UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                            -------------------------

                                   FORM 10-KSB

(Mark One)

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT OF
     1934 FOR THE FISCAL YEAR ENDED: December 31, 2003

                                       OR

[    ] TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO ______________

                         Commission file number: 0-30058

                                MOVING BYTES INC.
              (Exact name of small business issuer in its charter)

              Canada                                  Not Applicable
  (State or other jurisdiction of           (I.R.S. Employer Identification No.)
   incorporation or organization)

        2000 Powell St. Ste. 1205
          Emeryville, California                          94608
  (Address of principal executive offices)              (Zip Code)

                    Issuer's telephone number: (510) 985-1033

Securities Registered Under Section 12(b) of the Exchange Act:        None

Securities Registered Under Section 12(g) of the Exchange Act:   Common Shares
                                                                (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 preceding
12 months (or for such shorter  period that the  Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes |X | No |_|

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of Regulation S-K is not contained in this form,  and no disclosure  will be
contained,  to the  best of  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 the issuer's revenue for its most recent fiscal year: $533,627

     State the  aggregate  market  value of voting stock and  non-voting  common
equity held by  non-affiliates  computed by  reference to the price at which the
common equity was sold, or the average bid and asked price of such equity, as of
a specified date within the past 60 days:  $25,867 as of March 15, 2004 based on
the average  bid and asked  price of $0.002 per share as quoted on the  National
Association of Securities Dealer over the counter bulletin board.

     State the number of shares  outstanding of each of the issuer's  classes of
common  equity,  as of the latest  practicable  date:  The issuer had 14,739,691
common shares issued and outstanding as of March 15, 2004.

     Documents Incorporated by Reference:

     None


<PAGE>


                                TABLE OF CONTENTS


<TABLE>
<S>                                                                                                              <C>
PART I............................................................................................................1
   ITEM 1. DESCRIPTION OF BUSINESS................................................................................2
   ITEM 2.  DESCRIPTION OF PROPERTY..............................................................................10
   ITEM 3. LEGAL PROCEEDINGS.....................................................................................10
   ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................................................11

PART II..........................................................................................................11
   ITEM 5. MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER  MATTERS.......................................11
   ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS.................................................................12
   ITEM 7. FINANCIAL STATEMENTS..................................................................................22
   ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..................45

PART III.........................................................................................................45
   ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE
           EXCHANGE ACT. ........................................................................................45
   ITEM 10. EXECUTIVE COMPENSATION...............................................................................48
   ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.......53
   ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................................................54
   ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.....................................................................55
   ITEM 14. CONTROLS AND PROCEDURES..............................................................................59
   ITEM 15. PRINCIPAL ACCOUNTANT FEES AND SERVICES...............................................................59
</TABLE>






                                       i
<PAGE>


PART I

Note Regarding Forward-Looking Statements

     Except for statements of historical  fact,  certain  information  contained
herein constitutes "forward-looking  statements," including, without limitation,
statements  that express or involve  discussions  with  respect to  predictions,
expectations,  beliefs, plans,  projections,  objectives,  assumptions or future
events or  performance  (often,  but not always,  using words or phrases such as
"expects"  or "does  not  expect",  "is  expected",  "anticipates"  or "does not
anticipate", "plans", "estimates" or "intends", or stating that certain actions,
events or results "may", "could",  "would", "might" or "will" be taken, occur or
be achieved) are not statements of historical  fact and may be  "forward-looking
statements." 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,  among others,  the following:  the Company's
limited operating history; the Company's termination of its business operations;
the  Company's  immediate  need for  additional  capital to  continue as a going
concern;  the  Company's  inability  to meet  its  current  and  long-term  debt
obligations  and  contractual  obligations;  the  Company's  current  lack  of a
business strategy or plan; the price of the Company's common shares and the lack
of a trading market for such shares; risk related to litigation;  competition, ;
dependency  on effective  information  systems,  dependency on key personnel and
other risks associated with companies in the development stage. See "Description
of Business - Risk Factors." Such  statements are included,  among other places,
in this document under the headings  "Description of Business,"  "Description of
Property",  "Management's  Discussion  and Analysis." And other sections of this
report.

     The  Company  cautions  readers  not to place  undue  reliance  on any such
forward-looking  statements,  which speak only as of the date made.  The Company
disclaims any obligation  subsequently to revise any forward-looking  statements
to  reflect  events or  circumstances  after the date of such  statements  or to
reflect the occurrence of anticipated or unanticipated events.

     There can be no assurance that the Company will be able to raise sufficient
capital to continue as a going concern.



                                       1
<PAGE>

ITEM 1. DESCRIPTION OF BUSINESS.

     HISTORY OF THE COMPANY

     Moving Bytes Inc.  (the  "Company" or  "Registrant"  or "Moving  Bytes") is
incorporated  under the Canada  Business  Corporations  Act and is listed on the
National Association of Securities Dealers over-the-counter Bulletin Board under
the symbol "MBYTF".

     The Company  was  incorporated  under the Company Act of British  Columbia,
Canada,  on December 23,  1991,  under the name  "Jackpine  Mining Co. Inc." The
Company's  common shares listed for trading on the Vancouver Stock Exchange (now
known as the TSX Venture  Exchange)  ("VSE")  under the symbol "UVT" on December
20, 1993 and delisted  from the VSE on January 31, 2000.  The  Company's  common
shares  have been  quoted  on the NASD Over the  Counter  Bulletin  Board  since
September 7, 1999,  first,  under the symbol  "YDSLF",  under the symbol "ECNXF"
from June 20, 2000 through July 31, 2002 and under the symbol  "MBYTF" from July
31, 2002 to the present.

     On  July  16,  2000,  the  Company  continued  under  the  Canada  Business
Corporations Act and changed its name to E*Comnetrix Inc.

     On July 24, 2002 the Company changed its name to Moving Bytes Inc.

     On September 15, 2000,  the Company  acquired  90.28% of the common capital
stock of Exstream  Data,  Inc.  ("EDI"),  a California  corporation,  in a share
exchange  transaction.  As a  result  of the  transaction,  the  Company  issued
2,703,036 common shares and assumed 199,515 share purchase options with exercise
prices ranging from $0.48 to $1.00. The Company consolidated the accounts of EDI
in its financial statements and information subsequent to September 15, 2000. On
January  19,  2001,  the  Company  purchased  the  9.72%  it had not  previously
purchased by issuing 291,128  restricted  common shares,  bringing the Company's
interest in EDI to 100%.

     On September 15, 2000,  the Company  acquired  89.5% of the common  capital
stock of MovingBytes.com Inc. ("MBCI"), a Nevada corporation, in a cash purchase
transaction  for $511.  The  Company  consolidated  the  accounts of MBCI in its
financial  reports  subsequent  to September  15, 2000.  In December  2000,  the
Company wound up and dissolved MBCI.

     On  September  19,  2000,  the  Company   formed  Moving  Bytes   Broadband
Corporation  ("MBI"),  a Nevada  Corporation,  and Layer 427, Inc.  ("L427"),  a
Nevada Corporation.

     On March 31, 2001, the Company merged USV Telemanagement Inc., a California
corporation and wholly-owned  subsidiary of the Company,  and MBI. There were no
material financial effects as a result of the merger.

     On August 20, 2001, the Company renamed MBI to Moving Bytes, Inc.

     On September 30, 2001 the Company wound up and dissolved  L427.  During the
year ending December 31, 2001, L427 had no revenues, profits or material losses.

     On September 30, 2001 the Company merged EDI and MBI, with MBI remaining as
the surviving company and as the Company's sole subsidiary.

     On February 27, 2004, MBI terminated its Electronic  Media Service business
operations.  Neither the Company nor any of its  subsidiaries  has any  business
operations as of the date of this report. The Company's  management is currently
exploring business and capital raising  opportunities,  although no arrangements
or agreements exists at the date of this report. The Company requires additional
financing to meet its current and long-term  obligations.  The Company's ability
to continue as a going concern is uncertain.

     Neither the Company nor any of its  subsidiaries  have been involved in any
bankruptcy, receivership or other similar proceeding.

BUSINESS OF THE COMPANY

     The Company,  through its  wholly-owned  subsidiary  MBI, sells  electronic
document processing and management services  ("Electronic Media Services"),  and
telecommunications voice and data services ("Business



                                       2
<PAGE>

Communications   Services").  On  September  1,  2003,  MBI  sold  its  Business
Communications  Services assets.  On February 27, 2004 MBI closed its Electronic
Media  Services  business.  See  "Risk  Factors - Closure  of  Electronic  Media
Services  Business and  "Material  Agreements - Sale of Business  Communications
Services Assets."

Electronic Media Services

     Overview

     Since 1989 and through February 27, 2004, MBI provided,  as an applications
service provider, outsourced e-mail and fax centric electronic document delivery
services to  organizations of all sizes. MBI revenue from these services in 2003
was $533,627 (2002 - $711,162).

     MBI's revenue mix in Electronic Media Services was derived from fax, e-mail
and  image  based  document  processing  and is  generally  based on  usage.  In
addition,  some of MBI's  services  contain  fixed  monthly fees which may be in
addition to usage fees. Cost of services consists  primarily of the cost of long
distance  transmission,  internet  access and other  telecommunications  related
charges.

     On February 27, 2004, MBI terminated its Electronic  Media Service business
operations.  Neither the Company nor any of its  subsidiaries  has any  business
operations as of the date of this report.

     Electronic Media Services Business Strategy

     Until the closure of MBI's Electronic Media Services business, MBI provided
highly scalable,  feature rich document processing and management services on an
outsourced basis,  e-mail and fax broadcast  services and other services adjunct
to electronic  document  receipt and delivery.  Although MBI had a fourteen year
operating  history in  Electronic  Media  Services,  MBI was not able to provide
those services profitably or with technical consistency.

     Electronic Media Services Operations

     MBI's network services are provided by one or more  independent  companies,
which  provide  switching  and network  services  to MBI.  These  services  were
required to be operational  twenty-four  (24) hours a day, seven (7) days a week
and must be  available  to MBI on a  cost-effective  basis.  MBI was not able to
maintain its operations profitably.

     On February 27, 2004 MBI closed its  Electronic  Media  Services  business.
Lack of sufficient  financing led to staff  reductions  which resulted in both a
deterioration of service quality and a lack of technical support.  This resulted
in customer  attrition  and a reduction  in revenue and gross  profits,  further
deteriorating  MBI's  operations and its ability  support the  Electronic  Media
Services  business.  MBI  had  insufficient  financial  resources  to  spend  on
marketing  programs  sufficient to grow revenues  commensurate with the level of
customer  attrition.  MBI does not intend to resume it Electronic Media Services
business  in the  future.  MBI  believes  that  there is little or no value with
respect to its assets associated with the Electronic Media Service business. See
"Risk Factors - Closure of Electronic Media Services Business."

     MBI built a proprietary,  high-throughput,  multi-threaded  delivery engine
for e-mail and fax delivery,  giving clients confidence that their messages will
be delivered in a timely manner. MBI had maintained a proprietary 24 x 7 network
operations center located in Emeryville,  California.  MBI experienced technical
problems that led to significant  client  attrition  during the first quarter of
2004.  MBI's Chief  Technical  Officer  resigned in February 2004, an individual
upon whom MBI was dependent to sustain the operability of MBI's systems.

     MBI  experiences a timing gap in its billing and  collection  cycle arising
from its  obligations  to pay  underlying  carriers  from fifteen to thirty days
prior to when  MBI's  clients  pay for  those  services  delivered  by MBI.  MBI
believes that it will be able to collect only a small percentage of its accounts
receivable at February 27, 2004. MBI believes that it may not be able to pay its
underlying  carriers for amounts due for services  provided through February 27,
2004. See "Risk Factors - Future Operations and Going Concern" and "Risk Factors
- Closure of  Electronic  Media  Services  Business"  and "Risk  Factors - Focal
Agreement."

     MBI had entered into carrier services  contracts with Focal  Communications
and  Qwest   Communications.   See  "Material  Agreements  -  Telecommunications
Agreements."



                                       3
<PAGE>

Business Communications Services

     Overview

     Until  the sale of  MBI's  Business  Communications  Services  assets,  MBI
purchased underlying services on a wholesale basis, and resold them to end users
at retail prices typically below those of its major  competitors,  which include
AT&T,  MCI/WorldCom,  Qwest  Communications,  and Sprint (the  "Carriers").  MBI
primarily sold its services through  independent  "interconnect"  companies that
sell,  lease,  install  and  service  telephone  and  other   telecommunications
equipment  to  end  users.   See   "Material   Agreements  -  Sale  of  Business
Communications Services Assets."

     The Business Communications Services Industry

     The  telecommunications  industry is broken down into a number of segments.
Local, long-distance and international voice and data transmission services fall
under the umbrella of traditional  telephone services.  Alternative  carriers of
voice and data, such as cable and fiber-optics, are grouped under the heading of
wireline services.  Cellular service, paging and personal communications devices
are  considered  wireless  services,  and satellite  services  include fixed and
mobile voice, data and video delivered through communications satellites.

     In the late 1980's,  telecommunications  resellers,  like MBI,  which owned
neither switching equipment nor their own transmission lines, emerged to provide
discounted  long distance  services to end-users.  Telecommunications  resellers
purchase  services  from  carriers at  wholesale  prices and offer them to their
subscribers at discount prices. Telecommunications resellers sell services under
their  own  names  and  maintain  provider-customer   relationships  with  their
subscribers.

     By "renting" the principal physical elements,  telecommunications resellers
are able to become "virtual  carriers",  differentiating  them from  traditional
carriers. To become a virtual carrier, a reseller must have a significant volume
of  traffic  and  enough  working  capital  to  sustain  operational  cash  flow
requirements.

     Business Communications Services Business Strategy

     MBI targeted end-users constituting small-to-medium sized businesses.

     MBI's basic marketing  strategy had been to build and maintain a network of
independent  interconnect  companies  through  which MBI can sell and market its
services to end-users.

     Business Communications Services Operations

     MBI's  underlying  services  were  provided  by one  or  more  third  party
providers,  whom provide  switching,  network and billing services to MBI. These
services must be operational twenty-four (24) hours a day, seven (7) days a week
and must be available to MBI on a cost-effective basis.

     MBI contracted with such third parties to provide network  transmission and
therefore has not needed to commit, and does not anticipate committing,  capital
for its own network and transmission  facilities.  As a result, MBI believes its
ability  to  expand  is  not  limited  by  capacity,   geographic   coverage  or
configuration of a particular provider's network.

     MBI had entered into carrier services contracts with  MCI/WorldCom,  Global
Crossing and Qwest Communications. See "Material Agreements - Telecommunications
Agreements."

     MBI Business Communications Services

     MBI's Business  Communications Services consisted of traditional 1+ and 800
(toll free) telecommunications services, data and frame relay services and audio
conferencing.  Business  Communications  Services  are  anticipated  to be fully
developed by third parties and re-sold by MBI.

     On September 1, 2003, MBI sold its Business Communications Services assets.
Neither the Company nor any of its subsidiaries  has any business  operations as
of the date of this report.

Personnel

     As of March 15, 2004,  the Company had no full-time  personnel  and two (2)
officers and MBI had no personnel and one (1) officer.



                                       4
<PAGE>

Trademarks

     The  brand  name  "Moving  Bytes"  and  "Ecommunicate  to  the  World"  are
registered trademarks of MBI in the United States.  Because MBI no longer offers
services the  registered  trademarks  may have little or no value and may not be
enforceable.  There  can be no  assurance  that any  registered  trademark  will
provide the Company  with any  significant  marketing  or industry  recognition,
protection, advantage or benefit.

Material Agreements

     Telecommunication Agreements

     MBI has entered into the following telecommunications service agreements :

     MCI/WorldCom  effective  July 15, 1994,  as amended  December 31, 1998 (the
"MCI/WorldCom  Agreement"),  with  a  term  expiring  December  31,  2001.  This
agreement  was assumed by  Comtech21,  LLC. See  "Material  Agreements - Sale of
Business Communications Services Assets."

     Qwest Communications  Corporation  ("Qwest") effective May 1, 2002 and June
5, 2001 (the  "Qwest  Agreement"),  as  amended  on  October  1, 2002 with terms
expiring May 1, 2003 and June 5, 2003 respectively, and continuing on a month to
month  basis  thereafter.  Under the terms of the Qwest  Agreements,  Qwest will
provide MBI with switched and dedicated telecommunications,  Internet access and
data services at specified rates. There are no minimum purchase requirements and
the Qwest  Agreement  is  generally  terminable  by either party on a thirty day
advance  notice  to the  other  party.  Effective  with the  closure  of the its
Electronic Media Services  business MBI no longer uses the service of Qwest. MBI
believes that net of current invoices it is due a refund from Qwest in an amount
still to be determined.

     Focal  Communications   ("Focal")  effective  April  2,  2002  (the  "Focal
Agreement")  expiring  April 2,  2003,  and  continuing  on a year to year basis
thereafter.  Under the terms of the Focal Agreement, Focal will provide MBI with
local access  services at specified  rates. On October 30, 2003 MBI entered into
term  purchase  orders with Focal under which MBI became  obligated  for minimum
payments of $3,767 per month  through  October 30, 2005 and payments of $350 per
month on a month to month basis.  MBI has defaulted on payments to Focal.  Focal
has engaged a collection  agent to enforce payment under the agreement  claiming
MBI owes Focal $133,198 including interest and collection costs.  Excess amounts
claimed of  $129,502  over amount  recorded in accounts  payable in 2004 will be
recorded  as a loss  on  service  agreement  in the  consolidated  statement  of
operations in 2004. See "Risk Factors - Focal Agreement."

     Global  Crossing  ("Global")  effective  November  21,  2002  (the  "Global
Agreement")  expiring and continuing on a year to year basis  thereafter.  Under
the terms of the Global  Agreement,  Global will  provide MBI with  switched and
dedicated  telecommunications,  Internet  access and data  services at specified
rates.  There are no minimum  purchase  requirements and the Global Agreement is
generally terminable by either party on a ninety day advance notice to the other
party prior to the end of then current term. MBI's  obligations under the Global
Agreement were assumed by Comtech21,  LLC on September 1, 2003. MBI continues to
dispute amounts claimed due Global by MBI for services and events which occurred
after   September  1,  2003.  See  "Material   Agreements  -  Sale  of  Business
Communications Services Assets."

     Digital  Communications  of America,  Inc. ("DCA") effective July 15, 1994,
and amended  effective  December16,  1998,  with a term expiring April 15, 1999,
automatically  renewed for  additional  one hundred and twenty (120) day periods
unless  either party gives notice prior to the end of the then current term (the
"DCA Agreement"). Effective September 9, 2003 MBI entered into a promissory note
with DCA for $12,500  against  payment of the final  costs  under MBI's  billing
agreement  with DCA.  The  promissory  note was due October 1, 2003 and included
provisions  for a payment of up to 4% of the  principal  amount as a late charge
or, plus attorney's fees in the event of any collection action. MBI defaulted on
the note and on March 4, 2004 DCA filed a lawsuit against MBI the district court
of Oklahoma County,  State of Oklahoma to enforce its payment.  DCA claims under
the suit include  $12,500 in the principal  amount of the note,  interest at the
rate of 5.63% from October 16, 2003, $500 pursuant to the late charge  provision
and  reasonable  attorney's  fees and cost of the suit,  and  other and  further
relief as the court may deem just and  proper.  As of March 15, 2004 MBI had not
responded to the complaint. MBI does not have sufficient funds to respond to the
claim and  believes  that DCA will receive a default  judgment  against MBI. See
"Legal Proceedings - DCA Judgment" and "Risk Factors - DCA Judgment."



                                       5
<PAGE>

     Acquisition of Exstream Data, Inc., a California Corporation

     On September 15, 2000,  the Company  acquired  90.28% of the common capital
stock of EDI in a share exchange  transaction.  As a result of the  transaction,
the Company issued  2,703,036  common shares and assumed  199,515 share purchase
options with exercise  prices ranging from $0.48 to $1.00.  On January 19, 2001,
the Company  purchased the remaining  9.72%  interest in EDI from the dissenting
shareholders  by issuing  291,128 common shares.  The Company  consolidated  the
accounts  of EDI in its  financial  statements  and  information  subsequent  to
September 15, 2000.

     Karwat Agreements

     The Company entered into an employment agreement dated August 7, 2000, with
Joseph  Karwat  ("Karwat"),  which  was  terminated  for  cause by the  board of
directors on January 29, 2002.  The  agreement  provided that in the event of an
involuntary  termination by the Company  without cause,  including  constructive
dismissal,  the  Company  would be  required  to pay to Karwat a single lump sum
severance payment of $150,000.  Under the terms of the agreement the Company and
Mr. Karwat entered into an arbitration proceeding regarding a dispute of amounts
due Karwat under the employment agreement.

     On May 12,  2003,  the  Company  received  the final  ruling  and notice of
arbitration  award related to the termination of Karwat.  The aggregate award to
Karwat under the arbitrator's  final ruling is $292,953 (the "Final  Arbitration
Award").  On June 16, 2003, the Company and MBI, jointly and severally,  entered
into settlement and security agreements (respectively the "Settlement Agreement"
and the "Security  Agreement")  with Karwat with respect to payment of the Final
Arbitration  Award.  Under the terms of the  Settlement  Agreement,  and through
March 15,  2004,  the  Company  paid Karwat a total of  $261,122  consisting  of
$50,000 upon the signing of the  agreement,  $50,000 from sums received from the
Company's  Employment  Practices  Liability  Insurance (EPLI) carrier;  $100,000
received from  Comtech21 on the sale of MBI's Business  Communications  Services
assets and cash  payments of  $61,122.  The  Company is  obligated  to make nine
additional  payments of $4,034 each, once each month through  December 15, 2004.
There can be no guarantee  that the Company will have  sufficient  funds to make
any or all of the  remaining  payments  to  Karwat.  See "Risk  Factors - Karwat
Agreements."

     Under the terms of the  Security  Agreement  the Company  granted  Karwat a
blanket security interest in all of the Company's assets including the assets of
its wholly owned  subsidiary  MBI. See "Risk  Factors - Karwat  Agreements"  and
"Legal Proceedings - Karwat Agreements."

     Premise Leases

     Effective  November 1, 2003, MBI into a property lease amendment with Emery
Station  Joint  Venture,  LLC under  which the  Company  was  released  from its
property  lease at 5858  Horton St.,  Emeryville,  California  in  exchange  for
prepayment of expected rents and operating expenses through December 31, 2003 in
the amount of  $23,331,  forfeiture  of both its lease  deposit in the amount of
$23,406 and an electrical  generator  carried at zero book value, and a one time
payment of  $35,500.  The  amendment  eliminates  $227,841  in base rents and an
estimated $118,562 is operating costs over the remaining 29 months of the lease.
See "Item 2.  Description  of  Properties"  for a  description  of the Company's
premise leases. See "Risk Factors - Watergate Lease."

