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# U.S.
SECURITIES AND EXCHANGE COMMISSION

# Washington, D.C. 20549

# FORM 10-KSB

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# [X]  ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended October 31,
2002

# [  ] TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission File Number 000-26439

STEALTH
MEDIALABS, INC.
(Exact name of small business issuer in its charter)

NEVADA   
              
              
              
              
          
          
        98-0203927
              
              
              
    (State of incorporation)    
              
           
              
             
   (I.R.S. Employer Identification No.)

11475
Commercial Drive, Suite 11, Richmond, Il      
              
60071
(Address of principal executive offices)      
            
  (Zip Code)

Issuers
telephone number: (847) 356-0799

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

Securities registered pursuant to Section 12(g) of the Act:Common Stock, 0.001 par value
(Title of Class)

Check whether the issuer
(1) filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X]  
No [  ]

Check if 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 the
registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [  ]

State issuers
revenues for most recent fiscal year:  $11,000

State
the aggregate market value of the voting and non-voting common equity held by
non-affiliates based on the average bid and asked price as of February 28, 2003
being $1.50 per share: approximately $10,218,932.

The number of
shares of common stock of the Registrant outstanding on February 28, 2003 was 21,602,184

Documents
Incorporated by Reference: None

Transitional Small
Business Disclosure Format (check one): Yes [  ] No
[X]

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# TABLE
OF CONTENTS

`Page

PART I

Item 1.       Description of Business .................................................     1

Item 2.       Description of Property .................................................    17

Item 3.       Legal Proceedings .......................................................    17

Item 4.       Submission of Matters to a Vote of Security Holders .....................    18

PART II

Item 5.       Market for Common Equity and Related Stockholder Matters ................    18

Item 6.       Managements Discussion and Analysis of Financial Condition
              and Results of Operations ...............................................    23

Item 7.       Financial Statements ....................................................    27

Item 8.       Changes in and Disagreements with Accountants
              on Accounting and Financial Disclosure ..................................    28

PART III

Item 9.       Directors, Executive Officers, Promoters and Control Persons;
              Compliance With Section 16(a) of the Exchange Act .......................    28

Item 10.      Executive Compensation ..................................................    32

Item 11.      Security Ownership of Certain Beneficial Owners and Management ..........    35

Item 12.      Certain Relationships and Related Transactions ..........................    37

Item 13.      Exhibits and Reports on Form 8-K ........................................    38

Item 14.      Controls and Procedures .................................................    40

Signatures ............................................................................    41

Certifications ........................................................................    42`

ii

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NOTE
REGARDING FORWARD LOOKING STATEMENTS

Except
for statements of historical facts, certain information contained herein
constitutes forward-looking statements, including without limitation
statements containing the words believes, anticipates,
intends, expects and words of similar import, as well as
all forecasts of future results. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual
results or achievements of the Company to be materially different from any
future results or achievements of the Company expressed or implied by such
forward-looking statements. Such factors include, but are not limited to the
following:

| | o   
the Companys lack of an operating history;
o   the Companys lack of significant revenues and unpredictability of future
revenues;
o   the rate of technological change within the industry;
o   the Companys future capital requirements to meet its ongoing capital
requirements and to continue as a going concern;
o   intense competition from established competitors with greater resources;
o   reliance on third-party developed systems and system development risks;
o   the risks of system failure;
o   the Companys dependence on the continued growth
of online commerce;
o   the uncertainty of participating in developing a market;
o   the risks associated with rapidly changing technology;
o   risks associated with
online commerce security;
o   the risks associated with governmental regulations
and legal uncertainties; and
o   the other risks and uncertainties described under
Description of Business  Risk Factors in this Form 10-KSB.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The
Company does not intend to update forward looking statements contained in this
report. Investors are cautioned against placing undue reliance on forward
looking statements. We urge you to review and consider the above uncertainties
and the risk factors, and those identified from time to time in our reports and
filings with the SEC, for information above the risks and uncertainties that may
affect our future results.

iii

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PART
I

Item 1.
Description of Business

History of
the Registrant

Stealth
MediaLabs, Inc was organized and incorporated under the laws of the state of
Nevada on February 4, 1999 as Kidstoysplus.com, Inc.( Kidstoysplus).
Kidstoysplus operated an online retail business until September 2002. BitzMart,
Inc. (BitzMart) was incorporated in Colorado on October 31, 2000.
Subsequent to its incorporation, BitzMart raised capital and commenced
development of its digital media property distribution software. On October 30,
2002, a reverse merger transaction was completed under which all outstanding
stock of BitzMart was acquired by Kidstoysplus and the name of our corporation
was changed to Stealth MediaLabs, Inc. Prior to completion of the transaction
the assets and retail business of the Company had been conveyed to its majority
stockholder. Certain directors and officers of BitzMart became the directors and
officers of Stealth MediaLabs at the time of the transaction. The transaction is
considered to be a recapitalization of BitzMart for financial reporting
purposes. On October 31, 2002, we changed our fiscal year end from January 31 to
October 31. Descriptions of our business and affairs and our financial
statements in this report reflect those of BitzMart, and all references to our
common stock have been adjusted to show the effect of the acquisition. Stealth
MediaLabs, Inc. has principal offices at 11475 Commercial Drive, Suite 11,
Richmond, Illinois 60071. The Companys website is
www.stealthmedialabs.com.

General
Overview

Stealth
MediaLabs has two lines of business. Our primary business first involves a
proprietary suite of patent-applied for software and related technology and
services, known as the StealthChannel.

Our
second line of business, named RollingDream, deploys our
specialized software and hardware technology to permit practical,
economically-priced reception of satellite broadcast television and other
broadband services installed in consumer automobiles. We intend to purchase used
high quality SUV vehicles, retrofit them with appropriate hardware and software
and resell the vehicles. RollingDream, Inc. was incorporated in Illinois as a
wholly-owned subsidiary during February 2003.

StealthChannel
Overview

A
problem for commercial media distribution is that rightful owners lose control
of future uses of their creative properties when the movies, music, TV shows,
games, etc. are sold to consumers in digital format. The StealthChannel
technology offers media developers and producers a wide range of tools to
maintain connection with their creative properties. The connection can be used
both to control unauthorized uses and for communications to each user of every
digital copy of a property. We do not believe that individualized control of
digital multimedia objects has been possible with other technologies.

1

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Our
StealthChannel technology is a unique, proprietary technology for embedding a
large, unprecedented volume1 of hidden binary data (or
metadata) within certain types of analogue and digital audio
signals. This ability to embed covert, or hidden, data within audio signals, in
large part without regard to wherever such signals may go, is believed by us to
have significant commercial value in digital rights management, in military
intelligence, in defense applications, and in a wide range of other commercial
uses. The StealthChannel technology may also be applied to substantially
increase the value to consumers of music, movies, radio and TV broadcasts and
other forms of audio-containing media content.

The
confusing term content refers to the subject matter of particular
intellectual pieces. For example a TV show is a single piece of content; a music
track or album of music tracks are considered pieces of content; and a movie is
likewise content.

The
StealthChannel technology permits hidden data to be embedded within audio
signals through a process commonly referred to as encoding. The
hidden data can be extracted and viewed or listened to using the StealthChannel
decoder. We believe that once we have established high volume
distribution of our decoder, demand for StealthChannel encoding services will
increase as the installed base of decoder-enabled hardware and software devices
grows. We are pursuing alliances with major-brand technology vendors to widely
distribute StealthChannel decoders via entertainment-playing hardware and
software devices in general; and within PC operating systems in particular.
Accordingly, we are pursuing mass distribution of StealthChannel decoders in
hardware and software media players such as Microsoft Windows Media
Player, Real Media Player and hardware devices such as Apples iPod
Media Player, and music-playing wireless phones, for example.

We
are seeking to establish reseller relationships with some kinds of technical
service companies which act as suppliers to large, and dominant media companies.
If we are able to establish these relationships, we would earn revenue by
licensing the StealthChannel technology and by providing encoding services
related to is its use for anti-piracy, security, and ecommerce revenue
generation.

We
see a principal additive economic value of the StealthChannel in its use to
cross-sell secondary licensed products and services from within the primary
products. For example, in an album of a popular vocalist, marketing information
to sell the artists T-shirts, calendars, coffee table books and other
related products can be embedded using the StealthChannel technology. This
marketing information is inaudible when playing the music and yet when decoded
is presented to the primary consumer who already has an interest in that
particular artist. This direct marketing is extremely low cost and very focused.
Similarly, the StealthChannel-encoded media can readily assist back-catalog
sales of music, movies, TV shows and other media content. For example, many
large media companies own archived properties with high value and interest, yet
re-marketing the properties to consumers might be prohibitive. For example, a
1989 Madonna album might be of great interest to fans of Madonna yet it is
probably unavailable from the original producer. The StealthChannel would enable
a record publisher or produce to embed ecommerce offers for back-catalog content
in newly released or promoted products and thereby leverage a current campaign
for the artists newest releases to sell archived properties with very low
marketing expense. Again, once a sufficient volume of StealthChannel decoder
software is in place in audio-playing devices, these types of commercializations
of our technology will increase.

_________________

1
We believe that the volume of data per second with StealthChannel, or
bandwidth, at a nominal 20 kilobites per second exceeds the nearest
competing technologies by a multiplication factor of at least 10 times.

2

---

Finally,
we envision that some DVD and other digital movie releases to consumers could
include StealthChannel embedded video games, related to the subject of the
movie, for instance. The movie purchaser could for a small additional fee,
download from the video producer the required decoder key to permit
the embedded video game to be available to the user, thus increasing revenue for
the video game with limited market costs and enabling the consumer to have
access to products in which he may have a greater interest.

We
also intend to generate revenue by selling or licensing StealthChannel encoding
services and related programming to media producers. Applications of our
technology which we believe would increase profitability for customers include
broadcast auditing, embedding of licensed merchandise promotions in streaming
movie, music and sports clips, anti-piracy techniques in theatrical movie
distribution, such as DVDs and videos, permanent serialization and
identification of authorized users of distributed, digitized audio and
audio/video files, highly enriched digital rights control and management,
digital broadcasting of information over analogue networks, interactive
marketing of additional products by the media producer and similar uses.

How
StealthChannel Works

Our
industry refers to the fundamental pieces of software code that make up core
technology collectively as an engine. Much as an automobile
engine is not useful until it is surrounded by application
engineering  i.e. the transmission, body, steering wheel etc., which build
around an engine to make it into a car  our StealthChannel
engine is not useful until we wrap commercially desirable
applications around it. In a similar example, a magnetic recording head is not
useful until it is built into a cassette recorder, hard disk drive or into the
device that embeds your name and credit card number into the brown stripe on the
back of your credit card.

The
StealthChannel is our proprietary multimedia metadata pipeline
 a means to insert additional data into and through audio-conducting
electronic and computing devices. Our software embeds a hidden, indelible,
highly compressed data sub-carrier within analog or digital audio streams. This
data stream emerges from the proprietary and patent applied-for StealthChannel
software engine at a nominal rate of 20 kilobits per second. Any kind of binary
data, ranging from small amounts of text to fully executable application
software program may be encoded. Our proprietary software algorithm makes use of
a psycho-acoustic property of human hearing to render inaudible data modulation
into any media which includes audio modulation. Until the StealthChannel
technology was developed, no person or research team known by us had managed to
teach or execute this sort of technique with adequate computational efficiency,
inaudibility and practicality. While other metadata and watermarking software
applications have been developed, we believe that no competing technology stands
up to the three critical qualities offered by the StealthChannel:

|o |  | Once the data is encoded, it indelibly sticks to audio and
audio/video signals whether in the digital or analog- domain with extraordinary
resistance to filtering; and if a user converts a digital format which includes
embedded information, to an analog format, or vice versa, the StealthChannel
information is still present and fully operable when decoded with the
StealthChannel decoder technology, with an extraordinarily high resistance to
filtering
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|o |  | Compresses embedded data to minimize expansion of principal file size.
|- |  | ----------------------------------------------------------------------

|o |  | Nearly unlimited data capacity, limited only by streaming time (the time the audio
media plays).
|- |  | ------------------------------------------------------------------------------------------------

The
StealthChannel also is effective as a new form of data compression, suitable for
multimedia delivery applications where additional bandwidth conservation is
required and/or desirable, as in wireless and portable devices.

3

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Following
the original provisional patent application filed by the licensors in June 2000,
a full international-qualifying application was filed with the United States
Patent Office during the third quarter of 2001. While issuance of a final patent
cannot be guaranteed, the patent application was produced after an exhaustive
year-long professional search of prior art. The patent process is
approximately 50% completed as of the date of this Report. In addition, a
subsequent, supplementary provisional patent application has been filed for
deploying the StealthChannel in wireless applications.

StealthChannel
Development Plan

There
are two fundamental directions that we may take to commercialize our
StealthChannel technology. Our choice is dependent upon the availability of
capital resources and outside financing.

Without
additional capital, our most likely path will be to out-license the right to use
the StealthChannel encoder and decoder technology to other audio engineering and
related software companies with sufficient financial and human resources to
develop full commercial execution. We may enter into acceptable licensing
arrangements with several such entities and have commenced discussions with a
few. While this might present a means to limit our capital requirements and
achieve revenue growth over time, we would obviously not control the development
nor maximize the potential return which we believe is available.

If
we succeed in attracting adequate additional capital resources or other
financing, we believe that the opportunity exists to commercialize the
technology into many new products and electronic services in diverse industries.
For example, with the assistance of the offices of both U.S. Senators from
Florida, we have presented a number of concepts for national defense
applications of the covert embedded information transmission capabilities of
StealthChannel to senior officials of the U.S. Department of Defense, National
Security Agency and Central Intelligence Agency. These approaches were well
received and we have been encouraged to pursue government contracts for
development of devices and techniques enabled by the StealthChannel technology.

We
have demonstrated unique application concepts of the StealthChannel to a
well-known brand manufacturer of electronic devices. In one example, in certain
digital music player devices, the StealthChannel could be utilized to enable
display of scrolling text lyrics on the LCD display panel of the device, with
near-zero additional costs of manufacturing the player or the media played.
Obviously, other product marketing or visual data of encoded data could be
displayed on such a device. For another example, incorporating StealthChannel
encoding into FM radio broadcasting would enable voluminous display of text on
automobile radio panels  permitting storage and read-back of entire news
stories after conclusion of voiced broadcasts.

The
following is a list of potential applications which we believe exist for our
StealthChannel engine, together with our estimate of likely additional
development costs required to complete application engineering for the uses
shown. As of the present we have not taken most of the steps which would be
necessary to advance application engineering of the StealthChannel engine for
these purposes.

4

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Sampling
of Potential Applications to Utilize the StealthChannel Engine

|Application                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | Market                                                                                                                                                                                                | EstimatedRemainingDevelopment Cost | Benefits to StealthMediaLabs                                                                                                                                               
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|MUSIC & MOVIE CROSS-MERCHANDISING CHANNEL.Embedding a persistent auxiliary channel within music and movies to cross-merchandise ancillary and back-catalog products.                                                                                                                                                                                                                                                                                                                                                                                                                    | Diversified media companies, movie studios, record labels, of digitally recorded music and movie content. The Licensed Merchandise Market alone is a $22 billion industry worldwide in North America. | $250,000 to $500,000               | We see a possibility of expanding the size of the Licensed Merchandise Market through application of our StealthChannel technology. We would seek a 5% to 7% revenue share.
|DIGITAL RIGHTS MANAGE-MENT. Current music and movie copy prevention techniques do not survive transcoding or transfer between the digital and analog domains. Enhancing the present means used with StealthChannel encoding would overcome this deficiency.                                                                                                                                                                                                                                                                                                                             | Diversified media companies, movie studios, record labels. We believe that more than 1 billion units per year are sold of CDs and DVDs.                                                               | $150,000 to $250,000               | Royalties of approximately 1-2 cents per copy of every CD, DVD and download object sold with StealthChannel encoding.                                                      
|WIRELESS PHONE MARKETING CHANNEL.Emerging cell, PCS and other wireless devices are increasingly equipped with music playing capabilities. Embedding a StealthChannel decoder within wireless phone operating systems would enable direct delivery of a wide variety of ecommerce opportunities. For example, a game software company might contract with a music download company to test market a reduced-feature set game for free, embedded within music downloaded to cellphones. Hotel chains and restaurants might embed discount coupons within free pieces of downloaded music. | Game software companies, retailers, entertainment, food, beverage and lodging vendors. Also cellphone manufacturers.                                                                                  | $700,000 to $800,000               | We see sharing the revenue from products and services sold through cellphones via the StealthChannel, as the most logical revenue strategy.                                
|AUTOMOBILE STEREO SYSTEM UPGRADES. Small LCD screens could display textual information transmitted by an FM radio station, such as lyrics, news briefs, weather, traffic, stock quotes, etc.                                                                                                                                                                                                                                                                                                                                                                                            | Auto manufacturers; manufacturers of sound systems for autos.                                                                                                                                         | $200,000 to $300,000               | Royalties on encoder-enabled services sold.                                                                                                                                

5

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|Application                                                                                                                                                                                                                                                                                                                | Market                                                                                                                         | EstimatedRemainingDevelopment Cost | Benefits to StealthMediaLabs                                                                                                                                                  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|VIDEO GAME FORCE-FEEDBACK HAND CONTROLLER CHANNEL.The StealthChannel would enable delivery of a stream of data to videogame hand controllers, which could enhance the game for the user in certain ways, including induction of intricate responsive mechanical movements, or "force-feedback" into controller mechanisms. | Joystick manufacturers; video game software makers. The video game industry has surpassed the movie industry in gross revenue. | $150,000 to $250,000               | Royalties on encoder-enabled services sold.                                                                                                                                   
|"COUPONING" TV SET.A television receiver set, DSB satellite receiver or set-top box with parallel data output, for connection to an inexpensive thermal printer - for outputting retailer discount coupons or other marketing promotions as transmitted within TV commercials.                                             | Manufacturers of TV sets, satellite receivers and cable set-top boxes                                                          | $500,000 to $700,000               | Royalties on encoder-enabled services sold.                                                                                                                                   
|APPLE iPOD w/MULTIMEDIA. Apple iPod music player, enabled with StealthChannel technology, could extract and display color graphics and song lyrics from downloaded media.                                                                                                                                                  | Apple Computer                                                                                                                 | $200,000                           | Royalties on encoder-enabled services sold.                                                                                                                                   
|DIGITAL IDENTIFICATION OBJECT. The StealthChannel would permanently encode compressed serial number, name, address, email, etc. of  consumers of downloaded audio or audio/video media. Unauthorized copying or transfer could be identified in the copied content.                                                        | PressPlay, Movielink, Roxio New Napster                                                                                       | $50,000 to $100,000                | 1 to 3 cents royalty per downloaded object. We expect the market for paid, downloaded media objects to grow rapidly over the next several years, as broadband internet access.
|DEEPLY ENCRYPTED INSTANT MESSAGING SOFTWARE. Modified version of NetMeeting or similar software, possibly for restricted usage, capable of switching between encrypted and non-encrypted text, graphics and VOIP communications, utilizing the StealthChannel as a covert data subcarrier.                                 | Microsoft, AOL, other ISPs, government agencies                                                                                | $150,000 to $250,000               | One time paid-up license fees.                                                                                                                                                

6

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|Application                                                                                                                                                                                                                                                                                     | Market                                            | EstimatedRemainingDevelopment Cost | Benefits to StealthMediaLabs            
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------- | ---------------------------------- | ----------------------------------------
|VIDEO GAME CHARACTER ANIMATOR. Video game system programmed with sound containing embedded StealthChannel.  The game audio is generated by speakers and the toy responds to inaudible command data. Embedded StealthChannel decoder in the toy interprets commands and controls servo movement. | Microsoft, Sony, Nintendo video game distributors | $200,000 to $300,000               | One time paid-up license fees.          
|SINGING TOY ANIMATOR.Inexpensively sends renewable music and movement commands to servo-controlled animated toy.                                                                                                                                                                                | Toy manufacturers                                 | $100,000                           | Negotiated royalties per unit sold.     
|NATIONAL DEFENSE AND INFORMATION SECURITY  APPLICATIONS for the U.S. Government                                                                                                                                                                                                                 | U.S. Government                                   | $750,000 to $1 million             | Negotiated license and development fees.

