' Equity                   F-27

Consolidated Statements of Cash Flows                                       F-28

Notes to Consolidated Financial Statements                                  F-29




<PAGE>

                     REPORT OF INDEPENDENT REGISTERED PUBLIC
                                 ACCOUNTING FIRM




To the Board of Directors of
Stellar Technologies, Inc.
Naples, Florida


We have audited the accompanying consolidated balance sheets of Stellar
Technologies, Inc. and subsidiaries as of June 30, 2004, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the six months then ended and for the period March 13, 2000 (date of inception)
through June 30, 2004. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Stellar Technologies, Inc. and
subsidiaries as of June 30, 2004, and the results of its operations, changes in
stockholders' equity and cash flows for the six months then ended and for the
period March 13, 2000 (date of inception) through June 30, 2004, in conformity
with accounting principles generally accepted in the United States of America.


L J SOLDINGER ASSOCIATES LLC


Deer Park, Illinois
October 13, 2004



                                      F-1
<PAGE>


                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                           Consolidated Balance Sheet


                                     ASSETS
                                     ------
<TABLE>
<CAPTION>
                                                                                  June 30, 2004
                                                                                  -------------
<S>                                                                               <C>
Current assets
   Cash                                                                           $  3,036,682
   Accounts receivable (net of allowance for doubtful accounts of $3,000)              124,976
   Prepaid expenses and other assets                                                   132,857
   Advance                                                                              22,000
                                                                                  ------------

Total current assets                                                                 3,316,515

Property and equipment, net                                                             75,193

Cost based investment
                                                                                       400,000
                                                                                  ------------

                                                                                  $  3,791,708
                                                                                  ============


                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

Current liabilities
    Convertible notes payable                                                     $    493,084
    Current portion of obligations under capital leases                                  4,088
    Accounts payable and accrued expenses                                              181,772
    Deferred revenues                                                                  164,768
                                                                                  ------------

Total current liabilities                                                              843,712

Obligations under capital leases, net of current portion                                 6,607
                                                                                  ------------

Total liabilities                                                                      850,319
                                                                                  ------------

Commitments and Contingencies
Stockholders' Equity
   Preferred stock, no par value; authorized 10,000,000 shares:
     0 shares issued and outstanding                                                         -
   Common stock, no par value; authorized 100,000,000 shares:
     25,759,558 shares issued, outstanding
     as of June 30, 2004                                                                25,760
Additional paid-in capital                                                          10,188,499
Deferred compensation                                                                 (725,346)
Deficit accumulated in the development stage                                        (6,547,524)
                                                                                  ------------
Total Shareholders' Equity                                                           2,941,389
                                                                                  ------------
                                                                                  $  3,791,708
                                                                                  ============

   The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                      F-2
<PAGE>

                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                         Six Months       March 13, 2000
                                                           Ended          (Inception) to
                                                       June 30, 2004      June 30, 2004
                                                       -------------      -------------
<S>                                                    <C>                <C>
Revenues                                               $    109,374       $    283,085

Expenses
    Depreciation and amortization expense                    23,275             76,576
    Investment costs                                              -             90,228
    Labor costs and expense reimbursement                   559,965          1,142,396
    Management fees, related party                           79,500            473,250
    General and administrative                              168,657            454,925
    Professional fees                                       384 523            541,181
    Marketing                                               116,045            220,664
    Research, development and product support                55,507            194,356
    Office rents                                             27,802            139,569
    Loan impairment                                         354,949            354,949
    Impairment of goodwill                                        -            121,595
    Subsidiary loan impairment                                    -            378,404
                                                       ------------       ------------

Total expenses                                            1,770,223          4,188,093
                                                       ------------       ------------

Loss from operations                                     (1,660,849)        (3,905,008)
                                                       ------------       ------------

Other income (expense)
    Investee losses                                               -         (1,040,096)
    Interest and money market dividends                       4,341            178,358
    Gains in trading securities                             138,393             49,846
    Interest expense                                        (62,874)           (62,874)
                                                       ------------       ------------

Total other income (expense)                                 79,860           (874,766)
                                                       ------------       ------------

Net loss                                                 (1,580,989)        (4,779,774)

Preferred dividend                                        1,767,750          1,767,750
                                                       ------------       ------------

Net loss to common stockholders                        $ (3,348,739)      $ (6,547,524)
                                                       ============       ============

Pro Forma Information (Unaudited)
    Net loss                                                                (6,547,524)
    Pro forma tax provision                                                          -
                                                                          ------------

Pro forma net loss                                                          (6,547,524)
                                                                          ============

Basic and diluted loss per common share                $      (0.14)      $      (0.46)
                                                       ============       ============

Basic and diluted weighted average common
  shares outstanding                                     24,493,028         14,170,534
                                                       ============       ============

 The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


                                      F-3
<PAGE>

<TABLE>
<CAPTION>
                                      STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                                             (A DEVELOPMENT STAGE ENTITY)
                                     Statement of Changes in Stockholders' Equity

                                                                                                      Deficit
                                                                                                    Accumulated
                                       Common Stock          Additional                                in the
                                  ----------------------      Paid-in      Deferred  Subscription   Development
                                    Shares       Amount       Capital    Compensation  Receivable       Stage           Total
                                  ----------     -------    -----------  ------------  ----------    ------------    -----------
<S>                               <C>            <C>        <C>            <C>         <C>           <C>             <C>
March 13, 2000 (Inception)                 -     $     -    $        -     $       -    $       -    $          -    $         -

June 6, 2000 private placement     3,633,028           -         1,100             -       (1,100)              -              -

June 15, 2000 private placement   11,064,221           -     3,350,000             -            -               -      3,350,000

Offering costs paid                        -           -       (29,843)            -            -               -        (29,843)

Net loss                                   -           -             -             -            -        (475,730)      (475,730)
                                  ----------     -------    -----------    ---------   ----------    ------------    -----------

Balance at December 31, 2001      14,697,249           -     3,321,257             -       (1,100)       (475,730)     2,844,427

Offering costs paid                        -           -        (9,746)            -            -               -         (9,746)

Net loss                                   -           -             -             -            -      (1,702,769)    (1,702,769)
                                  ----------     -------    -----------    ---------   ----------    ------------    -----------

Balance at December 31, 2002      14,697,249           -     3,311,511             -       (1,100)     (2,178,499)     1,131,912

November 2003 private
  placement                        3,302,752           -     1,000,000             -            -               -      1,000,000

Offering costs paid                        -           -       (65,442)            -            -               -        (65,442)

Net loss                                   -           -             -             -            -      (1,020,286)    (1,020,286)
                                  ----------     -------    -----------    ---------   ----------    ------------    -----------

Balance at December 31, 2003      18,000,001     $     -    $4,246,069     $       -   $   (1,100)   $ (3,198,785)   $ 1,046,184

Paid subscription receivable               -           -             -             -        1,100               -          1,100

February 2004 private placement
    of Series A Preferred
    automatically
    converted and warrants,
    net of offering costs paid     1,178,500           -     1,764,001             -            -               -      1,764,001

Preferred dividend from
    beneficial conversion feature
    of preferred stock issuance            -           -     1,767,750             -            -               -      1,767,750

Gain on sale of treasury stock             -           -        59,163             -            -               -         59,163

Net assets and liabilities
    acquired in merger with
    International Travel
    CD's, Inc.                     6,250,022           -       573,706             -     (320,000)              -        253,706


Collection of subscription
    receivable                             -           -             -             -      320,000               -        320,000


Amendment to articles of
    incorporation                          -      25,429       (25,429)            -            -               -              -

Additional shares issued for
    waiver of decenters rights       331,035         331          (331)            -            -               -              -

 Debt discount in connection
    with warrants to acquire
    2,400,000 shares issued in
    Convertible note offering in
    June 2004                              -           -     1,057,500             -            -               -      1,057,500

Warrants to acquire 300,000
    shares issued in June 2004 for
    advisory services                      -           -        746,070     (746,070)           -               -              -

 Amortization of warrants issued
    for advisory services                  -           -             -        20,724            -               -         20,724

Net loss                                   -           -             -             -            -      (3,348,739)    (3,348,739)
                                  ----------     -------    -----------    ---------   ----------    ------------    -----------

Balance at June 30, 2004          25,759,558     $25,760    $10,188,499    $(725,346)  $        -    $ (6,547,524)   $ 2,941,389
                                  ==========     =======    ===========    =========   ==========    ============    ===========

                      The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                                        F-4
<PAGE>

                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                       March 13, 2000
                                                                  Six Months Ended     (Inception) to
                                                                   June 30, 2004        June 30, 2004
                                                                  ----------------     --------------
<S>                                                                <C>                  <C>
Cash flows from operation activities
    Net loss to common stockholders                                $(3,348,739)         $(6,547,524)
    Adjustments to reconcile net income (loss) to net cash
        Provided by (used in) operating activities
          Depreciation and amortization                                 23,275               76,576
          Amortization of deferred consulting fees                      20,724               20,724
          Amortization of debt discount                                 50,584               50,584
          Amortization of loan fees                                     10,000               10,000
          Subsidiary loan impairment loss                                    -              378,404
          Equity method loss in subsidiary                                   -            1,040,096
          Loan impairment                                              354,949              354,949
          Loss on impairment of goodwill                                     -              121,595
          Bad debts                                                      3,000                3,000
          Preferred dividend                                         1,767,750            1,767,750
          (Gains) losses in trading securities                        (138,391)             (49,847)
          Proceeds from sales of trading securities                    294,530              645,273
          Purchases of trading securities                                    -             (683,589)
          Changes in assets and liabilities
             Decrease in accounts receivable                          (125,088)            (119,603)
             Decrease in prepaid expenses                               32,074                5,766
             Increase in accounts payable                              126,430              115,077
             Increase in deferred revenues                              87,048              104,693
                                                                   -----------          -----------

Net cash used in operating activities                              $  (841,854)         $(2,706,076)
                                                                   -----------          -----------

Cash flows provided by (used in) investing activities
    Purchase of property and equipment                                 (25,659)             (69,604)
    Checks issued in excess of funds acquired upon
       merger with International Travel CD                            (109,086)            (109,086)
    Advances to investees                                                    -           (1,018,500)
    Purchase of investee interest, net of cash assumed                       -             (893,055)
                                                                   -----------          -----------

Net cash used in investing activities                                 (134,745)          (2,090,245)
                                                                   -----------          -----------

Cash flows from financing activities
    Advances                                                           (22,000)             (22,000)
    Principal payments on capital lease obligations                     (1,866)              (2,393)
    Offering costs paid                                               (123,749)            (228,780)
    Proceeds from sale of treasury stock                                88,163               88,163
    Gain from sale of treasury stock (See Note 10)                      59,163               59,163
    Proceeds from sales of preferred stock and warrants              1,767,750            1,767,750
    Collection of subscription receivable                              321,100            4,671,100
    Proceeds from sale of convertible notes                          1,500,000            1,500,000
                                                                   -----------          -----------

Net cash provided by financing activities                            3,588,561            7,833,003
                                                                   -----------          -----------

Net increase (decrease) in cash                                      2,611,962            3,036,682

Cash and cash equivalents, beginning of year                           424,720                    -
                                                                   -----------          -----------

Cash and cash equivalents, end of period                           $ 3,036,682          $ 3,036,682
                                                                   ===========          ===========

     The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


                                      F-5
<PAGE>

                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements


NOTE 1 - DESCRIPTION OF BUSINESS

Nature of Operations
--------------------

The Company provides employee Internet management ("EIM") products and services
that enable businesses to monitor, report and manage how their employees use the
Internet. The Company's products and services give managers the ability to
implement Internet access policies for different users and groups within their
businesses, and support their efforts to improve employee productivity, conserve
network bandwidth and mitigate potential legal liability. The Company and its
subsidiaries are in the development stage.