     Sale of Business Communications Services Assets

     On September  1, 2003 MBI entered  into an  agreement  with ComTech 21, LLC
("ComTech21") of Wallingford,  CT, to sell its Business  Communications Services
assets including customer accounts,  customer contracts and accounts receivable.
Subsequent to the sale,  MBI no longer  offers long distance  telecommunications
services. As the business sold represents only one component of MBI's operations
discontinued  operations  accounting applies. As a result balances and operating
results directly attributable to Business Communications Services ("Discontinued
Operations")  have been  presented  separately  from those of  Electronic  Media
Services ("Continuing Operations"), for all periods presented.

     Total proceeds from the sale included  $600,000 in cash  consideration  for
the telecommunications  assets, not including accounts receivable,  and $291,168
cash  consideration  for the  accounts  receivable  resulting  in a net  gain on
disposition of $555,411.

     MBI paid  $100,000  to secure  release of a security  lien on its  Business
Communications Services assets. See "Karwat Agreements". MBI paid $44,589 to the
KDW Group of  Washington,  D.C.  as a finders  fee. A director of the Company is
paid  consultant  of the KDW  Group.  See  "Certain  Relationships  and  Related
Transactions."



                                       6
<PAGE>

     As of December 30, 2003, MBI had received payments from ComTech21  totaling
$891,138  as  payment  in full on the  transaction  including  $438,311  in cash
payments  made  directly to MBI and  $452,857 in payments  made by  ComTech21 on
behalf of MBI to third party  suppliers  and  creditors.  MBI expects no further
payments from ComTech21.

     ComTech21  also  agreed to assume the future  liabilities  and  obligations
associated  with the  ongoing  operations  related  to  Business  Communications
Services effective September 1, 2003.

     The Asset  Purchase  Agreement  contained  representations,  warranties and
covenants customary in asset purchase transactions. ComTech21 is at arms' length
to MBI and the purchase  price was  negotiated  by the  parties.  ComTech21 is a
private company.

     Because the  Company  determined  that the assets  sold did not  constitute
substantially all of the Company's  assets, no shareholder  approval of the sale
was required.

     The Company  reported the foregoing  transaction on Form 8-K filed with the
Securities and Exchange Commission on October 2, 2003.

     EPLI Carrier Policy

     The  Company  filed  a  claim  under  its  Employment  Practices  Liability
Insurance (EPLI) policy for coverage related to the Final Arbitration  Award. On
August 31,  2003,  the  Company  received  a payment  of  $90,205  from its EPLI
carrier.  In addition,  the carrier paid the Company's costs of defense less the
Company's $25,000 deductible. The Company believes that it may be due additional
coverage under the policy and requested a mediation hearing,  as required by the
policy,  with its EPLI carrier prior to taking legal action to enforce it rights
under the policy.  On January 9, 2004,  the Company  entered  mediation with the
EPLI  policy  insurer  at which time the EPLI  policy  insurer  refused  further
payment on the claim.  The Company is considering the  commencement of a lawsuit
against the EPLI insurer if it can obtain sufficient  additional capital to fund
litigation. See "Legal Proceedings - EPLI Carrier Claim."


RISK FACTORS

         The securities of the Company are highly speculative. A prospective
investor or other person reviewing the Company should not consider an investment
unless the investor is capable of sustaining an economic loss of the entire
investment. Certain risks are associated with the Company's business, including
the following:

     Future Operations and Going Concern

     The auditors' report on the Company's audited financial  statements for the
year ended December 31, 2003, includes an additional  explanatory paragraph that
states  that due to  recurring  losses  from  operations  and cash flows used in
operating  activities,  substantial  doubt exists about the Company's ability to
continue as a going concern.  The audited financial  statements include a future
operations and going concern note that provides further information with respect
to this uncertainty and management's plans.

     The Company has negative working capital and significant cash requirements.
The Company has no ability to generate cash flows from  operations.  The Company
has insufficient funds to meet it financial obligations.  Unless the Company can
raise  financing  Management does not believe that the Company can continue as a
going  concern.  However,  there  can be no  assurance  that  financing  will be
available on acceptable terms, if at all.

     The financial  statements do not include any adjustments  that might result
from the outcome of this uncertainty. See "Liquidity and Capital Resources."

     Sufficiency of Working Capital

     As of December 31, 2003, the Company had a net working  capital of $32,531.
On February 27, 2004, MBI terminated  its  Electronic  Media Services  business.
Neither the Company nor any of its subsidiaries  has any business  operations as
of the date of this report.  The Company has inadequate  financial  resources to
sustain  its  business  activities  or to maintain  its listing on the  National
Association of Securities Dealer over the counter bulletin board.

     There is  substantial  doubt that the Company will be able to continue as a
going concern,  absent raising additional financing.  The Company has no ability
to generate cash flows from  operations.  The Company  believes that its working
capital will not be  sufficient to fund its cash  requirements  through the year
ended December 31,



                                       7
<PAGE>

2004,  unless  it is able  to  successfully  raise  financing.  There  can be no
assurance  that  the  Company  will be  successful  in  obtaining  the  required
financing to sustain its business  activities  or to maintain its listing on the
National  Association of Securities Dealer over the counter bulletin board or to
invest in or develop new businesses. See "Liquidity and Capital Resources."

     MBI Unable to Continue as a Going Concern

     MBI has  substantial  debts far exceeding  the value of its assets.  In the
event that MBI's  creditors  determine to enforce any judgments they may receive
against MBI, MBI could be forced into a bankruptcy proceeding. In such event MBI
could not continue as a going concern.  MBI will require  additional  capital to
continue as a going concern.

     Limited Operating History; History of Losses

     The  Company  has been  operating  since  March  1991.  The Company had net
earnings during only one fiscal year to date,  which was net earnings of $16,646
in the year ended  December 31, 1999. The Company has a history of losses before
and after such fiscal year, including losses of $640,694 in 2003,  $1,649,696 in
2002,  $2,093,471 in 2001,  $265,566 in 2000, $130,479 in 1998, $134,845 in 1997
and $1,131,542 in 1996.  Neither the Company nor any of its subsidiaries has any
business  operations as of the date of this report. The Company currently has no
prospects for revenue subsequent to February 27, 2004. There can be no assurance
that the Company will have net earnings in the future, if at all.

     Need for Additional Resources

     The  Company's  management  is  currently  exploring  business  and capital
raising opportunities, although no arrangements or agreements exists at the date
of this  report.  Subject to the receipt of  financing,  the Company  intends to
invest in or develop new businesses.  There can be no assurance that the Company
will not require  additional  financing or that such financing will be available
on acceptable terms, if at all.

     Lack of Experience in Investing in or Developing New Businesses

     The  Company's  strategy for MBI includes  investing in or  developing  new
businesses.  MBI has limited experience  investing or developing new businesses.
To be successful, MBI must compete successfully with companies that have greater
financial  resources  and  experience  than MBI.  MBI may be required to develop
financial,  technical and marketing expertise in order to successfully invest in
or develop new  businesses.  There can be no assurance  that MBI will be able to
capitalize the Company to be able to invest in or develop new businesses or that
those effort swill be successful if acted upon.

     Closure of Electronic Media Services Business

     On February 27, 2004,  MBI closed its Electronic  Media Services  business.
The Company was not able to raise  additional  funding to support the Electronic
Media Services  business.  MBI does not currently intend to resume it Electronic
Media Services  business in the future.  MBI believes that there is little or no
value with respect to its assets  associated  with the Electronic  Media Service
business.

     MBI believes that it will be able to collect only a small percentage of its
accounts  receivable at February 27, 2004.  MBI believes that it may not be able
to pay its underlying  carriers and other creditors for amounts due for services
provided through February 27, 2004. See "Liquidity and Capital Resources."

     Dependence on Key Personnel

     The Company  believes that its success will depend to a significant  extent
upon the abilities and continued efforts of its management; particularly Mark M.
Smith,  the Company's  President and Chief  Financial  Officer.  The loss of the
services of such individual could have a material adverse effect on the Company.
The success of the Company will also depend, in part, upon the Company's ability
to hire and retain  additional  key  personnel,  for its new  business,  if any,
including  senior  management,  who are also being  sought by other  businesses.
Competition  for  qualified  personnel  is  intense.  Difficulty  in hiring  and
retaining  such personnel  could have a material  adverse effect on the Company.
The Company does not maintain `key man' life insurance on any of its officers or
key employees.

     Karwat Agreements

     On June 16, 2003, the Company entered into the Settlement Agreement and the
Security  Agreements with respect to payment of the Final Arbitration  Award. As
of March 15, 2004 the Company is obligated to make nine



                                       8
<PAGE>

additional  payments of $4,034 each, once each month through  December 15, 2004.
The Company  currently has nor business  operations or revenue from  operations.
The  Company  will be  required  to raise  additional  financing  to make  these
payments.  There can be no guarantee that the Company will have sufficient funds
to make any or all of the  remaining  payments.  In the event  that the  Company
cannot pay under the terms of the Settlement Agreement the Company and MBI could
be forced to liquidate any then  remaining  assets.  See "Material  Agreements -
Karwat Agreements" and "Legal Proceedings - Karwat Agreements."

     USAC Assessments

     On October 22, 2003,  MBI  received a demand  notice from USAC for assessed
USF fees related to its Business  Communications Services business in the amount
of $78,531 (the "First USAC  assessment)".  The First USAC  Assessment  included
fees for the period of September 1, 2003 through September 30, 2003 during which
period the Company did not sell any services subject to USF fees. On November 1,
2003 the Company paid the First USAC  Assessment  in full,  inclusive of $50,637
paid directly by ComTech 21, LLC to USAC on behalf of MBI. The Company  believes
that it is owed a refund by USAC for the  period of  September  1, 2003  through
September 30, 2003.

     On February  23,  2004,  MBI received an invoice from USAC for assessed USF
fees in the amount of $23,527 for the period of October 1, 2003 through December
31,  2003 (the Second  USAC  Assessment").  During the period of October 1, 2003
through  December 31, 2003,  MBI did not sell any services  subject to USF fees.
The Company  believes that it is the policy of USAC to invoice  assessments  for
USF fees for the entire calendar year,  irrespective as to whether a company was
actually in the business of providing telecommunications services assessable for
USF fees for the  entire  year,  and to  provide a refund in the third  calendar
quarter of the following  year for any amounts that were  assessed  incorrectly.
Even though MBI did not provide any services  subject to USF fees from September
1, 2003  forward it may be  required to pay the Second  USAC  Assessment  and to
subsequently  apply for a refund.  MBI has insufficient  funds to pay the Second
USAC Assessment.

     If MBI fails to pay the Second USAC  Assessment it may face legal sanctions
which include,  but are not limited to, the initiation of proceedings to recover
the  outstanding  debt,  together with any  applicable  administrative  charges,
penalties, and interest pursuant to the provisions of the Debt Collection Act of
1982 and the Debt Collection  Improvement Act of 1996, as amended.  In the event
that  proceedings  against MBI are initiated,  the Second USAC Assessment may be
transferred to the Federal  Communications  Commission  and/or the United States
Department  of Treasury  for  collection.  In this event the United  States will
charge MBI  interest,  an  administrative  penalty  equal to 18% of the  claimed
amount due, a penalty of 6% per annum for as long as the Second USAC  Assessment
remains unpaid,  and interest at the published  investment rate for Treasury tax
and loan accounts.

     Although,  MBI is working with USAC to avoid payment of the  assessment for
the period October 1, 2003 through December 31, 2003, and to obtain an immediate
refund for the period of September 1, 2003 through  September 30, 2003, there is
no assurance that MBI will be successful in these effort.

     Focal Agreement

     On October 30,  2003,  MBI entered into a term  purchase  orders with Focal
Communications  ("Focal") under which MBI became  obligated for minimum payments
of $3,767 per month through October 30, 2006 and payments of $350 per month on a
month to month basis. MBI has defaulted on payments to Focal.  Focal has engaged
a collection  agent to enforce  payment  under the  agreement  claiming MBI owes
Focal $133,198 including  interest and collection costs.  Excess amounts claimed
of $129,502 over amount recorded in accounts payable in 2004 will be recorded as
a loss on service agreement in the consolidated statement of operations in 2004.
There can be no assurance  that Focal will not take legal action  against MBI to
enforce its rights to collect.  To the extent that Focal takes action to enforce
its rights,  MBI will be unable to pay Focal and there will be substantial doubt
that MBI will have the ability to carry on as a going concern.

     Watergate Lease

     On June 28,  2001,  the Company  entered into a lease for 1,601 square feet
full service in Emeryville, California for sixty-months at $2.85 per square foot
per month commencing August 1, 2001 (the "Watergate  Lease"). A security deposit
in the amount of $10,000 was paid to secure the Watergate Lease. Under the terms
of the lease the Company is obligated to pay base rents of $4,840 per month from
January 1, 2004  through  July 31,  2004,  $4,985 per month from  August 1, 2004
through  July 31, 2005 and $5,135 per month from August 1, 2005 through July 31,
2006.On  March 5, 2004,  the Company  vacated the  Watergate  premises  and quit
making required lease



                                       9
<PAGE>

payments.  The  Company is  currently  under  negotiations  with  Equity  Office
Properties Trust ("Equity")  regarding early termination of the Watergate Lease.
There is no assurance  that the Company will be able to reach an agreement  with
Equity regarding early termination of the Watergate Lease. If the Company cannot
reach an agreement to terminate  the  Watergate  Lease the Company does not have
sufficient  financial  resources to fulfill its obligations  under the lease. To
the extent that Equity takes  action to enforce its rights under the lease,  and
that any part of  amounts  due Equity  cannot be paid,  there will be a material
adverse  impact on the  Company  and there  will be  substantial  doubt that the
Company will have the ability to carry on as a going concern.

     DCA Litigation

     Effective September 9, 2003 MBI entered into a promissory note with DCA for
$12,500  against  payment of the final costs under MBI's billing  agreement with
DCA. The promissory  note was due October 1, 2003 and included  provisions for a
payment of up to 4% of the principal amount as a late charge or, plus attorney's
fees in the event of any  collection  action.  MBI  defaulted on the note and on
March 4, 2004 DCA filed a lawsuit  against  MBI the  district  court of Oklahoma
County,  State of  Oklahoma to enforce its  payment.  DCA claims  under the suit
include  $12,500 in the  principal  amount of the note,  interest at the rate of
5.63% from  October 16, 2003,  $500  pursuant to the late charge  provision  and
reasonable attorney's fees and cost of the suit, and other and further relief as
the court may deem just and proper.  As of March 15, 2004 MBI had not  responded
to the complaint. MBI does not have sufficient funds to respond to the claim and
believes  that DCA will  receive a default  judgment  against MBI. To the extent
that DCA receives a default judgment against MBI and takes action to enforce its
rights there will be  substantial  doubt that MBI will have the ability to carry
on  as  a  going  concern.   See  "Material   Agreements  -   Telecommunications
Agreements."


ITEM 2.  DESCRIPTION OF PROPERTIES.

     On April 25,  2001,  MBI entered into a  sixty-month  triple net lease with
Emery Station Joint  Venture,  LLC ("ESJV") for 2,595 square feet in Emeryville,
California  at $2.75  per  square  foot per month  commencing  June 1, 2001 (the
"Horton Street Lease").  A security deposit in the amount of $23,407 was paid to
secure  the  Horton  Street  Lease.  Under  the  Horton  Street  Lease,  MBI  is
responsible for its pro-rata share of operating  expenses  including  insurance,
taxes and utilities.  On November 1, 2003 the Company  entered into an agreement
with ESJV releasing it from the Horton Street Lease effective December 31, 2003.
Under the terms of that  agreement the Company paid ESJV $35,500,  forfeited its
security deposit in the amount of $23,407 and forfeited certain tangible assets.

     On June 28,  2001,  the Company  entered into a lease for 1,601 square feet
full service in Emeryville, California for sixty-months at $2.85 per square foot
per month commencing August 1, 2001 (the "Watergate  Lease"). A security deposit
in the amount of $10,000 was paid to secure the Watergate Lease.

     On February 28, 2003, the Company  entered into a sublease of the Watergate
Lease  for its  remaining  term the rate of at $1.70 per  square  foot per month
commencing  March 1, 2003 until  February  29,  2004,  $1.75 per square foot per
month until  February  28, 2005 and $1.85 per square foot [per month] until July
31, 2006,  on a month to month basis.  The  sublease  was  terminated  effective
January 31, 2004.

     On February 5, 2004 the Company  relocated its  administration,  accounting
and operations  under the Watergate  Lease. On March 5, 2004 the Company vacated
the  Watergate  premises  and quit making  required  lease  payments.  See "Risk
Factors -Watergate Lease."


ITEM 3. LEGAL PROCEEDINGS.

     EPLI Carrier Claim

     The  Company  filed  a  claim  under  its  Employment  Practices  Liability
Insurance (EPLI) policy for coverage related to the Final Arbitration  Award. On
August 31, 2003 the Company received a payment of $90,205 from its EPLI carrier.
In addition the carrier paid the  Company's  costs of defense less the Company's
$25,000 deductible.  The Company believes that it may be due additional coverage
under the policy and requested a mediation  hearing,  as required by the policy,
with its EPLI  carrier  prior to taking  legal action to enforce it rights under
the policy.



                                       10
<PAGE>

     On January  9, 2004 the  Company  entered  mediation  with the EPLI  policy
insurer at which time the EPLI policy  insurer  refused  further  payment on the
claim. The Company is considering the commencement of a lawsuit against the EPLI
insurer if it can obtain sufficient additional capital to fund litigation. There
can be no  assurance  that the  Company  will be able to fund the  legal  costs,
expense  and other fee  obligations  which may be incurred as result of pursuing
actions  against its EPLI policy insurer,  or that, if funded,  the Company will
prevail in litigation.

     DCA Litigation

     Effective September 9, 2003 MBI entered into a promissory note with DCA for
$12,500  against  payment of the final costs under MBI's billing  agreement with
DCA. The promissory  note was due October 1, 2003. MBI defaulted on the note and
on March 4, 2004 DCA filed a lawsuit  against MBI the district court of Oklahoma
County,  State of  Oklahoma to enforce its  payment.  DCA claims  under the suit
include  $12,500 in the  principal  amount of the note,  interest at the rate of
5.63% from  October 16, 2003,  $500  pursuant to the late charge  provision  and
reasonable attorney's fees and cost of the suit, and other and further relief as
the court may deem just and proper.  As of March 15, 2004 MBI had not  responded
to the complaint. MBI does not have sufficient funds to respond to the claim and
believes  that DCA will  receive a default  judgment  against MBI. To the extent
that DCA receives a default judgment against MBI and takes action to enforce its
rights there will be  substantial  doubt that MBI will have the ability to carry
on as a going concern. See "Risk Factors - DCA Litigation."

     To the best of its knowledge,  the Company nor MBI are subject to any other
active  or  pending  legal  proceedings  or  claims  against  it or  any  of its
properties. However, from time to time, the Company may become subject to claims
and litigation generally associated with any business venture.


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

     No matters were  submitted to a vote of security  holders during the fourth
quarter of 2003.


PART II

ITEM 5. MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER  MATTERS.

     The Company's  common shares were listed for trading on the Vancouver Stock
Exchange  (now known as the TSX Venture  Exchange)  ("VSE") on December 20, 1993
under the symbol "UVT" and were voluntarily delisted from the VSE on January 31,
2000. The Company's  shares began quoting on the NASD Over the Counter  Bulletin
Board ("OTCBB") under the symbol "YDSLF" on September 7, 1999. On June 20, 2000,
in  conjunction   with  the  Company's  name  change  and  change  of  corporate
jurisdiction,  the Company's  shares began trading under the symbol "ECNXF".  On
July 31, 2002,  in  conjunction  with the Company's  name change,  the Company's
shares began trading under the symbol "MBYTF".

     The following  table sets forth the nature of the Company's  trading market
on the OTCBB during the period from  January 1, 2002 to the Company  fiscal year
ended  December 31, 2003,  and for the period ending March 15, 2004 as quoted by
the OTCBB.


     NASD Over-the-Counter Bulletin Board

       ------------------------------------------------------------------------
            2002              High (US$)         Low (US$)         Volume
       ------------------------------------------------------------------------
          1st Quarter           $0.19              $0.08           623,200
       ------------------------------------------------------------------------
          2nd Quarter           $0.42              $0.13           845,200
       ------------------------------------------------------------------------
          3rd Quarter           $0.33              $0.14           269,600
       ------------------------------------------------------------------------
          4th Quarter           $0.30              $0.09           294,600
       ------------------------------------------------------------------------




                                       11
<PAGE>


       ------------------------------------------------------------------------
            2003              High (US$)         Low (US$)         Volume
       ------------------------------------------------------------------------
          1st Quarter           $0.20              $0.08           263,600
       ------------------------------------------------------------------------
          2nd Quarter           $0.10              $0.04           953,400
       ------------------------------------------------------------------------
          3rd Quarter           $0.09              $0.05           184,600
       ------------------------------------------------------------------------
          4th Quarter           $0.08              $0.02           684,324
       ------------------------------------------------------------------------


       ------------------------------------------------------------------------
            2004              High (US$)         Low (US$)         Volume
       ------------------------------------------------------------------------
         1st Quarter            $0.04              $0.002        1,238,036
       ------------------------------------------------------------------------


     The above quotations reflect inter-dealer  prices,  without retail mark-up,
mark-down or commission.

     On March 15, 2004, the closing price quoted OTCBB for the Company's  common
shares was $0.002.

     The Company's  common shares are issued in  registered  form.  Based on the
records of Pacific Corporate Trust Company, the Company's registrar and transfer
agent, as of March 15, 2004,  there were one seven hundred fifty (1,750) holders
of record of the Company's  common shares.  Holders with United States addresses
collectively  held 8,457,178  common shares,  or  approximately  fifty seven and
four-tenths  percent (57.4%) of the Company's  14,739,691 issued and outstanding
common shares.

     The  Company  has never paid  dividends  on its common  shares and does not
anticipate paying any dividends in the foreseeable future.

     See  "Item  11 -  Security  Ownership  of  Certain  Beneficial  Owners  and
Management and Related Matters" for information  regarding securities authorized
for issuance under compensatory plans.

     Recent Sales of Unregistered Securities.