Short
Term Product Development Focus

Due
to our extremely limited capital resources it is not possible for us to pursue
all of the available opportunities and markets for our technology at once. Given
our anticipated financial resources that we expect will be available in 2003, we
intend to focus on the first two applications described in the table above. As
we achieve required capital resources or secure additional financing or enter
into strategic alliances with others with an interest in any of the various
applications, we will consider attempting to commercialize and actualize more of
the above opportunities. We will also seek appropriate funding, perhaps if
available from U.S. government sources under the SBIR and STTR
programs2, to develop prototypes of the StealthChannel engine used
for certain applications, including classified information security
applications. We do not know whether the applicable governmental agencies will
be willing to pursue this use of the StealthChannel technology. We have had a
number of meetings with representatives of such agencies to present the
potential StealthChannel applications.

Marketing
Strategy

Our
strategy to commercialize our StealthChannel technology includes three basic elements:

1.
Widely mass distribute decoders.

StealthChannel
function requires that our specialized decoder software detects the presence of
StealthChannel encoded files. For example, when a piece of music is played on a
Windows-based PC, it is played most often using Microsoft Windows Media
Player, an integral part of Windows. StealthChannel encoding makes it
possible to embed MTV-like graphics, scrolling text lyrics, and offers for the
artists licensed clothing  within the song  without increasing
the songs file size or streaming time. However, extracting the
StealthChannel signal requires that our decoder software be present and running
in Windows.

_________________

2
http://www.acq.osd.mil/sadbu/sbir/>

7

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Our
plan is to widely distribute our StealthChannel decoders with entertainment
player makers in general, and specifically PC operating system vendors like
Microsoft, Apple and Palm; TV set-top box makers like General Instrument and
Motorola; and entertainment hardware makers like RCA/Thomson, Sony, Matsushita
and others.

An
initial critical mass of high volume distribution is necessary to
demonstrate a trend and achieve distribution among all types of player makers.
We have been working on establishing such a critical mass of distribution;
however severely limited access to capital has hampered our efforts.

2.
Market encoding services directly to movie studios, music labels, TV networks, and other
media  sellers.

Piracy
of intellectual property is one of the biggest concerns of media sellers.
StealthChannel encoding may be applied to act as an audit trail for
broadcast monitoring and anti-piracy purposes. With a StealthChannel decoder
present in Windows Media Player, it becomes possible to enable and disable play
of a given movie or piece of music, based upon authorization instructions
pre-encoded into the media piece when purchased (online) or when physically
reproduced, as on CDs and DVDs. It also becomes possible to use the music or
movie itself to sell a rightful license, from the content owner to the consumer
over the Web, through a call center, through the cable TV company, or other
digital provider.

It
is our plan to initially market StealthChannel encoding to diversified media
companies (such as, Sony Corporation, AOL Time Warner etc.), movie studios and
music labels as an anti-piracy and security technique. We are convinced that
StealthChannels security benefits are so valuable that our initial
programming and encoding fees present a compelling cost/benefit picture for
content owners. As StealthChannels data delivery capacities become clearer
to clients, we plan to offer expanded services. We are seeking seller
relationships with technical service companies already acting as major suppliers
to large, dominant media companies.

Certain
companies like Technicolor division of Thomson multimedia for example, supply a
wide range of technical services to the movie and music industries.
StealthChannel encoding is clearly complementary to such services. We have also
demonstrated StealthChannel to the most senior technical staff at the Motion
Picture Association of America (MPAA). MPAA staffers have advised us to expect
quality exposure to that industry through MPAA facilities.

3.
Pursue ancillary market opportunities.

We
have conceptualized a long list of possible ancillary applications for
StealthChannel, summarized above, which represent revenue opportunities in a
number of industries. Some of these opportunities are presently speculative,
although with high potential financial upsides. Our plan is to offer prototypes
and licenses for given fields of use, on a royalty basis, as opportunities
present themselves.

8

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Intellectual
Property

Our
university-based research team has advanced a fundamental scientific discovery.
The StealthChannel is not a device or product per se, as
it is a fundamental underlying technology that we own,
for the enablement of many devices, mostly yet to
be developed.

For
example, The first magnetic recording device was demonstrated and patented by
the Danish inventor Valdemar Poulsen in 1898. Poulsen made a magnetic recording
of his voice on a length of piano wire. This discovery ultimately enabled the
development of many watershed products including the technical breakthroughs in
magnetic recording that took place during the century from Poulsens
experiment to todays ubiquitous audio, video, and data recording
technologies: including tape recorders, video cassette recorders, and computer
hard drives. We believe that the StealthChannels development presents a
rational and reasonable potential to result in a long series of breakthrough
products of similar economic significance.

The
StealthChannel technology is in development under license from the University of
Miami College of Engineering. UTEK Corporation, a publicly owned business
development company, AMEX trading symbol UTK, arranged for this
university-to-business technology transfer in April 2001. We acquired
UTEKs subsidiary, which holds the license and is party to a research and
development agreement with the University of Miami, later in the same month for
shares of our common stock. UTEK later invested cash and consulting services in
exchange for additional common stock, and now holds nearly 20% of our
outstanding shares. We are obligated to pay royalties to the University of Miami
equal to 3.5% of revenue we may receive from commercializing our own products
which incorporate the StealthChannel technology and 50% of any amounts we
receive if we should sublicense the right to use the technology to third
parties. We are obligated to pay certain patent application expenses and minimum
royalties of $15,000 in 2003, $20,000 in 2004 and $25,000 annually for each year
thereafter until expiration of any patents which issue under the patent
applications. The licensor can terminate our license agreement for the
technology if we have not commercialized the technology or sublicensed a
licensed product or use to another entity which has sales over $10.0 million by
February 2004.

Since
we acquired the exclusive license to the technology in 2001, the research and
development of the invention has been advanced by the University of Miami.
Software developers and engineers engaged by us as consultants have begun the
process of engineering the patent-pending technology into operating software
encoders and decoders for various of the applications which we summarized above.
We initially referred to the software as our Hercules technology and we
now refer to the various potential uses of our software as the
StealthChannel.

During
the two fiscal years ended October 31, 2002, we had research and development
expenses on the StealthChannel technology, which have been charged to expense as
incurred, totaling approximately $363,000.

RollingDream
Overview

The
Company has developed and test-marketed resale of several concept motor vehicles
equipped with satellite TV and radio reception systems, laptop PCs with wireless
Internet access, DVD, and Playstation2 entertainment systems. We purchase used
SUV vehicles from nationally organized wholesale vehicle auctions, and install
our specialized software with required hardware, modified by us as necessary. We
utilize eBay Motors online trading platform for sales, marketing and
ecommerce transaction facilitation. A Wall Street Journal report on
February 7, 2003, indicated that more than $2 billion worth of automobile sales
transactions were conducted using eBay Motors in 2002. Our website and the
interconnected (linked) eBay facilities may all be accessed
presently from www.rollingdream.com. Our first revenue was received in October
2002 when we sold our initial test vehicle for $11,000. We had a gross margin
exceeding 25% in our initial test and the vehicle sold in less than a week.
Several similar subsequent sales have been successfully consummated.

9

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Our
financial strategy with respect to RollingDream is to utilize cash we expect to
generate to lessen our dependence upon outside equity financing and to cover
most or all of our overall fixed overhead operating expenses. If we are
successful, cash generated by RollingDream will also be available for advancing
development and commercialization of the StealthChannel technology.

Given
that recent model automobiles have long been accepted by financial institutions
as collateral security for conventional asset-based financing, we expect to
obtain conventional bank financing to develop and grow the RollingDream business
by borrowing to purchase used automobile inventory and to outfit the vehicles.
We believe that for every $100,000 of bank financing available to us for 12
continuous months for the purchase of inventory automobiles, we can generate as
much as $285,000 in positive gross margin (before operating expenses) given the
following assumptions.

|                                                         | 
|-------------------------------------------------------- | 
|Amount of wholesale inventory financing:                 | 
|Avg. cost per used vehicle acquired:                     | 
|Avg. gross profit per vehicle sold:                      | 
|Inventory turns per month:                               | 
|Unit sales per month =                                   | 
|Unit sales/year per $100K financing:                     | 
|Cash flow generated for every $100,000 in                | 
|financing over 12 months duration:                       | 
|Max annual rate of interest to lender:                   | 
|Annual financing cost:                                   | 
|Internal annual gross cash flow before expenses on $100K | 
|of wholesale inventory financing:                        | 

10

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We
intend to continue pursuing additional equity financing to fund continued
development and commercialization of the StealthChannel technology. Our existing
capital resources are insufficient to fully carry out our business plan for
revenue development and make programming enhancements and modifications to the
StealthChannel decoder applications required for compatibility with existing
products such as Microsoft Windows Media Player, Real Media Player, Apple
iPod, etc. We can make no assurances that we will achieve necessary financing to
continue implementation of our marketing and distribution plans for our decoder
technology and our encoder services. As a result, we may postpone significant
development of StealthChannel and rely on the RollingDream portion of our
business until some time in the future when additional equity or other financing
or internally generated cash makes further development feasible. We do, however,
believe that if we obtain around $700,000 in additional equity or other similar
financing during 2003, we will be able to maintain our business operations,
complete required development of the StealthChannel technology for the two
specific initial applications that we have identified, pursue marketing
alliances and make meaningful inroads toward commercialization of our planned
products. See Item 6. Managements Discussion and Analysis of Financial
Condition and Results of Operations.

Subsequent
to October 31, 2002, we completed additional private placement equity
transactions for the sale of additional shares of common stock to certain
existing shareholders and raised $125,000 which we agreed to devote exclusively
to completion of required filings under the Securities Act of 1934.

Employees

As
of October 31, 2002 and the date of this Report, there was one full-time
employee. Howard Leventhal, the President, CEO and a Director of the Company,
works full-time on strategic marketing alliances, finance activities, product
development, and corporate management. Various individuals and organizations are
engaged to provide marketing, programming, product development, legal, and
accounting support on a contract basis as necessary. For other services we have
relied and expect in the future to rely upon consultants and contractors to
provide services or assistance as we seek to commercialize the StealthChannel
technology.

Risk
Factors Applicable to our Business

Our
business is subject to a number of risks that are generally associated with
start-up companies in the development stage of their business. These risks could
cause our actual results to differ materially from the results we expect and any
forward-looking statement we make in this Report. Below is a description of some
of the risks that we anticipate will be associated with our business and an
investment in our company.

Available
funds may not be adequate to support current and future financial requirements.

We
believe our available cash resources, combined with the net proceeds from the
private equity placement subsequent to year-end, will be sufficient to last for
at least the next four months. Our future liquidity and capital requirements
will depend upon numerous factors, including the success of our product
offerings and competing market developments. Accordingly, we expect to require
substantial additional financing no later than June, 2003. We will require the
additional funding to support our future growth, to develop new or enhanced
products, respond to competitive pressures, acquire complementary technologies
and to take advantage of unanticipated opportunities.

11

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We
cannot assure you that additional financing will be available on terms favorable
to us, or at all. If adequate funds are not available or are not available on
acceptable terms, our ability to fund our expansion, take advantage of
unanticipated opportunities, develop or enhance products or otherwise respond to
competitive pressures would be significantly limited. Our rate of planned growth
would likely be reduced as we would expand our operations and sales activities
less aggressively. If we raise additional funds by issuing equity or convertible
debt securities, the percentage ownership of our shareholders would be reduced
and these securities may have rights, preferences or privileges senior to those
of our current shareholders.

Burdensome
costs of maintaining public status.

Our
costs required for financial auditing, legal services and SEC compliance
procedures as a publicly owned firm are extraordinarily burdensome for an
enterprise at this stage of development. Without an amount of new financing
roughly equal to all of the financing raised to date, bearing these expenses and
management burdens may lead us to liquidation.

We
may be unable to establish our StealthChannel decoder in a large number of
audio-playing devices.

The
StealthChannel decoders detect the StealthChannels proprietary embedded
signal and implement the functionality in receiving devices. Accordingly, our
ultimate commercial success depends upon our having the StealthChannel decoding
software in a very large number of hardware playing devices. Our plan is to
implement wide distribution of our StealthChannel decoder software to PC
operating system vendors, entertainment hardware makers, online Internet service
providers and others. Once a relatively large number of receiving and playing
devices are equipped to decode the StealthChannel embedded information, then
media distributors will be more incented to utilize our services and
StealthChannel technology in their digital products. If we are unsuccessful,
potential users of our StealthChannel encoding technology and services will be
less likely to use the StealthChannel.

Our
short operating history makes our business difficult to evaluate.

Our
limited operating history makes evaluating our business operations and our
prospects difficult. We anticipate making significant investments in product
development, sales and marketing programs and personnel. We believe that we may
experience net losses on a quarterly and annual basis for the foreseeable
future. We may also use significant amounts of cash and/or equity to acquire
complementary businesses, products, services or technologies.

If
we cannot compete effectively, we will lose business.

Our
market is positioned to become intensely competitive. There are technological
and marketing barriers to entry, but we cannot guarantee that the barriers we
are capable of producing will be sufficient to defend the market share we wish
to gain against future competitors. The principal competitive factors in this
market include:

12

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| | o   Ongoing
development of enhanced technical features and benefits;
o   Price of  digitally delivered goods;
o   The ability to maintain and expand distribution  channels;
o   Brand name;
o   The ability to deliver our products to our customers
when requested;
o   The timing of
introductions of new products and services; and
o   Financial resources.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We
may not be able to compete.

We
cannot give you any assurance that we will have the resources or expertise to
compete successfully in the future. Some of our current and potential
competitors who offer security and anti-theft protection for some digital
products in the market include:

| | o   Sunncomm (http://www.sunncomm.com)
o   Gracenote (http://www.gracenote.com)
o   Verance (http://www.verance.com)
o   Digimarc (http://www.digimarc.com)
o   Macrovision (http://www.macrovision.com)
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

All
of these firms may be potential partners as well, and we have been involved at
some level of joint business discussion with some of them.

Some
of our competitors have substantially greater resources, more customers, longer
operating histories, greater name recognition and more established relationships
in the industry. As a result, these competitors may be able to develop and
expand their infrastructures and product offerings more quickly, devote greater
resources to the marketing and sale of their products and adopt more aggressive
pricing policies. In addition, these competitors have entered and will likely
continue to enter into business relationships to provide additional products
competitive to those we provide or plan to provide.

The
complex nature of our products increases the likelihood that our products will
contain defects.

Complex
products, such as those we offer, frequently contain defects when first
introduced into the market and as new versions are released. Delivery of
software with production defects or reliability or quality problems could
significantly delay or hinder market acceptance of our products, which in turn
could damage our reputation and adversely affect our ability to retain our
existing customers and to attract new customers. Correcting these production
problems may require us to expend significant amounts of capital and other
resources. We cannot give you any guarantee that despite our testing of these
products errors or defects will not be found in new products after commencement
of commercial production. If there are product errors or defects, this will
result in additional development costs, loss of or delays in market acceptance
of our products, diversion of technical and other resources from our other
development efforts, increased product repair or replacement costs, or the loss
of credibility with our current and prospective customers.

13

---

We
might not be successful in our attempts to keep up with rapid technological
change and evolving industry standards.

The
emergence of new industry standards could render our products unmarketable or
obsolete and require us to incur substantial unanticipated costs to comply with
such new standards. For example the software industry has attempted to establish
a set of widely accepted practices and technologies for prevention of music
piracy, known as the Secure Digital Music Initiative, or SDMI. A considerable
amount of money and resources were invested in SDMI, now considered largely to
be a failure.

Our
ability to adapt to similar false starts, changes and to anticipate future
standards, and the rate of adoption and acceptance of those standards, will be a
significant factor in maintaining or improving our competitive position and our
prospects for growth. We cannot give you any assurance that we will be able to
anticipate the evolving standards in our industry, or that we will be able to
successfully develop and introduce new products into such market. Our failure to
anticipate technological change and introduce new products that achieve market
acceptance could materially and adversely affect our business, financial
condition and results of operations.

Our
inability to successfully develop new products could hinder our ability to
attract and retain customers.

Our
Companys success will depend, in part, on our ability to develop new
products and enhance our existing products for our market and to successfully
introduce and promote such products. The development of these new products is
highly technical and we may experience delays in completing their development
and introduction. Successful product development and introduction depends on
several factors, including, among other things:

| | o   Accurate prediction of market requirements and evolving standards;
o   Sufficiently prescient and intuitive new product definition;
o   Timely completion  and introduction of new product designs;
o   Timely qualification and industry  interoperability certification
of our products; and
o   Market acceptance of our  products.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We
cannot give you any assurance that we will be able to introduce new products in
a timely and cost-effective manner or that such products will satisfy customer
requirements or achieve market acceptance.

Government
regulation and legal uncertainties may harm our business.

Companies
engaged in advanced technology product development in general and Internet-based
sales in particular, have thus far enjoyed very limited or non-existent
governmental regulation or interference, particularly with respect to sales tax
collection. At some time in the future, it is quite likely that companies such
as ours will be burdened by every state and country in which they do business to
collect sales taxes and conform to as yet undreamt governmental regulations. The
costs of complying with these burdens is as of yet unknown, and may adversely
effect financial results.

14

---

Our
future success depends on our key personnel.

Our
success depends in significant part upon the continued services of our key
technical, sales and senior management personnel and consultants. If we lose the
services of one or more of our key employees or are unable to attract additional
qualified personnel, our business would be adversely affected. We do not carry
key-person life insurance for any of our employees.

Protection
of our patents, trademarks and proprietary rights is uncertain.

We
regard our copyrights, trademarks, trade secrets, patent applications and
similar intellectual property as critical to our success. We intend to rely on
trademark, copyright, patent and trade secret law, as well as confidentiality
agreements with our employees, customers, partners and others to protect our
proprietary rights. If we fail to receive appropriate confidentiality agreements
from these persons we could lose some or all of our proprietary rights to
certain of our technology and could otherwise be adversely affected. Effective
trademark, service mark, copyright, patent and trade secret protection may not
be available in every country in which we intent to sell our products,
particularly in Asia. Therefore, the steps we take to protect our proprietary
rights may be inadequate.

Intellectual
property claims against us can be costly and result in the loss of significant
rights.