History
-------

The Company, formerly International Travel CD's, Inc. ("ILCD"), was formed on
July 20, 2000, as a Colorado corporation. In September 2003, the Company
disposed of all of its former operations and related assets resulting in it
becoming a public shell company, defined as an inactive, publicly quoted company
with minimal assets or liabilities.

In January 2004, the Company consummated an agreement and plan of merger with
Stellar Venture Partners, LLC ("Stellar LLC"). The plan of merger provided for
the Company to issue 18,000,001 shares of its common stock to the members of
Stellar LLC in consideration for which each of the issued and outstanding Class
A and Class B member units of Stellar LLC were cancelled and each issued and
outstanding share of common stock of the Company's wholly-owned subsidiary,
International Travel CD's Acquisition Corp., was converted into one membership
interest in Stellar LLC. The combination of Stellar LLC and ILCD was treated as
a recapitalization of Stellar LLC and all equity transactions have been revised
to reflect the recapitalization. As a result of the merger, the former members
of Stellar LLC received approximately 74% of the then issued and outstanding
common stock of the Company on a fully diluted basis, which resulted in Stellar
LLC being treated as the accounting acquirer and thus the operations and the
financial statements of Stellar LLC prior to the merger have become those of the
Company. In connection with the merger, the Company changed its name to Stellar
Technologies, Inc.

Stellar Venture Partners, LLC was formed as a limited liability company under
the laws of the state of Georgia on March 13, 2000. In November of 2000, Stellar
LLC and IO Ventures, LLC ("IO") formed Stellar Business Builders, LLC ("SBB")
for the purpose of acquiring and managing the operations of its startup
affiliates. Stellar LLC and IO each owned 50% of SBB. In May and June of 2001,
Stellar Business Builders, LLC formed two wholly-owned subsidiaries, Stellar
Internet Monitoring, LLC ("SIM") (formerly known as ICaughtYou, LLC) whose
principal activity is providing companies with the ability to monitor their
employee usage of the internet and Kidweb, LLC ("KW") whose primary activity is
providing a web site development suite targeted directly to children. In
November 2003, the Company purchased IO's remaining 50% interest in SBB for
$100,000 in cash and as a result, SBB became a wholly-owned subsidiary of the
Company.


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
---------------------

The accompanying financial statements have been prepared on the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States of America ("US GAAP").

Principles of Consolidation and Ownership Interest in Investors
---------------------------------------------------------------

The accompanying financial statements have been presented on the consolidated
basis in 2004 and include all the accounts of SBB, SIM and KW.

                                      F-6
<PAGE>

                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)

In July 2001, the Company purchased a 10% interest in Synergy Networks, Inc.
("SNI") for $400,000 in cash which was reflected under the cost method for 2003.

Consolidation
-------------

Affiliate entities in which the Company directly or indirectly owns more than
50% of the outstanding, voting interest are accounted for under the
consolidation method of accounting. Under this method, an investee company's
results of operations are reflected within the Company's consolidated statement
of operations. All significant intercompany accounts and transactions have been
eliminated.

Cost Method
-----------

Entities in which the Company directly or indirectly owns less than 20% of the
outstanding voting interest are accounted for under the cost method of
accounting. Under this method income received from the investees is reflected
within the Company's consolidated statement of operations as investment income
or loss unless the amount of the dividends exceeds the Company's proportionate
share of the affiliates' income. In that case the excess amount would be
considered a return of capital and be recorded as a reduction of the investment.

Development Stage Enterprise
----------------------------

The Company is a Development Stage Enterprise, as defined in Statement of
Financial Accounting Standards ("SFAS") No. 7 "Accounting and Reporting for
Development Stage Enterprises." Under SFAS No. 7, certain additional financial
information is required to be included in the financial statements for the
period from inception of the Company to the current balance sheet date.

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 amount of assets and liabilities and disclosures of
contingent assets and liabilities at the date of financial statements and the
reported amounts of increases and decreases in net assets from operations during
the reporting period. Actual results could differ from these estimates.

Cash and Cash Equivalents
-------------------------

Cash and cash equivalents include cash on hand and investments in money market
funds. The Company considers all highly-liquid instruments with an original
maturity of 90 days or less at the time of purchase to be cash equivalents.

Federal Income Taxes
--------------------

Prior to the merger on January 15, 2004, no provision for income taxes has been
made, since under federal and state regulation, tax attributes were passed
through to the former Stellar LLC members who assumed responsibility for payment
of income taxes, if any. Subsequent to the merger, income taxes are recorded in
the period in which the related transactions are recognized in the financial
statements, net of any valuation allowances recorded against deferred tax
assets, if the Company estimates that it is more likely than not that it will be
unable to utilize those deferred tax benefits in future periods. Deferred tax
assets and liabilities are recorded for the expected future tax consequences of
temporary differences between the tax basis and the financial reporting basis of
assets and liabilities.

                                      F-7
<PAGE>

                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)

Credit Risk
-----------

Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash deposits at financial institutions and
trade receivables. To mitigate these risks, the Company provides credit in the
normal course of business and performs ongoing credit reviews of its customers
while maintaining a provision for credit losses which, when realized have been
with in the range of management's expectations. Also, the Company places its
cash deposits only with high credit quality institutions. At various times
during the year, the Company may exceed the federally insured limits. Management
believes the risk of loss of cash placed in these institutions is minimal.

Goodwill and Acquired Intangibles
---------------------------------

The Company accounts for goodwill and acquired intangible assets in accordance
with SFAS No. 142, "Goodwill and Other Intangible Assets." Accordingly, goodwill
arising from the acquisition of investments is not amortized, but is reviewed
annually for impairment.

Fair Value of Financial Instruments
-----------------------------------

The carrying amounts reflected in the consolidated balance sheet for cash and
equivalents, short-term receivables and short-term payables approximate their
fair value due to the short maturity of the instruments.

Recent Accounting Pronouncements
--------------------------------

In January 2003, the FASB issued Financial Interpretation No. 46, "Consolidation
of Variable Interest Entities - An Interpretation of ARB No. 51" ("FIN 46" or
"Interpretation"). FIN 46 is an interpretation of Accounting Research Bulletin
51, "Consolidated Financial Statements," and addresses consolidation by business
enterprises of variable interest entities ("VIEs"). The primary objective of the
Interpretation is to provide guidance on the identification of, and financial
reporting for, entities over which control is achieved through means other than
voting rights; such entities are known as VIEs. The Interpretation requires an
enterprise to consolidate a VIE if that enterprise has a variable interest that
will absorb a majority of the entity's expected losses if they occur, receive a
majority of the entity's expected residual returns if they occur or both. An
enterprise is required to consider the rights and obligations conveyed by its
variable interests in making this determination. On October 9, 2003, the FASB
issued Staff Position No. 46-6 which deferred the effective date for applying
the provisions of FIN 46 for interests held by public entities in variable
interest entities or potential variable interest entities created before
February 1, 2003. On December 24, 2003, the FASB issued a revision to FIN 46.
Under the revised interpretation, the effective date was delayed to periods
ending after March 15, 2004 for all variable interest entities, other than SPEs.
The adoption of FIN 46 is not expected to have an impact on the Company's
financial condition, results of operations or cash flows.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement No. 133 on
Derivative Instruments and Hedging Activities. This statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. The adoption of SFAS No. 149 did not have a material impact
on the Company's results of operations or financial position.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150
establishes standards for classification and measurement by an issuer of certain
financial instruments with characteristics of both liabilities and equity. The
statement requires that an issuer classify a financial instrument that is within
its scope as a liability (or asset in some circumstances). Many of those
instruments were previously classified as equity. This Statement also addresses
questions about the classification of certain financial instruments that embody
obligations to issue equity shares. The adoption of the effective

                                      F-8
<PAGE>

                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)

provisions of SFAS No. 150 did not have a material impact on the Company's
results of operations or financial position.

On December 17, 2003, the Staff of the Securities and Exchange Commission
("SEC") issued Staff Accounting Bulletin No. 104 ("SAB 104"), Revenue
Recognition, which supersedes Staff Accounting Bulletin No. 101, Revenue
Recognition in Financial Statements ("SAB 101"). SAB 104's primary purpose is to
rescind the accounting guidance contained in SAB 101 related to multiple-element
revenue arrangements that was superseded as a result of the issuance of EITF
00-21, Accounting for Revenue Arrangements with Multiple Deliverables.
Additionally, SAB 104 rescinds the SEC's related Revenue Recognition in
Financial Statements Frequently Asked Questions and Answers issued with SAB 101
that had been codified in SEC Topic 13, Revenue Recognition. While the wording
of SAB 104 has changed to reflect the issuance of EITF 00-21, the revenue
recognition principles of SAB 101 remain largely unchanged by the issuance of
SAB 104, which was effective upon issuance. The adoption of SAB 104 did not have
a material effect on the Company's financial position or results of operations.

Revenue Recognition
-------------------

Revenue from the sale of monitoring services is recognized ratably over the life
of the monitoring service agreement. Accounts receivable represents balances due
from customers for all billed but not collected Internet monitoring service
agreements signed by the customer. As a result of billing monitoring service
agreements in advance of services preformed, the Company has established a
deferred income account representing amounts billed but not earned. Since
inception, essentially all sales have been from Internet monitoring services.
Bad debts are charged to operations in the year in which the account is
determined to be uncollectable.

Marketable Securities
---------------------

The investments with which the Company was involved with were primarily of a
traditional nature. The Company's short-term investments were comprised of
equity securities that trade either on a United States national securities
market or on the over-the-counter bulletin board ("OTC BB"). The securities were
all classified as trading securities, and were carried at fair market value
based upon the quoted market prices of those investments. Accordingly, net
realized gains and losses on trading securities were included in net earnings
for the period.

The Company uses the specific identification method as the basis for determining
the cost of trading securities sold.

Advertising Costs
-----------------

The Company follows the policy of charging the costs of advertising to expense
as incurred. Advertising costs amounted to $116,045 and $220,664 for 2004 and
the period March 13, 2000 (inception) through June 30, 2004, respectively.

Property and Equipment
----------------------

Property and equipment is recorded at cost, less accumulated depreciation and is
depreciated using the straight-line method over their estimated useful life of
the asset, which range from three to seven years.

Loss Per Share
--------------

Loss per common share is calculated in accordance with SFAS No. 128, "Earnings
Per Share." Basic loss per common share is computed based upon the weighted
average number of shares of common stock outstanding for the period and excludes
any potential dilution. Shares associated with stock options, warrants and
convertible debt are not included because their inclusion would be antidilutive
(i.e., reduce the net loss per share). The per share calculations take into
effect all stock dividends, stock splits, recapitalizations and reverse stock
splits.

                                      F-9
<PAGE>

                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)

The total numbers of such shares excluded from diluted net loss per common share
were 4,098,000 at June 30, 2004, which includes 81,250 shares related to
warrants issued by ILCD prior to the recapitalization.