     On February  28,  2002,  the Company  issued  1,000,000  common  shares and
1,000,000  common share purchase  warrants to one of the Company's  officers and
directors,  Mark  Smith,  in a  private  placement  under  Regulation  D of  the
Securities  Act of 1933,  as amended.  This private  placement was subject to an
escrow arrangement, and the conditions for release were satisfied during 2002.

     The Company  did not issue any  unregistered  securities  during the fourth
quarter ended December 31, 2003.

     The Company has previously reports sales of unregistered  securities in its
prior  reports on forms 10-QSB and forms 10-KSB  filed with the  Securities  and
Exchange Commission.

     Repurchases of Equity Securities by the Company and Affiliates.

     There were no  repurchases  by the Company or any  affiliate of the Company
during the period covered by this report.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS.

SUMMARY FINANCIAL DATA

     The  following  table sets forth  selected  financial  data  regarding  the
Company's  consolidated  operating results and financial position.  The data has
been derived from the Company's  consolidated  financial statements,  which have
been prepared in accordance with accounting principles generally accepted in the
United  States  ("U.S.  GAAP").  See  "Management's  Discussion  and Analysis of
Financial Condition and Results of Operation."

     The Company acquired 100% of USVT pursuant to a Share Exchange in July 1996
and 90.28% of EDI and MBI in September 2000. The Company  acquired the remaining
9.72% of EDI in January 2001. The financial data



                                       12
<PAGE>

for the year ended  December 31, 2001  consolidates  EDI and  reflects  minority
interest  for the first 19 days of the year  before  the  Company  acquired  the
remaining 9.72%.

     MBI sold its Business Communications Services assets in September 2003. The
Company  restated  its  financial  results  for  2003 and  2002 to  account  for
discontinued operations.  The Company has not restated its financial results for
periods prior to 2002.

     In February 2004, MBI  terminated its Electronic  Media Services  business.
Neither the Company nor any of its subsidiaries have any business  operations or
source of revenue as of the date of this report.

     The following  selected financial data is qualified in its entirety by, and
should be read in conjunction  with, the consolidated  financial  statements and
notes thereto included elsewhere this Annual Report. The selected financial data
and the  Company's  consolidated  financial  statements  are  expressed  in U.S.
dollars.Subsequent  to December 31, 2003, MBI  terminated  its Electronic  Media
Services business operations. As of the date of this report, neither the Company
nor  any  of  its  subsidiaries  has  any  business  operations.  The  financial
information  contained  in this report and the  Company's  financial  statements
should  not be  considered  indicative  of future  operations.  Period to period
results are expected to vary in future periods.






                                       13
<PAGE>

<TABLE>
---------------------------------------------------------------------------------------------
                                                             Fiscal Year Ended December 31,
                                                       --------------------------------------
                                                            2003(1)             2002(1)
                                                       --------------------------------------
<S>                                                     <C>                    <C>
Revenue                                                 $    553,627           $    711,162

General & Administrative Expenses                       $  2,040,484           $  3,239,324

Net Income (Loss) from Continuing Operations(1)         $ (1,653,122)          $ (2,740,304)

Net Income (Loss) for the Year                          $   (640,694)          $ (1,649,696)

Net Income (Loss)  per Share                            $      (0.04)          $      (0.12)
---------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
---------------------------------------------------------------------------------------------
                                                            Fiscal Year Ended December 31,
                                                       --------------------------------------
                                                            2003(1)             2002(1)
                                                       --------------------------------------
<S>                                                     <C>                    <C>
Working Capital                                         $     32,531           $    268,686

Total Assets                                            $    271,514           $  1,355,816

Total Liabilities                                       $    262,873           $    706,481

Share Holder's Equity                                   $      8,641           $    649,335

Long Term Obligations                                   $     57,890           $     92,658
---------------------------------------------------------------------------------------------
(1)  On September 1, 2003 MBI sold its Business  Communications  Services assets
     to Comtech 21, LLC. As assets sold  represent  only one  component of MBI's
     operations discontinued operations accounting applies. As a result balances
     and operating results directly attributable to discontinued operations have
     been presented separately from continuing operations, for 2003 and 2002.
(2)  Subsequent  to December 31,  2003,  MBI  terminated  its  Electronic  Media
     Services  business,  and the Company  currently  has no source of operating
     revenues.
</TABLE>


     You should read the following  discussion and analysis in conjunction  with
the audited financial  statements and notes thereto appearing  elsewhere in this
Form 10-KSB.

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations

     The following  discussion  and analysis  discusses  trends in the Company's
financial  condition  and results of  operations  for the two fiscal years ended
December  31,  2003 and 2002.  This  discussion  and  analysis of the results of
operations and financial  condition of the Company should be read in conjunction
with  the  audited  financial  statements  and  the  related  notes,  as well as
statements  made elsewhere in this Form 10-KSB.  The financial  statements  have
been prepared in accordance with U.S. generally accepted  accounting  principles
(GAAP) and are expressed in United States  dollars.  Unless noted  otherwise the
presentation  represents the consolidated  financial  results of the Company and
MBI.

     The consolidated  financial statements of the Company have been prepared on
the going concern basis,  which assumes that the Company will be able to realize
its assets and discharge its  obligations in the normal course of business.  The
Company  will be required to raise  substantial  additional  capital to meet its
working capital  requirements  and to discharge its obligations  during the next
twelve months.

     The auditors' report on the Company's audited financial  statements for the
year ended December 31, 2003, includes an additional  explanatory paragraph that
states  that due to  recurring  losses  from  operations  and cash flows used in
operating  activities,  substantial  doubt exists about the Company's ability to
continue as a going concern.  The audited financial  statements include a future
operations and going concern note that provides further information with respect
to this uncertainty and management's plans.



                                       14
<PAGE>

Critical Accounting Policies

     The  Company's  discussions  and analysis of its  financial  condition  and
results of  operations,  including  the  discussion  on  liquidity  and  capital
resources,  are based upon the Company's financial  statements,  which have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United  States.  The  preparation  of these  financial  statements  requires the
Company to make  estimates  and  judgments  that affect the reported  amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets  and  liabilities.  On an  ongoing  basis,  management  re-evaluates  its
estimates and judgments,  particularly those related to the determination of the
impairment of its tangible and  intangible  assets.  Actual results could differ
from  the  estimates.  The  Company  believes  the  following  are the  critical
accounting  policies  used  in the  preparation  of the  consolidated  financial
statements.

     The  consolidated  financial  statements  have been  prepared  on the going
concern basis, which assumes that the Company will be able to realize its assets
and discharge its  obligations in the normal course of business.  If the Company
were not to continue as a going concern,  it would likely not be able to realize
on its  assets at values  comparable  to the  carrying  value or the fair  value
estimates  reflected  in  the  balances  set  out  in  the  preparation  of  the
consolidated  financial statements.  The Company had a loss of $640,694 and used
cash flow in Continuing Operations of $1,073,603 for the year ended December 31,
2003, and decreased its cash position to $204,399 and working  capital  position
to $32,531 at December 31, 2003. Subsequent to December 31, 2003, MBI terminated
its  Electronic  Media  Services  business and as of the date of this report the
Company has no business  operations and no source of operating  revenue.  Unless
the Company can raise additional financing,  management does not believe that it
will have  sufficient  cash to fund  anticipated  cash  requirements.  See "Risk
Factors - Future Operations and Going Concern".

     In July 2001, the Financial  Accounting Standards Board issued SFAS No. 142
"Goodwill  and Other  Intangible  Assets".  Under  SFAS No.  142,  goodwill  and
indefinite life intangible assets are no longer amortized.  Separate  intangible
assets that are not deemed to have indefinite life will continue to be amortized
over their useful lives.  SFAS No. 142 also  establishes a new method of testing
goodwill and other intangible  assets for impairment on an annual basis or on an
interim basis if an event occurs or  circumstances  change that would reduce the
fair value of that goodwill or other  intangible asset below its carrying value.
The  non-amortization  provision  of SFAS No. 142 applying to goodwill and other
tangible assets acquired has been adopted at January 1, 2002.

     The Company  accounts  for stock  based  compensation  associated  with the
repricing of employee  stock options in accordance  with the  provisions of FASB
Interpretation  No. 44,  "Accounting  for Certain  Transactions  involving Stock
Compensation" ("FIN 44"). For accounting purposes,  the repricing of outstanding
stock options requires variable  accounting for the new options granted from the
date of  modification.  Variable  accounting  requires that the intrinsic value,
being the excess of the current market price at the end of each reporting period
in excess of the exercise price of the repriced options, be expensed as non-cash
stock based  compensation  expense,  until such time as the repriced options are
exercised,  expire or are  otherwise  forfeited.  Any increase in the  intrinsic
value  of  the  repriced  options  will  decrease  reported  earnings,  and  any
subsequent decreases in value will increase reported earnings.


Results of Operations

Year Ended  December  31, 2003  ("fiscal  2003")  Compared to December  31, 2002
("fiscal 2002")

     Revenue

     Revenue from continuing  operations  (Electronic Media Services) for fiscal
2003 decreased to $533,627 from $711,162 for fiscal 2002, a decrease of 25%. The
fall in revenue  was  primarily  due to  customer  attrition  and a slow down in
customer usage of Electronic  Media Services  attributable  to current  economic
conditions.  MBI lost  customers due to both  competition  and to system outages
that led to extended  system  downtime and loss of system  features.  Due to the
fact  that  anticipated  financing  did not  materialize,  MBI had  insufficient
working  capital to retain  sufficient  development  and technical  personnel to
manage  system  outages and to maintain its  software  and  hardware  systems in
general,  which  in  turn  led  to  additional  downtime  and  further  customer
attrition.   In  addition,   due  to  insufficient   working  capital,  MBI  had
insufficient  funds  spend  on  planned  marketing  programs  which  could  have
mitigated  customer   attrition.   MBI  ceased  all  Electronic  Media  Services
operations of February 27, 2004 and



                                       15
<PAGE>

currently does not plan to resume the Electronic  Media Services  business.  The
Company  has no other  sources of revenue and does not  anticipate  that it will
generate any revenue  until the Company  implements a new business  strategy and
plan.  See  "Business  of the Company -  Electronic  Media  Services"  and "Risk
Factors - Closure of Electronic Media Services Business".

     Gross Profit and Gross Profit Margin (Revenue less Cost of Goods Sold).

     Gross profit for fiscal 2003  decreased to $411,536 from $505,023 in fiscal
2002, a decrease of 18.5%. Gross profits decreased due to a reduction in revenue
not offset by the progress  MBI made to reduce its cost of sales by  negotiating
lower carrier costs, reducing commissions paid and eliminating billing costs due
to a conversion to 100%  electronic  billing  systems in mid-year  2003.  Due to
these latter cost cutting  factors the total gross profit  margin in fiscal 2003
was increased to 77% of sales as compared to 71% of sales in fiscal 2002.

     Personnel Expenses.

     The Company's  total costs for salaries and benefits  decreased to $610,718
or 114% of revenue in fiscal 2003 as compared to  $1,086,367  or 153% of revenue
in fiscal 2002. The decrease in personnel costs during fiscal 2003 resulted from
lay-offs of MBI personnel  which  accelerated  in the fiscal  fourth  quarter of
2003.  Salaries and benefits costs in fiscal 2002 included  $116,296 of non-cash
compensation  expenses  related to the repricing of stock options (there were no
non-cash salaries and benefits compensation expenses in fiscal 2003).

     Contract  and  consulting  services  costs  decreased to $246,057 or 46% of
sales  during  fiscal 2003 down from  $683,622 or 96% of revenue  during  fiscal
2002.  Contract  and  consulting  services  in fiscal  2002  included a $400,000
non-cash  compensation expense related to the private placement of securities to
an officer and director of the Company.

     The  Company  believes  that  non-cash  compensation  expenses  due  to the
repricing  of stock  options  will  continue  to have a  material  impact on the
Company's  results of operations  until such time as all repriced  stock options
have  been  exercised,   terminated  or  have  expired.   While  the  impact  of
fluctuations in the Company's stock price on non-cash  compensation expenses due
to the repricing of stock options cannot be forecasted, to the extent that there
is an  increase in the  Company's  stock  price,  from  reporting  period end to
reporting  period end, there will be a material  adverse effect on the Company's
results of operations.

     Subsequent  to December 31,  2003,  MBI  terminated  its  Electronic  Media
Services  business and reduced its work force. As such,  personnel  expenses are
expected to be lower in 2004 until the Company implements a new business plan.

     Amortization.

     Amortization  during  fiscal  2003 fell to $84,503  down from  $140,787  in
fiscal 2002 due to disposals and assets being fully amortized.

     Legal and Accounting, Rent, and Bad Debt.

     Legal and accounting expenditures decreased to $120,030 in fiscal 2003 down
from  $138,627 in fiscal 2002.  The Company has  implemented  internal  controls
designed to lower  customary  legal and accounting  expenditures,  including the
negotiation of lower fees with its legal counsel and auditors.

     Rent  decreased  to $128,703 in fiscal 2003 from  $212,406 in fiscal  2002.
During 2003 the Company  consolidated  its operations into a single location and
has sublet some of its office space which  resulted in a lowering of its monthly
rents.  The  Company  incurred a non-cash  loss of $98,774  associated  with the
sublease in fiscal 2002.

     During  the  fourth  fiscal  quarter of 2003 the  Company  entered  into an
agreement  releasing it from one of its property leases  effective  December 31,
2003. Under the terms of that agreement the Company paid $35,500,  forfeited its
security deposit in the amount of $23,407 and forfeited certain tangible assets.
See "Description of Properties."

     Bad debt  expense  (recovery)  was $521 in  fiscal  2003 as  compared  to a
recovery of $71,823 in fiscal 2002. The negative  balance in fiscal 2002 was due
to recovery of $100,000 in that year.



                                       16
<PAGE>

     Loss on Arbitration.

     The  Company  accrued a  $191,500  non-cash  loss  during the period on the
recognition of amounts the Company will be required to pay on Final  Arbitration
Award net of amounts received from it EPLI carrier.  See "Material  Agreements -
Karwat Agreements."

     Write-Off Equipment and Leasehold Improvements.

     The  Company  incurred a $355,010  non-cash  loss  during the period on the
write down of obsolete  equipment and software,  losses on liquidated  equipment
and the marking  down of retained  equipment to fair market  value.  The Company
believes that there is no value in MBI's  proprietary  software systems and that
MBI's equipment has little or no market value. Management believes it has made a
best effort attempt to determine a fair market value for the remaining equipment
assets  of MBI which  value  may not be  realized  upon the  liquidation  of the
equipment.

     Write-down of Goodwill.

     During fiscal 2002 the Company wrote down the value of goodwill by $600,000
to $0. The Company had experienced a significant  decline in the monthly revenue
of its  Electronic  Media  Services  business  since the  acquisition of EDI. At
December 31,  2002,  the Company  reviewed  the  carrying  value of goodwill for
impairment of its value and based upon the decline in revenues the Company wrote
off the remaining balance of goodwill in the amount of $600,000.

     Other General and Administrative Expenses.

     Other  general and  administrative  costs were $244,535 in fiscal 2003 down
from $258,840 in fiscal 2002.  Decreases in advertising  expenses and travel and
entertainment  expenses  more  than  offset  increases  in  insurance,  bank and
communications   expenses.  Due  to  the  reduction  in  revenue,   general  and
administrative  expenses  increased to 46% of revenue in fiscal 2003 up from 36%
of revenue in fiscal 2002. General and  administrative  expenses contain certain
fixed costs such as insurance  that cannot be reduced in response to  reductions
in revenue.  Overall  expense are expected to decline in 2004 as a result of the
termination of MBI's business operations subsequent to December 31, 2003.

     Net Loss from Continuing Operations.

     Net loss from  Continuing  Operations  was  $1,653,122 for fiscal 2003 down
39.7% from a loss of  $2,740,304  in fiscal 2002.  The Company  believes that it
will continue to have net losses from Continuing  Operations for the foreseeable
future. See "Risk Factors - Future Operations and Going Concern."

     Net Income  from  Discontinued  Operations.  Net income  from  Discontinued
Operations for fiscal 2003 was $1,012,428  down from  $1,090,608 in fiscal 2002.
Operating income from Discontinued  Operations during fiscal 2003 includes a net
gain of  $555,411  on the  disposal  of MBI's  Business  Communications  Service
assets.

     Net Loss.

     Net loss was $640,694 in fiscal 2003 down from $1,649,696 in fiscal 2002, a
decrease of 61.2%.  Decreases  in net loss were  primarily  due to a net gain of
$555,411 gain on the disposal of MBI's  Business  Communications  Service assets
and  lower  non-cash  compensation  and other  non-cash  expenses.  The  Company
believes  that it will continue to have net losses for the  foreseeable  future.
See "Risk Factors - Future Operations and Going Concern".

     Income (Loss) per Share.

     Net loss per share for fiscal 2003 was $0.04 compared to a loss of $0.12 in
fiscal 2002. Net loss per share from Continuing  Operations improved to $0.11 in
fiscal 2003 down from a loss of $0.20 per share in fiscal 2002.

     Liquidity and Capital Resources.

     At December  31,  2003 ("FYE  2003"),  the  Company had working  capital of
$32,531 including cash and equivalent  balances of $204,399 down from a positive
working capital balance of $268,686 at December 31, 2002 ("FYE 2002")  including
cash and equivalent  balances of $284,093.  The change in working  capital,  and
cash and equivalent  balances,  was primarily affected by proceeds from the sale
of the Company's Business  Communications  Services assets, payments made on the
Settlement  Agreement,  and accrued  expenses  associated with MBI's  Continuing
Operations recognized at FYE 2003.

     Accounts receivable was down from $106,788 at FYE 2002 to $30,577 FYE 2003.
This was  largely  due to  reduced  monthly  revenue  and  uncertainty  over the
collectability of accounts which led to higher bad debt reserves



                                       17
<PAGE>

relative  to revenue  size.  Accounts  receivable  amounts  primarily  represent
amounts due from the previous ninety days sales.

     Current assets from  Discontinued  Operations fell to zero at FYE 2003 from
$475,531 at FYE 2002.  Current  assets from  Discontinued  Operations  consisted
primarily of accounts receivable.  The Company wound up Discontinued  Operations
in the fourth quarter of 2003.

     Accounts payable increased from $68,004 at FYE 2002 to $80,485 at FYE 2003.
Accrued  liabilities  decreased  from  $45,973 at FYE 2002 to  $36,596.  Accrued
liabilities  consist of accrued  vacation pay and auditors  fees. The settlement
agreement payable balance in the amount of $47,132 at FYE 2003 represents unpaid
amounts due under the Settlement Agreement. See "Risk Factors - Focal Agreement"
and "Risk Factors - Karwat Agreements."

     Current  liabilities from Discontinued  Operations fell to zero at FYE 2003
from $459,701 at FYE 2002.  Current  liabilities  from  Discontinued  Operations
consisted primarily of trade payables and amounts due USAC. The Company wound up
Discontinued  Operations in the fourth quarter of 2003. See "Risk Factors - USAC
Assessments."

     The Company has no long-term debt or other long-term liabilities other than
capital leases and operating  sub-leases.  These  obligations are repayable over
the period through 2006.

     The  Company  has  entered   into  no   derivative   financial   instrument
arrangements to December 31, 2003.

     The Company did not receive any funds through the issuance of capital stock
during fiscal 2003.

     The Company currently has no external sources of liquidity.

     During  fiscal 2003 the Company  used  $1,073,603  in cash from  Continuing
Operations.  Cash used in  operations in fiscal 2003 was $893,104 as compared to
cash generated by operations of $104,920 in fiscal 2002.  Cash flows provided by
Discontinued  Operations of $1,322,343 in fiscal 2002 as compared to $180,499 in
fiscal 2003 accounts for a majority of the  difference  in operating  cash flows
from fiscal 2002 to fiscal 2003.

     During  fiscal  2003 the  Company  generated  $847,553  in cash  flow  from
investments  primarily due to $891,168 in proceeds from the sale of its Business
Communications  Services  assets.  Related to the  transaction  the Company paid
$44,589 as a finders fee. No further  payments are expected from the sale of the
Company's  Business  Communications  Services assets. In fiscal 2002 the Company
used $255,634 in cash on investments  primarily on equipment purchases that were
written  off in  fiscal  2003.  See  "Material  Agreements  - Sale  of  Business
Communications Services Assets."

     During  fiscal 2003 the Company paid $245,821 of the $292,953 due under the
Settlement Agreement, inclusive of $100,000 paid to secure release of a security
lien on its  Business  Communications  Services  assets.  The  Company  received
$90,250 from its EPLI carrier. See "Material Agreements - Karwat Agreements" and
"Material Agreements - EPLI Carrier Policy."

     Subsequent to December,  31, 2003,  MBI  terminated  its  Electronic  Media
Service  business  operations.  Neither the Company nor any of its  subsidiaries
currently have any business operations nor any source of revenue.  The Company's
management   is   currently   exploring   potential   business   and   financing
opportunities. The Company and MBI have contractual obligations of approximately
$300,000 payable in 2004 and additional contractual obligations of approximately
$100,000 during 2005and 2006.  These  obligations are in addition to general and
administrative  expenses and other creditor  obligations.  The Company currently
does not have sufficient  capital to meet its capital  requirements in the short
or long term,  which makes the Company's  ability to continue as a going concern
questionable.

     Contractual Obligations.

     The following table sets forth contractual obligations of the Company as of
December 31, 2003 (1).

<TABLE>
----------------------------------------------------------------------------------------
                              Less Than     One to Three    Three to Five     More Than
                                1 Year         Years            Years          5 Years
<S>                            <C>            <C>           <C>               <C>
Long-Term Debt(1)                Nil            Nil              Nil            Nil

Capital Leases(1)              $14,163        $20,064            Nil            Nil
----------------------------------------------------------------------------------------
</TABLE>



                                       18
<PAGE>

<TABLE>
----------------------------------------------------------------------------------------
                              Less Than     One to Three    Three to Five     More Than
                                1 Year         Years            Years          5 Years
<S>                            <C>            <C>           <C>               <C>
Operating Leases(1,2)          $31,435        $40,733            Nil             Nil

Purchase Obligations(1,3)      $45,204        $37,670            Nil             Nil
----------------------------------------------------------------------------------------
(1)

     (A)  Long-Term Debt Obligation  means a payment  obligation under long-term
          borrowings  referenced  in  FASB  Statement  of  Financial  Accounting
          Standards No. 47 Disclosure of Long-Term  Obligations (March 1981), as
          may be modified or supplemented.
     (B)  Capital  Lease  Obligation  means a payment  obligation  under a lease
          classified as a capital lease  pursuant to FASB Statement of Financial
          Accounting  Standards No. 13 Accounting for Leases (November 1976), as
          may be modified or supplemented.
     (C)  Operating Lease  Obligation  means a payment  obligation under a lease
          classified  as an  operating  lease  and  disclosed  pursuant  to FASB
          Statement of Financial  Accounting  Standards  No. 13  Accounting  for
          Leases  (November  1976),  as may be  modified  or  supplemented.