Other
parties may assert infringement or unfair competition claims against us. We
cannot predict whether third parties will assert claims of infringement against
us, or whether any past or future assertion or prosecutions will adversely
affect our business. If we are forced to defend against any such claims, whether
they are with or without merit or are determined in our favor, we may face
costly litigation, diversion of technical and management personnel, or product
development delays. As a result of such a dispute, we may have to develop
non-infringing technology or enter into royalty or licensing agreements. Such
royalty or licensing agreements, if required, may be unavailable on terms
acceptable to us, or at all. If there is a successful claim of product
infringement against us and we are unable to develop non-infringing technology
or license the infringed or similar technology on a timely basis, it could
adversely affect our business.

We
have applied to the U.S. Patent and Trademark Office for claims of patent on our
developments with two patent applications in concert with the University of
Miami. Our success depends on securing this patent protection and obtaining
future patent protection for new products, defending patents once obtained,
preserving our trade secrets and operating without infringing upon patents and
proprietary rights held by third-parties, both in the United States and in
foreign countries. We cannot be certain that any patents issued to or licensed
by us will not be challenged, invalidated, infringed or circumvented or that the
rights granted there under will provide competitive advantages for our business
or products. We may be subject to further risks as we expand our operations in
countries where intellectual property laws are not well developed or are
difficult to enforce. Legal protection of our proprietary rights may be
ineffective in those countries. In such event, our business, results of
operations and financial condition may be harmed.

In
addition, publication of our patent applications and subsequent issuance, if
any, presents a risk of intellectual property theft that might not be present in
the absence of such publication. The mere presence of patent prosecution
mechanisms does not prevent infringement. It is only through the successful
application of lawsuits and other legal procedures, which can be uncertain and
prohibitively expensive, that damages from the theft of patented teachings can
be recovered.

15

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Our
executive officers, directors and major shareholders control a majority of our
capital stock.

Executive
officers, directors and holders of 10 percent or more of our common stock in the
aggregate, beneficially own approximately 68% of our outstanding capital stock.
These shareholders would be able to significantly influence all matters
requiring approval by our shareholders, including the election of directors and
the approval of significant corporate transactions. This concentration in
ownership may make some transactions more difficult or impossible to complete
without the support of these stockholders.

We
do not intend to pay dividends.

We
have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings for funding growth and therefore,
do not expect to pay any dividends in the foreseeable future.

There
is a limited public market for our securities, most of the securities have not
yet been registered, and there is limited transferability of our shares.

The
shares issued under private equity offerings were offered and sold pursuant to
one or more exemptions from the registration requirements of the 1933 Act, and
without qualification or registration under the securities laws of the various
states. Consequently, holders may not sell, transfer or hypothecate the shares
hereunder without registration under the 1933 Act and applicable state laws or
without an exemption from such registration or qualification. The share
certificates will bear a legend restricting their transfer. In addition, a
limited public market currently exists for our securities and there is no
certainty that public market liquidity will improve in the future, nor can we
give any assurance that any public offering we might undertake in the future
will be successful.

We
may be required to sell additional common stock or parties may exercise options
and warrants that may cause dilution of shares.

The
number of shares of our outstanding common stock held by non-affiliates is large
relative to the trading volume of the common stock. Any substantial sale of our
common stock or even the possibility of such sales occurring may have an adverse
effect on the market price of the common stock.

We
have reserved up to an additional 3,000,000 shares of common stock for issuance
upon exercise of options or direct grants of stock under a our 2002 Consultant
Compensation Plan. We have granted 684,000 shares and an option to purchase up
to an additional 325,000 shares to a consultant under this plan..

As
of October 31, 2002, we have outstanding warrants to purchase up to 5,617,581
shares of our common stock at exercise prices ranging from $0.35 to $0.56 per
share. Since October 31, 2002, we have issued warrants to purchase up to 450,000
shares of our common stock at $0.50 per share.

Holders
of such warrants and options are likely to exercise them when, in all
likelihood, we could obtain additional capital on terms more favorable than
those provided by the options and warrants. Further, while our warrants and
options are outstanding, our ability to obtain additional financing on favorable
terms may be adversely affected. There can be no assurance that any options or
warrants will be exercised.

16

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Broker-dealers
may be discouraged from effecting transactions in our shares because they are
considered penny stocks and are subject to the penny stock rules.

Rules
15g-1 through 15g-9 promulgated under the Exchange Act impose sales practice and
disclosure requirements on NASD brokers-dealers who make a market in a
penny stock. A penny stock generally includes any non-NASDAQ equity
security that has a market price of less than $5.00 per share. Our shares are
quoted on the OTCBB. The closing price of our shares on February 28, 2003 was
$1.75. NASD broker-dealers who act as market makers for our shares generally
facilitate purchases and sales of our shares. The additional sales practice and
disclosure requirements imposed upon brokers-dealers may discourage
broker-dealers from effecting transactions in our shares, which could severely
limit the market liquidity of the Shares and impede the sale of our shares in
the secondary market.

Under
the penny stock regulations, a broker-dealer selling penny stock to anyone other
than an established customer or accredited investor (generally, an
individual with net worth in excess of $1,000,000 or an annual income exceeding
$200,000, or $300,000 together with his or her spouse) must make a special
suitability determination for the purchaser and must receive the
purchasers written consent to the transaction prior to sale, unless the
broker-dealer or the transaction is otherwise exempt.

In
addition, the penny stock regulations require the broker-dealer to deliver,
prior to any transaction involving a penny stock, a disclosure schedule prepared
by the Commission relating to the penny stock market, unless the broker-dealer
or the transaction is otherwise exempt. A broker-dealer is also required to
disclose commissions payable to the broker-dealer and the registered
representative and current quotations for the securities. Finally, a
broker-dealer is required to send monthly statements disclosing recent price
information with respect to the penny stock held in a customers account
and information with respect to the limited market in penny stocks.

Item
2. Description of Property

Our
principal office is located at 11475 Commercial Ave., Suite 11, Richmond,
Illinois 60071, as of January 27, 2003. We are leasing approximately 2550 square
feet on a 3 year lease for $1243 per month in Richmond. We also share facilities
in the Loop area of downtown Chicago with Windy City Software, a separate,
unrelated entity owned by our director Anan Yaagoub.

Item
3. Legal Proceedings

In
May 2002, an action designated as Gene Schenberg vs. BitzMart, Inc., was
commenced in the district court for the city and county of St. Louis, Missouri,
alleging that Mr. Schenberg, a former employee of BitzMart, was owed unpaid
compensation for services in the amount of approximately $65,000. We have
asserted that all claimed compensation was unearned incentive compensation and
that no amount is due the plaintiff. In addition, BitzMart asserted a
counterclaim for other compensatory damages. A trial has been set for June 2003.
No other litigation is pending or threatened, to our knowledge.

17

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

No
matter was submitted during the fourth quarter of our fiscal year to a vote of
our security holders through the solicitation of proxies or otherwise. However,
prior to the completion of the reverse merger transaction, BitzMart held a
special meeting of its shareholders for the purpose of ratifying and approving
the Share Exchange Agreement pursuant to which we acquired all outstanding
shares of BitzMart in exchange for our common stock. The BitzMart shareholder
meeting was held September 3, 2002. At the meeting, shareholders holding at
least a majority of the outstanding voting common stock of BitzMart were
represented and voted to ratify and approve the Share Exchange Agreement. No
votes were cast against, withheld or dissented to the transaction.

PART
II

Item 5.
Market for Common Equity and Related Stockholder Matters

The
Articles of Incorporation of Stealth MediaLabs authorize issuance of up to
50,000,000 shares of common stock, $0.001 par value. As of February 28, 2003,
the Company had 21,602,184 shares issued and outstanding which were held by
approximately 138 stockholders of record.

Our
common stock is listed on the NASDAQ OTCBB under the symbol SMLA.
Until November 2003, our shares were listed under the symbol KTYP.
The OTCBB constitutes a limited and sporadic trading market and does not
constitute an established trading market. An established public
trading market for our securities does not exist. The range of reported high and
reported low bid prices per share for our common stock for each fiscal quarter
during the last nine quarters, ending January 2003, as reported by the OTCBB is
set forth below. The quotations merely reflect the prices at which transactions
were proposed, and do not necessarily represent actual transactions.

Quarterly
Common Stock Price Ranges(1)

|                 | High | Low     
|---------------- | ---- | --------
|Quarter Ended:   |      |         
|January 31, 2001 |      | $     57
|April 30, 2001   |      | 22      
|July 31, 2001    |      | 42      
|October 31, 2001 |      | 50      
|Quarter Ended:   |     
|January 31, 2002 |      | 26      
|April 30, 2002   |      | 7       
|July 31, 2002    |      | 6       
|October 31, 2002 |      | 4       
|January 31, 2003 |      | 1       

________________

|(1) |  | These prices have been adjusted to reflect reverse stock splits which totaled 25
shares-into-one, effected before the acquisition transaction with BitzMart was
completed.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

18

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The
reported bid price of our common stock on the OTCBB was $1.50 on February 24,
2003. The over-the-counter market quotations set forth above reflect
inter-dealer prices, without retail mark-up, markdown or commission and may not
necessarily represent actual transactions.

2002
Consultant Compensation Plan

The
Company recently adopted and approved its 2002 Consultant Compensation Plan (the
Plan) which provides for the issuance of up to 3,000,000 shares of
its Common Stock to consultants for services to the Company. Directors, officers
and employees of the Company are not eligible to participate in the Plan. The
Plan is administered by a committee comprised of Howard Leventhal, Chief
Executive Officer of the Company.

Securities
Authorized for Issuance Under Equity Compensation Plan

|Plan category         | Number of securitiesto be issued uponexercise ofoutstanding options,warrants and rights(a) | Weighted-averageExercise price ofOutstanding options,warrants and rights(b) | Number of securitiesRemaining availableFor future issuanceUnder equityCompensation plans(excluding securitiesreflected in column (a))(c)
|--------------------- | ------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------
|Equity compensation   |                                                                                            |                                                                             |                                                                                                                                         
|plans approved by     |                                                                                           
|security holders      |                                                                                            | None                                                                        |                                                                                                                                         
|Equity compensation   |                                                                                           
|Plans not approved by |                                                                                           
|Security holders      |                                                                                            | 325,000(1)                                                                  |                                                                                                                                         
|                      |                                                                                            |                                                                             |                                                                                                                                         
|Total                 |                                                                                            | 325,000                                                                     |                                                                                                                                         

_________________

|(1) | Does
not reflect issuance of 684,000 shares of common stock to a consultant  under the Plan in
October 2002.
|--- | ------------------------------------------------------------------------------------------------------------

Dividends

We
have not paid dividends on our common stock since our inception. Dividends on
common stock are within the discretion of the Board of Directors and are payable
from profits or capital legally available for that purpose. It is our current
policy to retain any future earnings to finance the operations and growth of our
business. Accordingly, we do not anticipate paying any dividends on common stock
in the foreseeable future.

19

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Options
and Warrants

As
of October 31, 2002, the Company had outstanding warrants to purchase 5,617,181
shares of Common Stock at exercise prices ranging from $0.35 to 0.56 per shares,
and no outstanding stock options. Subsequent to the fiscal year end, we issued
450,000 additional warrants, which may be exercised at $0.50 per share to
purchase a like number of shares.

Registrar
and Transfer Agent

Recent
Sales of Unregistered Securities

Common Stock

In
October 2000, BitzMart, Inc., which was acquired by the Company in October 2002,
issued 9,633,900 shares of restricted common stock in connection with the
formation of BitzMart, Inc. The Company relied on the exemption under Section
4(2) of the Securities Act of 1933, as amended, in issuing the securities, and
all holders acquired the securities for investment purposes and certificates
representing the securities were marked with a restrictive legend.

Between
March and September 2001, BitzMart issued 1,084,039 shares of its common stock
in a private placement at $0.46 per share to 15 purchasers, all of whom
qualified as Accredited Investors as defined under Regulation D
adopted by the Securities and Exchange Commission under the Securities Act of
1933, as amended. The Company relied upon Rule 506 of Regulation D in issuing
the securities, and all holders acquired the securities for investment purposes
and certificates representing the securities were marked with a restrictive
legend. Schneider Securities, Inc. acted as placement agent for BitzMart in
connection with the offering and received cash commissions and expense
allowances totaling approximately $54,500 and a placement agent warrant
entitling it to purchase up to 89,916 shares of the Companys common stock
at an exercise price of $0.56 per share, expiring August 17, 2006.

In
April 2001, BitzMart issued 3,211,300 shares of its common stock to UTEK
Corporation to acquire a corporation whose sole asset was a technology license.
The value of the technology license was deemed to be $156,000. The Company
relied on the exemption under Section 4(2) of the Securities Act of 1933, as
amended, in issuing the securities, and the holder acquired the securities for
investment purposes and certificates representing the securities were marked
with a restrictive legend.

In
May 2001, BitzMart issued 141,297 shares of its common stock as consideration
for the acquisition of computer and technology equipment, which we valued at
$66,000 based on amounts paid by third parties for the Companys common
stock at or about the time. The Company relied on the exemption under Section
4(2) of the Securities Act of 1933, as amended, in issuing the securities, all
holders acquired the securities for investment purposes and certificates
representing the securities were marked with a restrictive legend.

20

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In
September 2001, BitzMart issued 642,260 shares of its common stock in exchange
for strategic consulting services provided by UTEK Corporation, valued at
$300,000, determined based on amounts paid by third parties for the
Companys common stock at or about the time of the agreement. The Company
relied on the exemption under Section 4(2) of the Securities Act of 1933, as
amended, in issuing the securities, and all holders acquired the securities for
investment purposes and certificates representing the securities were marked
with a restrictive legend.

In
November 2001, BitzMart issued 321,130 shares of its common stock in exchange
for strategic consulting services provided by UTEK Corporation, valued at
$150,000, determined based on amounts paid by third parties for the
Companys common stock at or about the time of the agreement. The Company
relied on the exemption under Section 4(2) of the Securities Act of 1933, as
amended, in issuing the securities, and all holders acquired the securities for
investment purposes and certificates representing the securities were marked
with a restrictive legend.

In
November 2001, BitzMart issued 430,956 shares of its common stock for $201,300
to three Accredited Investors. BitzMart also issued an additional 592,565 shares
of its common stock for $9,226 in cash to the same three investors upon exercise
of warrants issued to the investors in connection with the offering. BitzMart
relied on Regulation S and Rule 506 of Regulation D adopted by the Securities
and Exchange Commission under the Securities Act of 1933, as amended, in issuing
the securities, and all holders acquired the securities for investment purposes
and certificates representing the securities were marked with a restrictive
legend. Schneider Securities, Inc. acted as placement agent for BitzMart in
connection with the offering and received cash commissions and expense
allowances totaling approximately $39,000 and a placement agent warrant
entitling it to purchase up to 43,096 units of the Companys common stock
at an exercise price of $0.56 per unit (each unit consisting of one share of
common stock at and one warrant to purchase 1.375 additional shares at $0.16
each) which expire on or about November 30, 2006.

On
October 30, 2002, in connection with the Companys acquisition of
BitzMart, the Company issued 16,057,447 shares of its common stock to 29 persons
and entities which were shareholders of BitzMart. The Company relied on the
exemption under Section 4(2) of the Securities Act of 1933, as amended, in
issuing the securities, and all holders acquired the securities for investment
purposes and certificates representing the securities were marked with a
restrictive legend.

On
October 30, 2002, in connection with the Companys acquisition of BitzMart,
all the principal, along with accrued interest on convertible notes of BitzMart,
totaling $330,250 were converted into 660,500 shares of the Companys
common stock to three Accredited Investors. The Company relied on Regulation S
and Rule 506 of Regulation D adopted by the Securities and Exchange Commission
under the Securities Act of 1933, as amended, in issuing the securities, and all
holders acquired the securities for investment purposes and certificates
representing the securities were marked with a restrictive legend. We had
placement agent compensation paid to Continental Advisors S.R.L. totaling
approximately $253,000 in connection with the placement of the notes and later
conversion into our common stock.

On
October 30, 2002, in connection with the Companys acquisition of BitzMart,
the Company issued 400,000 shares of its common stock to one Accredited Investor
upon exercise of warrants. The Company relied on Regulation S and Rule 506 of
Regulation D adopted by the Securities and Exchange Commission under the
Securities Act of 1933, as amended, in issuing the securities, and all holders
acquired the securities for investment purposes and certificates representing
the securities were marked with a restrictive legend. Continental Advisors
S.R.L. acted as a placement agent in connection with placement and exercise of
the warrant, for compensation paid in connection with placement of the
convertible notes described above.

21

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In
October 2002, the Company issued 184,615 shares of its common stock in
connection with the acquisition of BitzMart for a subscription receivable of
$200,000 to one investor affiliated with Continental Advisors S.R.L. In December
2002, the 184,615 shares were returned to the Company for cancellation and the
subscription receivable was canceled, pursuant to a mutual release between
Continental Advisors S.R.L and Stealth MediaLabs. The Company relied on Section
4(2) of the Securities Act of 1933, as amended, in issuing the securities, and
all holders acquired the securities for investment purposes and certificates
representing the securities were marked with a restrictive legend.

On
October 30, 2002, the Company issued 684,000 shares of its common stock in
connection with the acquisition of BitzMart to two Accredited Investors
affiliated with GCH Capital, a consultant to the Company, for services valued at
$240,000. In addition, the Company also issued a warrant to purchase up to
325,000 shares of the Companys common stock exercisable at $0.35 per share
until July 1, 2004 as additional compensation. The Company relied on Section
4(2) of the Securities Act of 1933, as amended, in issuing the securities, and
all holders acquired the securities for investment purposes and certificates
representing the securities were marked with a restrictive legend.

On
October 30, 2002, the Company issued to six unrelated investors 3,118,750 shares
of its common stock and warrants to purchase up to 3,000,000 additional shares
of the Companys common stock at an exercise price of $0.35 per share until
October 1, 2007 for $31,187.50. The Company relied on Section 4(2) of the
Securities Act of 1933, as amended, in issuing the securities, and all holders
acquired the securities for investment purposes and certificates representing
the securities were marked with a restrictive legend.

Other
Warrants

In
November 2001, BitzMart issued a warrant to purchase up to 224,791 shares of the
Companys common stock at an exercise price of $0.56 per share exercisable
until November 14, 2004, in payment of director fees. The Company relied on
Section 4(2) of the Securities Act of 1933, as amended, in issuing the
securities, and all holders acquired the securities for investment purposes and
certificates representing the securities were marked with a restrictive legend.

In
June 2202, BitzMart issued a warrant to purchase up to 199,422 shares of the
Companys common stock at an exercise price of $0.56 per share exercisable
until December 31, 2006, in payment for consulting services. The Company relied
on Section 4(2) of the Securities Act of 1933, as amended, in issuing the
securities, and all holders acquired the securities for investment purposes and
certificates representing the securities were marked with a restrictive legend.

In
September 2002, the Company issued a warrant to purchase up to 256,904 shares of
the Companys common stock at an exercise price of $0.47 per share
exercisable until December 3, 2007, to BitzMarts President and CEO, who
became the President of the Company, as compensation to the President for
guaranteeing a $40,000 loan made to the Company. The Company relied on Section
4(2) of the Securities Act of 1933, as amended, in issuing the securities, and
all holders acquired the securities for investment purposes and certificates
representing the securities were marked with a restrictive legend.