Pro Forma Financial Information
-------------------------------

As discussed in Note 1 and Note 10, Stellar LLC was originally organized in the
form of a Limited Liability Company. Upon the merger of the wholly owned
subsidiary of the Company into Stellar LLC in 2004, the capital structure
changed for income tax purposes to that of a corporation. The change resulted in
the Company retaining the tax benefit for the portion of the losses generated
subsequent to January 15, 2004, whereas the previous losses were passed through
to the Stellar LLC members. Pursuant to Staff Accounting Bulletin Number 1B.2
"Pro Forma Financial Statements and Earnings per Share" ("SAB 1B.2"), a pro
forma income statement has been presented which reflects the impact of the
Stellar LLC change in capital structure as if it had occurred March 13, 2000
(Stellar LLC's inception). This presentation reflects the Company generating a
tax benefit, which has been offset with a valuation allowance, which includes
the net operating losses incurred by Stellar LLC during the period from March
12, 2000 to December 31, 2003, the operating period prior to Stellar LLC's
termination.

Stock-Based Compensation
------------------------

The Company applies the intrinsic value method of accounting prescribed by
Accounting Principles Board ("APB") Opinion No. 25, "Accounting For Stock Issued
To Employees", and related interpretations, in accounting for its stock-based
grants to employees. Under the intrinsic value method of accounting,
compensation expense is recorded on the date of grant only if the current market
price of the underlying stock exceeds the exercise price. The Company provides
fair value reporting disclosures for these transactions in the footnotes as
required by SFAS No. 148, Accounting For Stock Based Compensation - Transition
and Disclosure - an Amendment of SFAS 123.

SFAS 148 Disclosure
-------------------

As permitted under SFAS No. 123, the Company has continued to utilize APB 25 in
accounting for its stock-based compensation to employees. Had compensation
expense for the six months ended June 30, 2004 and March 13, 2000 (Inception) to
June 30, 2004 been determined under the fair value provisions of SFAS No. 123,
as amended by SFAS No. 148, the Company's net loss and net loss per share would
have differed as follows:
<TABLE>
<CAPTION>
                                                                 Six Months    March 13, 2000
                                                                   Ended       (Inception) to
                                                               June 30, 2004   June 30, 2004
                                                               -------------   --------------

<S>                                                             <C>             <C>
Net loss to common stockholders, as reported                    $ (3,348,739)   $ (6,547,524)

Add: Stock-based employee/director compensation
   included in reported net loss determined under APB No. 25,
   net of related tax effects                                              -               -
Deduct: Total stock-based employee/director compensation
   expense under the fair value based method for all awards,
   net of related tax effects                                       (482,060)       (482,060)
                                                                ------------    ------------

Pro forma net loss                                              $ (3,830,799)   $ (7,029,584)
                                                                ============    ============

   Loss per share basic and diluted - as reported               $      (0.14)   $      (0.46)
   Loss per share basic and diluted - pro forma                 $      (0.16)   $      (0.50)

Shares used in basic and diluted loss per share amounts           24,493,028      14,170,534
                                                                ============    ============
</TABLE>

                                      F-10
<PAGE>

                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)

These pro forma amounts may not be representative of future disclosures since
the estimated fair value of stock options is amortized to expense over the
vesting period and additional options may be issued in future years. The
estimated fair value of each option granted was calculated using the
Black-Scholes option pricing model. The following summarizes the weighted
average of the assumptions used in the model.


          Risk free rate                     4.15%
          Expected years until exercise      9.58
          Expected stock volatility          100%
          Dividend yield                       -

Stock compensation expense for options and warrants granted to non-employees has
been determined in accordance with SFAS 123 and the Emerging Issues Task Force
consensus in Issue No. 96-18, Accounting for Equity Instruments that are Issued
to Other than Employees for Acquiring, or in Conjunction with Selling Goods or
Services (EITF 96-18). The fair value of options and warrants granted to
non-employees and the associated expense is periodically re-measured as the
underlying options vest.

Reclassification
----------------

For comparative purposes, certain figures for the period March 13, 2000
(Inception) to June 30, 2004 have been reclassified where appropriate to conform
with the financial statement presentation used in the six months ended June 30,
2004. These reclassifications had no effect on the reported net loss.


NOTE 3 - NOTE RECEIVABLE

A note receivable was acquired in the merger with ILCD (see Notes 1 and 10) in
the amount of $350,000 as consideration for the sale of its 0.7 unit limited
partnership interest of Louisiana Shelf Partners, LP in September 2003 to LSP
Exploration, LLC. The note bears interest at the rate of three percent per annum
and matures on September 24, 2004. The acquisition of this note receivable by
the Company was a non-cash transaction and is therefore not reflected in the
cumulative statement of cash flows. The Company has fully impaired the entire
amount of the note and interest receivable at June 30, 2004 as management has
determined that it is more likely than not to be able to collect on the note and
accrued interest. The loss has been recorded in loan impairment loss at June 30,
2004.


NOTE 4 - ADVANCES

On June 29, 2004, the Company advanced CompuSven, Inc. $22,000.00 for working
capital purposes. This advance was non-interesting bearing provided that the
purchase agreement between the Company and CompuSven, Inc. was completed by July
31, 2004. If the purchase agreement was not completed by July 31, 2004,
CompuSven, Inc. would repay the advance plus interest at the rate of 1% per
month no later than September 30, 2004 (see Note 15).

                                      F-11
<PAGE>

                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements


NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at June 30, 2004:

                                                Useful Life        2004
                                                -----------     ---------

       Software                                   3 years       $  75,000
       Furniture, Fixtures and Equipment         5-7 years        107,696
       Capital Leases - Equipment                 5 years          13,088
                                                                ---------
                                                                  195,784
       Less: Accumulated Depreciation                            (120,591)
                                                                ---------
                                                                $  75,193
                                                                =========

Deprecation expense, which includes amounts under capital leases, amounted to
$23,275 and $76,576 during 2004 and from Inception through June 30, 2004,
respectively.


NOTE 6- INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary timing
differences between the carrying amounts of assets and liabilities reflected on
the financial statements and the amounts used for income tax purposes. The tax
effects of temporary differences and net operating loss carryforwards and tax
credits that give rise to significant portions of the deferred tax assets
recognized are presented below as of June 30, 2004:

       Deferred tax assets:
           Accumulated depreciation and amortization             $     4,000
           Allowance for doubtful accounts                             1,000
           Loan impairment                                           137,000
           Federal and state deferred tax benefit arising from
            net operating loss carryforwards                         891,000
                                                                 -----------
                                                                   1,033,000
       Deferred tax liability
           Depreciation and amortization                             (26,000)
       Less valuation allowance                                   (1,007,000)
                                                                 -----------

       Total deferred tax assets                                 $         -
                                                                 ===========

Income tax benefit consists of the following:

       Deferred
           Federal                                               $    99,000
           State                                                      17,000
       Federal and state tax benefit of net operating
          loss carryforward                                          891,000
                                                                 -----------
                                                                   1,007,000

       Less valuation allowance                                   (1,007,000)
                                                                 -----------

                Total                                            $         -
                                                                 ===========


                                      F-12
<PAGE>

                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements


NOTE 6- INCOME TAXES (Continued)

As of June 30, 2004, the Company had losses which resulted in net operating loss
carryforwards for tax purposes amounting to approximately $2,309,000 that may be
offset against future taxable income, of which approximately $1,149,000 was
incurred by ILCD prior to the merger. These carryforwards expire in 2021 through
2024. However, these carryforwards may be significantly limited due to changes
in the ownership of the Company (see Note 1 and 10).

Realization of the benefits of the deferred tax assets will require that the
Company generate future taxable income. There can be no assurance that the
Company will generate any taxable income in future years. Therefore, the Company
has established a valuation allowance for deferred tax assets (net of
liabilities) of approximately $1,007,000 as of June 30, 2004.

In accordance with federal income tax regulations, the net loss incurred by
Stellar LLC from inception to the date of the merger has been excluded from the
benefits of the net operating loss carryforwards reflected in this footnote.

The pro forma presentation on the statement of operations reflects the effect on
the Company had the change in capital structure to a corporation been effective
as of March 13, 2000 (Stellar LLC inception) (see Note 2).

The following table presents the principal reasons for the difference between
the Company's effective tax rates and the United States federal statutory income
tax rate of 35% at June 30, 2004.


       Federal income tax benefit at statutory rate                $   553,000
       ILCD federal net operating loss benefit                         380,000
       State income tax benefit (net of effect of federal benefit)      94,000
       Non-deductible expenses                                         (20,000)
       Valuation allowance                                          (1,007,000)
                                                                   -----------

           Income Tax Benefit                                       $        -
                                                                   ===========

           Effective Income Tax Rate                                         0%
                                                                   ===========


NOTE 7 - CAPITAL LEASE OBLIGATIONS

In September 2003, SIM entered into a capital lease to purchase computer
equipment with a cost of $4,787. The term of the lease is 36 months with monthly
payments in the amount of $187. The interest rate on the capital lease is
approximately 25%. At the end of the lease, SIM may purchase the equipment for
$1. The lessor holds a security interest in the equipment purchased.

In December 2003, SIM entered into a capital lease to purchase a new phone
system with a cost of $8,302. The term of the lease is 36 months with monthly
payments of $251. The interest rate on the lease is 6%. At the end of the lease,
SIM may purchase the equipment for $1. The lessor holds a security interest in
the equipment purchased.

                                      F-13
<PAGE>

                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements


NOTE 7 - CAPITAL LEASE OBLIGATIONS (Continued)

The following is a schedule by year of future minimum lease payments required to
be paid by SIM under capital lease obligations together with the present value
of the net minimum lease payments as of June 30, 2004:

       2005                                                         $  5,254
       2006                                                            5,254
       2007                                                            2,003
                                                                    --------

       Total Minimum Lease Payments                                   12,511

       Less Amount Representing Interest                              (1,816)
                                                                    --------

       Present Value of Net Minimum Lease Payments                    10,695

       Less Current Portion                                           (4,088)
                                                                    --------

       Non-Current Portion                                          $  6,607
                                                                    ========


NOTE 8 - DEFERRED REVENUES

Deferred revenues represent payments from and/or billings to customers for
internet monitoring services prior to the Company's requirement to perform the
internet monitoring service.


NOTE 9 - CONVERTIBLE NOTES PAYABLE

In June 2004, the Company raised gross proceeds of $1,500,000 through the
issuance of Convertible Promissory Notes (the "Notes") plus two series of
detachable warrants, Series A and B, to acquire 2,400,000 shares of common
stock. The Notes bear interest at a rate of 1.98% per annum, payable monthly,
and mature on June 7, 2005. The Notes are convertible, at an initial conversion
price of $2.50, into 600,000 shares of common stock. The Notes include a
provision requiring the Company to file a registration statement with the
Securities and Exchange Commission ("SEC") covering the public resale of the
shares underlying the common stock and warrants. The Notes automatically convert
into common stock upon effective date of such registration statement (See Note
15). Each A and B Warrant is exercisable into one share of common stock at an
exercise price of $2.50 per share and $3.50 per share, respectively. The
conversion price of the Notes and the exercise prices of the A and B Warrants
are subject to downward adjustment in the event that the Company issues shares
of common stock or securities that are convertible into shares of common stock
at a purchase or conversion price less than the conversion price or exercise
price at the time of issuance of the Notes. The Series A Warrants have an
expiration date of 90 days after the Company's filing of an effective
registration statement with the SEC covering the common stock underlying the
Series A Warrants. The Series B Warrants have an expiration date of June 7,
2009.