     (D)  Purchase  Obligation  means an agreement to purchase goods or services
          that  is  enforceable  and  legally  binding  on the  registrant  that
          specifies  all  significant   terms,   including:   fixed  or  minimum
          quantities  to  be  purchased;   fixed,   minimum  or  variable  price
          provisions; and the approximate timing of the transaction.

(2)  Assumes  continuation  of the  Watergate  Lease  operating  sub-lease.  The
     sublease was  terminated  effective  January 31, 2004.  The Company  became
     liable for making the full operating  lease payments at that time. On March
     5,  2003  the  Company  defaulted  on the  Watergate  lease.  See  "Item 2.
     Description of Properties" and "Risk Factors - Watergate Lease."

(3)  Assumes  continuation of the Focal Agreement  without default.  The Company
     has  defaulted  on  the  Focal  Agreement.   See  "Material   Agreements  -
     Telecommunications Agreements" and "Risk Factors - Focal Agreement."
</TABLE>


Business Outlook, Risks and Uncertainties

     Economic Uncertainties.

     Current  economic  slowdown,   industry   conditions,   and  the  political
environment may affect the Company's future results of operations and ability to
raise  financing.  As of the date of this report the neither the Company nor any
of its subsidiaries has any business operations, The Company will be required to
raise  additional  capital.  The  economic  and  political  uncertainty  in  the
financial markets makes it difficult to predict the Company's results for fiscal
year 2004 and its ability to continue as a going concern.

     Sufficiency of Working Capital.

     As of December  31, 2003,  the Company had net working  capital of $32,531.
The  Company  has  inadequate   financial  resources  to  sustain  its  business
activities or to maintain its listing on the National  Association of Securities
Dealer over the counter bulletin board.

     The Company  estimates  that it will need to raise  approximately  $500,000
during the next 12 months to meet its minimum capital requirements.

     There is  substantial  doubt that the Company will be able to continue as a
going concern,  absent raising additional financing.  The Company has no ability
to generate cash flows from  operations.  The Company  believes that its working
capital will not be  sufficient to fund its cash  requirements  through the year
ended  December 31, 2004,  unless it is able to  successfully  raise  financing.
There can be no assurance  that the Company will be  successful in obtaining the
required financing to sustain its business activities or to maintain its listing
on the National Association of Securities Dealer over the counter bulletin board
or  to  invest  in  or  develop  new  businesses.  See  "Liquidity  and  Capital
Resources."


                                       19
<PAGE>

     The  consolidated  financial  statements  have been  prepared  on the going
concern basis, which assumes that the Company will be able to realize its assets
and discharge its  obligations in the normal course of business.  If the Company
were not to continue as a going concern,  it would likely not be able to realize
on its  assets at values  comparable  to the  carrying  value or the fair  value
estimates  reflected  in  the  balances  set  out  in  the  preparation  of  the
consolidated financial statements.

     Auditors Report.

     The auditors' report on the Company's audited financial  statements for the
year ended December 31, 2003, includes an additional  explanatory paragraph that
states  that due to  recurring  losses  from  operations  and cash flows used in
operating  activities,  substantial  doubt exists about the Company's ability to
continue as a going concern.  The audited financial  statements include a future
operations and going concern note that provides further information with respect
to this uncertainty and management's plans.

     Long Term Debt.

     The Company currently has no long-term debt  obligations.  The Company does
not use  financial  instruments  for trading  purposes and is not a party to any
leverage  derivatives.  In the event the  Company  must issue  debt  obligations
outside of the course of its  normal  operations,  the  Company's  business  and
results of operations  may be materially  effected by changes in interest  rates
and certain other credit risk associated with its operations.


OTHER MATTERS

     Moving Bytes Inc. was formed under the Canada  Business  Corporations  Act.
Prior to June 19,  2000 the Company  was  incorporated  under the Company Act of
British Columbia, Canada. The Company's financial results are quantified in U.S.
dollars  and a majority  of the  Company's  obligations  and  expenditures  with
respect to its operations are incurred in U.S. dollars. In the past, the Company
has raised equity funding through the sale of securities denominated in Canadian
dollars,  and the Company may in the future raise  additional  equity funding or
financing denominated in Canadian dollars. Although the Company does not believe
it  currently  has any  materially  significant  market  risks  relating  to its
operations  resulting from foreign  exchange  rates,  if the Company enters 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.

     The Company currently has no long-term debt  obligations.  The Company does
not use  financial  instruments  for trading  purposes and is not a party to any
leverage derivatives. In the event the Company experiences substantial growth in
the future,  the Company's  business and results of operations may be materially
effected by changes in interest  rates and certain other credit risk  associated
with its operations.

     Stock Option Repricing

     The Company has repriced  stock  options  previously  granted to directors,
officers and employees of the Company.  Due to changes in the exercise price for
certain Stock Option granted under the Stock Option Plan,  those options will be
accounted for using variable plan accounting under Accounting Principles Board's
Opinion  No.  25,  Accounting  for Stock  Issued to  Employees  and the  related
interpretations  ("APB  25").  Therefore,  the Company  recognizes  compensation
expense were the fair value of the Company's stock exceeds the adjusted exercise
price.  The Company's  accounting for stock options is  significant  because the
effect the compensation  expense has on the Company's results.  The compensation
expense  associated with the Company's stock options has a significant effect on
its ability to incur positive net results.

     The Company did not recognize any compensation expenses associated with the
repricing  of  stock  options  during  the  year  ended  December  31,  2003 and
recognized  compensation  expenses of $25,878  associated  with the repricing of
stock options during the year ended December 31, 2002.

     The  Company  believes  that  non-cash  compensation  expenses  due  to the
repricing  of stock  options  will  continue  to have a  material  impact on the
Company's  results of operations  until such time as all repriced  stock options
have  been  exercised,   terminated  or  have  expired.   While  the  impact  of
fluctuations in the Company's stock price on non-cash  compensation expenses due
to the repricing of stock options cannot be forecasted, to the extent that there
is an  increase in the  Company's  stock  price,  from  reporting  period end to
reporting  period end, there will be a material  adverse effect on the Company's
results of operations.



                                       20
<PAGE>

     Off Balance Sheet Financing

     The Company has no off balance sheet  financing  arrangements  that have or
are  reasonably  likely to have a  current  or  future  effect on the  Company's
financial  condition,  changes in  financial  condition,  revenues or  expenses,
results of operations,  liquidity,  capital  expenditures or capital  resources,
that is material to investors.





                                       21
<PAGE>


ITEM 7. FINANCIAL STATEMENTS






                        Consolidated Financial Statements
                      (Expressed in United States dollars)


                                MOVING BYTES INC.



                     Years ended December 31, 2003 and 2002

                   (with Independent Auditors' Report Thereon)




                                       22
<PAGE>



INDEPENDENT AUDITORS' REPORT


The Board of Directors and Shareholders Moving Bytes Inc.


We have audited the accompanying consolidated balance sheets of Moving Bytes Inc
as of December 31, 2003 and 2002,  and the related  consolidated  statements  of
operations  and  deficit  and  cash  flows  for  the  years  then  ended.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of Moving Bytes Inc. as
of December 31, 2003 and 2002,  and the results of its  operations  and its cash
flows for the  years  then  ended,  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  discussed  in  note 2 to the
financial statements,  the Company has suffered recurring losses from operations
that raise  substantial  doubt about its ability to continue as a going concern.
Management's  plans in regard to these matters are also described in note 2. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.









Chartered Accountants

/s/ KPMG LLP

Vancouver, Canada

March 19, 2004



                                       23
<PAGE>

MOVING BYTES INC.
Consolidated Balance Sheets
(Expressed in United States dollars)

December 31, 2003 and 2002

<TABLE>
---------------------------------------------------------------------------------------------------------------
                                                                                 2003                 2002
---------------------------------------------------------------------------------------------------------------
                                                                                                    (Restated
                                                                                                   - note 2(b))
<S>                                                                        <C>                    <C>
Assets

Current assets:
     Cash and cash equivalents                                             $     204,399          $   284,093
     Accounts receivable, less allowance for doubtful accounts
       of $20,388 in 2003 and $17,802 in 2002                                     30,577              106,788
     Prepaid expenses                                                              2,538               16,097
     Current assets from discontinued operations (note 2(b))                           -              475,531
---------------------------------------------------------------------------------------------------------------
                                                                                 237,514              882,509

Equipment and leasehold improvements (note 4)                                     34,000              439,646

Other assets                                                                           -               33,661
---------------------------------------------------------------------------------------------------------------
                                                                           $     271,514          $ 1,355,816
---------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity (Deficiency)

Current liabilities:
     Accounts payable                                                      $      80,485          $    68,004
     Accrued liabilities                                                          36,596               45,973
     Current liabilities from discontinued operations (note 2(b))                      -              459,701
     Settlement Agreement payable (note 12(c))                                    47,132                    -
     Current portion of obligations under capital lease and
       operating sub-lease                                                        40,770               40,145
---------------------------------------------------------------------------------------------------------------
                                                                                 204,983              613,823

Obligations under capital lease and operating sub-lease (note 5)                  57,890               92,658

Shareholders' equity (deficiency):
     Capital stock (note 8)                                                    6,531,683            6,531,683
     Additional paid-in capital (note 8)                                         606,094              606,094
     Deficit                                                                  (7,129,136)          (6,488,442)
---------------------------------------------------------------------------------------------------------------
                                                                                   8,641              649,335
---------------------------------------------------------------------------------------------------------------
                                                                           $     271,514          $ 1,355,816
---------------------------------------------------------------------------------------------------------------
</TABLE>

Going concern (note 2)
Commitment (note 11)
Contingencies (note 12)
Subsequent events (note 14)


See accompanying notes to consolidated financial statements.



                                       24
<PAGE>

MOVING BYTES INC.
Consolidated Statements of Operations and Deficit
(Expressed in United States dollars)

Years ended December 31, 2003 and 2002


<TABLE>
---------------------------------------------------------------------------------------------------------------
                                                                                 2003                 2002
---------------------------------------------------------------------------------------------------------------
                                                                                                    (Restated
                                                                                                   - note 2(b))
<S>                                                                        <C>                    <C>
Revenue                                                                    $     533,627          $   711,162

Cost of goods sold:
     Transmissions and services                                                  115,562              177,426
     Commissions                                                                   4,763               20,155
     Other                                                                         1,766                8,558
---------------------------------------------------------------------------------------------------------------
                                                                                 122,091              206,139
---------------------------------------------------------------------------------------------------------------
Gross profit                                                                     411,536              505,023
Expenses (recovery):
     Advertising and promotion                                                    44,596               73,296
     Amortization                                                                 84,503              140,787
     Bad debt expense (recovery) (note 10)                                           521              (71,823)
     Bank charges                                                                 20,077               13,901
     Consulting services:
         Cash and other                                                          246,057              268,055
         Stock-based non-cash compensation (note 3(c))                                 -              415,567
     Communications services                                                      37,622               28,177
     Insurance                                                                    78,737               64,060
     Legal and accounting                                                        120,030              138,627
     Loss on arbitration (note 12(e))                                            191,500                    -
     Loss on sublease space                                                       58,907               98,774
     Miscellaneous                                                                43,702               31,047
     Rent                                                                        128,703              212,406
     Salaries:
         Cash and other                                                          610,718              970,071
         Stock-based non-cash compensation (note 3(c))                                 -              116,296
     State franchise tax                                                           6,595               14,024
     Travel and entertainment                                                     13,206               34,335
     Write-off of equipment and leasehold improvements                           355,010               91,724
     Write-off of goodwill                                                             -              600,000
---------------------------------------------------------------------------------------------------------------
                                                                               2,040,484            3,239,324
---------------------------------------------------------------------------------------------------------------
Loss from continuing operations before undernoted                              (1,628,948)          (2,734,301)

Other income (expense):
     Interest income                                                                  512                4,443
     Interest expense                                                             (12,589)              (8,475)
     Other expense                                                                (11,497)                (371)
---------------------------------------------------------------------------------------------------------------
                                                                                  (23,574)              (4,403)
---------------------------------------------------------------------------------------------------------------
Loss from continuing operations before income taxes                            (1,652,522)          (2,738,704)

Income taxes (note 7)                                                                 600                1,600
---------------------------------------------------------------------------------------------------------------
Loss from continuing operations                                                (1,653,122)          (2,740,304)

Income from discontinued operations of Business Communication
    Services segment (including 2003 gain on disposal of $555,411)
   (note 2(b))                                                                  1,012,428            1,090,608
---------------------------------------------------------------------------------------------------------------
Loss for the year, carried forward                                               (640,694)          (1,649,696)
</TABLE>



                                       25
<PAGE>

MOVING BYTES INC.
Consolidated Statements of Operations and Deficit, Continued
(Expressed in United States dollars)

Years ended December 31, 2003 and 2002


<TABLE>

---------------------------------------------------------------------------------------------------------------
                                                                                 2003                 2002
---------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                    <C>
Loss for the year, brought forward                                         $     (640,694)        $  (1,649,696)

Accumulated deficit, beginning of year                                         (6,488,442)           (4,838,746)
---------------------------------------------------------------------------------------------------------------

Accumulated deficit, end of year                                           $   (7,129,136)        $  (6,488,442)
---------------------------------------------------------------------------------------------------------------

Earnings (loss) per share (note 3(b)):
     Continuing operations, basic and diluted                              $       (0.11)       $       (0.20)
     Discontinued operations, basic and diluted                                     0.07                 0.08
     Loss, basic and diluted                                                       (0.04)               (0.12)

Weighted average number of shares outstanding, basic and diluted               14,739,691           14,112,066
----------------------------------------------------------------------------------------------------------------
</TABLE>






See accompanying notes to consolidated financial statements.


<PAGE>

MOVING BYTES INC.
Consolidated Statements of Cash Flows
(Expressed in United States dollars)

Years ended December 31, 2003 and 2002


<TABLE>
---------------------------------------------------------------------------------------------------------------
                                                                                 2003                 2002
---------------------------------------------------------------------------------------------------------------
                                                                                                    (Restated
                                                                                                   - note 2(b))
<S>                                                                        <C>                    <C>
Cash provided by (used in):
Operations:
     Loss for the year                                                     $     (640,694)      $   (1,649,696)
     Adjustment for income from discontinued operations                        (1,012,428)          (1,090,608)
     Items not involving cash:
         Amortization                                                              84,503              140,787
         Stock-based compensation                                                       -              531,863
         Write-off of equipment and leasehold improvements                        355,010               91,724
         Loss on disposal of operating sub-lease                                        -               98,774
         Write-down of goodwill                                                         -              600,000
     Change in non-cash operating working capital:
         Accounts receivable                                                       76,211               49,675
         Prepaid expenses                                                          13,559               (4,490)
         Accounts payable                                                          12,481               13,448
         Accrued liabilities                                                       (9,377)               1,100
         Settlement agreement payable                                              47,132                    -
---------------------------------------------------------------------------------------------------------------
     Cash flows provided by (used in) continuing operations                    (1,073,603)          (1,217,423)

     Cash flows provided by discontinued operations                               180,499            1,322,343
---------------------------------------------------------------------------------------------------------------
     Cash flow provided by (used in) operations                                  (893,104)             104,920

Investments:
     Purchase of equipment                                                        (32,687)            (262,955)
     Proceeds on disposal of business (note 2(b))                                 891,168                    -
     Finders fees on disposal of business (note 9(c))                             (44,589)                   -
     Other assets                                                                  33,661                7,321
---------------------------------------------------------------------------------------------------------------
     Cash flows used in investing activities                                      847,553             (255,634)

Financing:
     Issuance of common shares for cash                                                 -               73,025
     Capital lease obligation payments                                            (34,143)              (6,086)
---------------------------------------------------------------------------------------------------------------
     Cash flows provided by financing activities                                  (34,143)              66,939
---------------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents                                             (79,694)             (83,775)
Cash and cash equivalents, beginning of year                                      284,093              367,868
---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                                     $      204,399       $      284,093
---------------------------------------------------------------------------------------------------------------
Supplementary information:
     Interest received                                                     $          512       $        4,442
     Interest paid                                                                 12,589                8,475
     Income taxes paid                                                                600                1,600
---------------------------------------------------------------------------------------------------------------
</TABLE>



See accompanying notes to consolidated financial statements.


                                       26
<PAGE>


MOVING BYTES INC.
Notes to Consolidated Financial Statements
(Expressed in United States dollars)
================================================================================


1.   Operations:

     Moving Bytes Inc. (the "Company" or "Moving Bytes") is  incorporated  under
     the  Canada  Business  Corporations  Act  and is  listed  on  the  National
     Association of Securities Dealers over-the-counter Bulletin Board under the
     symbol "MBYTF".  The Company,  through its wholly owned  subsidiary  Moving
     Bytes, Inc. ("MBI"),  sells  telecommunication  and data,  transmission and
     access  services  ("Business  Communications   Services"),  and  electronic
     document processing and management  services  ("Electronic Media Services")
     to  commercial  customers.  On  September  1, 2003,  the  Company  sold its
     Business Communications Services business (note 2(b)).

     On July 24, 2002 the  Company  changed  its name from  E*Comnetrix  Inc. to
     Moving Bytes Inc.

     The consolidated  financial statements include the accounts of Moving Bytes
     and MBI. All material  intercompany  balances  and  transactions  have been
     eliminated on consolidation.


2.   Going concern:

     (a)  These consolidated  financial statements have been prepared on a going
          concern basis,  which assumes that the Company will be able to realize
          its assets  and  discharge  its  obligations  in the normal  course of
          business.  The Company  incurred net losses of $640,694 and $1,649,696
          in 2003 and  2002,  respectively  and has an  accumulated  deficit  at
          December 31, 2003 of $7,129,136. The losses from continuing operations
          were  $1,653,122  and $2,740,304 in 2003 and 2002,  respectively.  The
          Company also used cash in continuing  operations of $1,073,603 in 2003
          and had working capital at December 31, 2003 of $32,531.

          As   discussed   in  note  2(b),   the  Company   sold  its   Business
          Communications Services business to provide additional interim funding
          to repay suppliers and creditors and allow the Company to focus on its
          Electronic  Media Services  business.  As discussed in note 14(a),  on
          February 27, 2004 MBI closed its Electronic  Media Services  business.
          The Company has not been  successful  in raising  financing to support
          the Electronic Media Services  business and the Company  currently has
          no intention to resume its Electronic  Media Services  business in the
          future.  The Company has written down assets of the  Electronic  Media
          Services business to their fair value representing  estimated proceeds
          of sale, net of estimated  disposal  costs,  or net  realizable  value
          (note 4). The Company has  defaulted  and received  demand  notices on
          certain of its debt  repayment  obligations  (notes  12(b) and 12(d)).
          Effective February 27, 2004, the Company has no operating segments.

          Although the Company will continue to seek  additional  cash resources
          through equity issuances in order to position the Company for possible
          future  opportunities,  there can be no  assurance  that funds will be
          available on an economic basis to the Company.



                                       27
<PAGE>

2.   Going concern (continued):

     (b)  On September 1, 2003,  MBI entered into an agreement  with ComTech 21,
          LLC  ("ComTech   21")  of   Walingford,   CT,  to  sell  its  Business
          Communications  Services assets including customer accounts,  customer
          contracts and accounts receivable. Subsequent to the sale, the Company
          no longer offers long  distance  telecommunications  services.  As the
          Company  has no  continuing  involvement  in the  business  sold,  the
          Business   Communications   Services   operations   are  presented  as
          discontinued operations in these consolidated financial statements. As
          a result,  balances and operating results directly attributable to the
          discontinued operations have been presented separately from continuing
          operations,  for all periods  presented.  No interest expense has been
          allocated to discontinued operations.

          Total proceeds from the sale included  $600,000 in cash  consideration
          for the telecommunications  assets, not including accounts receivable,
          and $291,168 cash consideration for the accounts receivable  resulting
          in a net gain on disposition of $555,411.

          MBI paid $100,000 to secure release of a security lien on its Business
          Communications  Services  assets  (note 12(e)) and paid $44,589 to the
          KDW as a finders  fee. A director of the Company is a paid  consultant
          of KDW (note 9(c)).

          As of December 31, 2003,  MBI had  received  payments  from ComTech 21
          totalling  $891,168  as payment in full on the  transaction  including
          $438,311  in  cash  payments  made  directly  to MBI and  $452,857  in
          payments made by ComTech 21 on behalf of MBI to third party  suppliers
          and creditors.


3.   Significant accounting policies:

     (a)  Basis of presentation:

          These  consolidated   financial   statements  have  been  prepared  in
          accordance with accounting principles generally accepted in the United
          States of America ("US GAAP"). All material  intercompany balances and
          transactions have been eliminated.

     (b)  Net earnings (loss) per share:

          Net earnings (loss) per share has been  calculated  using the weighted
          average  number of  shares  outstanding  during  the  period.  Diluted
          earnings  (loss)  per  common  share  are  computed  similar  to basic
          earnings  (loss) per share except that the weighted  average number of
          common shares  outstanding is increased to include  additional  common
          shares from the assumed exercise of options and warrants, if dilutive.
          Dilutive  loss per  share is the same as basic  loss per  share in all
          periods,  since the impact of  outstanding  options  and  warrants  is
          dilutive.  The following  securities  could  potentially  dilute basic
          earnings per share in the future:

         -----------------------------------------------------------------------
                                             December 31,         December 31,
                                                     2003                 2002
         -----------------------------------------------------------------------
         Options (note 8(d))                    4,435,950            5,017,870
         Warrants (note 8(c))                   1,000,000            1,200,000
         -----------------------------------------------------------------------



                                       28
<PAGE>

3.   Significant accounting policies (continued):

     (c)  Stock based compensation - options and performance escrow shares:

          The Company  applies the  intrinsic  value-based  method of accounting
          prescribed by  Accounting  Principles  Board  ("APB")  Opinion No. 25,
          "Accounting   for   Stock   Issued   to   Employees",    and   related
          interpretations to account for its employee stock options plans. Under
          this  method,  compensation  expense is  recorded on the date of grant
          only if the current market price of the  underlying  stock exceeds the
          exercise   price.   SFAS  No.   123,   "Accounting   for   Stock-Based
          Compensation",  established  accounting  and  disclosure  requirements
          using a fair value-based method of accounting for stock-based employee
          compensation  plans.  As  allowed by SFAS No.  123,  the  Company  has
          elected  to  continue  to apply the  intrinsic  value-based  method of
          accounting   described   above,   and  has  adopted   the   disclosure
          requirements of SFAS No. 123 for employee stock option grants.  Option
          grants to non-employees  will be recognized at their fair value as the
          services are provided and the options earned.