22

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In
September 2002, BitzMart issued a warrant to purchase up to 128,452 shares of
common stock at an exercise price of $0.47 per share exercisable until September
3, 2007, in payment for consulting services. The Company relied on Section 4(2)
of the Securities Act of 1933, as amended, in issuing the securities, and all
holders acquired the securities for investment purposes and certificates
representing the securities were marked with a restrictive legend.

On
December 12, 2002, the Company issued 250,000 shares of its common stock and
warrants to purchase 300,000 shares at $0.50 per share at any time until
December 31, 2005, to four Accredited Investors for $125,000. The Company relied
on Section 4(2) of the Securities Act of 1933, as amended, in issuing the
securities, and all holders acquired the securities for investment purposes and
certificates representing the securities were marked with a restrictive legend.

On
December 20, 2002, the Company agreed to issue 350,000 shares of common stock
and warrants to purchase in additional 150,000 shares at $0.50 per share at any
time through December 31, 2005, to one Accredited Investor as compensation for
consulting services. The Company relied on Section 4(2) of the Securities Act of
1933, as amended, in issuing the securities, and all holders acquired the
securities for investment purposes and certificates representing the securities
were marked with a restrictive legend.

Item 6.
Managements Discussion and Analysis of Financial Condition and Results of Operations

The
following discussion and analysis explains our results of operations for our
last two fiscal years ending October 31, 2002, our financial condition and
liquidity and our plan of operations for the next 12 months. You should review
our discussion and analysis of financial condition and results of operation in
conjunction with our financial statements and the related notes.

General
Overview

Stealth
MediaLabs was organized and incorporated under the laws of Nevada on February 4,
1999 as Kidstoysplus.com, Inc. BitzMart, Inc. was incorporated in Colorado on
October 31, 2000. On October 30, 2002, an acquisition transaction was completed
in which we acquired all outstanding stock of BitzMart in exchange for an amount
of our common stock equal to approximately 88% of our issued and outstanding
shares following the transaction. Our corporate name was changed to Stealth
MediaLabs and BitzMarts officers and certain of its directors became our
officers and directors and we changed our fiscal year end from January 31 to
October 31. The transaction is considered to be a recapitalization of BitzMart
for financial reporting purposes and accordingly our financial statements and
this discussion and analysis pertain to BitzMart and its business and
operations, as the previous business and assets of Kidstoysplus were transferred
to certain of its stockholders prior to the transaction.

We
develop and market our proprietary software and services for professional media
content developers, distributors, owners and users. StealthChannel permits
embedding large amount of indelible, hidden, highly compressed data within
analog or digital audio and audio/video streams. Our target markets include
movie and video studios and developers, television networks, record labels,
terrestrial and satellite radio networks, advertisers, post-productions studios
and distributors of most forms of digitizable and analog media. We believe that
our StealthChannel technology enables additional profitability for distributors
of digitized media. We believe we have, during our first two fiscal years of
operation, advanced the strategic and tactical planning and development of the
StealthChannel software and technology.

23

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We
are pursing strategic alliances with other technology vendors to join in their
efforts to distribute the StealthChannel software to third party users with the
software products of the other vendors. Beginning late in the fiscal year ended
October 31, 2002, we have also developed and test marketed a concept motor
vehicle which we retrofit with satellite TV and radio systems, a laptop PC with
wireless Internet access, DVD, and video game entertainment systems. Generally,
we have purchased used SUV vehicles, retrofitted them with these technology
enhancements and resold the vehicle using the Ebay Internet auction
system. We have designated this project as RollingDream and we believe
that if successful we may be able to generate minimal cash flow to support our
administrative costs during the next few months.

Our
ability to focus on and execute our business plan has been severely hampered
since our inception by our limited financial resources. As a result, much of our
efforts since inception have been devoted to the pursuant of financing.
Financial advisers and placement agents selected by us did not materially assist
us in the capital raising process and we believe we were deterred by poor advice
and assistance we received. We pursued and completed the acquisition
transactions described above, pursuant to which we became a public-reporting
corporation subject to the reporting obligations of the Securities Exchange Act
of 1934 at the advice of some of the advisers and consultants. We expected that
becoming a public reporting entity would assist us to raise additional capital.
However, as explained elsewhere in this Report, a majority of the $525,000 which
we raised in anticipation of becoming public were consumed by charges and
expenses in connection with the offering, transaction costs and expenses
incurred in complying with public reporting obligations. In short, had BitzMart
foregone the advice to be acquired by a public entity, it would likely have been
in a better position to obtain required financing and to commercialize the
StealthChannel technology. Notwithstanding these developments, we are now in a
position going forward to provide liquidity to the stockholders, make available
to the investing public the results of our operations and development of our
business and proceed with our business plans as the capital resources become
available.

Accounting
Policies and Estimates

Our
discussion and analysis of our financial condition and results of operations is
based upon our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the US. The preparation of these
financial statements requires us to make estimates and judgments of certain
circumstances that affect the reported amounts of assets, liabilities, revenues
and expenses, and related disclosure of contingent liabilities. In preparing
these financial statements management has made its best estimates and judgments
of certain amounts included in the financial statements giving due consideration
to materiality. On an on-going basis, we evaluate our estimates, including those
related to revenue recognition, investments, income taxes, financing operations,
and other contingencies. Management bases its estimates on historical experience
and on various other assumptions that are believed to be reasonalble under the
circumstances.

Results
of Operations

Fiscal
Years Ended October 31, 2002 (FY2002) and October 31, 2001 (FY2001)

Revenue.During our first two fiscal years of operation we received only $11,000 of
revenue, during the fourth quarter of our most recent fiscal year. The revenue
was received from the first market test sale of a RollingDream vehicle. We
had no revenue in connection with our attempts to complete and commercialize the
StealthChannel technology. Comment here on future revenue.

24

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We had
$6000 in cost of goods sold paid to a founding shareholder for purchase of the
automobile used in the first test sale.

Research
and Development.In 2002 we had $12,990 of research and development expense
paid to unrelated parties compared to $ 132,773 in 2001. The decrease is because
more of our research was conducted by Windy City Software, Inc. which is owned
and operated by our Chief Technology Officer who is also a director and
therefore a related party of our corporation. Accordingly, our R&D expenses
paid to related parties increased from 81,412 in 2001 to $135,800 in 2002 .
Total research and development decreased from $ 214,185 in 2001 to $148,790 in
2002 because we lacked sufficient funding to complete necessary development.
R&D costs in 2003 are expected to increase over 2002 provided that we are
successful in raising additional financing that is available for that purpose.

Depreciation
Expense.Depreciation and amortization expense increased to $36,825
in 2002 from $24,543 in 2001 and reflects
depreciation of equipment over a full year.

General
and administrative expenses. General and administrative expenses increased
to $1,037,583 in 2002 compared to $352,638 in 2001. The 2002 increase over 2001
was attributable to non-cash stock- and warrant-based compensation for
consulting services and amortization of deferred compensation.

Net
cash used in operating activities since inception was $1.1 million. Expenditures
in both periods were a result of research and development expenses, general and
administrative expenses and business promotion expenses and marketing expenses.

Interest
Income.  Interest  income  decreased  to $1,438 in 2002 from $2,364 due to lower
interest  rates paid  and a lower average cash balances.

Interest
Expense.The increase ininterest expense to $175.693 in 2002 from
$2,609 in 2001 is primarily due to expensing the discount of approximately
$169,000 on the $325.000 of convertible notes issued prior to the business
combination, which had been originally booked due to the issuance of warrants in
connection with convertible notes, upon conversion of the notes into stock. When
the notes were converted to our stock in October 2002, we expensed the remaining
unamortized portion of the discount.

Income
Tax expense.Due to operating losses, there was no income tax provision on
2002 or in 2001. The Company had losses that resulted in net operating
loss carryforwards for tax purposes that may be offset against future taxable
income amounting to approximately $667,331 on October 31, 2002, which expire in
2022 and $362,364 on October 31, 2001 which expire in 2021. However, these
carryforwards and credits may be significantly limited due to changes in the
ownership of the Company as a result of future equity offerings.

25

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Noncash
Charges

Included
in the expenses described above are certain non-cash charges totaling $783,789
in 2002 compared to $66,751 in 2001. Of these expenses, approximately $245,791 or
31.4% relate to our issuance of securities, primarily warrants entitling the holders
to purchase additional shares of our common stock in the future, for services
and other assistance provided to us. A summary of those non-cash charges in each
of the last two fiscal years is as follows:

`Item                                               Amount Charged
                           ----                                               --------------

2001                       Depreciation                                        29,743
                           Amortization of deferred compensation               37,008
                                                                              -------
                                                                               66,751

2002                       Depreciation                                        47,225
                           Consulting and financing services paid
                           by warrant issue                                   245,791
                           Amortization of deferred compensation              315,742
                           Non-cash interest expense                          175,031
                                                                              -------
                                                                              783,789

Total non-cash charges                                                        850,540
                                                                              -------`

Of the
$2,242,208 in net losses realized from commencement of operations to October 31,
2002, $850,540 or 37.9% was due to non-cash charges occurring in 2001 and 2002.

Capital
Raising Charges and Expenses

In
2001 and 2002 we engaged several entities to assist us in raising capital, for
financial advice, for investment banking and other assistance. In 2001, we
completed a private placement of our common stock in which we sold 1,084,039
shares and received total gross proceeds of $503,453. After payment of placement
fees and expenses, and other offering costs, we had net proceeds of
approximately $420,000. In December 2001, we completed an additional placement
to three investors from the first placement. In this second placement we sold
1,023,518 shares (including shares issued upon exercise of warrants issued to
the investors) for total gross proceeds of $210,527. After payment of placement
agent fees and other cash expenses the Company had net proceeds of approximately
$153,000.

26

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In
the fourth quarter of 2002, two investors (who had also been
participants in the December 2002 placement) purchase $325,000 of our 12%
Convertible Notes, convertible at $0.50 per share, and also received warrants to
purchase up to 1,750,000 additional shares of common stock, also at $0.50 per
share. At the time of completion of our acquisition transaction described above,
one of the warrant holders exercised 400,000 warrants for $200,000, and the
convertible notes and accrued interest were converted into 660,500 shares of our
common stock. We expected that when the acquisition transaction was completed,
the remaining 1,350,000 warrants would also be exercised for proceeds of around
$675,000 which would have been sufficient capital to enable us to implement our
business plan through 2003. After payment of placement fees, and a required loan
to an affiliate of the placement agent, placement agent expenses and related
offering expenses, the Company received net cash proceeds of only approximately
$235,000.

In
addition, in connection with completing the acquisition transaction, we issued
warrants and stock, valued at $301,750 for financial reporting purposes, to a
consultant who assisted in completing the acquisition transaction. The issuance
of these securities, and the subsequent cancellation of the placement
agents obligation to repay our loan of a portion of the offering proceeds
to an affiliate of the placement agent, and the offering costs and compensation
expenses to the consultant together totaled approximately $551,000
which substantially exceeded the net cash we received in
connection with the second placement and the reverse merger transaction.

In
summary, the 2002 acquisition transaction diluted the ownership interest of the
original BitzMart shareholders, resulted in only minimal net cash proceeds,
substantially increased our general and administrative expenses by requiring us
to become subject to the reporting obligations of the Securities Exchange Act of
1934 and diverted the time of our management and directors away from
implementing our business plan and conducting our business as we had
anticipated. In early December 2002, we terminated all relationships with the
placement agent and financial advisers who had recommended the acquisition
transaction. Subsequently, we retained Westminster Securities to assist us with
future marketing and development of our business and handling of our investor
relationships.

Liquidity
and Capital Resources

As
of October 31, 2002, we had cash or cash equivalents of $172,596. We had
accounts payable and accrued liabilities in the amount of $248,828. Our auditors
have expressed substantial doubt as to our ability to continue as a going
concern without additional financing. We anticipate that our cash on hand will
be sufficient to enable us to meet our anticipated expenditures for the next two
months.

Since
our inception through the end of the fiscal year ended October 31, 2002, we have
received approximately $1.57 million in cash investments from our Founders and
from private investors. Due to capital raising and legal compliance expenses
that were higher than we anticipated, approximately $900,000 of these
investments were available to implement our business plans. When BitzMart was
formed in October 2000, we estimated that $1.5 Million to $3.0 million would be
required to fund our business plans We have been able to raise only a fraction
the of capital required. As of October 31, 2002, we had cash of approximately
$170,000, and a working capital deficiency of approximately $76,400. At the end
of our first quarter ended January 31, 2003, we had a materaially larger working
capital deficiency. We have used the net proceeds we received from these
investments for research and development associated with the StealthChannel
technology, for business development activities to establish marketing alliances
and for additional fund raising activities. This result occurred in general due
to the general downturn in equity markets, specific concern by potential
investors over technology companies and because we lacked sufficient initial
capitalization to promptly demonstrate the potential and efficacy of the
StealthChannel technology to potential investors and joint venture participants.

We
are also seeking bank or other secured financing of a minimum of $100,000 and up
to $1,000,000 to implement our RollingDream line of business for the next 12
months. We would expect that if we succeed achieving significant additional
financing for RollingDream, that resulting cash flow retained from sales
will fund a substancial portion of the StealthChannel research and development
that we can foresee over the next year. We do not plan to seek equity
investments for this purpose, although certain types of equity incentives may be
offered to secured lenders in exchange for favorable terms. We have not received
any commitment from any lender for this project, In February 2003 our CEO and
his spouse personally borrowed $50,000 and lent it to us for the RollingDream
business. We intend to make satisfactory compensation arrangements with the CEO
and his spouse for this lending facility and for any future similar
arrangements. If we are unable to borrow additional funds for this project we
plan to proceed more slowly and fund each vehicle with proceeds from sales of
retrofitted vehicles.

We
anticipate that at least $700,000 will be required to continually grow our
StealthChannel business and to meet our financial obligations and substancially
complete development and implementation of the technology for 2 applications
during our current fiscal year ending October 31, 2003. We anticipate that if we
can raise approximately $250,000 during the fiscal year, we will be able to meet
our fixed operating expenses, and meet our obligations under our license. We
believe our estimates of our capital requirements to be reasonable. The capital
requirements are only estimates and can change for many different reasons, some
of which are beyond our control. We cannot make assurances that we will
successfully complete any financing transaction in a timely manner, if at all.
If we are unable to obtain financing to fund the business development
activities, we will be unable to continue as a going concern.

We
expect net losses to continue through at least the present fiscal year, as we
will have significant expenses in connection with completing the development of
our technology, our efforts to market the technology to third parties and
co-venturers and related expenses.

Inflation

Our
results of operations have not been affected by inflation and management does
not expect inflation to have a significant effect on our operations in the
future.

Quantitative
and Qualitative Disclosures About Market Risks

Our
financial results are quantified in U.S. dollars and a majority of our
obligations and expenditures with respect to our operations are incurred in U.S.
dollars. We do not believe we currently have any materially significant market
risks relating to our operations resulting from foreign exchange rates. If we
enter into financing or other business arrangements denominated in currency
other than the U.S. dollar, variations in the exchange rate may give rise to
foreign exchange gains or losses that may be significant.

We
currently have no material long-term debt obligations. The RollingDream
short term $50,000 inventory loan is due in May 2003 and the collateral vehicles
which secure the loan are readily convertible into cash through wholesale
auctions, if unsold to retail customers. We do not use financial instruments for
trading purposes and we are not a party to any leverage derivatives. In the
event we experience substantial growth in the future, our business and results
of operations may be materially affected by changes in interest rates and
certain other credit risk associated with its operations.

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Item
7. Financial Statements

Reference
is made to the financial statements, the reports thereon, the notes thereto, and
supplementary data commencing at page F-1 of this Form 10-KSB, which financial
statements, reports, notes, and data are incorporated herein by reference.

# TABLE
OF CONTENTS TO THE FINANCIAL STATEMENTS

`Page(s)
                                                                                                        -------

Independent Auditors Report                                                                              F3

Balance Sheets as of October 31, 2002 and 2001                                                            F4

Statements of Operations for the Years Ended October 31, 2002 and 2001 and the Period from
 September 30, 2000 (Commencement of Operations) to October 31, 2002                                      F5

Statements of Stockholders Equity for the Years Ended October 31, 2002 and 2001 and the
 Period from September 30, 2000 (Commencement of Operations) to October 31, 2002                          F6

Statements of Cash Flows for the Years Ended October 31, 2002 and 2001 and the Period from
 September 30, 2000 (Commencement of Operations) to October 31, 2002                                    F7-F9

Notes to Financial Statements                                                                         F10-F17`

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

On
January 15, 2002, we engaged the independent accounting firm of LJ Soldinger
& Associates to audit the financial statements of Stealth MediaLabs, Inc.
for the fiscal years ended October 31, 2001 and 2002, replacing Davidson &
Company, the former auditors of the Company. Each report of the former auditor,
covering the fiscal years ending January 31, 2000 and 2001 raised substantial
doubt about the Companys ability to continue as a going concern. We had no
dispute with the former auditors on any matter of financial principles or
practices, financial statement disclosure or auditing scope or procedure
reporting or any other aspect of their engagement. The former auditors practiced
outside the United States near the site of the business operations of
Kidstoysplus.com, our predecessor.

PART
III

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

The
following table sets forth information with respect to our executive officers
and directors.

|Name                | Age | Position | Since
|------------------- | --- | -------- | -----
|Howard E. Leventhal |     | 45       |      
|                    |     |          |      
|Anan Y. Yaagoub     |     | 39       |      

_________________

|(1) | Mr.
Leventhal  was a founder of BitzMart,  Inc. and has been a director and the  President of
BitzMart  since inception. He became a director and the President of the Company in
September 2002.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Mr.
Yaagoub has been a director of the Company since September 2002.
|--- | --------------------------------------------------------------------

28

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Our
board of directors currently consists of two persons. We have three vacancies on
our present board, although we have no present plan to fill these vacancies.
Four investors who purchased our common stock and warrants in December 2002 have
a contractual right to have three persons added to our Board of Directors, one
of whom must be acceptable to our President. . We do not have an audit committee
financial expert serving on the Board of Directors nor an audit committee. We
have no such person serving on our Board of Directors because we have been
unable to find a person with required financial expertise who is willing to
serve as one of our directors, primarily because we are unable to afford
directors errors and omission liability insurance and we are not in a
financial position to pay any meaningful compensation to such a director.

Presently
each director is elected for a period of one year at our annual meeting of
shareholders and serves until the next annual meeting or until his or her
successor is duly elected and qualified. Our board of directors elects executive
officers on an annual basis. Executive officers serve until their successors
have been duly elected and qualified. There are no family relationships among
any of the directors, officers or key full-time employees of our Company.

Howard
Leventhal

co-founded
(along with our present shareholder Burton Slotky and their partner Marino
Cecchi) Suncom Technologies, the first manufacturer of digital entertainment
hand controllers, or joysticks in the Western hemisphere. Suncom was
sold to a New York investment firm after delivering 20 million Atari Video
Game-compatible joysticks and other peripherals into hands of consumers
worldwide. After divesting Suncom, Mr. Leventhal joined firms which developed
early PC multimedia peripherals under private label for Packard Bell, IBM Easy
Options Division and Radio Shack.