The Company's stock price at the time of the Note offering was $3.28;
consequently, pursuant to the requirements of Emerging Issues Task Force
("EITF") 98-5 "Accounting for Convertible Securities with Beneficial Conversion
Features or Contingently Adjustable Conversion Ratios" and EITF 00-27
"Application of Issue No. 98-5 to Certain Convertible Instruments", the issuance
of the Notes and detachable warrants resulted in a discount being recorded in
the amount of $1,057,500 from the relative fair value of the warrants, as
determined using the black-scholes model, and will be amortized over the term of
the Notes.

The Company did not record the relative fair value assigned to the beneficial
conversion feature of the notes at June 30, 2004, which amounted to $442,500,
since the discount was contingent upon the effectiveness of a registration
statement covering the public resale of the shares underlying the notes, whereby
the notes automatically convert. In July of 2004 the registration statement was
declared effective by the SEC, the remaining unamortized warrant discount and
the contingent discount from the beneficial conversion feature will be


                                      F-14
<PAGE>

                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements


NOTE 9 - CONVERTIBLE NOTES PAYABLE (Continued)

immediately recorded and expensed as interest expense. The Company amortized
$50,584 of the discount to interest expense using the effective interest method
as of June 30, 2004. At June 30, 2004, this note payable, net of an unamortized
debt discount of $1,006,916 was reflected in the balance sheet as $493,084.

If the Company failed to file an effective registration statement with the SEC
by October 6, 2004 (the "Registration Date"), the Company would have been
obligated to pay damages to the Note holders.

In connection with the $1.5 million convertible note offering, the Company paid
commissions of $120,000 to Founders Equity Securities, Inc.


NOTE 10- STOCKHOLDERS' EQUITY

In January 2004, the Company consummated an agreement and plan of merger with
Stellar LLC pursuant to which the Company acquired 100% of the issued and
outstanding membership interests of Stellar LLC in consideration for which the
members of Stellar LLC received 18,000,001 newly-issued shares of the Company's
common stock. The combination of Stellar LLC and the Company was treated as a
recapitalization of Stellar LLC and all equity transactions have been revised to
reflect the recapitalization. Upon consummation of the merger the total number
of common shares outstanding was 24,250,023 including the 250,000 newly issued
private placement shares subscribed to on the date of the merger and 162,500
shares issued for advisory services.

In January 2004, the Company raised $320,000 through the issuance of 250,000
shares of its common stock in a private placement transaction, which was
consummated on the date of the merger and the related subscription receivable
was collected the following day.

In January 2004, in connection with the merger, the Company issued 162,500
shares of common stock for advisory services rendered to ILCD prior to the
merger.

Subsequent to the merger, the sole officer and director of the Company resigned
and was replaced by the manager of Stellar LLC, the Company changed its name to
Stellar Technologies, Inc. and effected a 1 for 4 reverse stock split.

In November 2003, Stellar LLC acquired 25,000 shares of common stock of the
Company for its trading account. Upon completion of the merger on January 15,
2004, these shares were reclassified to treasury stock. In March 2004, Stellar
LLC, a subsidiary of the Company, sold the 25,000 shares of its treasury stock
for gross proceeds of $88,163, which resulted in a gain of $59,163, which was
recorded as additional paid in capital.

From January through February 2004, the Company raised gross proceeds of
$1,767,750 through the sale of 2,357,000 shares of Series A Convertible
Preferred Stock ("Series A Preferred"), $0.001 par value per share, and warrants
("Warrants") to acquire up to 589,250 shares of common stock, $0.001 par value
per share. The Series A Preferred and Warrants were sold in units comprised of
one share of Series A Preferred and one Warrant ("Units"). The Units were sold
at a purchase price of $0.75 per Unit. Each Series A Preferred was initially
convertible into one-half of a share of common stock, subject to adjustment, and
each Warrant is initially exercisable into one share of common stock at an
exercise price of $2.40 per share, subject to adjustment, for a period of three
years from the date of issuance. The Series A Preferred had no voting rights,
dividend rights that were pari passu with the common stock of the Company, and
no liquidation preferences. The Series A Preferred had a mandatory conversion
feature, whereby if the Company either (i) effected a reverse stock split or
(ii) increased the number of shares authorized to be issued above the current
authorized limit of 100,000,000, each Series A Preferred automatically converted
into one-half of a share of common stock of the Company. The Company's stock
price on the commencement of the offering was $2.20; consequently, pursuant to
the requirements of Emerging Issues Task Force ("EITF") 98-5 "Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios" and EITF 00-27 "Application of Issue No. 98-5 to
Certain Convertible Instruments", the issuance of the Series A Preferred, which
was convertible at $1.50 per share, and detachable warrants with an exercise

                                      F-15
<PAGE>

                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements


NOTE 10- STOCKHOLDERS' EQUITY (Continued)

price of $2.40 per share, resulted in a beneficial conversion feature recorded
as a preferred stock dividend in the amount of $1,767,750.

In March 2004, the Company effected a 1 for 4 reverse stock split of its common
stock. On the date of the reverse stock split all 2,357,000 shares or Series A
Preferred automatically converted into 1,178,500 shares of common stock. All
share and per share amounts in these financial statements have been adjusted for
the reverse stock split. At this time the Company also changed the par value of
its common stock to $0.001 from no par value.

In June 2004, the Company issued 331,035 shares of common stock to a former
member of Stellar LLC in consideration for the waiver of dissenters' rights
obtained by the member in connection with the merger.

In June 2004, the Company entered into an agreement whereby FEQ Investments,
Inc. (FEQ) will provide the Company with financial advisory services for a
period of three years and will be paid $5,000 per month and issued a warrant to
acquire 300,000 shares of common stock to FEQ at an exercise price of $3.25 per
share expiring on June 7, 2009.

In accordance with EITF 96-18, the Company accounts for stock options and
warrants issued to non-employees at fair value. The value of such stock options
is amortized to expense over the service period of the agreement. The Company
has recorded total compensation cost related to the warrants issued to FEQ at
$746,070, of which $20,724 has been amortized to expense, and $725,346 has been
recorded as deferred compensation and will be amortized ratably over the three
year service agreement.

The estimated fair value of the warrant granted was calculated using the
Black-Scholes option pricing model. The following summarizes the weighted
average of the assumptions used in the model.

       Risk free rate                       3.96%
       Expected years until exercise         5.0
       Expected stock volatility             100%
       Dividend yield                          -

Options
-------

On February 4, 2004, the Company granted to five employees and the new president
of the Company, all of whom are leased employees, options to purchase 727,500
shares of the Company's common stock at the exercise price of $1.76 which was
the closing price of the Company's common stock on that date. The options vest
over 1 year and expire 10 years from the date of grant.

The following tables summarize the Company's stock option activity and related
information during 2004:

                                             Number of        Weighted-Average
                                              Shares           Exercise Price
                                            -----------       -----------------

        Balance at December 31, 2003                 -           $       -

        Granted                                727,500                1.76

        Exercised                                    -                   -

        Expired                                      -                   -
                                            ----------           ---------

        Balance at June 30, 2004               727,500           $    1.76
                                            ==========           =========

                                      F-16
<PAGE>

                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements


NOTE 10- STOCKHOLDERS' EQUITY (Continued)

The weighted average grant-date fair value of options granted during 2004 was
$1.59 per share.
<TABLE>
<CAPTION>
                                        OPTIONS OUTSTANDING                               OPTIONS EXERCISABLE
                      ---------------------------------------------------------    -----------------------------------
                           Number of             Weighted           Weighted            Number            Weighted
    Range of          Outstanding Shares          Average           Average         Exercisable at         Average
    Exercise              At June 30,            Remaining          Exercise           June 30,           Exercise
     Prices                  2004              Contract Life         Price               2004               Price
------------------    --------------------    ----------------    -------------    -----------------    --------------
<S>                        <C>                      <C>              <C>               <C>                 <C>
   $   1.76                727,500                  9.58             $ 1.76                    -           $   1.76
</TABLE>


NOTE 11 - OPERATING LEASES

The Company had a lease commitment for its office space until August 2004 at
which time it entered into a month to month lease. The monthly lease commitment
is $2,371 per month which includes common area maintenance and taxes.

SIM has a lease commitment for its office space commencing December 1, 2003 for
a period of 37 months. The lease contains one month of free rent and yearly
escalation clauses that raise the basic monthly rent from $1,935 in 2004 to
$2,052 in 2006. SIM is also responsible for common area maintenance and taxes in
addition to the base rent.

In January 2003, the Company leased space for its computer servers and high
speed Internet lines with a term of twelve months with a minimum lease rate of
approximately $4,450 per month. In January 2004, the Company renewed the
agreement on substantially similar terms except it extended the agreement to a
three year term.

Total rental expense for all operating leases was $60,445 for the six months
ending June 30, 2004, and $298,407 for the period of March 13, 2000 (Inception)
through June 30, 2004.

The following is a schedule by year of future minimum rental payments required
under operating leases that have initial or remaining noncancelable lease terms
of one year or greater as of June 30, 2004:

                 2005               73,964
                 2006               74,669
                 2007               37,513
                                  --------

                                  $186,146
                                  ========


NOTE 12 - SEGMENT REPORTING

In 2004, the Company determined it has one reportable segment, employee Internet
monitoring. Prior to 2004, the Company had three segments: employee internet
monitoring, children's website development and sales, and investment management
and corporate development.


                                      F-17
<PAGE>

                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements


NOTE 13 - TRANSACTIONS WITH AFFILIATES

MAS Services, Inc. provided management services to Stellar LLC. MAS Services,
Inc. is an investment analysis company. Under the Stellar LLC operating
agreement MAS Services, Inc. earned an annual management fee equal to three
percent (3%) of the total capital committed to Stellar LLC by its members. MAS
Services was also reimbursed for all out-of-pocket costs it incurred in
connection with the organization or operation of Stellar LLC. The Company
incurred management fees in the amount of $79,500, and $473,250 for the six
months ended June 30, 2004 and from March 13, 2000 (Inception) through June 30,
2004, respectively. MAS Services and the Company had mutually agreed to
terminate the management services arrangement between MAS Services, Inc. and
Stellar LLC.


NOTE 14 - SUPPLEMENATARY CASH FLOW INFORMATION

In 2004, SIM paid $395 of interest expense on the capital lease obligations.


NOTE 15 - SUBSEQUENT EVENTS

On July 14, 2004, the Company purchased 100% of the common stock of CompuSven,
Inc. ("CompuSven"), subject to the terms and conditions of the Stock Purchase
Agreement signed on that date. The purchase price of the CompuSven common stock
was $889,985 paid in cash plus a number of shares of Company common stock
equivalent to $150,000 as determined by the closing price of the common stock of
the Company as of the date immediately preceding the closing. The purchase price
was paid in the following manner: cash of $773,900 and 36,850 shares of common
stock to the sole stockholder of CompuSven, and cash of $95,479 and 6,503 shares
of common stock to E-Mail Technologies, Inc. ("E-Mail"). Of this amount, $20,606
was held in reserve until E-Mail completed collection of outstanding accounts
receivable invoices of CompuSven. In connection with the closing, the selling
shareholder of CompuSven and other key employees signed employment and
confidentiality agreements with the Company, the sales agreement between
CompuSven and E-Mail was terminated and the sole shareholder of Email signed an
employment and confidentiality agreement with the Company.