          The Company accounts for stock based compensation  associated with the
          repricing of employee stock options in accordance  with the provisions
          of FASB  Interpretation No. 44,  "Accounting for Certain  Transactions
          involving Stock Compensation" ("FIN 44"). For accounting purposes, the
          repricing of existing stock options requires  variable  accounting for
          the new  options  granted  from  the  date of  modification.  Variable
          accounting  requires that the intrinsic value, being the excess of the
          current market price at the end of each reporting  period in excess of
          the exercise  price of the repriced  options,  be expensed as non-cash
          stock  based  compensation  expense,  until such time as the  repriced
          options are exercised, expire or are otherwise forfeited. Any increase
          in the intrinsic value of the repriced options will decrease  reported
          earnings, and any subsequent decreases in value will increase reported
          earnings.

          The closing price of the  Company's  common stock on December 31, 2003
          was $0.03 per share and  therefore  the  Company  recognized  employee
          non-cash  compensation expense charges of nil (2002 - $25,878) for the
          year ended December 31, 2003 related to repriced stock options.  There
          is a potential for such a variable  non-cash charges in each reporting
          period in the future until all of the Company's repriced stock options
          are exercised, forfeited or expire.

          The   performance   escrow  shares  are  treated  as  a   compensatory
          arrangement.  Compensation expense will be recognized in the statement
          of  operations  equal to the fair  value of the shares  released  to a
          shareholder that provides services as an officer, director,  employee,
          consultant or contractor.

          Had the Company  determined  compensation cost based on the fair value
          at the grant date for its  employee  awards  under SFAS No.  123,  the
          Company's net loss would have been  increased to the pro forma amounts
          indicated below:

<TABLE>
         -------------------------------------------------------------------------------------------------------
                                                                             December 31,         December 31,
                                                                                2003                   2002
         -------------------------------------------------------------------------------------------------------
         <S>                                                              <C>                  <C>
         Loss for the year, as reported                                    $  (640,694)         $  (1,649,696)
         Add: Employee stock-based compensation expense, as reported                 -                 25,878
         Deduct: Employee stock-based compensation expense
           determined under the fair value method                              (21,614)               (76,690)
         -------------------------------------------------------------------------------------------------------
         Pro forma loss for the year                                       $  (662,308)         $  (1,700,508)
         -------------------------------------------------------------------------------------------------------
         Pro forma - basic and diluted loss per share                      $     (0.04)         $       (0.12)
         -------------------------------------------------------------------------------------------------------
</TABLE>



                                       29
<PAGE>

3.   Significant accounting policies (continued):

     (c)  Stock based compensation - options and performance escrow shares:

          The weighted  average fair value of options  granted in 2003 was $0.01
          (2002 - $0.14) per option.

          The  fair  value  of  employee  options  granted  during  the year was
          estimated  using  the  Black-Scholes  option-pricing  model  with  the
          following  weighted average  assumptions:  risk-free  interest rate of
          1.31%  (2002 - 4.50%) no annual  dividends;  expected  lives  equal to
          one-half the option lives; and volatility of 118% (2002 - 312%).

     (d)  Goodwill:

          The  Company  prospectively  adopted  SFAS 142 -  "Goodwill  and Other
          Intangible  Assets" on January 1, 2002.  Under these  recommendations,
          goodwill is no longer amortized and is tested for impairment annually,
          or more frequently if events or changes in circumstances indicate that
          the asset might be  impaired.  In prior years,  the Company  amortized
          goodwill  straight-line  over a period of five years.  The  impairment
          test is carried  out in two steps.  In the first  step,  the  carrying
          amount of the reporting  unit is compared with its fair value.  If the
          fair value of a reporting unit exceeds its carrying  amount,  goodwill
          of the reporting  unit is considered not to be impaired and the second
          step of the impairment test is unnecessary. The second step is carried
          out when the  carrying  amount of a  reporting  unit  exceeds its fair
          value,  in which case the implied fair value of the  reporting  unit's
          goodwill is compared with its carrying  value to measure the amount of
          the  impairment  loss,  if any.  The implied fair value of goodwill is
          determined  in the same  manner  that the  value  of the  goodwill  is
          determined  in a  business  combination,  using the fair  value of the
          reporting  unit as if it was the  purchase  price.  When the  carrying
          amount of the reporting unit goodwill  exceeds the implied fair value,
          an impairment  loss is recognized in an amount equal to the excess and
          is  presented  as a separate  line item in the  statement  of earnings
          before extraordinary items and discontinued operations.

          On  adoption,  all  goodwill  was  assigned  to the  electronic  media
          services  reporting  unit.  The  Company  completed  the  transitional
          impairment  test at January 1, 2002 and  concluded  that no impairment
          charge was  required at that time.  The Company  completed  its annual
          impairment test on December 31, 2002 and determined that an impairment
          charge was required (see note 6).

     (e)  Cash and cash equivalents:

          Cash equivalents are represented by highly liquid  investments  having
          terms to maturity of 90 days or less when acquired.

     (f)  Equipment and leasehold improvements:

          Equipment and leasehold improvements are stated at cost.  Amortization
          is  provided on a  straight-line  basis over the  following  estimated
          useful lives:

         ---------------------------------------------------------------
         Asset                                                    Years
         ---------------------------------------------------------------
         Furniture and fixtures                                       7
         Computer and office equipment                                5
         Test and other equipment                                     7
         Equipment under capital lease                                5
         Leasehold improvements                                       5
         ---------------------------------------------------------------



                                       30
<PAGE>

3.   Significant accounting policies (continued):

     (f)  Equipment and leasehold improvements (continued):

          Equipment   and  leasehold   improvements   are  assessed  for  future
          recoverability,  whenever  events or  circumstances  indicate that the
          carrying value of these assets may not be  recoverable,  by estimating
          future  undiscounted  cash flows.  When the net  carrying  amount of a
          capital asset exceeds its estimate net recoverable  amount,  the asset
          is written down to its fair value with a charge to income.

     (g)  Revenue recognition:

          Revenue, for long distance reselling, is recognized and billed monthly
          to customers  based upon customer usage as determined by the Company's
          telecommunications carriers electronic switching and billing systems.

          Revenue,  for electronic  document delivery,  is recognized and billed
          monthly to customers  based upon  customer  usage as determined by the
          Company's internal billing systems.

     (h)  Income taxes:

          The Company follows the asset and liability  method for accounting for
          income taxes. Under this method,  deferred income taxes are recognized
          for the future income tax  consequences  attributable  to  differences
          between the financial statement carrying values of existing assets and
          liabilities  and  their   respective   income  tax  bases   (temporary
          differences),  and  loss  carry  forwards.  Deferred  tax  assets  and
          liabilities  are measured using enacted tax rates expected to apply to
          taxable  income  in the  years  in  which  temporary  differences  are
          expected to be recovered or settled. The effect on deferred income tax
          assets and  liabilities of a change in tax rates is included in income
          in the period that includes the enactment  date.  Deferred  income tax
          assets are evaluated and if realization is not considered "more likely
          than not", a valuation allowance is provided.

     (i)  Foreign currency translation:

          The  functional  currency  of the  Company  and  its  subsidiaries  is
          considered  to be  the  US  dollar  as  substantially  all  operating,
          financing  and  investing  transactions  are  made in  that  currency.
          Accordingly,  monetary assets and liabilities and  non-monetary  items
          carried at market values which are  denominated  in Canadian  dollars,
          have been translated into US dollars using exchange rates in effect at
          the balance sheet date.  Statement of operations  items are translated
          at  weighted  average  exchange  rates.  Exchange  gains or losses are
          included in the determination of net earnings (loss) for the year.

     (j)  Use of estimates:

          The  preparation of financial  statements in conformity with generally
          accepted  accounting  principles requires management to make estimates
          and  assumptions  that affect the  reported  amounts of the assets and
          liabilities and disclosure of contingent assets and liabilities at the
          date of the financial  statements and the reported amounts of revenues
          and expenses during the reporting period.  Actual results could differ
          from  those  estimates.   Significant   areas  requiring  the  use  of
          management  estimates relate to the determination of collectibility of
          accounts  receivable,  recoverability  of  equipment  and goodwill and
          rates for amortization.



                                       31
<PAGE>

3.   Significant accounting policies (continued):

     (k)  Recently adopted accounting standards:

          (i)  In August 2001, the Financial Accounting Standards Board ("FASB")
               issued FAS No. 143, "Accounting or Asset Retirement  Obligations"
               ("SFAS No.  143"),  which  requires  entities  to record the fair
               value  of a  liability  for  an  asset  or  an  asset  retirement
               obligation   in  the  period  in  which  it  is  incurred  and  a
               corresponding  increase  in the  carrying  amount of the  related
               long-lived  asset.  SFAS No. 143 is  effective  for fiscal  years
               beginning after June 15, 2002.

          (ii) In July 2002,  the FASB  released SFAS No. 146,  "Accounting  for
               costs  associated with Exit or Disposal  Activities",  ("SFAS No.
               146"), which addresses the financial accounting and reporting for
               costs associated with exit or disposal  activities.  SFAS No. 146
               relates to the  recognition of a liability for a cost  associated
               with an exit or disposal  activity and requires  that a liability
               be  recognized  for  these  costs  only  when  the  liability  is
               incurred,  that is, when it meets the  definition  of a liability
               under FASB' conceptual  framework.  SFAS No. 146 also established
               fair  value  as  the   objective  for  initial   measurement   of
               liabilities related to exit or disposal activities.  As a result,
               SFAS 146 significantly reduces an entity's ability to recognize a
               liability for future expenses related to restructuring.  SFAS 146
               is effective  for exit and disposal  activities  initiated  after
               December 31, 2002.

          (iii)In May  2003,  the FASB  issued  SFAS No.  150,  "Accounting  for
               certain  Financial   Instruments  with  Characteristics  of  both
               Liabilities and Equity" ("SFAS No. 150").  SFAS 150 requires that
               certain financial  instruments  issued in the form of shares that
               are  mandatorily  redeemable as well as certain  other  financial
               instruments   be  classified  as  liabilities  in  the  financial
               statements.  SFAS No. 150 is effective for financial  instruments
               entered into or modified after May 31, 2003.

          The  adoption  of SFAS No.  143,  SFAS No. 146 or SFAS No. 150 did not
          have a material affect on the Company's reported financial results.

          In addition,  the FASB and Emerging  Issues Task Force  ("EITF")  have
          issued  a  variety  of   interpretations   including   the   following
          interpretations with wide applicability:

               o    Financial  Interpretation  No. 45 ("FIN  45"),  "Guarantor's
                    Accounting  and  Disclosure   Requirements  for  Guarantees,
                    Including  Indirect  Guarantees of  Indebtedness  of Others"
                    which  addresses  disclosure  and  initial  recognition  and
                    measurement provisions related to guarantees. The disclosure
                    provisions   became   effective  for  periods  ending  after
                    December 15, 2002. The initial  recognition  and measurement
                    provisions  apply to  guarantees  issued after  December 15,
                    2002.

               o    Financial  Interpretation No. 46 ("FIN 46"),  "Consolidation
                    of  Variable   Interest   Entities",   which  addresses  the
                    consolidation  of  variable  interest   entities   (formerly
                    referred   to   as    "Special-Purpose    Entities").    The
                    Interpretation  is generally in effect for interim or annual
                    periods beginning after December 15, 2003.



                                       32
<PAGE>

3.   Significant accounting policies (continued):

     (k)  Recently adopted accounting standards (continued):

          o    In November  2002,  the EITF  reached a consensus on Issue 00-21,
               "Revenue Arrangements with Multiple Deliverables" ("EITF 00-21").
               This  consensus   addresses  issues  related  to  separating  and
               allocating value to the individual  elements of a single customer
               arrangement  involving  obligations  regarding multiple products,
               services, or rights which may be fulfilled at different points in
               time or over  different  periods of time.  EITF 00-21 guidance is
               applicable  for  arrangements  entered  into  in  fiscal  periods
               beginning after June 15, 2003.

     To date,  the  adoption of FIN 46, FIN 45, and EITF 00-21 has not  impacted
     the Company's consolidated financial statements.


4.   Equipment and leasehold improvements:

<TABLE>
     -----------------------------------------------------------------------------------------------------------
                                                                              Accumulated
                                                                             amortization             Net book
     2003                                                        Cost      and write-down                value
     -----------------------------------------------------------------------------------------------------------
    <S>                                              <C>                    <C>                  <C>
     Furniture and fixtures                           $        54,329        $     54,329         $          -
     Computer and office equipment                            260,218             226,218               34,000
     Test and other equipment                                 177,913             177,913                    -
     Equipment under capital lease                             45,914              45,914                    -
     -----------------------------------------------------------------------------------------------------------
                                                      $       538,374        $    504,374         $     34,000
     -----------------------------------------------------------------------------------------------------------
</TABLE>


<TABLE>
     -----------------------------------------------------------------------------------------------------------
                                                                              Accumulated             Net book
     2002                                                        Cost        amortization                value
     -----------------------------------------------------------------------------------------------------------
    <S>                                              <C>                    <C>                  <C>
     Furniture and fixtures                           $        54,329        $     16,469         $     37,860
     Computer and office equipment                            250,029              53,983              196,046
     Test and other equipment                                 155,413              12,847              142,566
     Equipment under capital lease                             45,914              14,539               31,375
     Leasehold improvements                                    44,370              12,571               31,799
     -----------------------------------------------------------------------------------------------------------
                                                      $       550,055        $    110,409         $    439,646
     -----------------------------------------------------------------------------------------------------------
</TABLE>

     Amortization  expense  for the  year is  $84,503  (2002 -  $140,787)  which
     includes the amortization of equipment under capital leases of $9,183 (2002
     - $9,183).

     As  discussed  in notes 14(a) and (b),  the  Company has ceased  operations
     related to its  Electronic  Media  Services  Business  and the  Company has
     vacated its premises  under lease  subsequent  to December  31,  2003.  The
     Company  has  determined  that  these  events,  as well as the state of its
     operations at December 31, 2003,  indicate  that the  remaining  assets had
     little or no value in operations of the Electronic Media Services  Business
     or expected ongoing corporate  activities in subsequent years. As a result,
     the Company recognized a write-down of equipment and leasehold improvements
     of $355,010 to their estimated fair value,  representing  quoted prices for
     similar  assets.  The write-off of equipment and leasehold  improvements is
     recorded  in  continuing  operations  in  the  consolidated   statement  of
     operations.



                                       33
<PAGE>

5.   Obligations under capital lease and operating sub-lease:

<TABLE>
     -----------------------------------------------------------------------------------------------------------
                                                            Operating             Capital
                                                            sub-lease               lease                Total
     -----------------------------------------------------------------------------------------------------------
     <S>                                                   <C>                 <C>                 <C>
     Year ending December 31:

     2004                                                  $   31,435         $    14,163         $     45,598
     2005                                                      25,517              14,163               39,680
     2006                                                      15,216               5,901               21,117
     -----------------------------------------------------------------------------------------------------------
     Total minimum lease payments                              72,168              34,227              106,395
     Amount representing interest at 19.33%                         -               7,735                7,735
     -----------------------------------------------------------------------------------------------------------
     Present value of net minimum capital lease payments       72,168              26,492               98,660
     Current portion of obligation                             31,435               9,335               40,770
     -----------------------------------------------------------------------------------------------------------
                                                           $   40,733         $    17,157         $     57,890
     -----------------------------------------------------------------------------------------------------------
</TABLE>

     Interest of $6,626 (2002 - $8,077)  relating to capital  lease  obligations
     has been included in interest expense.

     The  operating  sub-lease  obligation  represents  the loss on sub-lease of
     office space which has been recorded in 2002 (note 14(b)).


6.   Acquisition of Exstream Data, Inc. and goodwill:

     On September 15, 2000, the Company  acquired  90.28% of the common stock of
     Exstream Data, Inc. ("EDI"), a California corporation, for 2,703,036 common
     shares of the Company with a fair value of  $2,324,610  and assumed  38,000
     EDI employee  share  purchase  options  which were  converted  into 199,515
     vested stock options of the Company.  The fair value of the options  issued
     was $143,381  calculated by an option pricing  model.  On January 19, 2001,
     the Company  issued  291,128  common  shares in  exchange  for 9.72% of the
     common  capital  stock of EDI,  bringing the  Company's  interest in EDI to
     100%.

     In accordance with its stated accounting policy described in note 3(d), the
     Company  completed its annual  impairment test on December 31, 2002.  Based
     upon the  decline  in the  revenues  of the  electronic  document  delivery
     business  since  December  31, 2001 and the impact these  declines  have on
     expected  future net cash flows from this  reporting  unit, the Company has
     estimated  the fair value of the  reporting  unit to reflect  the  carrying
     value of the net identifiable assets resulting in a write off the remaining
     balance of goodwill in the amount of $600,000.




                                       34
<PAGE>

7.   Income taxes:

     Income  tax  expense  (recovery)   attributable  to  earnings  (loss)  from
     continuing  operations  differs  from the amounts  computed by applying the
     Canadian  Federal  tax rate of  approximately  34%  (2002-36%)  to earnings
     (loss) from  continuing  operations  before income taxes as a result of the
     following:

<TABLE>
     -----------------------------------------------------------------------------------------------------------
                                                                                     2003                 2002
     -----------------------------------------------------------------------------------------------------------
     <S>                                                                     <C>                  <C>
     At statutory rates                                                      $   (561,857)        $   (985,933)
     Other items, primarily goodwill, change in tax rates
       and stock compensation                                                      85,624              278,433
     Change in valuation allowance                                                476,233              707,500
     State income tax paid                                                            600                1,600
     -----------------------------------------------------------------------------------------------------------
                                                                             $        600         $      1,600
     -----------------------------------------------------------------------------------------------------------
</TABLE>


     The tax  effects of  temporary  differences  that give rise to  significant
     portions of the future tax assets and liabilities are as follows:

<TABLE>
     ----------------------------------------------------------------------------------------------------------
                                                                                     2003                 2002
     ----------------------------------------------------------------------------------------------------------
     <S>                                                                   <C>                  <C>
     Deferred tax assets:
         Losses carried forward                                            $    1,615,211       $    1,600,589
         Accounting amortization in excess of tax                                 130,480                9,850
         Other                                                                     42,232               44,707
     ----------------------------------------------------------------------------------------------------------
     Total gross deferred tax assets and liabilities                            1,787,923            1,655,146
     Valuation allowance                                                       (1,787,923)          (1,655,146)
     ----------------------------------------------------------------------------------------------------------
     Net deferred tax asset                                                $            -       $            -
     ----------------------------------------------------------------------------------------------------------
</TABLE>

     In assessing the realizability of deferred tax assets, management considers
     whether it is more likely  than not that some  portion or all of the future
     tax assets will be realized.  The ultimate  realization of the deferred tax
     assets is dependent upon the generation of future taxable income during the
     periods in which those temporary differences become deductible. A valuation
     allowance equal to the net deferred tax asset balance has been recorded, as
     the  realization of such losses at the balance sheet dates during the carry
     forward period cannot be considered to be more likely than not.



                                       35
<PAGE>

7.   Income taxes (continued):

     The  Company  and its  subsidiary  have the  following  non-capital  losses
     available to reduce future taxable income, expiring as follows:

     --------------------------------------------------------------------------
     Losses of Canadian parent (stated in US dollars):
         2004                                                 $       69,972
         2005                                                        100,703
         2006                                                        112,154
         2007                                                        705,900
     --------------------------------------------------------------------------
                                                                     988,729
     Losses of US operating subsidiary:
         2010                                                        167,334
         2011                                                        777,081
         2012                                                        116,722
         2015                                                        774,016
         2016                                                        787,149
         2017                                                        843,802
         2018                                                        279,081
     --------------------------------------------------------------------------
                                                                   3,745,185
     --------------------------------------------------------------------------
     Total losses                                             $    4,733,914
     --------------------------------------------------------------------------


8.   Capital stock:

     (a)  Authorized:

          Unlimited number of common stock, no par value.

          10,000,000 class A preferred stock, no par value. No class A preferred
          shares have been issued as of December 31, 2003.

          20,000,000  class B preferred  shares,  with no par value.  No class B
          preferred shares have been issued as of December 31, 2003.

     (b)  Issued and fully paid common shares:

<TABLE>
         ------------------------------------------------------------------------------------------------------
                                                                  Number of            Common       Additional
                                                              common shares      share amount  paid-in capital
         ------------------------------------------------------------------------------------------------------
         <S>                                                  <C>               <C>              <C>
         Balance, December 31, 2001                              13,509,441     $   6,458,658     $    149,081

         Shares issued for cash during the period:
              Pursuant to private placements (note 8(c))          1,000,000            50,000                -
              Options exercised                                     230,250            23,025                -

         Stock-based compensation - options and
           escrow shares released                                         -                 -          457,013
         ------------------------------------------------------------------------------------------------------
         Balance, December 31, 2002 and 2003                     14,739,691     $   6,531,683     $    606,094
         ------------------------------------------------------------------------------------------------------
</TABLE>



                                       36
<PAGE>

8.   Capital stock (continued):

     (c)  Private placement:

          On  February  25,  2002,  the Board of  Directors  approved  a private
          placement to an officer and director of the Company.  The terms of the
          private  placement are that the Company would issue  1,000,000  common
          shares at $0.05 per share and  issue  warrants  to  purchase  up to an
          additional  1,000,000  common  shares  at $0.05  per  share  which are
          exercisable  until March 1, 2007.  These shares and  warrants  will be
          held in escrow and  released  only in the event of  certain  events or
          conditions,  specified by the escrow  agreement.  The Company received
          the  $50,000  proceeds  in cash and the  private  placement  closed on
          February  28,  2002.  The market  price at the date of issuance of the
          shares was $0.25.

          On August 1, 2002,  the board of directors  approved a  resolution  to
          amend the escrow  between the  Company and an officer and  director of
          the Company.  The amendment provided for the release of the securities
          held in escrow in the event that the Company  reported two consecutive
          fiscal  quarters  of  positive   earnings  before   interest,   taxes,
          depreciation and amortization  charges once all non-cash  expenses are
          removed from the calculation of earnings,  ("Adjusted EBITDA"). During
          the fiscal quarters ended March 31, 2002 and June 30, 2002 the Company
          reported  positive  Adjusted  EBITDA  (as  defined  by  the  board  of
          directors).  As a result, the conditions  necessary for the release of
          the  securities  from escrow have been satisfied as of August 1, 2002.
          At August 1, 2002, compensation expense of $400,000,  representing the
          intrinsic  value of the shares and warrants  eligible for release from
          escrow has been recorded.