Mr.
Leventhal joined with Chicago-based Cole Taylor Banks in 1997 to develop
Cole Taylor Town one of the first online business communities on the
Internet. In 1997 Mr. Leventhal co-founded Primecom Interactive, Inc. and
personally created and developed Primecoms QuickSite software as a
response to the burden of manually altering small business websites for Cole
Taylor Town. More than 150,000 copies of QuickSite software were sold through to
end users, establishing it consistently as the number 2 or 3 highest selling Web
publishing software title, after Microsoft Front Page, during the period in
which it was published. In September 2000, Mr. Leventhal and other owners of
Primecom founded BitzMart, where he has worked full time since.

Mr.
Leventhal was born in Chicago and is an FAA-licensed pilot, an FCC-licensed
amateur radio experimenter, and has taught self defense to children as a black
belt instructor in TaeKwon-Do since 1975. He and his wife Mary adopted an
orphaned baby daughter in the Peoples Republic of China during 2002.

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Anan
Yaagoub

Mr.
Mr.  Yaagoub was born in the Middle  East and is a PhD  candidate  at  Northwestern
University  in  Advanced  Systems  Theory.  From 1994  until the  present  he has been
Chief  Executive  Officer  of Windy City  Software,  Inc.,  Chicago,  IL Mr.  Yaagoub
created  all of the back office  server  programming  and  original  proprietary  ActiveX
coding for the  QuickSite  software  at  Primecom,  where he met  Leventhal  as a
contract  vendor.  He  expects to  gradually  complete  work for his  doctorate  over the
next 12 to 24  months.  Doctoral  research  areas:  Databases,  Data  Compression & Parallel
Processing.  MS - Computer  Science,  Northwestern  University.  BS - Computer  Science
and  Mathematics  University  of Petroleum & Minerals,  Amman,  Jordan.  Mr.  Yaagoub is
married with a one year old daughter and is a permanent resident of the United States.

Science
and Technology Support

In
April 2001, our StealthChannel technology was acquired by UTEK Corporation
through a license to UTEKs subsidiary Watermark Technologies, Inc. (WTI)
from the University of Miamis College of Engineering and Technology
Transfer departments. The original inventors are UMs Mr. Alexander Iliev,
MSc. and Dr. Michael Scordilis, PhD, an associate professor. The license was
transferred to us when we acquired WTI from UTEK as a wholly-owned subsidiary.
Howard Leventhal, our President, contributed to the development of
StealthChannel application theories for radio-delivered transmission, and was
named as a co-inventor on the second patent application filed on the invention.

The
license agreement includes a funded research agreement that provides us with
ongoing research, development and technical support on a continuing basis,
subject to renewal through additional grants by us to the University of Miami.
The backgrounds of Mr. Iliev and Dr. Scordilis are listed below, along with
those of other individuals who work with us on a consulting basis for
technological development purposes.

Michael
Scordilis Ph.D., Science Advisor, StealthChannel Co-Inventor

Dr.
Scordilis  is  the  co-inventor  of  Stealth  MediaLabss  StealthChannel
Multimedia  Metadata  technology,  and an associate  professor in the  Department  of
Electrical  and  Computer  Engineering,  at the  University of Miami.  His work focuses
on the theory and  applications  of digital  signal  processing,  digital  speech and
audio  processing,  acoustics  and  communication  systems.  In addition to his  teaching
role,  Dr.  Scordilis is the author of numerous  publications  and articles.  His present
research  activities are directed  towards the  development  of  algorithms  and systems
for speech  processing,  audio  analysis  and coding,  and  digital watermarking.  1990:
Ph.D. in Electrical Engineering,  Clemson University,  Clemson, SC, USA. 1986: M.S.  in
Electrical  Engineering,  Clemson  University,  Clemson,  SC, USA. 1984: B.E. in
Communications  Engineering,  Royal Melbourne Institute of Technology, Melbourne,
Australia.

Alexander
Iliev, M.Sc., Contract Software Engineer, StealthChannel Co-Inventor

Mr.
Iliev works for the  Information  Technology at the  University of Miami and is currently
involved  in research  titled:  Auxiliary  Channel  Masking  Based on the Joint Stereo
Encoding of the  Short-Time  Phase  Spectrum of Audio Signal,  which is based on the
research done in his Master's  thesis.  Mr. Iliev is identified  as the  principal
inventor in 2 patent  applications  pending  with the USPTO on the same topic.  Mr. Iliev
was  also  involved  in a series of projects  one of which  resulted in a Speech
Navigation  application  for use on  Internet.

30

---

Mr.
Iliev also worked as an  Electrical  Consultant  for K&K Ltd.,  an  exclusive
representative  for  Panasonic in Bulgaria.  Mr. Iliev has been a member of the Audio
Engineering  Society  since 1997.  1999: MS in  Music  Engineering  Technology,  Miami
University - Miami, FL, USA. 1996: MS in Electrical  Engineering  degree,  Ivan Rilski
University - Sofia, Bulgaria. 1996: Multimedia Technologies, Technical University, Sofia,
Bulgaria.

The
following individuals have provided, and will, in the future, be providing
software programming, development and consulting services as consultants.

Mark
Baich, Software Engineer

Author
of United Airlines first online ticketing application software entitled
the United Connection, Mark spent 10 years at United and its Allegis
spin-off as a senior programming manager. Graduated 1986 from Illinois State
University with a B.S. in Computer Science.

Amjed
Hamdan, Software Engineer

MS
Computer Science, Northeastern Illinois University. Proficient in DOS, DAO, ADO,
ActiveX, ASP, Java Script, Java, MS C, C++, MS Visual Basic, ASSEMBLY, MS SQL
Server, Access, Windows 95/98 and NT, OS/2, ODBC, Front Page, HTML, Watcom,
Voice and Fax software and hardware, and Crystal Reports. PowerBuilder, Oracle,
Windows SQL, Windows NT, and Developer 2000.

Hitesh
Patel, Software Engineer

MS
in Computer Science, Northwestern University, Chicago, IL, BS  Electronics
Engineering SP University, India, Lecturer/Lab Administrator B.V.M. Engineering
College Tujarat India. Proficient in Windows NT 4.0, Windows 95, Windows 3.x,
MS-DOS 6.2, Visual Basic 6.0, Visual InterDev, Visual Café, FTP, CGI,
Personal Oracle, PL SQL, SQL Plus 3.3, Sybase SQL Anywhere, MS SQL 6.5, Access
7.0, Office 97, Visual C++, Crystal Reports, MS FrontPage, IIS, Enterprise
Server, PeerWeb services, InstallShield, and Adobe products. Perl, HTML, Java.,
Oracle 7.x7 Access 97,7.0,2.0, MS SQL 6.57 Sybase SQL Anywhere.

Dr.
Howard Morgan; Science Advisor

Dr.
Morgan joined Stealth MediaLabs as Science Advisor in March 2002. Howard began
working with Pasadena-based incubator ideaLab in 1997 and began serving as
ideaLab Vice Chairman in early 2000. Howard is also President and Founder of the
Arca Group, Inc., a consulting and venture capital investment firm specializing
in the areas of computer and communications technologies. He has more than 25
years of experience with more than thirty high-tech entrepreneurial ventures.
Howard was also a professor of decision sciences at the Wharton School of the
University of Pennsylvania and a professor of computer science at the Moore
School at the University of Pennsylvania for almost 15 years. He serves on the
boards of a number of companies and is a respected author. Howard received his
Ph.D. in operations research from Cornell University and his B.S. from the City
University of New York.

31

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Board
Meetings and Committees of the Board

During
the fiscal year ended October 31, 2002, the Board of Directors had no meetings,
but met telephonically to discuss Company business and signed 4 written
consents in lieuof special meetings. All directors are deemed to have
been present for all such meetings.

Section
16(a) Beneficial Ownership Reporting Compliance, as amended

W
have not adopted a code of ethics which would apply to our principal financial
officer, principal accounting officer, controller or persons performing similar
services. We have not adopted a code of ethics because we presently have two
directors and we anticipate that we will have a total of at least four directors
during the present fiscal year. We intend to adopt a code of ethics when the
present vacancies on our Board of Directors have been filled.

The
following summarizes delinquent and late reports required to be filed by our
directors and officers and each owner of more than 10% of our outstanding common
stock:

|Name ofReporting Person | Form 3/#transactionsdelinquent | Form 4/#transactionslate or delinquent | Form5/#transactionslate or delinquent
|----------------------- | ------------------------------ | -------------------------------------- | -------------------------------------
|Howard Leventhal        |                                |                                        |                                      
|CEO and Director        |                                | 1                                      |                                      
|Anan Yaagoub            |                               
|CTO and Director        |                                | 1                                      |                                      

Item 10.
Executive Compensation

We
employ the remainder of our executive officers as consultants or independent
contractors.

Summary
Compensation Table

The
table below shows, for the last two fiscal years, compensation paid to the
Companys President, the most highly paid executive officer serving at
fiscal year end, and the only executive officer who received compensation. Our
chief technology officer, who is not an executive officer, also received
compensation. The compensation information for these individuals is set forth
below. We refer to all these persons as the Named Executive
Officers.

The
following table sets forth compensation information for our fiscal period ended
October 31, 2002:

|Name and PrincipalPosition | FiscalYear endedOctober 31 | CompensationSalary         Bonus | Other | Long TermCompensationSecuritiesunder Options | All OtherCompensation($)(4)
|-------------------------- | -------------------------- | -------------------------------- | ----- | -------------------------------------------- | ---------------------------
|Howard Leventhal           |                            | 2001                             |       | 89,750                                       | (1)                        
|President & CEO            |                            | 2002                             |       | 65,000                                       | (1)                        
|Anan Yaagoub               |                            | 2001                             |       | 41,450                                       | (3)                        
|CTO & Director             |                            | 2002                             |       | -0-                                          |                            

_____________________

32

---

| | (1) | Mr.
Leventhal is employed as President and CEO at any annual salary of $150,000  beginning
November 1, 2000. Because we have lacked sufficient capital resources,  we have been
unable to pay all of his salary as earned. The amount shown as  salary in 2001 and 2002
reflect the amount paid to Mr. Leventhal, directly and  indirectly, and include a total
of approximately $90,000 which we paid to a  marketing consulting firm owned by the
Presidents spouse. We reduced the  amount of accrued salary owed to the President
by the amount paid to the  marketing consulting firm. We have deemed all payments made to
the President and  the spouses marketing consulting firm to be compensation
expense. As of  October 31, 2001, we owed $71,788 to the President, and as of October 31,
2002,  we owed $156,788 to the President in accrued, unpaid salary. As of January 31,
2003, the total unpaid accrued salary owed to the President was  $194,288.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | During
our fiscal years ended 2001 and 2002, the Presidents spouse  assisted the President
and served as a consultant to the Company, providing  limited services related to capital
raising, business development and marketing.  In each of 2001 and 2002, the spouse
advanced approximately $44,000 to the  Company to pay certain expenses and the Company
reimbursed her for those  expenses during those years.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Mr.
Yaagoub is the sole owner of Windy City Software, which has provided  software
programming and other consulting services as a contractor to the  Company. The amount
shown reflects the total payments we made to Windy City  Software.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | Perquisites
and other personal benefits, securities or property did not exceed  10% of the total
annual salary and bonus reported for each of the Named  Executives Officers.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Stock
Option Plans

On
October 31, 2000 the Board of Directors of BitzMart approved the 2000 Incentive
and Bon-Statutory Stock Option Plan (the Plan). The Plan provided
for the grant of incentive and non-qualified options to purchase up to 2,000,000
shares of common stock to officers, directors, employees, and other qualified
persons that may be selected by the Plan Administrator (which currently is the
Board of Directors). The Plan is intended to help attract and retain key Company
employees and any other persons that may be selected by the Plan Administrator
and to give those persons an equity incentive to achieve the objectives of the
Companys shareholders.

Incentive
stock options may be granted to any individual who, at the time of grant, is an
employee of the Company or any related corporation. Non-qualified stock options
may be granted to employees and to any other persons that may be selected by the
Plan Administrator. The Plan Administrator fixes the exercise price for options
in the exercise of its sole discretion, subject to certain minimum exercise
prices in the case of incentive stock options, which prices shall not be less
than 100% of market price on the date of the grant. Options will not be
exercisable until they vest according to a vesting schedule specified by the
Plan Administrator at the time of grant of the option. No options have been
granted under the Plan and we do not expect that BitzMart will ever grant
options.

33

---

2002
Consultant Compensation Plan

On
October 30, 2002, our Board of Directors adopted the 2002 Consultant
Compensation Plan pursuant to which we reserved 3.0 million shares to be granted
as stock bonuses, nonqualified stock options with or without stock appreciation
rights or otherwise to consultants of the Company as compensation or additional
incentive to consultants. The plan permits the Board of Directors or a committee
appointed by the Board of Directors to grant nonqualified stock options, SARs or
stock bonuses to certain consultants selected by the Board of Directors from
time to time. Also on the date we adopted the plan, we issued to GCH Capital, a
consultant to us, the following securities under the 2002 Consultant
Compensation Plan: (i) to right to purchase up to 325,000 shares of our common
stock at an exercise price of $0.35 per share at any time during the period
ended October 30, 2007, and (ii) 684,000 shares of our common stock. In December
2002, we filed a registration statement on Form S-8 registering all shares of
common stock underlying the 2002 Consultant Compensation Plan. We presently have
2,316,000 shares reserved for issuance upon exercise of nonqualified options or
stock awards given under the 2002 Consultant Compensation Plan.

Option
Grants in the Last Fiscal Year:

We
have made no option grants or issued any securities to any of the Named
Executive Officers nor to any of our directors under these plans.

Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values:

No
Named Executive Officers nor any directors hold any outstanding options or other
rights under these plans.

Employment
Contracts

None
of our officers nor directors have any employment contract or other agreement
obligating us to make payments upon termination of employment or changes in
control of our Company.

Report
of the Board of Directors on Executive Compensation

During
the fiscal year ended October 31, 2002, the Board of Directors was responsible
for establishing compensation policy and administering the compensation programs
of the Companys executive officers.

The
amount of compensation paid by the Company to each of its directors and officers
and the terms of those persons employment is determined solely by the
Board of Directors, except as otherwise noted below. We consider that the
compensation paid to our directors and officers is fair to us.

In
the past, Howard Leventhal has negotiated all executive salaries of the Company.

Compensation
of Directors

We
have not compensated our directors for serving the Company, including the four
following persons who have served as directors of BitzMart since its inception,
and continue to serve as directors of BitzMart: Howard Leventhal, Burton Slotky
and Rudolph Russo. We do not intend to pay our directors any separate
compensation for service as directors until we are in a financial position to
pay cash compensation. We may determine that it will be appropriate to issue
stock options or warrants to our directors, including the persons who serve as
directors of BitzMart.

34

---

Howard
Leventhal receives compensation from the Company in his capacity as President
and CEO to the Company. For more information on the compensation paid by the
Company to Mr. Leventhal, please see Executive Compensation  Summary
Compensation Table.

Anan
Yaagoub receives compensation from the Company from time to time as a Consultant
and CTO to the Company. For more information on the consultant compensation paid
by the Company to Mr. Yaagoub, please see Executive Compensation 
Summary Compensation Table.

See
Executive Compensation below for a description of the Plan.

The Company
does not intend to pay its directors compensation for the fiscal year ended
October 31, 2003. However, the Company may issue stock options to directors and
executive officers in the fiscal year ending October 31, 2003.

Item
11. Security Ownership of Certain Beneficial Owners and Management

The
following table sets forth certain information concerning shares of our $0.001
par value common stock, the only class of our securities issued and outstanding
owned beneficially as of February 28, 2003 by: (i) each person known to us to
own more than five percent (5%) of any class of our voting securities; (ii) each
of our executive officers and directors; and (iii) all our directors and
executive officers as a group. Unless otherwise indicated, the shareholders
listed possess sole voting and investment power with respect to the shares
shown.

35

---

|Name and Address ofBeneficial Owner | Amount and Nature ofBeneficial Owner (1) | Percent ofClass(1)
|----------------------------------- | ---------------------------------------- | ------------------
|Howard Leventhal                    |                                          | 3,442,779         
|Director and President              |                                         
|11475 Commercial Ave., #11          |                                         
|Richmond, IL 60071x                 |                                         
|Anan Yaagoub                        |                                          | 834,937           
|Director                            |                                         
|203 N. Wabash, #1805                |                                         
|Chicago, IL 60610x                  |                                         
|Colorocs Information                |                                          | 1,097,827         
|Technologies, Inc.                  |                                         
|35 Market St                        |                                         
|Poughkeepsie, NY 12601x             |                                         
|Rudopth Russo                       |                                          | 3,231,958         
|35 Market St                        |                                         
|Poughkeepsie, NY 12601x             |                                         
|Burton A. Slotky                    |                                          | 2,228,723         
|1723 Central Ave                    |                                         
|Evanston, IL 60201x                 |                                         
|UTEK Corporation                    |                                          | 4,421,165         
|202 S. Wheeler                      |                                         
|Plant City, IL  33563x              |                                         
|Lemanik SA                          |                                          | 2,795,579         
|Lugano, Switzerland                 |                                         
|All Directorsand Officers as        |                                          | 9,738,397         
|a group(6)                          |                                         

___________________

|(1) |  | Based
on an aggregate 21,602,184 shares outstanding as of February 28,2003.
|--- |  | ---------------------------------------------------------------------------

|(2) |  | Includes presently exercisable warrants to purchase up to 256,904 shares at
$0.46 per share. We may consider issuing our shares and/or additional warrants
to Mr. Leventhal in full or partial satisfaction of unpaid salary owed to him,
which totaled $194,288 at January 31, 2003.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Mr.
Russo is President and a director of Colorocs Information  Technologies,  Inc. and may be
deemed to  be a beneficial owner of shares owned by it.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Includes
warrants  to  acquire  200,000  shares  of our  common  stock at $0.50 per  share,  which
are  currently exercisable.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------

36

---

|(5) |  | Includes
warrants  to  acquire  1,350,000  shares of our common  stock at $0.50 per  share,  which
are  currently exercisable.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------

|(6) |  | We include shares beneficially owned by Messrs. Russo and Slotky, as they each
were founders of BitzMart and are directors of BitzMart, our subsidiary
corporation.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

Item
12. Certain Relationships and Related Transactions

During
the fiscal year ended 2002, we purchased for $6,000 a test vehicle from Mr.
Slotky, a director of BitzMart, which we retrofitted and resold as our first
RollingDream test vehicle. The purchase price we paid was based on the wholesale
Kelly Blue Book trade-in value of the vehicle.

During
fiscal year ended 2001 we received a loan in the amount of $50,000 from Mr.  Slotky.  We
repaid  the loan in the same fiscal year and paid  interest of $2,027.  During  fiscal
year ended  October 31, 2001,  we  received a  non-interest  bearing loan  approximating
$26,000 from Mr.  Leventhal.  As of October 31, 2002, the  remaining unpaid balance to
Mr. Leventhal is $200.

During
fiscal 2001 and 2002 the Company paid approximately $149,000 and $80,000,
respectively, to Windy City Software for rental of office space, Internet
connection and computer programming services. The majority owner of Windy City
has served as one of our directors since September 2002 and is the non-employee
Chief Technology Officer of BitzMart and the Company. For the two fiscal years
ended October 31, 2002 and 2001, total rent expense paid to Windy City amounted
to $13,200 and $13,250, respectively,

During
fiscal 2001 and 2002 the spouse of Mr. Leventhal, our President, assisted the
President and served as a consultant to BitzMart and the Company, providing
limited services related to capital raising, business development and marketing.
In 2001, 2002 and 2003, the spouse advanced a total of $88,000 to BitzMart to pay
certain expenses and we reimbursed her for those expenses during those years.