                                      F-18
<PAGE>

                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements


NOTE 15 - SUBSEQUENT EVENTS (Continued)

The following unaudited pro forma balance sheet of CompuSven assumes the
Company's acquisition of CompuSven took place on June 30, 2004:
<TABLE>
<CAPTION>
                                                                                         Allocation
                                                                      Unaudited              of
                                                                      Historical       Purchase Price
                                                                      ----------       --------------
<S>                                                                   <C>                <C>
       Cash                                                           $    6,207         $    6,207
       Accounts receivable, net allowance for doubtful accounts           99,815             99,815
       Other                                                               2,525              2,525
                                                                      ----------         ----------
       Total Current Assets                                              108,547            108,547
       Property, Plant & Equipment, net                                   14,293             14,293
       Intangibles                                                             -          1,366,544
       Other Assets                                                        3,500              3,500
                                                                      ----------         ----------
            Total Assets                                                 126,340          1,492,884
                                                                      ==========         ==========

       Credit cards payable                                              152,938            152,938
       Accounts payable and accrued expenses                             106,826            106,826
       Other liabilities                                                  22,000             22,000
       Deferred Revenue                                                  164,616            164,616
                                                                      ----------         ----------
       Total current liabilities                                         446,380            446,380
       Deferred revenue                                                    6,519              6,519
                                                                      ----------         ----------
            Total Liabilities                                            452,899            452,899
                                                                      ----------         ----------

            Total Purchase Price                                                         $1,039,985
                                                                                         ==========
</TABLE>

The Company has allocated the excess of the purchase price over the net assets
received to goodwill until such time as it receives an expert, independent
valuation of the fair value of the assets of CompuSven as of the date of the
stock purchase agreement.

In July 2004, the SEC declared effective the Company's registration statement
covering the public resale of 8,207,996 shares of its common stock, of which
600,000 shares are issuable upon conversion of the Notes and 3,289,251 shares
are issuable upon the exercise of outstanding warrants.


                                      F-19
<PAGE>

                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements


NOTE 16 - COMPARATIVE FINANCIAL INFORMATION - UNAUDITED

The following table presents the unaudited condensed consolidated balance sheet
of the Company as of June 30, 2003:

Cash                                                            $   491,133
Other                                                                 8,448
                                                                -----------

Total current assets                                                499,581

Investments                                                         400,000
Fixed assets, net                                                    61,331
                                                                -----------

Total Assets                                                    $   960,912
                                                                ===========

Accounts payable and accrued expenses                           $    23,419
Deferred revenue                                                     71,439
                                                                -----------

Total Liabilities                                                    94,858
                                                                -----------

Common stock, no par value, authorized 100,000,000 shares;
    outstanding 15,357,799 shares                                         -
Additional paid-in capital                                        3,480,568
Deficit accumulated in the development stage                     (2,614,514)
                                                                -----------

Total Stockholder's Equity                                          866,054
                                                                -----------

Total Liabilities and Stockholders' Equity                      $   960,912
                                                                ===========




                                      F-20
<PAGE>

                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements


NOTE 16 - COMPARATIVE FINANCIAL INFORMATION - UNAUDITED (Continued)

The following table presents the unaudited condensed consolidated statement of
operations of the Company for the six months ended June 30, 2003:

Revenues                                                         $    75,293

Operating expenses
   Depreciation                                                       19,522
   Labor costs and expense reimbursements                            292,763
   Management fees, related party                                     51,750
   General and administrative                                         86,151
   Professional fees                                                  30,768
   Marketing                                                          31,789
   Research, development and product support                          29,224
   Office rents                                                       17,651
                                                                 -----------

Total expenses                                                       559,618
                                                                 -----------

Loss from operations                                                (484,325)

Other income                                                          48,310
                                                                 -----------

Net loss                                                         $  (436,015)
                                                                 ===========

Pro forma information                                               (436,015)
    Net loss                                                               -
                                                                 -----------

Pro forma Net Loss                                                  (436,015)
                                                                 ===========

Basic and diluted loss per share                                 $     (0.03)
                                                                 ===========

Basic and diluted weighted average common shares outstanding      15,027,527
                                                                 ===========



                                      F-21
<PAGE>

                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements


NOTE 16 - COMPARATIVE FINANCIAL INFORMATION - UNAUDITED (Continued)

The following table presents the unaudited condensed consolidated statement of
cash flows of the Company for the six months ended June, 30, 2003:

Cash used in operations                                            $(149,892)
                                                                   ---------

Cash flows from investing activities
    Purchase of property and equipment                               (57,382)
                                                                   ---------

    Cash used in investing activities                                (57,382)
                                                                   ---------

Cash flows from financing activities
    Sale of common stock                                             200,000
    Offering costs paid                                              (29,843)
                                                                   ---------

    Cash provided by financing activities                            170,157
                                                                   ---------

Net decrease in cash                                                 (37,117)

Cash and cash equivalents, beginning of period                       528,250
                                                                   ---------

Cash and cash equivalents, end of period                           $ 491,133
                                                                   =========


NOTE 17 - GOODWILL

On November 14, 2003, the Company paid $100,000 in cash to IO to acquire the
remaining 50% of SBB it did not own. On the date of the acquisition, SBB's
liabilities exceeded its assets, which resulted in the Company recording
goodwill in the entire amount of the purchase price of $100,000 plus the amount
by which the liabilities exceeded the assets in the amount of $21,595. At
December 31, 2003, the Company fully impaired the goodwill in accordance with
SFAS No. 142, "Goodwill and Other Intangible Assets" as the subsidiary has had
losses since inception and management is unable to determine when, if ever, the
subsidiary will become profitable.



                                      F-22




<PAGE>

                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)






















               FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED
                           DECEMBER 31, 2003 and 2002





















                                      F-23
<PAGE>



                     REPORT OF INDEPENDENT REGISTERED PUBLIC
                                 ACCOUNTING FIRM




To the Board of Directors of
Stellar Technologies, Inc.
Naples, Florida


We have audited the accompanying consolidated balance sheets of Stellar
Technologies, Inc. and subsidiaries as of December 31, 2003 and 2002, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years then ended and for the period March 13, 2000 (date of
inception) through December 31, 2003. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Stellar Technologies, Inc. and
subsidiaries as of December 31, 2003 and 2002, and the results of its
operations, changes in stockholders' equity and cash flows for the years then
ended and for the period March 13, 2000 (date of inception) through December 31,
2003, in conformity with accounting principles generally accepted in the United
States of America.


L J SOLDINGER ASSOCIATES LLC


Deer Park, Illinois
March 4, 2004 (except for Notes 1, 8 and 16, for which the date is April 30,
2004)








                                      F-24
<PAGE>
<TABLE>

                                  STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                                         (A DEVELOPMENT STAGE ENTITY)
                                          Consolidated Balance Sheets
                                          December 31, 2003 and 2002



                                                    ASSETS
                                                    ------
                                                                                  2003               2002
                                                                              -----------         -----------
<S>                                                                           <C>                 <C>
Current assets
   Cash                                                                       $   424,720         $   528,250
   Marketable securities                                                          244,300             179,460
   Accounts receivable                                                              2,888                   -
   Prepaid management fees, related party                                          14,250              16,750
   Prepaid expenses                                                                 9,524               2,351
                                                                              -----------         -----------

Total current assets                                                              695,682             726,811
                                                                              -----------         -----------

Property and equipment, net                                                        72,809              23,471
Cost based investment                                                             400,000             400,000
Deposits                                                                            2,534                   -
                                                                              -----------         -----------

                                                                              $ 1,171,025         $ 1,150,282
                                                                              ===========         ===========


                                     LIABILITIES AND STOCKHOLDERS' EQUITY
                                     ------------------------------------

Current liabilities
    Current portion of obligations under capital leases                       $     4,088         $         -
    Accounts payable and accrued expenses                                          34,560              18,370
    Deferred revenues                                                              77,720                   -
                                                                              -----------         -----------

Total current liabilities                                                         116,368              18,370

Obligations under capital leases, net of current portion                            8,473                   -
                                                                              -----------         -----------

Total liabilities                                                                 124,841              18,370
                                                                              -----------         -----------

Stockholders' equity
   Preferred stock, no par value; authorized 10,000,000 shares;
     zero shares issued and outstanding                                                 -                   -
   Common stock, no par value; authorized 100,000,000 shares; 18,000,001
     and 14,697,249 shares issued and outstanding as of December 31, 2003
     and 2002                                                                           -                   -
Additional paid-in capital                                                      4,246,069           3,311,511
Subscription receivable                                                            (1,100)             (1,100)
Deficit accumulated with the development stage                                 (3,198,785)         (2,178,499)
                                                                              -----------         -----------
Total Stockholders' Equity                                                      1,046,184           1,131,912
                                                                              -----------         -----------

                                                                              $ 1,171,025         $ 1,150,282
                                                                              ===========         ===========
</TABLE>






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




                                      F-25
<PAGE>

<TABLE>
<CAPTION>
                                       STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                                               (A DEVELOPMENT STAGE ENTITY)
                                          Consolidated Statements of Operations
                                      Years Ended December 31, 2003 and 2002 and for
                                      the Period March 13, 2000 (Date of Inception)
                                                through December 31, 2003




                                                                                                           March 13, 2000
                                                                                                           (Inception) to
                                                                                                            December 31,
                                                                         2003                 2002              2003
                                                                      -----------          -----------      ------------
<S>                                                                   <C>                  <C>              <C>
Revenues                                                              $   173,711          $         -      $    173,711

Expenses
    Depreciation and amortization expense                                  39,428                6,015            53,301
    Investment costs                                                       22,831               50,890            90,228
    Labor costs and expense reimbursements                                547,791               34,350           582,431
    Management fees, related party                                        109,000              100,500           393,750
    General and administrative                                            165,339               27,267           286,268
    Professional fees                                                      12,970               41,818           156,658
    Marketing                                                              93,082                    -           104,619
    Research, development and product support                             138,849                    -           138,849
    Office rents                                                           33,774               30,328           111,767
    Subsidiary loan impairment                                                  -              378,404           378,404
    Impairment of goodwill                                                121,595                    -           121,595
                                                                      -----------          -----------      ------------

Total expenses                                                          1,284,659              669,572         2,417,870
                                                                      -----------          -----------      ------------

Loss from operations                                                   (1,110,948)            (669,572)       (2,244,159)
                                                                      -----------          -----------      ------------

Other income (expense)
    Investee losses                                                             -             (870,627)       (1,040,096)
    Interest and money market dividends                                     1,882               10,408           174,017
    Gains (losses) in trading securities                                   88,780             (172,978)          (88,547)
                                                                      -----------          -----------      ------------

Total other income (expense)                                               90,662           (1,033,197)         (954,626)
                                                                      -----------          -----------      ------------

Net loss to common stockholders                                       $(1,020,286)         $(1,702,769)     $ (3,198,785)
                                                                      ===========          ===========      ============

Pro forma information (unaudited)
    Net loss                                                           (1,020,286)          (1,702,769)       (3,198,785)
    Pro forma tax provision                                                     -                    -                 -
                                                                      -----------          -----------      ------------
    Pro forma net loss                                                 (1,020,286)          (1,702,769)       (3,198,785)
                                                                      ===========          ===========      ============

Basic and diluted loss per common share                               $     (0.06)         $     (0.12)     $      (0.25)
                                                                      ===========          ===========      ============