     (d)  Stock options:

          The Company has stock option  plans,  which allow the Company,  at the
          discretion of the board of  directors,  to issue options to employees,
          directors  and  consultants  to purchase up to a maximum of 13,000,000
          common  shares of the Company.  The Moving Bytes  Amended and Restated
          Stock Option Plan 2000, approved by the Company's shareholders on June
          22,  2001,  allows for the issuance of 8,000,000  stock  options.  The
          Moving  Bytes  Stock  Option  Plan  2003,  approved  by the  Company's
          shareholders  on June 22,  2003 allows for the  issuance of  5,000,000
          stock  options.  Stock purchase  options are granted  having  exercise
          prices based on the market price at the date of grant. The outstanding
          stock options expire at various dates ranging from January 16, 2004 to
          June 30, 2008 and vest  according to the terms of the Company's  stock
          option  plan  as  may  be  amended  by  the  individual  stock  option
          agreements.



                                       37
<PAGE>

8.   Capital stock (continued):

     (d)  Stock options (continued):

          The  following  summarizes  changes  in stock  options  for the twelve
          months  ended  December  31,  2003 and  prior  fiscal  year  reporting
          periods:

<TABLE>
         -------------------------------------------------------------------------------------------------------
                                                         2003                                   2002
                                            ---------------------------             --------------------------
                                                       Weighted average                       Weighted average
                                              Shares     exercise price               Shares    exercise price
         -------------------------------------------------------------------------------------------------------
         <S>                               <C>                  <C>                <C>                <C>
         Outstanding, beginning of year    5,017,870            $  0.14            5,481,300          $  0.25
         Granted                             250,000               0.10              824,020             0.66
         Granted on repricing                      -                  -            4,510,100             0.10
         Exercised                                 -                  -            (230,250)             0.10
         Forfeited                         (831,920)               0.27          (1,057,200)             0.37
         Amended on repricing                      -                  -          (4,510,100)            (0.25)
         -------------------------------------------------------------------------------------------------------
         Outstanding, end of year          4,435,950            $  0.12            5,017,870          $  0.14
         -------------------------------------------------------------------------------------------------------
</TABLE>

          The Company has the following stock options  outstanding and vested at
          December 31, 2003:

<TABLE>
         -------------------------------------------------------------------------------------------------------
                                               Total              Total
                                               number            vested    Price                        Expiry
         -------------------------------------------------------------------------------------------------------
         <S>                                 <C>               <C>         <C>             <C>
         Employees                            100,000           100,000     0.10              January 16, 2004
         Employees                             50,000            50,000     0.10                  May 24, 2004
         Employees                            100,000           100,000     0.10                   May 24,2004
         Officers/directors                   625,000           625,000     0.10            September 29, 2004
         Officer/director                     500,000           500,000     0.10              January 25, 2005
         Employees/director                   105,200           105,200     0.10             February 25, 2005
         Employee/officer/director            550,000           550,000     0.10                 June 26, 2005
         Employee                              15,750            15,750     0.10                 June 29, 2005
         Directors                            150,000           150,000     0.10                 June 30, 2005
         Director                              50,000            50,000     0.30                August 1, 2005
         Employees                             50,000            50,000     1.00               October 1, 2005
         Directors                             70,000            70,000     0.50               October 1, 2005
         Employees/director                   320,000           320,000     0.10              December 6, 2005
         Officer/director                     500,000           500,000     0.10              January 25, 2007
         Director                              25,000            25,000     0.25                March 22, 2007
         Employee/directors                 1,225,000         1,225,000     0.10                  June 30,2008
         -------------------------------------------------------------------------------------------------------
         Total                              4,435,950         4,435,950
         -------------------------------------------------------------------------------------------------------
</TABLE>



                                       38
<PAGE>

8.   Capital stock (continued):

     (e)  Repriced options:

          On February  25, 2002,  the  Company's  Board of Directors  approved a
          stock  option  repricing  program  for  options to purchase a total of
          5,281,300 common shares. Under the repricing program,  certain holders
          of stock options,  including directors and officers,  were entitled to
          exchange their existing stock options,  which had an exercise price of
          $0.25 per share,  for  repriced  stock  options  with the same  terms,
          except the exercise  price was reduced to $0.10 per share.  Holders of
          4,510,100  options  elected to have their  options  repriced.  At this
          repricing date, the new exercise price equaled the market price of the
          Company's  common  shares.  At December 31, 2002,  4,294,850  repriced
          stock options  remain  outstanding.  These  repriced stock options are
          accounted  for as variable in accordance  with note 3(c).  Incremental
          stock-based compensation recognized during the year ended December 31,
          2003  for  employee  awards  subject  to  variable  accounting  due to
          repricing transactions totaled nil (2002 - $25,878).


9.   Related party transactions:

     (a)  Payments:

          During the year, the Company paid  consulting fees of $150,000 (2002 -
          $150,000;  2001 - $185,000) to a company  controlled  by a director of
          the Company.

     (b)  Consulting agreements:

          (i)  On March 1, 2002, the Company entered into a consulting  services
               agreement  with J. Erik Mustad  "Mustad") for the period March 1,
               2002 to December 31,  2003,  as amended  October 15,  2002,  (the
               "Mustad  2002  Agreement").  On July 1, 2003 the Company  entered
               into  a new  consulting  services  agreement  with  Mustad  which
               replaced the Mustad 2002 Agreement (the "Mustad 2003 Agreement").
               Pursuant  to the  Mustad  2003  Agreement,  Mustad  will  provide
               certain  services to the Company in  consideration  of $7,500 per
               month  through  December  31,  2003 at which time the Mustad 2003
               Agreement  will  expire,  except if the  Company  should  receive
               common  stock  financing  in a minimum  gross  amount of $500,000
               dollars and a commitment  to a total common stock  financing in a
               minimum  gross amount of  $2,000,000  dollars  (inclusive  of the
               $500,000 dollars),  from sources outside of the United States, on
               or before  December 31, 2003 in which event the Agreement will be
               extended through December 31, 2004 with no provision for renewal.
               As of December 31, 2003, the Company had not secured gross equity
               financing  of  $500,000  or more and the  Mustad  2003  Agreement
               expired under its terms.  Consulting fees of $22,500 are owing at
               December  31,  2003  and  included  in  accounts  payable  in the
               consolidated balance sheet.



                                       39
<PAGE>

9.   Related party transactions (continued):

     (b)  Consulting agreements (continued):

          (ii) On March 1, 2002, the Company entered into a consulting  services
               agreement with Interven Capital Corporation  ("Interven") for the
               period March 1, 2002 to December 31, 2003, as amended October 15,
               2002, (the "Interven 2002  Agreement").  Pursuant to the Interven
               2002  Agreement,  as  amended,   Interven  will  provide  certain
               services  to the  Company in  consideration  of $13,750 per month
               through  June 30,  2002 and  $12,500  per month from July 1, 2002
               through  December  31,  2003,  to  increase  to $15,000 per month
               beginning in the month in which the Company  should receive gross
               equity  financing of $2,000,000 or more.  Through March 19, 2004,
               the Company had not secured gross equity  financing of $2,000,000
               or more.

               The Interven 2002  Agreement  had an expiration  date of December
               31, 2003 (the "Initial Term") and could be automatically  renewed
               for additional one-year terms unless earlier  terminated.  In the
               event of  termination  by the Company  during the  Initial  Term,
               other than for cause,  the Company  must pay to Interven the full
               balance of fees which would have been payable to Interven had the
               Consultant been engaged for the entire Initial Term, payable at a
               rate of  $13,750  per  month  for the  first  four  months of the
               Initial  term and $12,500  per month (to  increase to $15,000 per
               month if the Company  had  received  gross  equity  financing  of
               $2,000,000  or more) for the  remaining  18 months of the Initial
               Term. As of March 19, 2004,  the Interven 2002  Agreement had not
               been terminated.

     (c)  Finders Fee Agreement:

          On May 28, 2003 MBI entered into a finders fee agreement  with The KDW
          Group, LLC ("KDW") of Washington, D.C. with respect to the sale of its
          Business Communications Services business (the "KDW Agreement"). Under
          the terms of the KDW  Agreement,  the Company paid KDW finders fees of
          $44,589. A director of the Company is a paid consultant of KDW Group.


10.  Bad debt recovery:

     In May 2001,  the Company  filed a complaint in the  Superior  Court of the
     State of  California  in the county of Alameda  against  Prime  T.V.,  LLC,
     Gatelinx Corporation,  Gatelinx Financial  Corporation,  Gatelinx Solutions
     Corporation  and Thomas  O'Hanlon  (jointly  and  severally  "Prime  T.V.")
     alleging  that  Prime  T.V.   committed  breach  of  contract,   fraud  and
     intentional  tort  associated  with the non-payment of $119,313 in services
     provided to Prime T.V. by EDI during  March and April 2001.  The  complaint
     sought  relief of  $144,313  plus  additional  sums plus  interest  accrued
     thereon and attorney fees.

     On May 3, 2002, the Company agreed to an out of court settlement with Prime
     TV in the amount of  $100,000 in cash,  in  exchange  for which the Company
     withdrew its  complaint.  As at December  31, 2002,  all of this amount has
     been  received.  The  recovery  has  been  included  in  bad  debt  expense
     (recovery) on the consolidated statements of operations.



                                       40
<PAGE>

11.  Commitment:

     Lease commitments:

     At December 31, 2003, the Company is committed under an operating lease for
     office premises. Minimum lease payments are as follows:

    ---------------------------------------------------------------------------
     2004                                                        $     58,365
     2005                                                              59,949
     2006                                                              35,949
    ---------------------------------------------------------------------------
                                                                 $    154,263
    ---------------------------------------------------------------------------


12.  Contingencies:

     (a)  Finders fee agreement:

          The Company entered into a Finders Fee Agreement on June 14, 2002 with
          Glenara  Associates of Panama City,  Panama (the  "Glenara  Finder Fee
          Agreement"), under which the Company would pay to Glenara Associates a
          fee equal to $2,500 plus five percent (the ("Monetary Finders Fee") of
          any  proceeds  it  receives  as  a  result  of  money  raised  from  a
          prospective  financing  by Kalnes A/S  ("Kalnes").  In  addition,  the
          Company  would  issue to  Glenara  Associates  333,333  shares  of its
          restricted  common  stock  upon  receipt  of  the  first  $500,000  in
          financing by Kalnes A/S and 666,667  shares of its  restricted  common
          stock upon receipt of an additional  $1,000,000 in financing by Kalnes
          A/S.

          On October  15,  2002,  the Company  amended  the  Glenara  Finder Fee
          Agreement.  Under the  amended  terms  the  Monetary  Finders  Fee was
          limited to the first $15,000,000 in financing  received from Kalnes on
          the basis of $2,500 plus 1% of any amounts  received up to  $5,000,000
          and 2% of any  amounts  received  in  excess of  $5,000,000  and up to
          $15,000,000.

     (b)  DCA promissory note:

          Effective  September 9, 2003, MBI entered into a promissory  note with
          Digital  Communications  of America,  Inc. ("DCA") for $12,500 against
          payment of the final costs under MBI's billing agreement with DCA. The
          promissory note was due October 1, 2003 and included  provisions for a
          payment of up to 4% of the principal  amount as a late charge or, plus
          attorney's fees in the event of any collection  action.  MBI defaulted
          on the note and on March 4, 2004 DCA filed a  lawsuit  against  MBI in
          the district court of Oklahoma County,  State of Oklahoma,  to enforce
          its  payment.  DCA  claims  under  the  suit  include  $12,500  in the
          principal  amount  of the  note,  interest  at the rate of 5.63%  from
          October 16,  2003,  $500  pursuant to the late  charge  provision  and
          reasonable  attorney's  fees and  costs of the  suit,  and  other  and
          further  relief as the court  may deem just and  proper.  MBI does not
          have  sufficient  funds to respond to the claims and believes that DCA
          will likely receive default judgment against MBI.



                                       41
<PAGE>


12.  Contingencies (continued): (c) USAC assessment:

     On October 22, 2003,  MBI  received a demand  notice from USAC for assessed
     USF fees related to its Business  Communications  Services  business in the
     amount of $78,531 (the "First USAC Assessment)".  The First USAC Assessment
     included  fees for the period of September 1, 2003  through  September  30,
     2003 during which  period the Company did not sell any services  subject to
     USAC fees.  On November 1, 2003 the Company paid the First USAC  Assessment
     in full  inclusive of $50,637  paid  directly by ComTech 21, LLC to USAC on
     behalf of MBI.  The Company  believes  that it is owed a refund by USAC for
     the period of September 1, 2003 through September 30, 2003.

     On February  23,  2004,  MBI received an invoice from USAC for assessed USF
     fees in the  amount of $23,527  for the  period of October 1, 2003  through
     December  31,  2003 (the  Second  USAC  Assessment").  During the period of
     October 1, 2003 through  December  31, 2003,  MBI did not sell any services
     subject to USF fees.  MBI believes that it is the policy of USAC to invoice
     assessments for USF fees for the entire  calendar year,  irrespective as to
     whether   a  company   was   actually   in  the   business   of   providing
     telecommunications  services  assessable  for USF fees for the entire year,
     and to provide a refund in the third calendar quarter of the following year
     for any amounts  that were  assessed  incorrectly.  Even though MBI did not
     provide any services  subject to USF fees from September 1, 2003 forward it
     may be required to pay the Second USAC Assessment and to subsequently apply
     for a refund.  Although,  MBI is working with USAC to avoid  payment of the
     assessment for the period October 1, 2003 through December 31, 2003, and to
     obtain an  immediate  refund for the period of  September  1, 2003  through
     September  30, 2003,  there is no assurance  that MBI will be successful in
     these efforts.

     If MBI  fails to pay the  Second  USAC  Assessment  due by USAC it may face
     legal  sanctions  which include,  but are not limited to, the initiation of
     proceedings to recover the outstanding  debt,  together with any applicable
     administrative charges,  penalties, and interest pursuant to the provisions
     of the Debt Collection Act of 1982 and the Debt Collection  Improvement Act
     of  1996,  as  amended.  In the  event  that  proceedings  against  MBI are
     initiated,  the Second USAC  Assessment  may be  transferred to the Federal
     Communications  Commission  and/or the United States Department of Treasury
     for  collection.  In this event,  the United States  Department of Treasury
     will  charge  MBI an  administrative  penalty  equal to 18% of the  claimed
     amount  due,  a  penalty  of 6% per annum  for as long as the  Second  USAC
     Assessment  remains unpaid,  and interest at the published  investment rate
     for Treasury tax and loan accounts.  MBI does not have  sufficient  cash or
     working capital to pay the Second USAC Assessment.



                                       42
<PAGE>

12.  Contingencies (continued):

     (d)  Focal Agreement:

          On October 30, 2003,  MBI entered into a term service order with Focal
          Communications  ("Focal") under which MBI became obligated for minimum
          payments of $3,767 per month through  October 30, 2005 and payments of
          $350 per month on a month to month basis. Under the service agreement,
          Focal was required to provide storage,  data lines and internet access
          services. MBI has defaulted on payments to Focal and the agreement was
          terminated  in 2004.  Focal has engaged a collection  agent to enforce
          payment under the agreement claiming MBI owes Focal $133,198 including
          interest and collection costs. Excess amounts claimed of $129,502 over
          amounts  recorded  in accounts  payable  will be recorded as a loss on
          service agreement in the consolidated statement of operations in 2004.
          There  can be no  assurance  that  Focal  will not take  legal  action
          against MBI to enforce its rights to collect. To the extent that Focal
          takes  action to enforce its  rights,  MBI will be unable to pay Focal
          and there will be substantial  doubt that MBI will have the ability to
          carry on as a going concern. All amounts owing to Focal, as determined
          by  management  have been accrued for in accounts  payable and accrued
          liabilities.

     (e)  Settlement Agreement payable:

          On May 12, 2003,  the Company  received the final ruling and notice of
          arbitration   award  related  to  the  termination  of  Joseph  Karwat
          ("Karwat") in the amount of $292,953 (the "Final Arbitration  Award").
          On June 16, 2003,  the Company  entered into  settlement  and security
          agreements  (respectively the "Settlement Agreement" and the "Security
          Agreement")   with  Karwat  with  respect  to  payment  of  the  Final
          Arbitration  Award.  Under the terms of the  Security  Agreement,  the
          Company  granted  Karwat a  blanket  security  interest  in all of the
          company's  assets  including the assets of its wholly owned subsidiary
          MBI.  The  security  interest is to be removed  upon final  payment of
          amounts due under the Settlement Agreement.

          On August 11, 2003, the EPLI policy  insurer paid the Company  $90,205
          representing  amounts they  believe are subject to coverage  under the
          EPLI policy.  On January 9, 2004, the Company  entered  mediation with
          the EPLI policy insurer at which time the EPLI policy insurer  refused
          further  payment  on  the  claim.   The  Company  is  considering  the
          commencement  of a lawsuit  against the EPLI  insurer if it can obtain
          sufficient  additional  capital  to fund  litigation.  There can be no
          assurance  that  the  Company  will be able to fund the  legal  costs,
          expense and other fee  obligations  which may be incurred as result of
          pursuing actions against its EPLI policy insurer,  or that, if funded,
          the Company will prevail in  litigation.  The  outstanding  balance at
          December  31,  2003 owing  pursuant  to the  Settlement  Agreement  is
          $47,132.  To March 19,  2004,  the Company is in  compliance  with the
          terms of the Settlement Agreement.



                                       43
<PAGE>

13.  Segmented information and financial instruments:

     (a)  Segmented information:

          The Company  operates  primarily in the United States through MBI, its
          US  subsidiary.  All of the  Company's  revenues are  generated in the
          United  States.  The  following  table  sets out the  location  of the
          Company's assets for the years presented:

<TABLE>
         -------------------------------------------------------------------------------------------------------
                                                        United States              Canada         Consolidated
         -------------------------------------------------------------------------------------------------------
         <S>                                        <C>                     <C>                <C>
         2002                                        $      1,071,723        $    284,093       $    1,355,816
         2003                                                  67,115             204,399              271,514
         -------------------------------------------------------------------------------------------------------
</TABLE>

     (b)  Financial instruments:

          Fair value:

          The Company's financial instruments include cash and cash equivalents,
          accounts  receivable,   accounts  payable,   accrued  liabilities  and
          Settlement  Agreement payable. The carrying value of these instruments
          approximates  their fair value due to their immediate or short-term to
          maturity or their ability for liquidation at comparable amounts.

         The Company's obligations under capital lease and operating sublease
         are also financial instruments. The carrying value of these instruments
         approximates their fair value. Fair value was determined based on
         estimated future cash flows discounted using the current market rate
         for debt under similar circumstances with similar terms and remaining
         maturities.


14.  Subsequent events:

     (a)  Closure of Electronic Media Service Business:

          On February 27, 2004, MBI  discontinued  its Electronic Media Services
          business.  The  Company  was not able to raise  additional  funding to
          support the Electronic  Media Services  business,  including  costs to
          maintain and repair hardware and software  systems which caused system
          downtime.  MBI does not intend to resume it Electronic  Media Services
          business in the future.  MBI believes that there is little or no value
          with  respect  to its  assets  associated  with the  Electronic  Media
          Service  business and as a result has  recognized  impairment  loss on
          certain fixed assets (note 4).

     (b)  Watergate Lease:

          On March 5, 2004,  the Company  vacated  the  Watergate  premises  and
          ceased making required lease payments.  The Company is currently under
          negotiations  with Equity  Office  Properties  Trust  (`Equity"),  the
          lessor,  regarding early termination of the Watergate Lease.  There is
          no assurance  that the Company will be able to reach an agreement with
          Equity  regarding  early  termination of the Watergate  Lease.  If the
          Company  cannot reach an agreement to terminate the  Watergate  Lease,
          the Company does not have  sufficient  financial  resources to fulfill
          its  obligations  under the lease.  To the extent  that  Equity  takes
          action to  enforce  its rights  under the lease,  and that any part of
          amounts due Equity  cannot be paid,  there will be a material  adverse
          impact on the Company.



                                       44
<PAGE>

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

     None.



PART III

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

     All  of  the  directors  of  the  Company  are  elected   annually  by  the
shareholders   and  hold  office  until  the  next  annual  general  meeting  of
shareholders  or until their  successors are duly elected and qualified,  unless
they sooner  resign or cease to be directors in  accordance  with the  Company's
Articles or the Canada  Business  Corporations  Act. The  Company's  last annual
regular  general  meeting was held on June 30,  2003.  The  Company's  executive
officers are appointed by and serve at the pleasure of the Board of Directors.

     As of December 31,  2003,  the  following  persons  were  directors  and/or
executive officers of the Company:

<TABLE>
--------------------------------------------------------------------------------------------------------
                                        Director/Officer since(2)   Principal occupation during the
Name and present office held                                        preceding five years
--------------------------------------------------------------------------------------------------------
<S>                                     <C>                        <C>
J. Erik Mustad                          July 11, 1996               Director, Chairman and CEO,
Green Brae, California U.S.A.                                       E*Comnetrix Inc.
Chief Executive Officer and Director
--------------------------------------------------------------------------------------------------------
Mark M. Smith(1)                        July 11, 1996               Director, President, Chief Financial
Sparks, Nevada U.S.A.                                               Officer and Secretary, E*Comnetrix
President, Chief Financial Officer                                  Inc.
and Director
--------------------------------------------------------------------------------------------------------
Jim Miller(1)                           May 31, 2002                Self-employed Businessman
--------------------------------------------------------------------------------------------------------
Ernie Kelly(3)                          October 1, 2002             2002 to present, a consultant with the
                                                                    KDW Group, a business and financial
                                                                    consulting firm.
--------------------------------------------------------------------------------------------------------
Thomas Wharton                          December 20, 1995           Self-employed Businessman
Vancouver, B.C. Canada
Director
--------------------------------------------------------------------------------------------------------
(1)  Member of the Company's audit committee.
(2)  Directors  serve until their  successors  are  nominated and elected by the
     shareholders  and Officers  serve until their  successors are nominated and
     appointed  by the Board of  Directors.  On June 30, 2003 Stuart  Rogers,  a
     director, resigned from the Board of Directors.
(3)  On January 21, 2004 Ernie  Kelly,  a director,  resigned  from the Board of
     Directors.
</TABLE>



                                       45
<PAGE>


J. Erik Mustad, Chief Executive Officer and Director, Age 63

     Mr.  Mustad  has  over 32  years of  experience  in the  telecommunications
services industry,  serving in a broad range of executive positions with several
public and  privately  held  companies.  Since 1975,  he has been an investor in
various start-up ventures.