During
fiscal 2002 we made approximately $90,000 in payments to a marketing consulting
firm, owned by Mr. Leventhals spouse and reduced the accrued unpaid salary
owed to Mr. Leventhal by a like amount. The payment should have been made
directly to the President as compensation owed t o him. As a result, we
inadvertently may have under reported wages paid to the President by $90,000 and
related combined payroll tax liability of the Company and Mr. Leventhal by
approximately $15,000. The Company has deemed all payments made to Mr. Leventhal
and his spouses consulting firm to be compensation expense. As of October
31, 2002 and 2001 the Company owed $156,788 and $71,788, respectively to Mr.
Leventhal in accrued unpaid salary.

In
September 2002 Mr. Leventhal guaranteed a $40,000 loan to the Company. As
compensation for the loan guarantee we issued a warrant to Mr. Leventhal to
purchase, until September 3, 2007, 256,904 shares of the Companys common
stock at an exercise price of $0.47 per share, the same exercise price
applicable to other warrants we issued to unrelated third parties at or about
the same time.

37

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Item
13. Exhibits and Reports on Form 8-K

(a)
Exhibits. The exhibits required by Item 601 of Regulation S-B are listed
below and are filed with this report or incorporated herein by reference to a
prior filing, as indicated.

|Exhibit Number | Description                                                                                      | Location                                                                                          
|-------------- | ------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------
|               |                                                                                                  |                                                                                                   
|Exhibit 2.1    | Share Exchange Agreement dated August 23, 2002, including exhibits thereto.                      | Incorporated by reference to Exhibit 1 to the Current Report on Form 8-K dated September 18, 2002.
|Exhibit 3.1    | Articles of Incorporation.                                                                       | Incorporated by reference to Exhibit 2.1 to Form 10 filed June 18, 1999.                          
|Exhibit 3.1(1) | Certificate of Amendment to the Articles of Incorporation.                                       | Incorporated by reference to Exhibit 3.2 to Current Report on Form 8-K dated October 30, 2002.    
|Exhibit 3.1(2) | Certificate of Amendment to the Articles of Incorporation.                                       | Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K dated October 30, 2002.    
|Exhibit 3.1(3) | Certificate of Change in Number of Authorized Shares of Common Stock.                            | Incorporated by reference to Exhibit 3.3 to Current Report on Form 8-K dated October 3, 2002.     
|Exhibit 3.2    | Bylaws.                                                                                          | Incorporated by reference to Exhibit 2.2 of Form 10 filed June 18, 1999.                          
|Exhibit 10.1   | Agreement and Plan of Acquisition of Watermark Technologies, Inc. by BitzMart, Inc.              | Filed herewith.                                                                                   
|Exhibit 10.2   | Sales Agent Agreement with Continental Advisors Srl dated July 15, 2002.                         | Filed herewith.                                                                                   
|Exhibit 10.3   | Research and Development Agreement between Watermark Technologies, Inc. and University of Miami. | Filed herewith.                                                                                   
|Exhibit 10.4   | License Agreement between Watermark Technologies, Inc. and University of Miami.                  | Filed herewith.                                                                                   

38

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|Exhibit Number | Description                                                                                        | Location                                                                                              
|-------------- | -------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------
|               |                                                                                                    |                                                                                                       
|Exhibit 10.5   | Consulting Agreement with GCH Capital, Ltd. dated effective July 1, 2002.                          | Filed herewith.                                                                                       
|Exhibit 10.6   | Warrant Agreement with GCH Capital, Ltd. effective as of October 1, 2002.                          | Filed herewith.                                                                                       
|Exhibit 10.7   | General Release Agreement between Stealth MediaLabs, Inc. and GCH Capital, Ltd. and other parties. | Filed herewith.                                                                                       
|Exhibit 10.8   | Mutual Release between Stealth MediaLabs, Inc. and Continental Advisors, Srl, and other parties.   | Filed herewith.                                                                                       
|Exhibit 10.9   | Form of Redeemable Common Stock Purchase Warrant issued by BitzMart, Inc. in August 2002.          | Filed herewith.                                                                                       
|Exhibit 10.10  | Engagement Agreement with Westminster Securities Corporation, dated December 20, 2002.             | Filed herewith.                                                                                       
|Exhibit 10.11  | Form of Warrant issued in December 2002.                                                           | Filed herewith.                                                                                       
|Exhibit 10.12  | Form of Office Lease dated effective December 1, 2002.                                             | Filed herewith                                                                                        
|Exhibit 10.13  | 2002 Consultant Compensation Plan adopted October 30, 2002.                                        | Incorporated by reference to Exhibit 10 to Registration Statement on Form S-8 filed December 20, 2002.
|Exhibit 10.14  | Form of Warrant Agreement With Westminster Securities Dec 20, 2002.                                | Filed herewith                                                                                        
|Exhibit 10.15  | Form of Stock Purchase Warrant dated October __, 2002.                                             | Filed herewith                                                                                        
|Exhibit 16.1   | Letter from Davidson & Company.                                                                    | Incorporated by reference to Exhibit 16.1 to Current Report on Form 8-K filed January 30, 2003.       
|Exhibit 21.1   | List of Subsidiaries.                                                                              | Filed herewith                                                                                        
|Exhibit 99.1   | Certification                                                                                      | Filed herewith                                                                                        

39

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(b)
Reports Filed on Form 8-K. We filed the following Current Reports on Form
8-K during the last quarter of our fiscal year ended October 31, 2002 and during
the first quarter of 2003:

|Date of Report     | Date Filed         | Items Reported                                                                                   
|------------------ | ------------------ | -------------------------------------------------------------------------------------------------
|September 16, 2002 | September 20, 2002 | Item 2.  Acquisition or Disposition of Assets.                                                   
|September 18, 2002 | September 24, 2002 | Item 2.  Acquisition or Disposition of Assets.                                                   
|October 30, 2002   | November 8, 2002   | Item 1. Changes in Control, Item 2.  Acquisition or Disposition of Assets, Item 5.  Other Events.
|December 13, 2002  | December 20, 2002  | Item 5.  Other Events.                                                                           
|January 15, 2003   | January 30, 2003   | Item 4. Changes in Registrants Certifying Accountant, Item 7. Financial Statements and Exhibits.

Item
14. Controls and Procedures

(a)
Evaluation of Disclosure Controls and Procedures. Our Chief Executive
Officer who is our only employee and also serves as the principal financial
officer evaluated the effectiveness of our disclosure controls and procedures
(as such term is defined in Rules 13a-14(c) and 15d-14(c) under the Securities
Exchange Act of 1934, as amended (the Exchange Act)) as of a date
within 90 days prior to the filing date of this annual report (the
Evaluation Date). Based on such evaluation, he concluded that, as of
the Evaluation Date, our disclosure controls and procedures were reasonably
effective in alerting him on a timely basis to material information relating to
our company (including our consolidated subsidiaries) required to be included in
our reports filed or submitted under the Exchange Act. However, because of our
limited staff and other resources and our relative inexperience in filing
reports under the Exchange Act, he concluded that our disclosure controls and
procedures should be improved as our resources permit.

(b) Changes in Internal Controls. Since the Evaluation Date, there have not
been any significant changes in our internal controls or in other factors that
could significantly affect such controls. We have taken steps to formalize our
regular and recurring transaction recording procedures, and we have retained a
consultant on a temporary basis to assist us to properly record and report our
financial condition.

40

---

# STEALTH
MEDIALABS, INC.
(A Development Stage Entity)

INDEX TO THE
FINANCIAL STATEMENTS

`Page
                                                                                                     ---------------

Independent Auditors Report                                                                            F2


Consolidated Balance Sheets as of October 31, 2002 and 2001                                             F3


Consolidated Statements of Operations for the Years Ended October 31, 2002 and 2001 and the
 Period from September 25, 2000 (Commencement of Operations) to October 31, 2002                        F4


Consolidated Statements of Stockholders' Equity for the Years Ended October 31, 2002 and 2001
 and the Period from September 25, 2000 (Commencement of Operations) to October 31, 2002                F5


Consolidated Statements of Cash Flows for the Years Ended October 31, 2002 and 2001 and the
 Period from September 25, 2000 (Commencement of Operations) to October 31, 2002                        F8


Notes to Financial Statements                                                                           F9`

F-1

---

# INDEPENDENT
AUDITORS REPORT

Board
of Directors and ShareholdersStealth MediaLabs, Inc.Richmond, Illinois

We
have audited the accompanying consolidated balance sheets of Stealth MediaLabs,
Inc. (a development stage entity) as of October 31, 2002 and 2001, and the
related consolidated statements of operations, stockholders equity, and
cash flows for the years then ended and for the period September 25, 2000
(commencement of operations) through October 31, 2002. These financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Stealth MediaLabs, Inc. as of
October 31, 2002 and 2001, and the results of operations, changes in
stockholders equity and its cash flows for the years then ended and for
the period September 25, 2000 (commencement of operations) through October 31,
2002 in conformity with accounting principles generally accepted in the United
States of America.

The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As shown in the financial statements, the
Company incurred a net loss of $1,460,127 and $708,408 during the years ended
October 31, 2002 and 2001, respectively, and, as of October 31, 2002 had a
working capital deficiency of $76,432. Also as disclosed in Note 3 to the
financial statements, the Company does not currently have sufficient funds to
execute its business plan. These conditions raise substantial doubt about the
Companys ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

/s/  L J
SOLDINGER ASSOCIATES

Arlington
Heights, Illinois

February 28,
2003

F-2

---

STEALTH
MEDIALABS, INC.
(A Development Stage Entity)
Consolidated Balance Sheets

ASSETS

|                                                               | October 31, |                
|-------------------------------------------------------------- | ----------- | ---------------
|
|Current Assets                                                 |             |                
|Cash and cash equivalents                                      |             | $    172,596   
|Prepaid offering cost                                          |             | --             
|                                                               |     |                
|Total Current Assets                                           |             | 172,596        
|Property and Equipment, net                                    |             | 46,592         
|Intangible Assets, net                                         |             | 140,400        
|                                                               |     |                
|                                                               |             | $    359,588   
|                                                               |     |                
|                                                               |     |                
|LIABILITIES AND STOCKHOLDERS' EQUITY                           |            
|                                                               |             |                
|Current Liabilities                                            |            
|Loans from an officer and director                             |             | $           200
|Accounts payable                                               |             | 6,437          
|                                                               |             |                
|Accrued liabilities                                            |             | 242,391        
|                                                               |     |                
|Total Current Liabilities                                      |             | 249,028        
|                                                               |     |                
|Commitments and Contingencies                                  |            
|Stockholders' Equity                                           |            
|Common stock; $.001 par value; authorized - 50,000,000 shares; |            
|issued and outstanding - 21,186,799 shares in 2002 and         |            
|14,712,796 shares in 2001                                      |             | 21,187         
|Additional paid-in capital                                     |             | 2,810,923      
|Deferred compensation                                          |             | (279,342       
|Subscription receivable                                        |             | (200,000       
|Deficit accumulated in the development stage                   |             | (2,242,208     
|                                                               |     |                
|Total Stockholders' Equity                                     |             | 110,560        
|                                                               |     |                
|                                                               |             | $    359,588   
|                                                               |     |                
|                                                               |     |                

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

F-3

---

STEALTH
MEDIALABS, INC.
(A Development Stage Entity)
Consolidated Statements of Operations

|                                       | Years Ended October 31,2002                       2001 | September 25,2000(Commencement)to October 31,2002 |           
|-------------------------------------- | ------------------------------------------------------ | ------------------------------------------------- | ----------
|Revenue                                |                                                        | $        11,000                                   |           
|Cost of Goods Sold - Related Party     |                                                        | 6,000                                             |           
|                                       |                                              |                                                   | 
|Gross Profit                           |                                                        | 5,000                                             |           
|                                       |                                              |                                                   | 
|Expense                                |                                                       
|Business promotion expense             |                                                        | 67,674                                            |           
|Depreciation and amortization expense  |                                                        | 36,825                                            |           
|General administration                 |                                                        | 1,037,583                                         |           
|Research & development - related party |                                                        | 135,800                                           |           
|Research & development                 |                                                        | 12,990                                            |           
|                                       |                                              |                                                   | 
|Total Expense                          |                                                        | 1,290,872                                         |           
|                                       |                                              |                                                   | 
|Operating Loss                         |                                                        | (1,285,872                                        | )         
|                                       |                                              |                                                   | 
|Other (Income) and Expense             |                                                       
|Interest income                        |                                                        | (1,438                                            | )         
|Interest expense                       |                                                        | 175,693                                           |           
|                                       |                                              |                                                   | 
|Net Other Expense                      |                                                        | 174,255                                           |           
|                                       |                                              |                                                   | 
|Net Loss to Common Stockholders        |                                                        | $(1,460,127                                       | )         
|                                       |                                              |                                                   | 
|                                       |                                              |                                                   | 
|Basic and Diluted Loss Per Share       |                                                        | $         (0.09                                   | )         
|                                       |                                              |                                                   | 
|                                       |                                              |                                                   | 
|Weighted Average Number of Shares of   |                                                       
|Common Stock Outstanding               |                                                        | 15,986,499                                        |           
|                                       |                                              |                                                   | 
|                                       |                                              |                                                   | 

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

F-4

---

STEALTH
MEDIALABS, INC.
(A Development Stage Entity)
Consolidated Statement of Stockholders Equity

|                                          | Common StockShares          Amount | AdditionalPaid-InCapital | SubscriptionReceivable | DeferredCompensation | AccumulatedDuring theDevelopmentStage |                
|----------------------------------------- | ---------------------------------- | ------------------------ | ---------------------- | -------------------- | ------------------------------------- | ---------------
|Balance, September 25, 2000               |                                    |                          |                        |                      |                                       |                
|(Commencement of Operations)              |                                    | --                       |                        | $       --           |                                       | $            --
|Founders' Contributions, October 31, 2000 |                                    | 9,633,900                |                        | 9,634                |                                       | 363,366        
|Net Loss                                  |                                    | --                       |                        | --                   |                                       | --             
|                                          |                             |                          |                   |                      |                                |                
|Balance, October 31, 2000                 |                                    | 9,633,900                |                        | 9,634                |                                       | 363,366        
|                                          |                             |                          |                  |                      |                                |                
|Founders' Contribution, December 30, 2000 |                                    | --                       |                        | --                   |                                       | --             
|Common stock issued to acquire Watermark  |                                   
|Technologies, Inc., April 17, 2001;       |                                   
|3,211,300 shares at $0.05 per share       |                                    | 3,211,300                |                        | 3,211                |                                       | 152,789        
|Common stock issued to purchase fixed     |                                   
|assets, May 4, 2001; 141,297 shares at    |                                   
|$0.47 per share                           |                                    | 141,297                  |                        | 141                  |                                       | 65,859         
|Common stock issued in private placement  |                                   
|net of issuance costs of $108,249,        |                                   
|March - August 2001; 1,084,039 shares     |                                   
|at $0.46 per share                        |                                    | 1,084,039                |                        | 1,084                |                                       | 394,121        
|Warrants to purchase shares of common     |                                   
|stock issued for raising capital for      |                                   
|private                                   |                                   
|placement, August 17,2001; 89,916         |                                   
|warrants valued at $0.35 per warrant      |                                    | --                       |                        | --                   |                                       | 31,178         
|Common stock issued in connection with    |                                   
|strategic alliance consulting             |                                   
|agreement;                                |                                   
|September 14, 2001;  624,260 shares       |                                   
|at $0.47 per share                        |                                    | 642,260                  |                        | 643                  |                                       | 299,357        
|Amortization of Deferred Compensation     |                                    | --                       |                        | --                   |                                       | --             
|Net Loss                                  |                                    | --                       |                        | --                   |                                       | --             
|                                          |                              |                          |                   |                      |                                 |                
|Balance, October 31, 2001                 |                                    | 14,712,796               |                        | 14,713               |                                       | 1,306,670      
|                                          |                             |                          |                  |                      |                                |                
|Common stock issued in connection with    |                                   
|strategic alliance consulting             |                                   
|agreement;                                |                                   
|November 1, 2001; 321,130 shares at       |                                   
|$0.47 per share                           |                                    | 321,130                  |                        | 321                  |                                       | 149,679        
|                                          |                             |                          |                  |                      |                                |                
|Balances Brought Forward                  |                                    | 15,033,926               |                        | $15,034              |                                       | $1,456,349     
|                                          |                             |                          |                  |                      |                                |                

See  notes to
condensed financial statements.

F-5

---

STEALTH
MEDIALABS, INC.
(A Development Stage Entity)
Consolidated Statement of Stockholders Equity

|                                       | Common StockShares         Amount | AdditionalPaid-InCapital | SubscriptionReceivable | DeferredCompensation | DeficitAccumulatedDuring theDevelopmentStage |           
|-------------------------------------- | --------------------------------- | ------------------------ | ---------------------- | -------------------- | -------------------------------------------- | ----------
|Balances Brought Forward               |                                   | 15,033,926               |                        | $15,034              |                                              | $1,456,349
|Warrants to purchase shares of common  |                                  
|stock issued for director's            |                                  
|compensation,                          |                                  
|November 14, 2001; 224,791 warrants    |                                  
|valued at $0 per warrant               |                                   | --                       |                        | --                   |                                              | --        
|Common stock issued in private         |                                  
|placement                              |                                  
|net of issuance costs of $72,465,      |                                  
|November 30, 2001; 430,956 shares      |                                  
|at $0.47 per share                     |                                   | 430,956                  |                        | 431                  |                                              | 128,404   
|Warrants to purchase shares of common  |                                  
|stock issued for raising capital for   |                                  
|private placement, November 30, 2001,  |                                  
|43,096 warrants valued at $0.35 per    |                                  
|warrant                                |                                   | --                       |                        | --                   |                                              | 14,912    
|Exercise of 430,956 unit warrants from |                                  
|private placement; November 30, 2001;  |                                  
|592,565 shares                         |                                   | 592,565                  |                        | 593                  |                                              | 8,634     
|Warrants to purchase shares of common  |                                  
|stock issued for consulting services,  |                                  
|June                                   |                                  
|19, 2002; 199,422 warrants valued at   |                                  
|$0.15 per warrant                      |                                   | --                       |                        | --                   |                                              | 30,342    
|Warrants to purchase shares of common  |                                  
|stock issued in connection with        |                                  
|convertible notes, August 1, 2002;     |                                  
|1,750,000 warrants valued at $0.10     |                                  
|per warrant                            |                                   | --                       |                        | --                   |                                              | 169,781   
|Warrants to purchase shares of common  |                                  
|stock issued for financing fee,        |                                  
|September                              |                                  
|3, 2002; 256,904 warrants valued at    |                                  
|$0.17 per warrant                      |                                   | --                       |                        | --                   |                                              | 43,068    
|                                       |                             |                          |                  |                      |                                        |           
|Balances Brought Forward               |                                   | 16,057,447               |                        | 16,058               |                                              | 1,851,490 
|                                       |                             |                          |                  |                      |                                        |           

See  notes to
condensed financial statements.