Basic and diluted weighted average common
    shares outstanding                                                 15,728,793           14,697,249        12,873,092
                                                                      ===========          ===========      ============
</TABLE>



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

                                      F-26
<PAGE>

<TABLE>
<CAPTION>
                                        STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                                                (A DEVELOPMENT STAGE ENTITY)
                                        Statement of Changes in Stockholders' Equity






                                                                                                Deficit
                                                                                              Accumulated
                                      Common Stock              Additional                      in the
                                 -----------------------         Paid-in     Subscription     Development
                                   Shares        Amount          Capital      Receivable         Stage            Total
                                 ----------     --------        ----------    ----------      -----------      -----------
<S>                              <C>            <C>             <C>           <C>             <C>              <C>
March 13, 2000 (Inception)                -     $      -        $        -    $        -      $         -      $         -

June 6, 2000 private placement    3,633,028            -             1,100        (1,100)               -                -

June 15, 2000 private placement  11,064,221            -         3,350,000             -                -        3,350,000

Offering costs paid                       -            -           (29,843)            -                -          (29,843)

Net loss                                  -            -                 -             -         (475,730)        (475,730)
                                 ----------     --------        ----------    ----------      -----------      -----------

Balance at December 31, 2001     14,697,249            -         3,321,257        (1,100)        (475,730)       2,844,427

Offerings costs paid                      -            -            (9,746)            -                -           (9,746)

Net loss                                  -            -                 -             -       (1,702,769)      (1,702,769)
                                 ----------     --------        ----------    ----------      -----------      -----------

Balance at December 31, 2002     14,697,249            -         3,311,511        (1,100)      (2,178,499)       1,131,912

November 2003 private
  placement                       3,302,752            -         1,000,000             -                -        1,000,000

Offering costs paid                       -            -           (65,442)            -                -          (65,442)

Net loss                                  -            -                 -             -       (1,020,286)      (1,020,286)
                                 ----------     --------        ----------    ----------      -----------      -----------

Balance at December 31, 2003     18,000,001     $      -        $4,246,069    $   (1,100)     $(3,198,785)     $ 1,046,184
                                 ==========     ========        ==========    ==========      ===========      ===========
</TABLE>










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


                                      F-27
<PAGE>

<TABLE>
<CAPTION>
                                      STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                                             (A DEVELOPMENT STAGE ENTITY)
                                         Consolidated Statements of Cash Flows
                                        Years Ended December 31, 2003 and 2002




                                                                                                        March 13, 2000
                                                                                                         (Inception) to
                                                                                                          December 31,
                                                                         2003              2002              2003
                                                                      -----------       -----------       -----------
<S>                                                                   <C>               <C>               <C>
Cash flows from operating activities
    Net loss                                                          $(1,020,286)      $(1,702,769)      $(3,198,785)
    Adjustments to reconcile net income (loss) to net cash
       provided by (used in) operating activities
        Depreciation                                                       39,428             6,015            53,301
        Loss on impairment of goodwill                                    121,595                 -           121,595
        Equity method loss in subsidiary                                        -           870,627         1,040,096
        Subsidiary loan impairment loss                                         -           378,404           378,404
        (Gains) losses in trading securities                              (88,780)          172,978            88,546
        Purchases of trading securities                                  (156,019)          (92,490)         (683,589)
        Redemptions of trading securities                                 179,959           175,132           350,743
        Changes in assets and liabilities
            Decrease in accounts receivable                                 5,485                 -             5,485
            Increase in prepaid expenses                                   (7,208)                -           (26,308)
            Decrease in accounts payable                                  (30,722)          (25,024)          (11,353)
            Increase in deferred revenues                                  17,643                 -            17,643
                                                                      -----------       -----------       -----------

Net cash used in operating activities                                    (938,905)         (217,127)       (1,864,222)
                                                                      -----------       -----------       -----------

Cash flows provided by (used in) investing activities
    Purchase of property and equipment                                     (6,601)           (3,303)          (43,945)
    Purchase of investee interest, net of cash assumed                    (92,055)                -          (893,055)
    Advances to investees                                                       -        (1,018,500)       (1,018,500)
                                                                      -----------       -----------       -----------

Net cash used in investing activities                                     (98,656)       (1,021,803)       (1,955,500)
                                                                      -----------       -----------       -----------

Cash flows from financing activities
    Principal payments on capital lease obligations                          (527)                -              (527)
    Offering costs paid                                                   (65,442)           (9,746)         (105,031)
    Proceeds from sales of common stock                                 1,000,000                 -         4,350,000
                                                                      -----------       -----------       -----------

Net cash provided by (used in) financing activities                       934,031            (9,746)        4,244,442
                                                                      -----------       -----------       -----------

Net increase (decrease) in cash                                          (103,530)       (1,248,676)          424,720

Cash and cash equivalents, beginning of year                              528,250         1,776,926                 -
                                                                      -----------       -----------       -----------

Cash and cash equivalents, end of year                                $   424,720       $   528,250       $   424,720
                                                                      ===========       ===========       ===========
</TABLE>




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


                                      F-28
<PAGE>

                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements



NOTE 1 - DESCRIPTION OF BUSINESS

Nature of Operations
--------------------

Stellar Technologies, Inc. and subsidiaries (the "Company") are engaged in two
activities, acquiring a controlling interest in and providing financial,
management and technical support to development stage internet businesses which
the Company either participates in its founding or identifies it as meeting
certain investment criteria and to a lesser extent, trading in public equity
securities. All of the Company's affiliate companies are currently in the
development stage. The Company is no longer, and has no intention of continuing,
in the business of trading in securities.

History
-------

The Company, formerly International Travel CD's, Inc. ("ILCD"), was formed on
July 20, 2000, as a Colorado corporation. In September 2003, the Company
disposed of all of its former operations and related assets resulting in it
becoming a public shell company, defined as an inactive, publicly quoted company
with minimal assets or liabilities.

In January 2004, the Company consummated an agreement and plan of merger with
Stellar Venture Partners, LLC ("Stellar LLC"). The plan of merger provided for
the Company to issue 18,000,001 shares of its common stock to the members of
Stellar LLC in consideration for which each of the issued and outstanding Class
A and Class B member units of Stellar LLC were cancelled and each issued and
outstanding share of common stock of the Company's wholly-owned subsidiary,
International Travel CD's Acquisition Corp., was converted into one membership
interest in Stellar LLC. The combination of Stellar LLC and ILCD was treated as
a recapitalization of Stellar LLC and all equity transactions have been revised
to reflect the recapitalization. As a result of the merger, the former members
of Stellar LLC received approximately 74% of the then issued and outstanding
common stock of the Company on a fully diluted basis, which resulted in Stellar
LLC being treated as the accounting acquirer and thus the operations and the
financial statements of Stellar LLC prior to the merger have become those of the
Company. In connection with the merger, the Company changed its name to Stellar
Technologies, Inc.

Stellar Venture Partners, LLC was formed as a limited liability company under
the laws of the state of Georgia on March 13, 2000. In November of 2000, Stellar
LLC and IO Ventures, LLC ("IO") formed Stellar Business Builders, LLC ("SBB")
for the purpose of acquiring and managing the operations of its startup
affiliates. Stellar LLC and IO each owned 50% of SBB. In May and June of 2001,
Stellar Business Builders, LLC formed two wholly-owned subsidiaries, Stellar
Internet Monitoring, LLC ("SIM"), (formerly known as ICaughtYou, LLC), whose
principal activity is providing companies with the ability to monitor their
employee usage of the internet and Kidweb, LLC ("KW") whose primary activity is
providing a web site development suite targeted directly to children. In
November 2003, the Company purchased IO's remaining 50% interest in SBB for
$100,000 in cash and as a result, SBB became a wholly-owned subsidiary of the
Company (see Note 4).


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
---------------------

The accompanying financial statements have been prepared on the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States of America ("US GAAP").

Principles of Consolidation and Ownership Interest in Investors
---------------------------------------------------------------
The accompanying financial statements have been presented on the consolidated
basis in 2003 and include all the accounts of SBB, SIM and KW. No loss was
allocated to the minority interest (see Note 10).






                                      F-29
<PAGE>


                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements



NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)

Prior to 2003, the Company accounted for SBB under the equity method. The
applicable accounting method is generally determined based on the Company's
ownership interest in the affiliate.

In July 2001, the Company purchased a 10% interest in Synergy Networks, Inc.
("SNI") for $400,000 in cash which was reflected under the cost method for 2003
and 2002.

Consolidation
-------------

Affiliate entities in which the Company directly or indirectly owns more than
50% of the outstanding, voting interest are accounted for under the
consolidation method of accounting. Under this method, an investee company's
results of operations are reflected within the Company's consolidated statement
of operations. All significant intercompany accounts and transactions have been
eliminated.

Equity Method
-------------

Affiliate entities in which the Company directly or indirectly owns between 20%
and 50% of the outstanding, voting interests are accounted for under the equity
method of accounting. Under the equity method of accounting, the Company's
proportionate share of the investees' net income or loss is included in
"Investee Losses" in the Consolidated Statements of Operations.

Cost Method
-----------

Entities in which the Company directly or indirectly owns less than 20% of the
outstanding voting interest are accounted for under the cost method of
accounting. Under this method income received from the investees is reflected
within the Company's consolidated statement of operations as investment income
or loss unless the amount of the dividends exceeds the Company's proportionate
share of the affiliates' income. In that case the excess amount would be
considered a return of capital and be recorded as a reduction of the investment.

Development Stage Enterprise
----------------------------

The Company is a Development Stage Enterprise, as defined in Statement of
Financial Accounting Standards ("SFAS") No. 7 "Accounting and Reporting for
Development Stage Enterprises." Under SFAS No. 7, certain additional financial
information is required to be included in the financial statements for the
period from inception of the Company to the current balance sheet date.

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 amount of assets and liabilities and disclosures of
contingent assets and liabilities at the date of financial statements and the
reported amounts of increases and decreases in net assets from operations during
the reporting period. Actual results could differ from these estimates.

Cash and Cash Equivalents
-------------------------

Cash and cash equivalents include cash on hand and investments in money market
funds. The Company considers all highly-liquid instruments with an original
maturity of 90 days or less at the time of purchase to be cash equivalents.







                                      F-30
<PAGE>



                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements



NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)

Federal Income Taxes
--------------------

Prior to the merger on January 15, 2004, no provision for income taxes has been
made, since under federal and state regulation, tax attributes were passed
through to the former Stellar LLC members who assumed responsibility for payment
of income taxes, if any. Subsequent to the merger, income taxes are recorded in
the period in which the related transactions are recognized in the financial
statements, net of any valuation allowances recorded against deferred tax
assets, if the Company estimates that it is more likely than not that it will be
unable to utilize those deferred tax benefits in future periods. Deferred tax
assets and liabilities are recorded for the expected future tax consequences of
temporary differences between the tax basis and the financial reporting basis of
assets and liabilities.

Credit Risk
-----------

Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash deposits at financial institutions. To
mitigate this risk, the Company places its cash deposits only with high credit
quality institutions. At various times during the year, the Company may exceed
the federally insured limits. Management believes the risk of loss is minimal.

Goodwill and Acquired Intangibles
---------------------------------

The Company accounts for goodwill and acquired intangible assets in accordance
with SFAS No. 142, "Goodwill and Other Intangible Assets." Accordingly, goodwill
arising from the acquisition of investments is not amortized, but is reviewed
annually for impairment.