     Mr. Mustad was a founder of Centex Telemanagement, Inc. and participated in
its initial  public  offering in 1987.  Centex was  acquired by  WorldCom,  Inc.
(NASDAQ:WCOM) in 1995.

     Mr. Mustad was an investor in Phoenix Network, Inc. and responsible for all
sales and marketing  during a time when Phoenix Network  experienced 400% growth
within  a 2-year  time  frame.  Phoenix  Network,  Inc.  was  acquired  by Qwest
Communications International Inc. (NASDAQ:Q) in 1998.

     In 1975,  he formed  his own  interconnect  company,  TCI,  Inc.  Under his
leadership,  TCI was  acquired in 1981 by  Inter-Tel,  Inc.  (NASDAQ:INTL).  Mr.
Mustad served as director of Inter-Tel from 1982 to 1984.


Mark M. Smith, President, Chief Financial Officer  and Director, Age 45

     Mr. Smith has over 17 years of  experience  in the  telecommunications  and
venture capital  industries,  and has served in a variety of executive positions
with  several  public and  privately  held  companies.  He has been a  financial
consultant providing strategic planning in public markets and finance. He joined
the  Company  as its acting  Chief  Financial  Officer in 1996 and  subsequently
assumed the role of President in September 1999.

     Mr. Smith has experience  advising small cap public  companies with respect
to the public markets and has  negotiated  international  agreements  with large
telecommunications and investment banking firms.

     From 1990 to 1992,  he was  Professor  of Corporate  Finance at  California
State  University.  Prior to this  position,  he was  associated  with  Richland
Partners,  a venture capital firm  specializing in technology  investments.  Mr.
Smith performed research for the Pension Research Institute in 1989 and 1990 and
received his Masters degree in  International  Finance in 1990. For his research
work in global asset  management,  he received a Wall Street Journal Award.  Mr.
Smith is a member of the Association for Investment Management and Research.


Jim Miller, Director, Age 54

     Mr.  Miller  is a  business  consultant  and  entrepreneur  and a  Founding
Director  of the  International  Seakeepers  Society  a  501(c)  (3)  registered
non-profit.  He has  served on several  boards of  directors  including  Phoenix
Network,  Inc. from 1990 to 1991.  Mr. Miller was with the U.S.  Securities  and
Exchange  Commission  (S.E.C) from 1974 through 1978 and was a S.E.C.,  Regional
Counsel from 1980-1981.  He began his law career as an attorney in the Office of
the General  Counsel of the S.E.C. in Washington DC. He received his B.A. degree
from the College of William and Mary and his J.D.  degree from the University of
San  Diego  School  of Law  where he was  Editor-in-Chief  of the San  Diego Law
Review.


Ernie Kelly, Director, Age 53

     Mr. Kelly is currently a consultant for the KDW Group,  in Washington  D.C,
providing business and financial consulting to telecommunications,  Internet and
related entities.  From 1993 through 2002 he was President of the Association of
Communications Enterprises in Washington,  D.C. a trade association representing
over 800  telecommunications  companies  with hundreds of billions of dollars in
assets.

     From 1977 through 1992 Mr. Kelly was the Director of  Government  Relations
and Manager of Congressional  Affairs for Communications  Satellite  Corporation
(COMSAT) and from 1974 through 1976 he was Legislative Assistant to the Hon. Ted
Stevens, U.S. Senator.



                                       46
<PAGE>

Thomas Wharton, Director, Age 60

     Mr. Wharton is a professional in the medical field. Since 1983, Mr. Wharton
has been a principal of T. Wharton and Associates,  Ltd., a consulting firm that
focuses on policy review, operations procedures, quality assurance and executive
evaluation in private sector healthcare.

     Mr. Wharton is currently a director of Telesis North  Communications,  Inc.
and Cusil Venture Corporation both listed on the TSX Venture Exchange.


     Members  of the  Board of  Directors  are  elected  by the  holders  of the
Company's  common  shares to represent the  interests of all  shareholders.  The
Board  of  Directors  meets  periodically  to  review  significant  developments
affecting the Company and to act on matters  requiring Board approval.  Although
the Board of Directors  delegates  many matters to others,  it reserves  certain
powers and functions to itself.

     Board Committees

     The only standing  committee of the Board of Directors of the Company is an
Audit  Committee.  The  Audit  Committee  of the  Company's  Board of  Directors
currently  consists of three (3)  individuals  including two outside  directors,
being Jim Miller  (chairman of the Audit  Committee)  and Thomas Wharton and one
inside  director  being Mark  Smith.  This  committee  is directed to review the
scope,  cost and results of the  independent  audit of the  Company's  books and
records, the results of the annual audit with management and the adequacy of the
Company's accounting, financial and operating controls; to recommend annually to
the Board of Directors the selection of the  independent  auditors;  to consider
proposals made by the Company's independent auditors for consulting work; and to
report  to the Board of  Directors,  when so  requested,  on any  accounting  or
financial  matters.  Such  reviews are carried  out with the  assistance  of the
Company's  auditors  and  senior  financial  management.  None of the  Company's
directors or executive  officers are parties to any arrangement or understanding
with any other  person  pursuant  to which  said  individual  was  elected  as a
director or officer of the Company.

     Board and Committee Meetings

     During 2003, the Board of Directors met 5 times  including  participants by
telephone and by consent. During 2003, the Audit Committee met once.

     From  December  31, 2002 to March 15,  2003,  the Board of Directors of the
Company has met 1 time.  The Company  believes that the Board of Directors  will
meet in April  2003 to  discuss,  among  other  things,  the timing of an annual
general meeting of shareholders for 2003.

     There are no arrangements or  understandings  among any of the directors or
officers of the Company regarding their election as directors or officers.

     Section 16(a) Beneficial Ownership Reporting Compliance

     Federal  securities  laws require the  Company's  directors  and  executive
officers and persons who own more than 10% of the Company's common stock to file
with the Securities  and Exchange  Commission  initial  reports of ownership and
reports of changes in ownership of any securities of the Company.

     To  the  Company's  knowledge  all of the  Company's  directors,  executive
officers, and greater-than-10%  beneficial owners made all required filings on a
timely basis for the fiscal year ended December 31, 2003.

     Code of Ethics

     The  Company has  adopted a code of ethics  that  applies to the  Company's
principal executive officer,  principal financial officer,  principal accounting
officer or controller,  or persons  performing  similar  functions.  The Company
intends to satisfy the  disclosure  requirement  regarding  any amendment to, or
waiver from, its code of ethics, by filing on form 8-K.



                                       47
<PAGE>


ITEM 10. EXECUTIVE COMPENSATION.

     The Company  grants  stock  options to  directors,  executive  officers and
employees. See "Options Grants and Option Exercises."

     The following  table sets forth the  compensation  for the years  indicated
paid to J. Erik Mustad,  Chief Executive  Officer of the  Corporation,  and each
executive  officer of the Company that earned a salary and bonus for such fiscal
year in excess of $100,000 (each, a "Named Executive Officer").

<TABLE>
---------------------------------------------------------------------------------------------------------------------------
                                           Annual Compensation                Long Term Compensation
                                     --------------------------------- -------------------------------------
                                                                                Awards            Payouts
                                                                       ------------------------- -----------
                                                                       Securities    Restricted
                                                             Other        Under      Shares or
                                                            Annual       Options     Restricted               All Other
                                                          Compensation   Granted    Share Units   LTIP(2)    Compensation
Name and Principal                   Salary(1)    Bonus       ($)          (#)          ($)        Payouts       ($)
     Position          Year Ended       ($)        ($)                                               ($)
---------------------------------------------------------------------------------------------------------------------------
<S>                     <C>           <C>         <C>      <C>          <C>           <C>          <C>        <C>
J. Erik Mustad          2003/12/31     $85,000      Nil         Nil         Nil             Nil        Nil           Nil
Chairman & Chief        2002/12/31     $72,000      Nil         Nil         Nil             Nil        Nil           Nil
Executive Officer       2001/12/31    $140,000      Nil         Nil         Nil             Nil        Nil           Nil
---------------------------------------------------------------------------------------------------------------------------
Mark M. Smith(3)        2003/12/31    $150,000      Nil         Nil         Nil             Nil        Nil           Nil
President               2002/12/31    $150,000      Nil         Nil         Nil             Nil        Nil   $400,000(4)
Chief Financial         2001/12/31    $185,000      Nil         Nil     340,000             Nil        Nil           Nil
Officer                                                                                                              Nil
---------------------------------------------------------------------------------------------------------------------------
(1)  All dollar amounts are in US dollars.
</TABLE>



                                       48
<PAGE>


(2)  "LTIP"  or  "long  term  incentive  plan"  means  any  plan  that  provides
     compensation intended to serve as incentive for performance to occur over a
     period longer than one financial year, but does not include option or stock
     appreciation  right  plans or plans  for  compensation  through  restricted
     shares or restricted share units. (3) Paid to Interven Capital Corporation.
     See "Employment and Employee Incentive Contracts". (4) Compensation expense
     of  $400,000  representing  the  intrinsic  value of  shares  and  warrants
     recorded to contracting and consulting services.

     The aggregate  direct  remuneration  paid or payable by the Company and its
subsidiaries to the directors and Named Executive  Officers of the Company,  for
their services in all capacities, during the fiscal year ended December 31, 2003
was $235,000.


DIRECTOR COMPENSATION

     The Company has no standard  arrangement pursuant to which any of the other
directors are compensated by the Company for their services in their capacity as
directors  except for the granting from time to time of incentive stock options.
Directors  are  entitled  to  reimbursement  for  reasonable  travel  and  other
out-of-pocket expenses incurred in connection with attendance at meetings of the
Board of Directors.  The Board of Directors  makes separate  remuneration to any
director  undertaking  services  on behalf of the  Company  other than  services
ordinarily required of a director. No director received any compensation for his
services  as a  director,  including  any  committee  participation  or  special
assignments.

     The  Company's  independent  directors  receive  stock  options to purchase
common shares of the Company as compensation for their service as directors. The
terms of stock option grants made to independent directors are determined by the
Board of Directors. See "Option Grants."


OPTION GRANTS

     The following table sets forth information regarding stock option grants to
the Company's  executive  officers and directors  during the year ended December
31, 2003:

<TABLE>
--------------------------------------------------------------------------------------------------------------------
         Individual                                                Option Grants
--------------------------------------------------------------------------------------------------------------------
           (a)                          (b)                     (c)                     (d)               (e)
--------------------------------------------------------------------------------------------------------------------
                                       Number of             % of Total
                                       Securities          Options Granted
                                  Underlying Options       to Employees in          Base Price
          Name                        Granted (#)             Fiscal Year              ($/Sh)          Expiration Date
--------------------------------------------------------------------------------------------------------------------
<S>                                   <C>                    <C>                    <C>                 <C>
J. Erik Mustad                               Nil                   Nil                   Nil                 Nil
--------------------------------------------------------------------------------------------------------------------
Mark M. Smith                                Nil                   Nil                   Nil                 Nil
--------------------------------------------------------------------------------------------------------------------
Jim Miller                                50,000                20.00%                 $0.10             6/30/05
--------------------------------------------------------------------------------------------------------------------
Ernie Kelly                               50,000                20.00%                 $0.10             6/30/05
--------------------------------------------------------------------------------------------------------------------
Thomas Wharton                            50,000                20.00%                 $0.10             6/30/05
--------------------------------------------------------------------------------------------------------------------
</TABLE>


OPTION EXERCISES.

     The  following  table sets forth  details of each exercise of stock options
during the  financial  year ended  December 31, 2003 by any of the directors and
Named  Executive  Officers,  and the  financial  year end  value of  unexercised
options on an aggregate  basis.  During the Company's  most  recently  completed
fiscal year ended  December  31, 2003,  and through the period  ending March 15,
2004,  no options and other  rights to purchase  securities  of the Company were
exercised by the directors  and executive  officers of the Company other than as
set forth below.



                                       49
<PAGE>

<TABLE>
--------------------------------------------------------------------------------------------------------------------
             Name                 Securities    Aggregate Value      Unexercised Options      Value of Unexercised
                                  Acquired on   Realized ($)(1)         At FY-End (#)         in the Money-Options
                                 Exercise (#)                           Exercisable/               at FY-End
                                                                        Unexercisable           ($) Exercisable/
                                                                                               Unexercisable (2)
--------------------------------------------------------------------------------------------------------------------
<S>                             <C>             <C>                <C>                         <C>
J. Erik Mustad                      Nil               Nil          1,125,000(exercisable)       Nil (exercisable)
                                                                    Nil (unexercisable)         Nil (unexercisable)
--------------------------------------------------------------------------------------------------------------------
Mark M. Smith                       Nil               Nil           2,465,000 (exercisable)     Nil (exercisable)
                                                                     Nil (unexercisable)        Nil (unexercisable)
--------------------------------------------------------------------------------------------------------------------
Jim Miller                          Nil               Nil           125,000 (exercisable)       Nil (exercisable)
                                                                     Nil (unexercisable)        Nil (unexercisable)
--------------------------------------------------------------------------------------------------------------------
West Oak Capital Group Inc.         Nil               Nil            Nil (exercisable)          Nil (exercisable)
(Stuart Rogers)(3)                                                   Nil (unexercisable)        Nil (unexercisable)
--------------------------------------------------------------------------------------------------------------------
Ernie Kelly                         Nil               Nil            100,000 (exercisable)      Nil (exercisable)
                                                                     Nil (unexercisable)        Nil (unexercisable)
--------------------------------------------------------------------------------------------------------------------
Thomas Wharton                      Nil               Nil            95,000 (exercisable)       Nil (exercisable)
                                                                     Nil (unexercisable)        Nil (unexercisable)
--------------------------------------------------------------------------------------------------------------------
(1)  Based on NASD OTCBB closing price on the date of exercise.
(2)  In-the-money  options  are those where the market  value of the  underlying
     securities  at the  fiscal  year-end  exceeds  the  exercise  price  of the
     options.  The closing price of the  Company's  shares on December 31, 2003,
     being the last day the  Company's  common  shares traded during 2003 on the
     NASD Over the Counter Bulletin Board, was $0.03.
(3)  Mr. Rogers  resigned from the Board of Directors of the Company on June 30,
     2003.
</TABLE>


     Report on Repricing of Options

     On February 25, 2002,  the  Company's  board of directors  approved a stock
option repricing program for the Company.  Under the repricing program,  certain
holders of stock  options,  including  directors and officers,  were entitled to
exchange their existing stock options,  which had an exercise price of $0.25 per
share, for repriced stock options with the same terms, except the exercise price
is  reduced  to $0.10 per  share.  At this  repricing,  the new  exercise  price
exceeded the market price of the Company's  common  shares.  Each repriced stock
option has terms  substantially  equivalent to the terms of the original  grant,
including the same vesting terms,  number of shares and expiration date. Options
to purchase a total of 4,510,100 common shares were repriced.

     Amendment of Expiration Dates

     During  the  Company's  fiscal  year  ended  December  31,  2003,   options
previously  granted  to two (2) Named  Executive  Officers  were  amended  as to
expiration date.

     By agreement dated September 9, 2000, the Company granted to J. Erik Mustad
options to purchase up to three hundred  seventy-five  thousand (375,000) common
shares expiring on September 9, 2004.  Pursuant to an amendment to the agreement
dated June 30, 2003 the expiration date was changed to June 30, 2008.

     By  agreement  dated April 9, 2000,  the  Company  granted to Mark M. Smith
options to purchase up to seven hundred fifty thousand  (750,000)  common shares
expiring on April 9, 2005.  Pursuant to an amendment to the agreement dated June
30, 2003 the expiration date was changed to June 30, 2008.

     Stock Option Plans

     On May 17,  1999,  the  board of  directors  of the  Company  approved  the
Company's Stock Option Plan (1999) (the "1999 Plan"). The 1999 Plan subsequently
received  shareholder  approval.  Pursuant  to section 11 of the 1999 Plan,  the
Board of Directors has the power to amend the 1999 Plan. On March 30, 2000,  the
board of directors of the Company amended the Company's 1999 Plan and renamed it
the Amended and Restated  Stock Option Plan (2000) (the "2000  Plan").  The 2000
Plan  increased  the number of common  shares  available  for issuance  from the
1,900,000  common shares  available  under the 1999 Plan to a total of 5,000,000
common shares available under the 2000 Plan. The 2000 Plan, received shareholder
approval at the  Company's  annual  meeting held on May 3, 2000.  On November 3,
2000, the board of directors of the Company  amended the 2000 Plan (the "Amended
2000  Plan").  The  Amended  2000 Plan  increased  the  number of common  shares
available for issuance from the 5,000,000



                                       50
<PAGE>

common  shares  available  under  the 2000 Plan to a total of  8,000,000  common
shares  available  under the Amended 2000 Plan. The Amended 2000 Plan,  received
shareholder approval at the Company's annual meeting held on June 22, 2001.

     As of December 31, 2003,  there were options to purchase  1,731,020  common
shares  issued and  outstanding  under the Amended 2000 Plan,  1,225,250  common
shares  have been issued  pursuant  to options  granted,  200,000  options  have
expired  unexercised,  1,225,250 options have been exercised,  1,682,460 options
have been  cancelled  and 4,843,730  common shares were  available to be granted
after  December  31,  2003 under the  Amended  2000 Plan.  All of the  remaining
options  available for grant  pursuant to the terms of the Amended 2000 Plan may
be granted without further regulatory or shareholder approvals.

     On May 7,  2003,  the  board  of  directors  of the  Company  approved  the
Company's  Stock Option Plan (2003) (the "2003 Plan").  The 2003 Plan authorized
the  granting of  5,000,000  options to purchase  common  shares.  The 2003 Plan
subsequently  received shareholder approval at the Company's annual meeting held
on June 30, 2003.

     As of December  31,  2003,  no options to purchase  common  shares had been
issued under the 2003 Plan.  All of the  remaining  options  available for grant
pursuant to the terms of the 2003 Plan may be granted without further regulatory
or shareholder approvals.

     Employment and Employee Incentive Contracts

     The Company has no plan or arrangement  whereby any Named Executive Officer
may be  compensated  in an  amount  exceeding  $100,000  in the  event  of  that
officer's resignation,  retirement or other termination of employment, or in the
event of a change of control of the Company or a  subsidiary  or a change in the
Named Executive Officer's  responsibilities  following such a change of control,
except as set out below:

     On March 1, 2002, the Company entered into a consulting  services agreement
with J. Erik Mustad "Mustad") for the period March 1, 2002 to December 31, 2003,
as amended October 15, 2002, (the "Mustad 2002 Agreement"). On July 1, 2003, the
Company  entered  into a new  consulting  services  agreement  with Mustad which
replaced the Mustad 2002  Agreement (the "Mustad 2003  Agreement").  Pursuant to
the Mustad 2003 Agreement,  Mustad will provide certain  services to the Company
in consideration of $7,500 per month through December 31, 2003 at which time the
Mustad 2003 Agreement  will expire,  except if the Company should receive common
stock  financing in a minimum gross amount of $500,000  dollars and a commitment
to a total  common  stock  financing  in a minimum  gross  amount of  $2,000,000
dollars (inclusive of the $500,000 dollars),  from sources outside of the United
States,  on or before  December  31, 2003 in which event the  Agreement  will be
extended through December 31, 2004 with no provision for renewal. As of December
31, 2003, the Company had not secured gross equity financing of $500,000 or more
and the Mustad 2002 Agreement expired under it terms.

     On March 1, 2002, the Company entered into a consulting  services agreement
with Interven Capital  Corporation  ("Interven") for the period March 1, 2002 to
December 31, 2003, as amended October 15, 2002, (the "Interven 2002 Agreement").
Pursuant to the  Interven  2002  Agreement,  as amended,  Interven  will provide
certain  services to the Company in  consideration  of $13,750 per month through
June 30, 2002 and $12,500 per month from July 1, 2002 through December 31, 2003,
to  increase to $15,000  per month  beginning  in the month in which the Company
should receive gross equity  financing of $2,000,000 or more.  Through March 15,
2004, the Company had not secured gross equity financing of $2,000,000 or more.

     The Interven 2002  Agreement  had an  expiration  date of December 31, 2003
(the "Initial Term") and could be automatically  renewed for additional one-year
terms unless  earlier  terminated.  In the event of  termination  by the Company
during the Initial Term,  other than for cause, the Company must pay to Interven
the full  balance of fees  which  would have been  payable to  Interven  had the
Consultant  been  engaged  for the  entire  Initial  Term,  payable at a rate of
$13,750 per month for the first four months of the Initial  term and $12,500 per
month (to increase to $15,000 per month if the Company had received gross equity
financing  of  $2,000,000  or more) for the  remaining  18 months of the Initial
Term. As of March 15, 2004 the Interven 2002 Agreement had not been terminated.

     Indemnification of Directors, Officers and Others

     The by-laws of the Company  provide that subject to the  provisions  of the
Canada  Business  Corporations  Act,  the  Company  may  indemnify a director or
officer or former  director  or officer of the  Company or of a  corporation  of
which the Company is or was a  shareholder  or creditor  and the heirs and legal
representatives  of any such  person  against all costs,  charges and  expenses,
including an amount paid to settle an action or satisfy a



                                       51
<PAGE>

judgment,  reasonably incurred by him or them in respect of any civil,  criminal
or  administrative  action or proceeding to which he is or they are made a party
by reason of his being or having  been a director or officer of the Company or a
director or officer of such  corporation,  including  any action  brought by the
Company or any such corporation.  Each director or officer of the Company,  upon
being elected or appointed,  shall be deemed to have contracted with the Company
on the terms of the indemnity set forth in the Company's by-laws.

     The by-laws of the Company  further  provide that the failure of a director
or officer of the Company to comply with the  provisions of the Canada  Business
Corporations  Act or of the  articles or the  by-laws of the  Company  shall not
invalidate any indemnity to which he is entitled to under the Company's by-laws.

     The  by-laws of the  Company  further  provide  that the  directors  of the
Company may cause the Company to purchase and maintain insurance for the benefit
of any person who is or was serving as a director, officer, employee or agent of
the Company or as a director,  officer,  employee or agent of any corporation of
which  the  Company  is  or  was  a  shareholder   and  his  heirs  or  personal
representatives,  against  any  liability  incurred  by  him as  such  director,
officer, employee or agent.