F-6

---

STEALTH
MEDIALABS, INC.
(A Development Stage Entity)
Consolidated Statement of Stockholders Equity

|                                        | Common StockShares            Amount | AdditionalPaid-InCapital | SubscriptionReceivable | DeferredCompensation | DeficitAccumulatedDuring theDevelopmentStage |            
|--------------------------------------- | ------------------------------------ | ------------------------ | ---------------------- | -------------------- | -------------------------------------------- | -----------
|Balances Brought Forward                |                                      | 16,057,447               |                        | $16,058              |                                              | $ 1,851,490
|Warrants to purchase shares of common   |                                     
|stock issued for consulting services,   |                                     
|September 3, 2002; 128,452 warrants     |                                     
|valued at $0.17 per warrant             |                                      | --                       |                        | --                   |                                              | 21,534     
|Common stock issued, October 30, 2002;  |                                     
|184,615 shares at $1.08 per share       |                                      | 184,615                  |                        | 185                  |                                              | 199,815    
|Conversion notes payable and accrued    |                                     
|interest net of issuance cost of        |                                     
|$81,159,                                |                                     
|October 30, 2002; 660,500 shares        |                                     
|converted at $0.50                      |                                      | 660,500                  |                        | 661                  |                                              | 248,429    
|Exercise of warrants with conversion of |                                     
|notes net of issuance cost of $39,000;  |                                     
|October 31, 2002; 400,000 shares        |                                     
|at $0.50 per share                      |                                      | 400,000                  |                        | 400                  |                                              | 160,600    
|Common stock issued for consulting      |                                     
|services, October 30, 2002; 684,000     |                                     
|shares                                  |                                     
|at $0.35 per share                      |                                      | 684,000                  |                        | 684                  |                                              | 239,316    
|Warrants to purchase shares of common   |                                     
|stock issued for consulting services,   |                                     
|October 30, 2002, 325,000 warrants      |                                     
|valued                                  |                                     
|at $0.19 per warrant                    |                                      | --                       |                        | --                   |                                              | 61,750     
|Common stock issued in connection with  |                                     
|the merger, October 30, 2002;           |                                     
|3,118,750 shares at $0.01 per share     |                                      | 3,118,750                |                        | 3,118                |                                              | 24,950     
|Warrants to purchase shares of common   |                                     
|stock issued in connection with the     |                                     
|merger,                                 |                                     
|October 30, 2002; 3,000,000 warrants    |                                     
|valued at $0.001 per warrant            |                                      | --                       |                        | --                   |                                              | 3,120      
|Common stock of pre-merger shareholders |                                      | 81,487                   |                        | 81                   |                                              | (81        
|Amortization of Deferred Compensation   |                                      | --                       |                        | --                   |                                              | --         
|Net Loss                                |                                      | --                       |                        | --                   |                                              | --         
|                                        |                               |                          |                   |                      |                                      |            
|Balance at October 31, 2002             |                                      | 21,186,799               |                        | $21,187              |                                              | $ 2,810,923
|                                        |                               |                          |                   |                      |                                      |            
|                                        |                               |                          |                   |                      |                                      |            

See  notes to
condensed financial statements.

F-7

---

STEALTH
MEDIALABS, INC.
(A Development Stage Entity)
Consolidated Statements of Cash Flows

|                                                | Years Ended October 31,2002                     2001 | September 25,2000(Commencement)to October 31,2002 |         
|----------------------------------------------- | ---------------------------------------------------- | ------------------------------------------------- | --------
|Cash Flows from Operating Activities            |                                                      |                                                   |         
|Net loss                                        |                                                      | $(1,460,127                                       | )       
|Adjustments to reconcile net income to net cash |                                                     
|provided by operations                          |                                                     
|Consulting fees paid by issuance of warrant     |                                                      | 245,791                                           |         
|Amortization of loan discount                   |                                                      | 169,781                                           |         
|Non-cash interest expense                       |                                                      | 5,250                                             |         
|Amortization of deferred compensation           |                                                      | 315,742                                           |         
|Depreciation and amortization                   |                                                      | 47,225                                            |         
|Changes in liabilities                          |                                                     
|Accounts payable                                |                                                      | 6,438                                             |         
|Accrued payroll - related party                 |                                                      | 85,000                                            |         
|Accrued expenses                                |                                                      | 57,407                                            |         
|                                                |                                             |                                                   | 
|Net Cash Used In Operating Activities           |                                                      | (527,493                                          | )       
|                                                |                                             |                                                   | 
|Cash Flows from Investing Activities            |                                                     
|Purchase of fixed assets                        |                                                      | --                                                |         
|                                                |                                             |                                                   | 
|Net Cash Used In Investing Activities           |                                                      | --                                                |         
|                                                |                                             |                                                   | 
|Cash Flows from Financing Activities            |                                                     
|Net proceeds from convertible debt              |                                                      | 272,000                                           |         
|Loans from director and officers                |                                                      | --                                                |         
|Repayment of loans from directors and officers  |                                                      | (1,800                                            | )       
|Net proceeds from exercise of warrants          |                                                      | 161,000                                           |         
|Net proceeds from issuance of common stock      |                                                      | 166,872                                           |         
|Collection of subscription receivable           |                                                      | --                                                |         
|Proceeds of borrowings from bank                |                                                      | 40,000                                            |         
|Repayment of bank loan                          |                                                      | (40,000                                           | )       
|                                                |                                             |                                                   | 
|Net Cash Provided By Financing Activities       |                                                      | 598,072                                           |         
|                                                |                                             |                                                   | 
|Net Increase in Cash and Cash Equivalents       |                                                      | 70,579                                            |         
|Cash and Cash Equivalents, Beginning of Period  |                                                      | 102,017                                           |         
|                                                |                                             |                                                   | 
|Cash and Cash Equivalents, End of Period        |                                                      | $    172,596                                      |         
|                                                |                                             |                                                   | 
|                                                |                                             |                                                   | 

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

F-8

---

STEALTH
MEDIALABS, INC.
(A Development Stage Entity)
Notes to Financial Statements

NOTE 1 -
DESCRIPTION OF BUSINESS

Nature
of Operations

Stealth
MediaLabs, Inc. (the Company) develops and markets proprietary
software and services for professional media content owners. Target markets
include movie and video studios, television networks, record labels, terrestrial
and satellite radio networks, advertisers, post-productions studios and
distributors of most forms of digital media. The Companys primary mission
is to develop processes and technology for enhancing the profitability of
digitized media distribution. To that end, Stealth MediaLabs controls a unique
technology for embedding large amounts of indelible, hidden, highly-compressed
data within analog or digital audio streams.

The
Company is pursing alliances with various technology vendors to widely
distribute the proprietary decoders via entertainment players in general and PC
operating systems in particular. An initial critical mass of high
volume distribution is necessary to demonstrate a trend and achieve distribution
among all types of player makers.

The
Company is establishing reseller relationships with technical service companies
who are already acting as major suppliers to large, dominant media companies.
The Company expects to earn revenue by licensing its patented technology and
providing encoding services related to its use for anti-piracy, security, and
promotional marketing messages. Ancillary applications for subsequent
exploration include national security applications, hardware devices for
in-theater, anti-piracy applications and, and tactical force-feedback in video
game peripherals.

The
Company has also developed and test marketed a concept which adds a satellite
TV, radio systems, laptop PC with wireless internet access, DVD, and
Playstation2 entertainment systems to automobiles. This project has been named
Rolling Dreams and, if successful, may provide a minimal cash flow to
support the Companys administrative costs during the next few months.

History

The
Company, formerly Kidstoysplus.com, Inc., was incorporated under the laws of the
state of Nevada on February 4, 1999. In October 2002, the Company was a public
shell company, defined as an inactive, publicly-quoted company with no assets
and liabilities.

On
October 30, 2002, BitzMart, Inc. (BitzMart), a Colorado corporation
formed on September 25, 2000, was merged into and became a wholly-owned
subsidiary of the Company. Upon completion of this recapitalization, the Company
changed its name to Stealth MediaLabs, Inc. The Company is the surviving legal
entity. The operations and financial statements of the Company are those of
BitzMart

In
connection with the merger, the Company issued 16,057,444 shares of its common
stock along with warrants to purchase 942,579 shares of the Companys
common stock at various exercise prices to the shareholders of BitzMart in a
1:6.4226 exchange for all of BitzMarts outstanding common stock and all of
its outstanding warrants to purchase shares of common stock. As a result of the
transaction, the former shareholders of BitzMart acquired a majority interest in
the Company.

NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis
of Presentation

The
Companys financial statements are prepared on the accrual basis of
accounting in accordance with United States generally accepted accounting
principles (US GAAP).

F-9

---

STEALTH
MEDIALABS, INC.
(A Development Stage Entity)
Notes to Financial Statements

NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The
combination of the Company and BitzMart, Inc. has been treated as a
recapitalization of the Company. The Company was the legal acquirer in the
merger. BitzMart, Inc. was the accounting acquirer since its stockholders
acquired a majority ownership interest in the Company. Consequently, the
historical financial information included in the financial statements of the
Company prior to October 30, 2002 is that of BitzMart, Inc. All historical share
and per share data presented for transactions occurring prior to the October 30,
2002 merger have been restated to reflect the share exchange ratio of 1 for
6.4226.

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.

Since
the inception of the Company, management has been in the process of raising
capital through private placement stock offerings, effecting its business
merger, and performing research and development activities.

Use
of Estimates

The
preparation of financial statements in conformity with generally accepted
accounting principles requires the Company to make estimates and assumptions
that affect reported amounts of assets, liabilities, income and expenses and
disclosures of contingencies. Actual results could differ from the estimates and
judgments made in preparing these financial statements.

Principles
of Consolidation

These
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiary, Watermark Technology, Inc. (WTI), a Florida
corporation, incorporated May 5, 2000. All intercompany transactions have been
eliminated on consolidation.

Revenue
Recognition

Revenue
from the direct sale of products is recognized when the Company delivers the
products to the customer.

Cash
and Cash Equivalents

Cash
and cash equivalents consist of cash on deposit and term deposits in money
market instruments with maturity dates of less than three months from the date
they are acquired. 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.

Property
and Equipment

Property
and equipment are recorded at cost, less accumulated depreciation computed on a
straight-line basis over the estimated useful lives of the respective assets.
Computer related equipment and software are being depreciated over 3 years.
Furniture and fixtures are being depreciated over 5 years. The Company
periodically reviews the carrying value of its property, plant and equipment
based on the undiscounted future cash flow from operating results to determine
whether such values are recoverable. Any resulting write-downs are charged to
earnings.

F-10

---

STEALTH
MEDIALABS, INC.
(A Development Stage Entity)
Notes to Financial Statements

NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income
Taxes

Income
taxes are recorded in the period in which the related transactions are
recognized in the financial statements, net of the valuation allowances which
have been recorded against deferred tax assets. Deferred tax assets and
liabilities are recorded for the expected future tax consequences of temporary
differences between the tax basis and the financial reporting of assets and
liabilities. Net deferred tax assets and liabilities, relating primarily to
federal and state net operating loss carryforwards, compensation for services
through the issuance of stock and warrants, and research and development credits
that have been deferred for tax purposes have been reduced by a valuation
allowance, because management has determined it is more likely than not, that
some portion or the entire deferred tax asset will not be realized.

Fair
Value of Financial Instruments

The
Companys financial instruments, including cash and cash equivalents,
accounts payable and accrued expenses, are carried at cost, which approximates
fair value.

Loss
Per Share

Loss
per common share is calculated in accordance with Statement of Financial
Accounting Standards No. 128, Earnings Per Share (FAS 128).
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
preferred stock are not included because their inclusion would be antidilutive
(i.e., reduce the net loss per share).

The
common shares potentially issuable arising from these instruments, which were
outstanding at October 31, 2002 and October 31, 2001 are shown as follows:

|               | October 31, |           
|-------------- | ----------- | ----------
|
|Exercise Price |             | $0.35-0.56
|Shares         |             | 5,617,581 

Segmented
Information

The
Companys business operations are contained within a single business
segment and operate solely within the United States.

Research
and Development Costs

The
cost of research, development and product improvement expenditures are charged
to expense as they are incurred. Research, development and product improvement
costs included in operating expenses amounted to $148,790 and $214,185 for the
periods ended October 31, 2002 and October 31, 2001, respectively.

Recent
Accounting Pronouncements

The
FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations in August 2001. This statement is effective for fiscal years
beginning after June 15, 2002. This statement addresses financial accounting and
reporting associated with the retirement of tangible long-lived assets and the
associated asset retirement cost. This new statement is not expected to have any
impact on the results of operations or financial position of the Company.

F-11

---

STEALTH
MEDIALABS, INC.
(A Development Stage Entity)
Notes to Financial Statements

NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In
December 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets that is applicable to the Companys
fiscal financial statements beginning after December 15, 2001. The FASBs
new rules on asset impairment supersede FASB Statement No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of, and provide a single accounting model for the disposition of
long-lived assets. The Company adopted the provisions of SFAS No. 144 effective
for accounting periods subsequent to January 1, 2002.

In April 2002,
the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 62,
Amendment of FASB  Statement No. 13, and Technical Corrections." For most companies,
SFAS No. 145 will require gains and losses on  extinguishments of debt to be classified
as income or loss from continuing operations rather than as  extraordinary items as
previously required under SFAS No. 4. Extraordinary treatment will be required for
certain  extinguishments as provided in Accounting Principles Board Opinion No. 30.  SFAS
No. 145 also amends SFAS No. 13  to require certain modifications to capital leases be
treated as a sale-leaseback and modifies the accounting  for sub-leases when the original
lessee remains a secondary obligor (or guarantor). SFAS No. 145 is effective for
financial statements issued on or after May 15, 2002, and is not expected to have a
material impact on the  results of operations or financial position of the Company.

FASB
Statement 146, Accounting for Costs Associated with Exit or Disposal
Activities, addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies EITF Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). The principal difference between Statement 146 and Issue
94-3 relates to Statement 146s requirements for recognition of a liability
for a cost associated with an exit or disposal activity. Statement 146 requires
that a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. Under Issue 94-3, a liability for an
exit cost as generally defined in Issue 94-3 was recognized at the date of an
entitys commitment to an exit plan. A fundamental conclusion reached by
the FASB in this Statement is that an entitys commitment to a plan, by
itself, does not create an obligation that meets the definition of a liability.
Therefore, this Statement eliminates the definition and requirements for
recognition of exit costs in Issue 94-3. This Statement also establishes that
fair value is the objective for initial measurement of the liability. The
provisions of this statement are effective for exit or disposal activities that
are initiated after December 31, 2002, and is not expected to have a material
impact on the results of operations or financial position of the Company.

NOTE 3 - GOING
CONCERN

The
Company currently is pursuing additional financing to fund the product
development and marketing efforts during the coming year. Existing funds are
insufficient to execute the marketing alliance plan for revenue development and
make programming modifications to the decoder application requested by specific
operating system vendors. There are no assurances the Company will receive funding
necessary to continue the execution of the encoder marketing and decoder
distribution plans, potentially resulting in the liquidation of the Company.

NOTE 4 -
INTANGIBLE ASSETS

On
April 20, 2001, the Company acquired Watermark Technologies, Inc., from the UTEK
Corporation in return for 3,211,300 shares of the Companys common stock.
WTIs only asset was a technology license, which WTI acquired by entering
into a license agreement with the University of Miami (Licensor) on
April 17, 2001. The license was assigned to the Company as a result of the
acquisition. WTI paid a total of $156,000 to the University of Miami, consisting
of $20,000 for an initial license fee and $136,000 for related research and
development enhancements, the total of which was determined to be the fair
market value of the license. The Company is required to pay minimum royalty payments
of $10,000, $15,000 and $20,000 for each of the three years subsequent to April
17, 2001, respectively, and $25,000 for all subsequent years. The license
expires on April 17, 2016 or on the expiration of the underlying patent whichever
is earlier. The Licensor can terminate the license agreement (as amended) if the
Company
has no commercial sales or, has not sublicensed the licensed product to a
company with sales over $10 million, by February 2004.

F-12

---

STEALTH
MEDIALABS, INC.
(A Development Stage Entity)
Notes to Financial Statements

NOTE 4  INTANGIBLE
ASSETS (Continued)

The
Company is amortizing the intangible asset over the term of 15 years. The
Company will evaluate this intangible for impairment annually under FAS 144
Accounting For The Impairment or Disposal of Long-Lived Assets.

As of
October 31, 2002 and 2001, the Company has amortized $10,400 and $5,200,
respectively, of the cost of the technology license. The amortization related to
the technology license is recorded as research and development cost as required
by SFAS No. 2, Accounting for Research and Development Costs.

NOTE 5 -
PROPERTY AND EQUIPMENT

Property
and equipment consisted of the following at October 31:

|                               | 2002     | 2001      
|------------------------------ | -------- | ----------
|Computer hardware and software |          | $ 109,165 
|Furniture and fixture          |          | 2,180     
|                               |  |           
|                               |          | 111,345   
|Less accumulated depreciation  |          | (64,753   
|                               |  |           
|                               |          | $   46,592
|                               |  |           
|                               |  |           

NOTE 6 -
ACCRUED LIABILIITES

Accrued
liabilities consist of the following at October 31:

|                                                | 2002     | 2001    
|----------------------------------------------- | -------- | --------
|Accrued employee compensation and benefit costs |          | $156,788
|Accrued professional fees and insurance         |          | 85,603  
|                                                |  |         
|                                                |          | $242,391
|                                                |  |         
|                                                |  |         

The
Company does not have any liability or asset protection insurance policies, and
is not aware of any contingencies which would require an accrual for potential
loss.

NOTE 7 - LOANS
FROM OFFICERS AND DIRECTORS

The
Company received loans from its officers totaling $76,550 as interim financing
during the fiscal year ended October 31, 2001. As of October 31, 2002 and 2001,
the outstanding balances on the loans were $200 and $2,000, respectively.

F-13

---

STEALTH
MEDIALABS, INC.
(A Development Stage Entity)
Notes to Financial Statements

NOTE 8 -
CONVERTIBLE PROMISSORY NOTE

On
August 1, 2002, the Company issued two convertible promissory notes in the total
amount of $325,000 with a stated annual interest rate of 12%, due and payable on
August 1, 2004. The notes had detachable warrants which entitle the note holders
to purchase up to 1,750,000 shares of the Companys common stock at the
exercise price of $0.50 per share until December 31, 2004.

The
note holders were entitled to convert the unpaid note principal and accrued
interest into the Companys common stock until maturity, at a conversion
price that equals to $0.50 of principal and accrued interest. Upon the merger,
the $325,000 unpaid principal and $5,250 accrued interest mandatorily
converted into 660,500 shares of the Companys common stock and 400,000 of
the detachable warrants were exercised at $0.50 per share. As of October 31,
2002, 1,350,000 of the warrants remained outstanding.

The
note and detachable warrants were valued at $159,353 and $165,647, respectively,
in accordance with Emerging Issues Task Force Issue (EITF) No. 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. An
intrinsic value of $10,429 was recorded for the notes beneficial
conversion feature. As a result, the notes were discounted in the amount of
$169,782. The entire amount of the discount was expensed upon conversion of the
notes.