Fair Value of Financial Instruments
-----------------------------------

The carrying amounts reflected in the consolidated balance sheet for cash and
equivalents, short-term receivables and short-term payables approximate their
fair value due to the short maturity of the instruments. The carrying value of
the investment in equity securities approximates fair value based on their
market trading price.

Recent Accounting Pronouncements
--------------------------------

In January 2003, the FASB issued Financial Interpretation No. 46, "Consolidation
of Variable Interest Entities - An Interpretation of ARB No. 51" ("FIN 46" or
"Interpretation"). FIN 46 is an interpretation of Accounting Research Bulletin
51, "Consolidated Financial Statements," and addresses consolidation by business
enterprises of variable interest entities ("VIEs"). The primary objective of the
Interpretation is to provide guidance on the identification of, and financial
reporting for, entities over which control is achieved through means other than
voting rights; such entities are known as VIEs. The Interpretation requires an
enterprise to consolidate a VIE if that enterprise has a variable interest that
will absorb a majority of the entity's expected losses if they occur, receive a
majority of the entity's expected residual returns if they occur or both. An
enterprise is required to consider the rights and obligations conveyed by its
variable interests in making this determination. On October 9, 2003, the FASB
issued Staff Position No. 46-6 which deferred the effective date for applying
the provisions of FIN 46 for interests held by public entities in variable
interest entities or potential variable interest entities created before
February 1, 2003. On December 24, 2003, the FASB issued a revision to FIN 46.
Under the revised interpretation, the effective date was delayed to periods
ending after March 15, 2004 for all variable interest entities, other than SPEs.
The adoption of FIN 46 is not expected to have an impact on the Company's
financial condition, results of operations or cash flows.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement No. 133 on
Derivative Instruments and Hedging Activities. This statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. The adoption of SFAS No. 149 did not have a material impact
on the Company's results of operations or financial position.






                                      F-31
<PAGE>


                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements



NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150
establishes standards for classification and measurement by an issuer of certain
financial instruments with characteristics of both liabilities and equity. The
statement requires that an issuer classify a financial instrument that is within
its scope as a liability (or asset in some circumstances). Many of those
instruments were previously classified as equity. This Statement also addresses
questions about the classification of certain financial instruments that embody
obligations to issue equity shares. The adoption of the effective provisions of
SFAS No. 150 did not have a material impact on the Company's results of
operations or financial position.

On December 17, 2003, the Staff of the Securities and Exchange Commission
("SEC") issued Staff Accounting Bulletin No. 104 ("SAB 104"), Revenue
Recognition, which supersedes Staff Accounting Bulletin No. 101, Revenue
Recognition in Financial Statements ("SAB 101"). SAB 104's primary purpose is to
rescind the accounting guidance contained in SAB 101 related to multiple-element
revenue arrangements that was superseded as a result of the issuance of EITF
00-21, Accounting for Revenue Arrangements with Multiple Deliverables.
Additionally, SAB 104 rescinds the SEC's related Revenue Recognition in
Financial Statements Frequently Asked Questions and Answers issued with SAB 101
that had been codified in SEC Topic 13, Revenue Recognition. While the wording
of SAB 104 has changed to reflect the issuance of EITF 00-21, the revenue
recognition principles of SAB 101 remain largely unchanged by the issuance of
SAB 104, which was effective upon issuance. The adoption of SAB 104 did not have
a material effect on the Company's financial position or results of operations.

Marketable Securities
---------------------

The investments with which the Company is involved with are primarily of a
traditional nature. The Company's short-term investments are comprised of equity
securities that trade either on a United States national securities market or on
the over-the-counter bulletin board ("OTC BB"). The securities are all
classified as trading securities, and are carried at fair market value based
upon the quoted market prices of those investments at period end. Accordingly,
net realized and unrealized gains and losses on trading securities are included
in net earnings for the period.

The Company uses the specific identification method as the basis for determining
the cost of trading securities sold. Unrealized losses in trading securities
amounted to $18,314 and $156,976 for securities held as of December 31, 2003 and
2002, respectively.

Revenue Recognition
-------------------

Revenue from the sale of monitoring services is recognized ratably over the life
of the monitoring service agreement. Accounts receivable represents balances due
from customers for internet monitoring services rendered. Management estimates
that such revenues are fully collectible. Since inception essentially all sales
have been from internet monitoring services.

Advertising Costs
-----------------

The Company follows the policy of charging the costs of advertising to expense
as incurred. Advertising costs amounted to $94,837, $11,582 and $108,053 for
2003, 2002 and the period March 13, 2000 (inception) through December 31, 2003,
respectively.

Property and Equipment
----------------------

Property and equipment is recorded at cost, less accumulated depreciation and is
depreciated using the straight-line method over their estimated useful life of
the asset, which range from three to seven years.







                                      F-32
<PAGE>



                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements



NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loss Per Share
--------------

Loss per common share is calculated in accordance with SFAS No. 128, "Earnings
Per Share." Basic loss per common share is computed based upon the weighted
average number of shares of common stock outstanding for the period and excludes
any potential dilution. Shares associated with stock options, warrants and
convertible debt are not included because their inclusion would be antidilutive
(i.e., reduce the net loss per share). The per share calculations take into
effect all stock dividends, stock splits, recapitalizations and reverse stock
splits (See Note 15).

From inception through December 31, 2003 the Company did not issue any dilutive
securities.

Pro Forma Financial Information
-------------------------------

As discussed in Note 1 and Note 15, Stellar LLC was originally organized in the
form of a Limited Liability Company. Upon the merger of the wholly owned
subsidiary of the Company into Stellar LLC in 2004, the capital structure
changed for income tax purposes to that of a corporation. The change resulted in
the Company retaining the tax benefit for the portion of the losses generated
subsequent to January 15, 2004, whereas the previous losses were passed through
to the Stellar LLC members. Pursuant to Staff Accounting Bulletin Number 1B.2
"Pro Forma Financial Statements and Earnings per Share" ("SAB 1B.2"), a pro
forma income statement has been presented which reflects the impact of the
Stellar LLC change in capital structure as if it had occurred March 13, 2000
(Stellar LLC's inception). This presentation reflects the Company generating a
tax benefit, which has been offset with a valuation allowance, which includes
the net operating losses incurred by Stellar LLC during the period from March
12, 2000 to December 31, 2003, the operating period prior to Stellar LLC's
termination.


NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31:
<TABLE>
<CAPTION>
                                                            Useful Life       2003         2002
                                                            -----------     --------     --------
<S>                                                         <C>             <C>          <C>

          Software                                            3 years       $ 75,000     $      -
          Furniture, Fixtures and Equipment                  5-7 years        82,038       37,344
          Capital Leases - Equipment                          5 years         13,088            -
                                                                            --------     --------
                                                                             170,126       37,344
          Less: Accumulated Depreciation                                     (97,317)     (13,873)
                                                                            --------     --------

                                                                            $ 72,809     $ 23,471
                                                                            ========     ========
</TABLE>
Deprecation expense which includes amounts under capital leases amounted to
$39,428, $6,015 and $53,301 during 2003, 2002 and from Inception through
December 31, 2003, respectively.


NOTE 4 - GOODWILL

On November 14, 2003, the Company paid $100,000 in cash to IO to acquire the
remaining 50% of SBB it did not own. On the date of the acquisition, SBB's
liabilities exceeded it assets, which resulted in the Company recording goodwill
in the entire amount of the purchase price of $100,000 plus the amount by which
the liabilities exceeded the assets in the amount of $21,595. At December 31,
2003, the Company fully impaired the goodwill in accordance with SFAS No. 142,
"Goodwill and Other Intangible Assets."






                                      F-33
<PAGE>


                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements


NOTE 5 - INCOME TAXES

In accordance with federal income tax regulations, the net loss incurred by
Stellar Venture Partners, LLC from inception to the date of its merger with the
Company has been excluded from the benefits of the net operating loss
carryforwards reflected in this footnote.

The following table presents the principal reasons for the difference between
the Company's effective tax rates and the United States federal statutory income
tax rate of 35%.
<TABLE>
<CAPTION>
                                                                                                March 13, 2000
                                                                                                (Inception) to
                                                                                                 December 31,
                                                                     2003           2002             2003
                                                                   ---------      ---------       ----------
     <S>                                                           <C>            <C>             <C>
     Federal income tax benefit at statutory rate                  $ 357,100      $ 596,000       $1,119,575
     Federal income tax benefit passed through to the
       members of Stellar Venture Partners, LLC                     (357,100)      (352,000)        (921,575)
     Non-deductible expenses                                               -       (244,000)        (198,000)
                                                                   ---------      ---------       ----------

         Income Tax Benefit                                        $       -      $       -       $        -
                                                                   =========      =========       ==========

         Effective Income Tax Rate                                        0%             0%               0%
                                                                   =========      =========       ==========
</TABLE>

NOTE 6 - CAPITAL LEASE OBLIGATIONS

In September 2003, SIM entered into a capital lease to purchase computer
equipment with a cost of $4,787. The term of the lease is 36 months with monthly
payments in the amount of $187. The interest rate on the capital lease is
approximately 25%. At the end of the lease, SIM may purchase the equipment for
$1. The lessor holds a security interest in the equipment purchased.

In December 2003, SIM entered into a capital lease to purchase a new phone
system with a cost of $8,302. The term of the lease is 36 months with monthly
payments of $251. The interest rate on the lease is 6%. At the end of the lease,
SIM may purchase the equipment for $1. The lessor holds a security interest in
the equipment purchased.

The following is a schedule by year of future minimum lease payments required to
be paid by SIM under capital lease obligations together with the present value
of the net minimum lease payments as of December 31, 2003:

         2004                                                      $ 5,254
         2005                                                        5,254
         2006                                                        4,258
                                                                   -------

         Total Minimum Lease Payments                               14,766

         Less Amount Representing Interest                          (2,205)
                                                                   -------

         Present Value of Net Minimum Lease Payments                12,561

         Less Current Portion                                       (4,088)
                                                                   -------

         Non-Current Portion                                       $ 8,473
                                                                   =======






                                      F-34
<PAGE>


                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements



NOTE 7 - DEFERRED REVENUES

Deferred revenues represent payments from customers for internet monitoring
services prior to the Company's requirement to perform the internet monitoring
service.


NOTE 8 - STOCKHOLDERS' EQUITY

On June 6, 2000, the Company sold 3,633,028 shares of its common stock to MAS
Services, Inc. for a subscription receivable of $1,100 under a private placement
offering. In January 2004, MAS Services, Inc. paid $1,100 to the Company in
satisfaction of the subscription receivable.

During the third and fourth quarters of 2000, the Company sold 11,064,221 shares
of its common stock under a private placement offering, and received gross
proceeds of $3,350,000. The Company paid offering costs of $29,843 and $9,746 in
2000 and 2001, respectively, in connection with this offering.

In November 2003, the Company sold 3,302,751 shares of its common stock under a
private placement offering and received $1,000,000 in gross proceeds. The
Company paid $65,442 in offering costs in connection with this private
placement.


NOTE 9 - OPERATING LEASES

The Company had a lease commitment for its office space commencing August 1,
2001 for a period of 24 months. The lease was renewed for a year in August 2003.
The monthly lease commitment is $2,371 per month which includes common area
maintenance and taxes.

SIM has a lease commitment for its office space commencing December 1, 2003 for
a period of 37 months. The lease contains one month of free rent and yearly
escalation clauses that raise the basic monthly rent from $1,935 in 2004 to
$2,052 in 2006. SIM is also responsible for common area maintenance and taxes in
addition to the base rent.

In January 2003, the Company leased space for its computer servers and high
speed internet lines with a term of twelve months with a minimum lease rate of
approximately $4,450 per month.

Total rental expense for all operating leases was $83,706, $101,561 and $237,962
for 2003, 2002 and the period of March 13, 2000 (Inception) through December 31,
2003.

The following is a schedule by year of future minimum rental payments required
under operating leases that have initial or remaining noncancelable lease terms
of one year or greater as of December 31, 2003:

                 2004                 $23,216
                 2005                  23,912
                 2006                  24,629
                                      -------

                                      $71,757
                                      =======






                                      F-35
<PAGE>


                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements



NOTE 10 - EQUITY METHOD LOSSES AND IMPAIRMENT OF INVESTEE LOAN RECEIVABLE

In accordance with Emerging Issues Task Force ("EITF") 98-13 "Accounting by an
Equity Method Investor for Investee Losses When the Investor has Loans to and
Investments in Other Securities of the Investee," and 99-10 "Percentage Used to
Determine the Amount of Equity Method Losses," in the event that minority
interest losses exceed stockholders' equity for the majority interest, the
excess minority interest loss is recorded against loan advances or other forms
of equity invested in the subsidiary. Accordingly, during 2002 the Company
reduced its loan receivable from the original amount invested of $1,018,500 by
the amount of the losses recorded in excess of the minority interest deficiency,
leaving a loan balance of $378,404 at December 31, 2002.

In addition, the Company fully impaired the remaining balance of the loan
receivable from the subsidiary at December 31, 2002.


NOTE 11 - SEGMENT REPORTING

Management Policy in Identifying Reportable Segments
----------------------------------------------------

The Company's reportable business segments are strategic business units that
offer distinctive products and services that are marketed through different
channels. They are managed separately because of their unique technology,
marketing and distribution requirements.

Types of Activities
-------------------

In 2003 the Company had three reportable segments: Internet Monitoring,
Children's Website Development and Sales, and Investment Management and
Corporate Development. Prior to 2003, the Company had only one segment,
Investment Management and Corporate Development.
<TABLE>
<CAPTION>
                                                                        Child Web        Investment
                                                          Internet      Site and       and Corporate
                                                         Monitoring    Development      Management
                                                         ----------    -----------     -------------
     <S>                                                 <C>           <C>             <C>
     Total assets (excluding intercompany)               $   54,943    $    14,606     $   1,101,476
                                                         ==========    ===========     =============

     Total liabilities (excluding intercompany)          $  104,693    $       175     $      19,973
                                                         ==========    ===========     =============

     Results of operations:
        Revenues                                         $  173,711    $         -     $           -
        Depreciation                                     $    7,995    $    25,000     $       6,433
        Net loss                                         $ (598,270)   $   (28,494)    $    (393,522)
</TABLE>

During 2003, one customer accounted for approximately 14% of revenue.






                                      F-36
<PAGE>


                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements




NOTE 12 - EQUITY INTERESTS IN UNCONSOLIDATED SUBSIDIARIES

The following table summarizes financial information for subsidiaries accounted
for under the equity method for the year ended December 31, 2002 which was SBB
and its two wholly-owned subsidiaries:
<TABLE>
<CAPTION>
                                                        SIM              KW            SBB
                                                    -----------       --------      ----------
<S>                                                 <C>               <C>           <C>
     Other assets                                   $    45,215       $ 39,654      $   39,849
     Intercompany loans receivable                            -              -         968,500
                                                    -----------       --------      ----------

     Total assets                                   $    45,215       $ 39,654      $1,008,349
                                                    ===========       ========      ==========

     Other liabilities                              $   106,909       $     79      $2,048,445
     Intercompany loans payable                         968,250            250               -
                                                    -----------       --------      ----------

     Total liabilities                              $ 1,075,159       $    329      $2,048,445
                                                    ===========       ========      ==========

     Results of operations:
       Net loss                                     $(1,023,350)      $(55,285)     $  (22,523)
       Revenues                                     $    79,140       $    214      $    4,000
       Depreciation                                 $     6,978       $ 25,000      $        -
</TABLE>


NOTE 13 - TRANSACTIONS WITH AFFILIATES

MAS Services, Inc. is the manager of the Company. MAS Services, Inc. is an
investment analysis company. Under the operating agreement of the Company, the
manager earns an annual management fee equal to three percent (3%) of the total
capital committed to the Company by its members. The manager also is reimbursed
for all out-of-pocket costs it incurred or has incurred in connection with the
organization or operation of the Company. The Company incurred management fees
in the amount of $109,000, $100,500 and $393,750 in 2003, 2002 and from
inception through December 31, 2003, respectively.


NOTE 14 - SUPPLEMENTARY CASH FLOW INFORMATION

In 2003, SIM financed $13,088 of the purchase of computer and phone system
equipment through capital lease obligations.

In 2003, SIM paid $97 of interest expense on the capital lease obligations.


NOTE 15 - SUBSEQUENT EVENTS

In January, 2004 the Company consummated an agreement and plan of merger with
Stellar LLC, pursuant to which the Company acquired 100% of the issued and
outstanding membership interests of Stellar LLC in consideration for which the
members of Stellar LLC received 18,000,001 shares of the Company common stock
after adjusting for the 1 for 4 reverse stock split in March 2004. As a result
of the merger, International Travel CD's Acquisition Corp., a wholly-owned
subsidiary of the Company, merged with and into Stellar LLC and the Company
became the sole member of Stellar LLC.







                                      F-37
<PAGE>




                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements



NOTE 15 - SUBSEQUENT EVENTS (Continued)

The combination of Stellar LLC and the Company was treated as a recapitalization
of Stellar LLC. As a result of the merger, Stellar LLC members acquired
approximately 74% of the issued and outstanding voting common stock of the
Company on a fully diluted basis. The Company was the legal acquirer in the
merger. Stellar LLC was the accounting acquirer since its members acquired a
majority ownership interest in ILCD. Consequently, the financial statements of
Stellar LLC have become those of the Company.

Subsequent to the merger, the sole officer and director of the Company resigned
and was replaced by the manager of Stellar LLC and the Company changed its name
to Stellar Technologies, Inc. and entered into a 1 for 4 reverse stock split.

In connection with the merger, the Company issued 162,500 shares of common stock
for advisory services.

In the first quarter of 2004, the Company sold 25,000 shares of its stock
resulting in a gain of $59,183.

After the merger the Company commenced raising capital through a private
offering of up to 2,500,000 shares of Series A Convertible Preferred Stock
("Shares"), no par value per share, and warrants ("Warrants") to acquire up to
625,000 shares of common stock, no par value per share. The Shares and Warrants
will be sold in units comprised of one share of Series A Convertible Preferred
Stock and one Warrant ("Units"). The Units will be sold at a purchase price of
$0.75 per Unit pursuant to Section 4(2) of the Securities Act of 1933, as
amended, and Rule 506 of Regulation D thereunder. Each Share is initially
convertible into one half share of common stock, subject to adjustment, and each
Warrant is initially exercisable into one share of common stock at an exercise
price of $2.40 per share, subject to adjustment for a period of three years from
the date of issuance. The Series A Preferred Stock has no voting rights,
dividend rights that are pari passu with the common stock of the Company, and no
liquidation preferences. All shares of Series A Convertible Preferred Stock
automatically converted effective March 12, 2004 or upon issuance thereafter.

As of March 23, 2004, the Company had issued approximately 589,250 units and
raised approximately $1,767,750 through the private offering.


NOTE 16 - BUSINESS COMBINATION

On November 14, 2003, Stellar LLC acquired the remaining 50% membership interest
in SBB and its wholly-owned subsidiaries from IO Ventures for $100,000 in cash.
The purchase price was allocated to the assets and liabilities in accordance
with SFAS No. 141 "Business Combinations." On the date of the acquisition, the
net liabilities of SBB and its wholly-owned subsidiaries exceeded its net assets
by $21,595, which consisted of the following components:

  Cash                                 $  7,943
  Accounts receivable                     4,873
  Other current assets                    3,500
  Fixed assets                           69,077
                                       --------
  Total Assets                         $ 85,393
                                       ========

  Accounts payable                     $ 46,724
  Other liabilities                      60,264
                                       --------
  Total Liabilities                    $106,988
                                       ========

  Net Deficit Acquired                 $(21,595)
                                       ========




                                      F-38
<PAGE>


                   STELLAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE ENTITY)
                          Notes to Financial Statements



NOTE 16 - BUSINESS COMBINATION (Continued)

The excess purchase price of $121,595 was recognized as goodwill as described in
Note 4.

The following pro forma presentation assumes the Company's acquisition of the
remaining 50% of SBB and its wholly-owned subsidiaries took place on January 1,
2002, and shows the pro forma effect on loss from operations.
<TABLE>
<CAPTION>
                                                                                       For the Year Ended
                                                                                       December 31, 2002
                                                                               --------------------------------
                                                                                                        Pro
                                                                                Historical             Forma
                                                                               -----------          -----------
                                                                                                    (Unaudited)
<S>                                                                            <C>                  <C>
                                                                               $         -          $    79,832
Revenues
Expenses
  Depreciation and amortization expense                                              6,015               37,992
  Investment costs                                                                  50,890               50,890
  Labor costs and expense reimbursements                                            34,350              820,865
  Management fees, related party                                                   100,500              100,500
  General and administrative                                                        27,267              101,976
  Professional fees                                                                 41,818               54,101
  Marketing                                                                              -              139,904
  Research, development and product support                                              -              135,602
  Office rents                                                                      30,328               30,328
                                                                               -----------          -----------
           Total expenses                                                          291,168            1,472,158

Loss from operations                                                           $  (291,168)         $(1,392,326)
                                                                               ===========          ===========
Net loss to commons stockholders                                               $(1,702,769)         $(1,554,896)
                                                                               ===========          ===========
Net loss per common share - basic and diluted                                  $     (0.12)         $     (0.11)
                                                                               ===========          ===========
Weighted average number of common shares
    outstanding - basic and diluted                                             14,697,249           14,697,249
                                                                               ===========          ===========
</TABLE>





                                      F-39

<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.

                                          STELLAR TECHNOLOGIES, INC.


Date: October 15, 2004                    /s/ Richard A Schmidt
                                          --------------------------------
                                          Richard A. Schmidt
                                          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 and in the capacities on the dates indicated.

<TABLE>
<CAPTION>
Signature                                             Title                               Date
---------                                             -----                               ----
<S>                                                    <C>                                  <C>
/s/ Richard A Schmidt                     Chief Executive Officer and               October 15, 2004
---------------------------               Director
    Richard A. Schmidt
</TABLE>


<PAGE>

                                  EXHIBIT INDEX

Exhibit Number      Description
--------------      -----------
     14.1           Code of Ethics

     21.1           Subsidiaries of the Company

     31.1           Certification of President of the Company required by Rule
                    13a-14(a) under the Securities Exchange Act of 1934, as
                    amended

     31.2           Certification of Treasurer of the Company required by Rule
                    13a-14(a) under the Securities Exchange Act of 1934, as
                    amended

     32.1           Certification of President and Treasurer of Registrant to 18
                    USC Section 1350, as Adopted Pursuant to Section 906 of the
                    Sarbanes-Oxley Act of 2002