NOTE 9 - 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, tax credits and
compensation through the issuance of stock and warrants that give rise to
significant portions of the deferred tax assets recognized are presented below:

|                                                    | October 31, |              
|--------------------------------------------------- | ----------- | -------------
|
|Deferred tax assets:                                |             |              
|Stocks and warrants                                 |             | $   46,413   
|Accrued executive compensation                      |             | 62,010       
|Federal and state deferred tax benefit arising from |            
|net operating loss carryforwards                    |             | 667,323      
|                                                    |     |              
|                                                    |             | 775,746      
|                                                    |     |              
|Deferred tax liabilities:                           |            
|Accumulated depreciation and amortization           |            
|                                                    |             | (48,146      
|Stocks and warrants                                 |             | --           
|                                                    |     |              
|                                                    |             | (48,146      
|                                                    |     |              
|Net deferred tax asset                              |             | 727,600      
|Less valuation allowance                            |             | (727,600     
|                                                    |     |              
|Total deferred tax assets                           |             | $          --
|                                                    |     |              
|                                                    |     |              

F-14

---

STEALTH
MEDIALABS, INC.
(A Development Stage Entity)
Notes to Financial Statements

NOTE 9 - INCOME
TAXES (Continued)

Income
tax benefit (expense) consists of the following at October 31:

|         | October 31, |     
|-------- | ----------- | ----
|
|Current  |             | $ --
|Deferred |             | $ --

The
Company had losses which resulted in net operating loss carryforwards for tax
purposes that may be offset against future taxable income amounting to
approximately $667,331 on October 31, 2002, which expire in 2022 and $362,364 on
October 31, 2001, which expire in 2021. However, these carryforwards and credits
may be significantly limited due to changes in the ownership of the Company as a
result of future equity offerings.

Recognition
of the benefits of the deferred tax assets and liabilities will require that the
Company generate future taxable income. There can be no assurance that the
Company generate any earnings or any specific level of earnings in future years.
Therefore, the Company has established a valuation allowance for deferred tax
assets (net of liabilities) of approximately $727,600 AND $260,000 as of October
31, 2002 AND 2001.

In
accordance with federal income tax regulations, the net loss incurred by
Kidstoysplus.com, Inc. 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
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%.

|                                                            | October 31, |              
|----------------------------------------------------------- | ----------- | -------------
|
|Federal income tax benefit at statutory rate                |             | $ 511,000    
|State income tax benefit (net of effect of federal benefit) |             | 83,700       
|Non-deductible expenses                                     |             | (187,800     
|NOL carryforward from previous years                        |             | 320,700      
|Valuation allowance                                         |             | (727,600     
|                                                            |     |              
|Income Tax Benefit                                          |             | $          --
|                                                            |     |              
|Effective Income Tax Rate                                   |             | 0            
|                                                            |     |              

F-15

---

STEALTH
MEDIALABS, INC.
(A Development Stage Entity)
Notes to Financial Statements

NOTE 10 -
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Statements
of Cash Flows

The
supplemental cash flow disclosures are as follows:

|                          | Year Ended October 31, |       
|------------------------- | ---------------------- | ------
|
|Supplemental Disclosures: |                        |       
|Interest paid             |                        | $5,250
|Income taxes paid         |                        | --    
|                          |                  |       
|                          |                        | $5,250
|                          |                  |       
|                          |                  |       

In the
Statement of Cash Flows, the following non-cash adjustments were made for the
years ended October 31, 2002 and 2001:

In
April 2001, the Company issued 3,211,300 shares if its common stock in exchange
for all of the outstanding stock of WTI and its sole asset valued at $156,000.

In May
2001, the Company issued 141,297 shares of common stock with an ascribed value
of $66,000 for equipment.

In
September 2001, the Company issued 642,260 of its common stock in exchange for
$300,000 of consulting services.

In
November 2001, the Company issued 321,130 of its common stock in exchange for
$150,000 of consulting services.

During
the period from June to September 2002, the Company issued warrants valued at
$94,944 in exchange for various consulting services and fees.

In
August 2002, the Company issued $325,000 of convertible notes, from which
$53,000 of loan cost and a loan to an unrelated third party was deducted. In
addition, the above third party paid GCH Capital $200,000 for consulting
services provided to the Company. The Company also issued 184,615 shares of
common stock for which it recorded a subscription receivable in the amount of
$200,000. The notes plus $5,250 of accrued interest were converted to common
stock October 30, 2002. In connection with the issuance of the convertible
stock, the Company issued warrants valued at $169,781, which was considered a
discount on the note and subsequently fully expensed upon conversion of the
notes.

On
October 30, 2002, the Company issued warrants and common stock valued at $61,750
and $240,000, respectively, for consulting services.

On
October 30, 2002, the Company issued warrants and common stock to various
investors. The proceeds of $31,188 the Company was supposed to receive was
offset against the consulting fee the Company owed to GCH Capital.

As of
October 31, 2002 the Company has accrued $28,159 of professional fees related to
raising capital.

F-16

---

STEALTH
MEDIALABS, INC.
(A Development Stage Entity)
Notes to Financial Statements

NOTE 11 -
CAPITAL STOCK ACTIVITY

The
Companys Articles of Incorporation authorizes the issuance of 50,000,000
shares of common stock, $0.001 par value per share.

As
discussed in Note 1, the combination of BitzMart and Kidstoysplus.com, Inc. was
treated as a recapitalization of BitzMart, whereby the Company issued to the
shareholders of BitzMart 16,057,444 shares of common stock and warrants to
purchase 942,579 shares of Company common stock at various exercise prices in a
1:6.4226 exchange for all of BitzMarts outstanding shares of common stock
and all of its outstanding warrants to purchase shares of common stock.

Common
Stock

In
October 2000, the Company issued 9,633,900 shares of restricted common stock to
various individuals (the Founders Shares) in connection with the
formation of the Company. The Company received cash in the amount $331,950 and
fixed assets valued at $41,050 for the Founders Shares.

During
the period from March to September 2001, the Company completed a $503,453
private placement of 1,084,039 shares of its common stock at $0.47 per share. In
connection this first placement, the Company issued to a placement agent a
warrant to purchase up to 89,916 shares of the Companys common stock at an
exercise price of $0.56 per share with an expiration date of August 17, 2006.

In
April 2001, the Company issued 3,211,300 shares of its common stock to acquire a
corporation whose sole asset was a technology license. The fair value of the
technology license was deemed to be $156,000, the cost incurred by WTI to obtain
the license. See Note 4 for more details.

In May
2001, the Company issued 141,297 shares of its common stock as consideration for
the acquisition of computer and technology equipment valued at $66,000. The fair
value of the equipment was determined based on the amount paid for the
Companys common stock by third parties at or about the time the equipment
was acquired.

In
September 2001, the Company issued 642,260 shares of its common stock in
exchange for strategic consulting services valued at $300,000, determined based
on amounts paid by third parties for the Companys common stock.

In
November 2001, the Company issued 321,130 shares of its common stock in exchange
for strategic consulting services valued at $150,000, determined based on
amounts paid by third parties for the Companys common stock.

In
November 2001, the Company completed a $201,300 private placement of 430,956
units (Unit) at $0.47 per Unit. Each Unit consisted of 1 share of
the Companys common stock and a Unit warrant, which entitled the holder to
acquire 1.375 additional shares of common stock at an exercise price of $0.016
per share at anytime through December 31, 2003. All of the Unit warrants were
exercised as of October 31, 2002, resulting in additional issuance of 592,565
shares of the Companys common stock for $9,226 in cash. In connection with
this placement, the Company issued to a placement agent a warrant to purchase
43,096 shares of the Companys common stock at an exercise price of $0.56
per share.

On
October 30, 2002, upon the Companys acquisition of BitzMart, the entire
principal along with accrued interests of the convertible notes in the amount of
$330,250 were converted into 660,500 shares of the Companys common stock.
400,000 of the detachable warrants were exercised at $0.50 per share for a total
of $200,000.

In
October 2002, the Company issued 184,615 shares of its common stock for
$200,000. As of October 31, 2002, the Company hasnt received the payment
from the stock subscriber. In December 2002, the 184,615 shares of stock was
returned back to the Company as a result of mutual release agreement between the
subscriber and the Company, and the subscription was canceled.

F-17

---

STEALTH
MEDIALABS, INC.
(A Development Stage Entity)
Notes to Financial Statements

NOTE 11 -
CAPITAL STOCK ACTIVITY (Continued)

On
October 30, 2002, the Company issued 684,000 shares of its common stock, valued
at $240,000 at the Companys option in lieu of cash, in exchange for
investment banking and prepaid strategic consulting services rendered in
connection with the merger transaction described in Note 1. In addition, the
Company also issued a warrant to purchase up to 500,000 shares of the
Companys common stock, exercisable at the price of $0.35 per share, until
July 1, 2004, as additional compensation for the consulting services. The
warrants were valued at $61,750 in total.

On
October 30, 2002, the Company sold to six unrelated investors 3,118,750 shares
of its common stock and warrants to purchase up to 3,000,000 additional shares
of the Companys common stock at an exercise price of $0.35 per share,
until October 1, 2003, for $31,188.

Warrants
 Not Disclosed Elsewhere

In
November 2001, the Company issued a warrant to purchase up to 224,791 shares of
the Companys common stock at an exercise price of $0.56 per share,
exercisable until November 14, 2004, in payment for director fees. The warrants
had minimal value.

In
June 2002, the Company issued a warrant to purchase up to 199,422 shares of the
Companys common stock at an exercise price of $0.56 per share, exercisable
until December 31, 2006, in payment for consulting services. The warrants were
valued at $30,342.

In
September 2002, the Company issued a warrant to purchase up to 256,904 shares of
the Companys common stock at an exercise price of $0.47 per share,
exercisable until September 3, 2007, in payment to the Companys President
and CEO for guaranteeing a $40,000 loan to the Company. The warrants were valued
at $43,068.

In
September 2002, the Company issued a warrant to purchase up to 128,452 shares of
the Companys common stock at an exercise price of $0.47 per share,
exercisable until September 3, 2007, in payment for consulting services. The
warrants were valued at $21,534.

A
summary of the Companys outstanding stock warrants as of October 31, 2002
is as follows:

|Grant Date | Number ofWarrants | DateExercisable | Exercise PricePer Share | ExpirationDate
|---------- | ----------------- | --------------- | ----------------------- | --------------
|8/17/01    |                   | 89,916          |                         | 8/17/01       
|11/14/01   |                   | 224,791         |                         | 11/14/01      
|11/28/01   |                   | 43,096          |                         | 11/28/01      
|6/19/02    |                   | 199,422         |                         | 6/19/02       
|8/1/02     |                   | 1,350,000       |                         | 8/1/02        
|9/3/02     |                   | 256,904         |                         | 9/3/02        
|9/3/02     |                   | 128,452         |                         | 9/3/02        
|10/30/02   |                   | 325,000         |                         | 10/30/02      
|10/30/02   |                   | 3,000,000       |                         | 10/30/02      
|           |                   | _________       |                         |               
|           |                   |                 |                         |               
|Total      |                   | 5,617,581       |                        
|           |                   | =========       |                         |               

F-18

---

STEALTH
MEDIALABS, INC.
(A Development Stage Entity)
Notes to Financial Statements

NOTE 11 -
CAPITAL STOCK ACTIVITY (Continued)

Stock
Options

On
October 31, 2000 the Board of Directors of the Company approved the 2000 Incentive
and Non-Statutory Stock Option Plan (the Option Plan). The Option
Plan provides for the grant of incentive and non-qualified options to purchase
up to 2,000,000 shares of common stock to officers, directors, employees, and
other qualified persons that may be selected by the Plan Administrator (which
currently is the Board of Directors). The Plan is intended to help attract and
retain key Company employees and any other persons that may be selected by the
Plan Administrator and to give those persons an equity incentive to achieve the
objectives of the Companys shareholders.

Incentive
stock options may be granted to any individual who, at the time of grant, is an
employee of the Company or any related corporation. Non-qualified stock options
may be granted to employees and to any other persons that may be selected by the
Plan Administrator. The Plan Administrator fixes the term and exercise price for
options, subject to certain minimum exercise prices in the case of incentive
stock options, which prices shall not be less than 100% of market price on the
date of the grant. Options will not be exercisable until they vest according to
a vesting schedule specified by the Plan Administrator at the time of grant of
the option. No options have been granted under the Plan, and we do not expect
that the Company will grant any options.

As of
October 31, 2002, no stock options have been granted pursuant to the Plan.

On
October 30, 2002, the Companys Board of Directors adopted the 2002
Consultant Compensation Plan and authorized 3,000,000 shares to be reserved for
use in connection with grants of stock bonuses, nonqualified stock options (with
or without stock appreciation rights) or otherwise to consultants of the Company
as compensation or additional incentive. The plan permits the Board of
Directors, or a committee appointed by the Board of Directors, to grant
nonqualified stock options, SARs or stock bonuses to consultants selected by the
Board of Directors. Upon adoption of the plan, the Company issued to GCH
Capital, a consultant, the following consideration: (i) to right to purchase up
to 325,000 shares of our common stock at an exercise price of $0.35 per share at
any time during the period ended October 30, 2007, and (ii) 684,000 shares of
our common stock. In December 2002, we filed a registration statement on Form
S-8 registering all shares of common stock underlying the 2002 Consultant
Compensation Plan. 3,000,000 shares were reserved for issuance
upon exercise of nonqualified options or stock awards given under the 2002
Consultant Compensation Plan.  684,000 were issued in October 2002 under the
Plan.

NOTE 12 -
RELATED PARTY TRANSACTIONS

During
fiscal year 2002, the Company purchased a test vehicle for $6,000 from a
founding shareholder and a Director of the Company. The purchase price was based on
the wholesale Blue Book value of the vehicle.

During
fiscal year 2001, the Company received a loan from a founding shareholder in the
amount of $50,000. The Company repaid the loan in the same fiscal year and paid
interest of $2,027. During fiscal year ended October 31, 2001, the Company
received from the president, a non-interest bearing loan of
approximately $26,000. As of October 31, 2002, the remaining unpaid balance was
$200.

During
fiscal 2002 and 2001, the Company paid approximately $149,000 and $80,000,
respectively, to Windy City Software for rental of office space, internet
connectivity and computer programming services. The majority owner of Windy City
Software has served as a director of the Company since September 2002 and is the
non-employee Chief Technology Officer of the Company since September 2000. As of
October 31, 2002 and 2001, the amount of these payments for rent expense
amounted to $13,200 and $13,250, respectively.

During
fiscal 2002 and 2001, the spouse of the Companys president
(President) assisted the President and served as a consultant to the
Company, providing limited services related to capital raising, business
development and marketing. Also during this period the spouse advanced a total
of $88,000 to the Company to pay certain expenses and the Company reimbursed her
for those expenses during those years.

F-19

---

STEALTH
MEDIALABS, INC.
(A Development Stage Entity)
Notes to Financial Statements

NOTE 12 -
RELATED PARTIES (Continued)

During
fiscal 2002 and 2001, the Company made approximately $90,000 in payments to a
marketing consulting firm, owned by the Presidents spouse. These payments
were applied against the accrued salary owed to the President and recorded as
compensation expense. The payments should have been paid directly to the
President. Consequently, the Company inadvertently under-reported wages paid to
the President by $90,000. The related combined payroll tax liability of the
Company and the President was approximately $15,000. As of October 31, 2002 and
2001, the Company accrued $156,788 and $71,788, respectively, to the President
for unpaid salary.

In
September 2002, the President guaranteed a $40,000 loan to the Company. In
exchange for the loan guarantee, the Company issued a warrant to the President
to purchase 256,904 shares of the Companys common stock at an exercisable
price of $0.47 per share exercisable until September 3, 2007.

NOTE 13 -
COMMITMENTS AND CONTINGENCIES

The
Company is subject to a litigation claim for approximately $65,000 brought by a
former employee. Management believes the claim is without merit and intends to
defend itself vigorously in this matter.

The
Company is a party to a license agreement for certain technology developed at
the University of Miami. Failure to commercialize the licensed technology by
February 2004, or reimburse the University for patent fees and R&D expenses,
may result in cancellation of the license agreement and therefore lose the right
to utilize such technology, which could cause the Company to significantly alter
its business plan and operations.

NOTE 14 -
CONCENTRATIONS

The
Company currently has two products that are under development. Lack of product
development or customer interest could have a materially adverse effect on the
Company. Further, significant changes in technology could lead to new products
or services that compete with the product to be offered by the Company. These
changes could materially affect the Company by rendering the Companys
products obsolete.

In
2003, the Company will need to generate funding by raising capital through the
sale of common stock or the exercise of warrants. Should the Company fail to
obtain such funding, it may need to find alternative sources of financing, alter
its business plan or significantly curtail its operations.

NOTE 15 -
SUBSEQUENT EVENTS

Subsequent
to October 31, 2002, the Company has completed a private placement of common
stock and warrants to five existing shareholders. The Company received $125,000
in proceeds and issued 250,000 shares of its common stock and warrants to
purchase 300,000 additional shares for $0.50 each over the three-year period
ended December 31, 2005. The Company agreed to utilize the proceeds solely to
pay professional fees and related expenses incurred in meeting the
Companys obligations under the Securities Act of 1934, and to file a
registration statement in early 2003 under the Securities Act of 1933. The
Company also issued 350,000 shares of its common stock and 150,000 warrants
as prepaid consulting fees to an investment banking firm.

On
December 1, 2002, the Company entered into a lease agreement and moved into a
new facility. The lease period is for three years and rent will be $1,243 per
month.

In
February 2003, the Company formed Rolling Dream, a wholly-owned subsidiary
incorporated in the State of Illinois.

F-20

---

# SIGNATURES

KNOW
ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Howard Leventhal, as his true and lawful
attorney-in-fact and agent with full power of substitution and substitution, for
him and in his name, place, and stead, in any and all capacities, to sign any or
all amendments to this Registration Statement on Form 10-KSB and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, grant unto said attorney-in-fact
and agent, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the foregoing as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitutes, may
lawfully do or cause to be done by virtue hereof.

In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Date:  March 7,
2003

| | By:  /s/ Howard Leventhal
      Howard Leventhal
      President and CEO
| | ------------------------------------------------------------------------

In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

| | Signature | Title | Date
| | --------- | ----- | ----

| | /s/ Howard Leventhal
Howard Leventhal | CEO and Director
(Principal Executive Officer)
Principal Financial Officer
and Accounting Officer | March 7, 2003
| | ------------------------------------- | ------------------------------------------------------------------------------------------------- | -------------

| | /s/ Anan Yaagoub
Anan Yaagoub | Director | March 7, 2003
| | ----------------------------- | -------- | -------------

41

---

# CERTIFICATION
OF PRINCIPAL EXECUTIVE OFFICERAND PRINCIPAL FINANCIAL OFFICER

I,
Howard E. Leventhal, Chief Executive Officer of Stealth MediaLabs, Inc., certify that:

1.
I have reviewed this annual report on Form 10-KSB of Stealth MediaLabs, Inc.;

2.
Based on my knowledge, this annual report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this annual report;

3.
Based on my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this annual report;

4.
The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

| | a)
designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b)
evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the Evaluation Date); and
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c)
presented in this annual report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the Evaluation
Date;
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

5.
The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

| | a)
all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b)
any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrants internal controls; and
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------

6.
The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date:  March 7,
2003

/s/ Howard E.
Leventhal
Howard E. Leventhal
Chief Executive Officer and
Principal Financial Officer

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