     Under the Canada Business  Corporations Act, except in respect of an action
by or on behalf of the Company to procure a judgment  in its favor,  the Company
may indemnify a director or officer of the Company, a former director or officer
of the  Company  or a person  who acts or acted at the  Company's  request  as a
director  or  officer  of a body  corporate  of which  the  Company  is or was a
shareholder or creditor,  and his heirs and legal  representatives,  against all
costs,  charges and  expenses,  including  an amount paid to settle an action or
satisfy a judgment, reasonably incurred by him in respect of any civil, criminal
or administrative  action or proceeding to which he is made a party by reason of
being or having been a director or officer of the Company or body  corporate  if
he acted  honestly  and in good faith with a view to the best  interests  of the
Company and, in the case of a criminal or  administrative  action or  proceeding
that is enforced by a monetary penalty,  he had reasonable grounds for believing
that his conduct was lawful.

     Further under the Canada Business  Corporations  Act, the Company may, with
the  approval  of a court,  indemnify a director  or officer of the  Company,  a
former  director  or officer of the Company or a person who acts or acted at the
Company's  request as a director  or  officer of a body  corporate  of which the
Company  is  or  was  a  shareholder  or  creditor,  and  his  heirs  and  legal
representatives,  in respect of an action by or on behalf of the Company or body
corporate  to  procure a judgment  in its favor,  to which he is made a party by
reason of being or having  been a director  or an officer of the Company or body
corporate, against all costs, charges and expenses reasonably incurred by him in
connection  with such action if he acted  honestly and in good faith with a view
to the  best  interests  of the  Company  and,  in the  case  of a  criminal  or
administrative  action or proceeding that is enforced by a monetary penalty,  he
had reasonable grounds for believing that his conduct was lawful.

     Further under the Canada Business  Corporations  Act, a director or officer
of the Company,  a former  director or officer of the Registrant or a person who
acts or acted at the  Company's  request  as a  director  or  officer  of a body
corporate  of which the Company is or was a  shareholder  or  creditor,  and his
heirs and legal  representatives,  is entitled to indemnity  from the Company in
respect  of all  costs,  charges  and  expenses  reasonably  incurred  by him in
connection with the defense of any civil,  criminal or administrative  action or
proceeding  to which  he is made a party by  reason  of being or  having  been a
director  or officer of the  Company or body  corporate,  if the person  seeking
indemnity  was  substantially  successful  on the  merits in his  defense of the
action or proceeding  and if he acted  honestly and in good faith with a view to
the  best  interests  of  the  Company  and,  in  the  case  of  a  criminal  or
administrative  action or proceeding that is enforced by a monetary penalty,  he
had reasonable grounds for believing that his conduct was lawful.

     Further  under the  Canada  Business  Corporations  Act,  the  Company  may
purchase and maintain  insurance for the benefit of a director or officer of the
Company,  a former  director  or officer of the  Company or a person who acts or
acted at the Company's  request as a director or officer of a body  corporate of
which the Company is or was a shareholder  or creditor,  and his heirs and legal
representatives,  against any  liability  incurred  by him in his  capacity as a
director or officer of the Registrant, except where the liability relates to his
failure to act honestly  and in good faith with a view to the best  interests of
the  Company,  or in his  capacity  as a director  or  officer  of another  body
corporate  where he acts or acted in that  capacity  at the  Company's  request,
except  where the  liability  relates to his failure to act honestly and in good
faith with a view to the best interest of the body corporate.

     The Company maintains  Directors' and Officers' Liability Insurance for its
directors.



                                       52
<PAGE>

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be  permitted  to  directors,  officers or persons  controlling  the
registrant  pursuant  to the  foregoing  provisions,  the  registrant  has  been
informed  that in the opinion of the  Securities  and Exchange  Commission  such
indemnification  is  against  public  policy  as  expressed  in the  Act  and is
therefore unenforceable.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
         AND OTHER RELATED STOCKHOLDER MATTERS.

     The Company is  authorized  to issue an unlimited  number of common  shares
without par value ("Common Shares"), and 10,000,000 are Class A Preferred Shares
(the  "Class A Preferred  Shares")  without par value,  and  20,000,000  Class B
Preferred  Shares  (the  "Class B Preferred  Shares")  without par value.  As of
December 31, 2003 and March 15, 2004,  14,739,691 Common Shares and no Preferred
Shares were issued and outstanding.

     Rule 13d-3 under the Securities Exchange Act defines the term,  "beneficial
ownership."  Under this rule, the term includes  shares over which the indicated
beneficial owner exercises voting and/or  investment  power. The rules also deem
common shares subject to options currently exercisable, or exercisable within 60
days, to be outstanding  for purposes of computing the  percentage  ownership of
the person holding the options but do not deem such stock to be outstanding  for
purposes of computing the percentage ownership of any other person.

     The  following  table  sets forth  information  concerning  the  beneficial
ownership of the Company's  outstanding  common shares as of March 15, 2004 for,
each of the Company's directors and executive officers individually, each person
or group that the Company knows owns  beneficially more than 5% of the Company's
common shares,  and all directors and executive  officers as a group.  Except as
otherwise  indicated,  the Company believes the beneficial  owners of the common
shares listed below,  based on information  furnished by them,  have sole voting
and investment power over the number of shares listed opposite their names.

<TABLE>
-------------------------------------------------------------------------------------------------------------
Title of Class            Identity of                          Number of               Percentage of Class(1)
                          Persons or Group                   Shares Owned
-------------------------------------------------------------------------------------------------------------
<S>                       <C>                                <C>                       <C>
Common Shares             J. Erik Mustad                      1,830,800(2)                  12.4%(2)
-------------------------------------------------------------------------------------------------------------
Common Shares             Mark M. Smith                       4,565,000(3)                  30.9%(3)
-------------------------------------------------------------------------------------------------------------
Common Shares             Jim Miller                            130,000(4)                     - (5)
-------------------------------------------------------------------------------------------------------------
Common Shares             Thomas Wharton                         95,000(6)                     - (5)
-------------------------------------------------------------------------------------------------------------
Common Shares             Joseph Karwat                       1,553,427(7)                  10.5%(7)
-------------------------------------------------------------------------------------------------------------
Common Shares             Officers, Directors,                8,174,227(8)                  55.46%(8)
                          Insiders as a group
-------------------------------------------------------------------------------------------------------------
(1)  Based on the 14,739,691 shares outstanding as of March 15, 2004.
(2)  Includes  705,800  common  shares and vested  options to acquire  1,125,000
     common  shares of the Company  exercisable  within  sixty days of March 15,
     2004.
(3)  Includes  1,100,000  common shares and vested options to acquire  2,465,000
     common  shares of the Company  exercisable  within  sixty days of March 15,
     2004 and 1,000,000 share purchase warrants exercisable within sixty days of
     March 15, 2004.
(4)  Includes 5,000 common shares and vested  options to acquire  125,000 common
     shares of the Company exercisable within sixty days of March 15, 2004.
(5)  Less than one percent (1%).
(6)  Consists of vested  options to acquire  95,000 common shares of the Company
     exercisable within sixty days of March 7, 2004.
(7)  Includes 1,553,427 common shares; based upon the Company's best estimate of
     the holdings.
(8)  Includes  3,359,227  common shares and vested options to acquire  3,850,000
     common shares of the Company within sixty days of March 7, 2004.
</TABLE>


     There are no  arrangements  known to the Company  that may, at a subsequent
date, result in a change in control of the Company.



                                       53
<PAGE>

Securities Authorized for Issuance Under Compensatory Plans

     The following  table  includes  information as of December 31, 2003 for all
compensatory plans previously approved by the Company's security holders and all
compensatory plans not previously approved by the Company's security holders.

         Equity Compensatory Plan Information

<TABLE>
-------------------------------------------------------------------------------------------------------------------
Plan Category                     Number of Securities to be     Weighted Average Exercise    Number of Securities
                                   Issued Upon Exercise of        Price of Outstanding       Remaining Available for
                                     Outstanding Options,         Options, Warrants and       Future Issuance Under
                                     Warrants and Rights                Rights             Equity Compensation Plans
                                                                                             (excluding securities
                                                                                            reflected in column (a))

                                          (a)                           (b)                             (c)
-------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                              <C>                        <C>
Equity Compensation Plans              1,731,020(1)                     $0.17                      9,843,730
Approved by Security Holders
-------------------------------------------------------------------------------------------------------------------
Equity Compensation Plans Not          3,704,930(2)                     $0.09                         Nil
Approved by Security Holders
-------------------------------------------------------------------------------------------------------------------
Total                                    5,435,950                      $0.12                      9,843,730
-------------------------------------------------------------------------------------------------------------------
(1)  Includes 465,070 options held by officers and directors.
(2)  Includes  2,704,930  options held by officers and  directors  and 1,000,000
     warrants held by an officer and director.
</TABLE>


     Description of Stock Option Plans

     See "Executive  Compensation - Stock Option Plans" for a description of the
Company's stock option plans.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Except for (a) the  transactions  described below, (b) the ownership of the
Company's securities, (c) the compensation described herein, and (d) advances to
and by certain  officers to or from the Company to cover expenses,  all of which
were  reimbursed or repaid without  interest,  none of the directors,  executive
officers,  holders of ten percent of the Company's outstanding Common Shares, or
any  associate  or  affiliate  of such  person,  have,  to the  knowledge of the
Company,  had a material  interest,  direct or  indirect,  during the two fiscal
years  ended  December  31,  2003  and  2002,  in any  transaction  or  proposed
transaction which may materially affect the Company.

     On May 28, 2003 the Company  entered into a finders fee agreement  with The
KDW Group,  LLC ("KDW") of  Washington,  D.C. (the "KDW  Agreement").  Under the
terms of the KDW  Agreement  the  Company  paid KDW finders  fees of $44,589.  A
director of the Company is a paid consultant of KDW.



                                       54
<PAGE>


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

(a)      Exhibits

EXHIBIT INDEX


Exhibit No.         Description
-----------         -----------
 3.1(1)             Certificate of Incorporation  for Jackpine Mining Co., Inc.,
                    dated December 23, 1991, previously filed as Exhibit 1.1

 3.2(1)             Form 1 (Section 5) Company Act Memorandum of Jackpine Mining
                    Co.,  Inc.,  dated  December 13, 1991,  previously  filed as
                    Exhibit 1.2

 3.3(1)             Articles of Jackpine Mining Co., Inc.,  previously  filed as
                    Exhibit 1.3

 3.4(1)             Certificate  of name  change  for USV  Telemanagement  Inc.,
                    dated July 10, 1996, previously filed as Exhibit 1.4

 3.5(1)             Province of British  Columbia  Form 21 (Section 371) Company
                    Act Special Resolution filed July 10, 1996, previously filed
                    as  Exhibit  1.5

10.1(1)             Share Exchange  Agreement  among certain  shareholders of US
                    Voice  Telemanagement,  Inc. and Jackpine  Mining Co., Inc.,
                    dated  February 1, 1996,  as amended  February 27, 1996,  as
                    amended June 29, 1996, previously filed as Exhibit 3.1

10.2(1)             Form of BC  Subscription  Agreement  for Private  Placement,
                    dated 1996, previously filed as Exhibit 3.2

10.3(1)             Escrow Agreement among the Bank of Nova Scotia Trust Company
                    of  New  York,   Jackpine   Mining  Co.,  Inc.  and  certain
                    shareholders,  dated  June  1,  1996,  previously  filed  as
                    Exhibit 3.3

10.4(1)             Form of  Telecommunication  Service Dealer  Agreement by and
                    between  USV   Telemanagement   Inc.  and  certain  dealers,
                    previously filed as Exhibit 3.4

10.5(1)             Office   Lease   Agreement   by   and   between   US   Voice
                    Telemanagement,  Inc. and Shoreline  Office  Center  Limited
                    Partnership,  dated  February 25, 1994,  as amended July 18,
                    1997, previously filed as Exhibit 3.5

10.6(1)(2)          Service  Agreement by and between Digital  Communications of
                    America, Inc. and US Voice Telemanagement,  Inc., dated July
                    15, 1994, as amended December 16, 1998,  previously filed as
                    Exhibit 3.6

10.7(2)(3)          Telecommunication  Service  Agreement by and between Wiltel,
                    Inc. and US Voice Telemanagement, Inc., dated July 15, 1994,
                    as amended  December 31, 1998,  previously  filed as Exhibit
                    3.7

10.8(1)             Security  Agreement by and between US Voice  Telemanagement,
                    Inc. and Wiltel, Inc., dated July 20, 1994, previously filed
                    as Exhibit 3.8

10.9 (2)(3)         Integrated  Internet Access Service Agreement by and between
                    WorldCom Network Services, Inc. and US Voice Telemanagement,
                    Inc., dated March 17, 1999, previously filed as Exhibit 3.9

10.10(1)(2)         Telecommunication  Service Agreement by and between IXE Long
                    Distance, Inc. and US Voice Telemanagement, Inc., dated July
                    15, 1996, as amended December 31, 1998,  previously filed as
                    Exhibit 3.10

10.11 (2)(3)        Network Resell  Services  Agreement by and between  Alliance
                    Group  Services,  Inc.  and US Voice  Telemanagement,  Inc.,
                    effective March 31, 1999, previously filed as Exhibit 3.11



                                       55
<PAGE>

Exhibit No.         Description
-----------         -----------
10.12 (2)(3)        Commercial  Revolving  Loan and  Security  Agreement  by and
                    between Alliance Group Services, Inc. and USV Telemanagement
                    Inc., effective March 31, 1999,  previously filed as Exhibit
                    3.12

10.13(1)            Consulting  Services Agreement by and between J. Erik Mustad
                    and  USV   Telemanagement   Inc.,  dated  January  1,  1998,
                    previously filed as Exhibit 3.13

10.14(1)            Consulting Services Agreement by and between Interven
                    Capital Corporation, Mark Smith and USV Telemanagement Inc.,
                    dated January 1, 1998, previously filed as Exhibit 3.14

10.15(1)            Subscription Agreement by and between USV Telemanagement
                    Inc. and P.E. Development A.S., dated July 3, 1997,
                    previously filed as Exhibit 3.15

10.16(1)            Nontransferable Share Purchase Warrant of USV Telemanagement
                    Inc. issued to P.E.  Development  A.S., dated July 16, 1997,
                    as amended  December  2, 1998,  previously  filed as Exhibit
                    3.16

10.17(1)            Incentive   Stock  Option   Agreement  by  and  between  USV
                    Telemanagement  Inc. and J. Erik Mustad,  dated February 17,
                    1999, previously filed as Exhibit 3.17

10.18(1)            Incentive   Stock  Option   Agreement  by  and  between  USV
                    Telemanagement  Inc. and Lisa Barsocchini,  previously filed
                    as Exhibit 3.18

10.19(4)            USV Telemanagement Inc. Stock Option Plan (1999), previously
                    filed as Exhibit 4.1

10.20(5)            USV  Telemanagement  Inc.  Amended and Restated Stock Option
                    Plan (2000), previously filed as Exhibit 4.7

10.21(5)            Incentive   Stock  Option   Agreement  by  and  between  USV
                    Telemanagement  Inc. and Mark Smith, dated March 10, 2000 as
                    amended April 19, 2000, previously filed as Exhibit 4.1

10.22(5)            Incentive   Stock  Option   Agreement  by  and  between  USV
                    Telemanagement  Inc. and Joseph  Karwat,  dated  February 8,
                    2000, as amended April 19, 2000, previously filed as Exhibit
                    4.2

10.23(5)            Incentive   Stock  Option   Agreement  by  and  between  USV
                    Telemanagement  Inc. and West Oak Capital Group, Inc., dated
                    January 25, 2000 as amended April 19, 2000, previously filed
                    as Exhibit 4.3

10.24(5)            Incentive   Stock  Option   Agreement  by  and  between  USV
                    Telemanagement  Inc. and Mark Smith,  dated January 25, 2000
                    as amended April 19, 2000, previously filed as Exhibit 4.4

10.25(5)            Stock  Appreciation  Right  Agreement  by  and  between  USV
                    Telemanagement  Inc.  and Mark Smith,  dated March 10, 2000,
                    previously filed as Exhibit 4.5

10.26(5)            Incentive   Stock  Option   Agreement  by  and  between  USV
                    Telemanagement  Inc. and J. Erik Mustad,  dated  January 25,
                    2000 as amended April 19, 2000,  previously filed as Exhibit
                    4.6

10.27(5)            Incentive  Stock  Option  Agreement  with Trevor Gibbs dated
                    April 19, 2000, previously filed as Exhibit 4.8



                                       56
<PAGE>


Exhibit No.         Description
-----------         -----------
10.28(5)            Incentive  Stock Option  Agreement with Thomas Wharton dated
                    April 19, 2000, previously filed as Exhibit 4.9

10.29(6)            Letter of Intent with Exstream  Data,  Inc.,  dated February
                    21, 2000  addressed to Joseph  Karwat,  previously  filed as
                    Exhibit 3.31

10.30(6)            Letter of Intent Amendment by and between USV Telemanagement
                    Inc. and Joseph Karwat dated May 1, 2000,  previously  filed
                    as Exhibit 3.32

10.31(6)            Letter  of   Employment   Agreement   by  and   between  USV
                    Telemanagement  Inc. and Joseph  Karwat  dated  February 21,
                    2000, previously filed as Exhibit 3.33

10.32(6)            Convertible  Debenture of Exstream  Data,  Inc., in favor of
                    holder  USV  Telemanagement  Inc.,  dated  March  27,  2000,
                    previously filed as Exhibit 3.34

10.33(6)            Investment  Banking  Services  Agreement  by and between USV
                    Telemanagement  Inc.  and NC Capital  Markets,  Inc.,  dated
                    October 13, 1999, previously filed as Exhibit 3.35

10.34(6)            Finder's  Fee  Agreement  by and between USV  Telemanagement
                    Inc. and  Rosenblum  Partners  LLC dated  February 25, 2000,
                    previously filed as Exhibit 3.36

10.35(6)            Subscription  Agreement  by and between  USV  Telemanagement
                    Inc. and Trafalgar  Resources  LLC dated  February 25, 2000,
                    previously filed as Exhibit 3.37

10.36(6)            Consulting   Services   Agreement   by   and   between   USV
                    Telemanagement  Inc. and Interven  Capital  Corporation  and
                    Mark Smith dated June 1, 2000,  previously  filed as Exhibit
                    3.38

10.37(6)            Consulting   Services   Agreement   by   and   between   USV
                    Telemanagement  Inc.  and J. Erik Mustad dated June 1, 2000,
                    previously filed as Exhibit 3.39

10.38(7)            Incentive  Stock  Option  Agreement  with Mark  Smith  dated
                    September 29, 2000, previously filed as Exhibit 4.10

10.39(7)            Incentive  Stock Option  Agreement with J. Erik Mustad dated
                    September 29, 2000, previously filed as Exhibit 4.11

10.40(7)            E*Comnetrix  Inc.  Amended and  Restated  Stock  Option Plan
                    (2000), previously filed as Exhibit 4.12

10.41(8)            Form of Amendment to Stock Option Agreement,  dated June 26,
                    2000

10.42(8)            Form of Amendment to Stock Option Agreement, dated March 16,
                    2001

10.43(8)            Termination of Stock  Appreciation  Rights  Agreement by and
                    between  E*Comnetrix Inc. and Mark Smith,  dated November 7,
                    2000

10.44(8)            Employment  Agreement  by and between  E*Comnetrix  Inc. and
                    Joseph Karwat, dated August 7, 2000

10.45(8)            Form of Bonus Compensation Agreement, dated August 21, 2000

10.46(8)            Share Exchange Agreement by and between certain shareholders
                    of Exstream Data Inc. and E*Comnetrix  Inc., dated August 7,
                    2000



                                       57
<PAGE>

Exhibit No.         Description
-----------         -----------
10.47(8)            Share Exchange Agreement by and between certain shareholders
                    of Moving Bytes,  Inc. and E*Comnetrix Inc., dated August 7,
                    2000

10.48(8)            Escrow  Agreement  by and between  certain  shareholders  of
                    Exstream  Data Inc. and  E*Comnetrix  Inc.,  dated August 7,
                    2000

10.49(8)            Settlement  Agreement  and  Mutual  Release  by and  between
                    William  Perell,  Cheryl Harrison doing business as Harrison
                    Design  Group,  Extreme  Data,  Inc.,  Joseph  Karwat,  Eric
                    Karlson,  Robert Dumper and E*Comnetrix  Inc., dated January
                    19, 2001

10.50(8)            Share Exchange  Agreement by and between  E*Comnetrix  Inc.,
                    Exstream  Data Inc.,  Harrison  Design  Group and William S.
                    Perell, dated January 19, 2001

10.51(9)            Amendment to Employment Agreement with Mark Smith dated June
                    2001

10.52(9)            Employment  Agreement with Erik Mustad Employment dated June
                    2001

10.53(9)            Lease Agreement  related  Watergate  Property dated June 28,
                    2001

10.54(10)           Non-Transferable  Share  Purchase  Warrant issued to Mark M.
                    Smith by E*Comnetrix Inc. dated February 25, 2002.

10.55(10)           Subscription  Agreement by and between  E*Comnetrix Inc. and
                    Mark Smith dated effective as of February 25, 2002.

10.56(10)           Escrow Agreement by and among  E*Comnetrix Inc., Mark Smith,
                    and J. Erik Mustad made as of March 1, 2002.

10.57(11)           Settlement Agreement between Moving Bytes Inc. and Joseph
                    Karwat dated June 16, 2003.

10.58(11)           Security  Agreement  between  Moving  Bytes Inc.  and Joseph
                    Karwat dated June 16, 2003.

10.59(12)           Asset  Purchase  Agreement  dated  September  1, 2003 by and
                    between Com Tech 21, LLC and Moving Bytes, Inc.  (previously
                    filed as Exhibit 1)

10.60(12)           Amendment  Agreement to amend the Asset  Purchase  Agreement
                    dated  September 1, 2003 by and between Com Tech 21, LLC and
                    Moving Bytes, Inc. (previously filed as Exhibit 2)

10.61(12)           Amendment  Agreement  dated  September 25, 2003 to amend the
                    Asset Purchase Agreement by and between Com Tech 21, LLC and
                    Moving Bytes, Inc. (previously filed as Exhibit 3)

10.62(12)           Finder's  Agreement  dated May 28,  2003 by and  between KDW
                    Group and Moving Bytes, Inc. (previously filed as Exhibit 4)

14.1                Code of Conduct

21.1                List of Subsidiaries

23.1                Consent of KPMG LLP

31.1                Section  302  Certificates  of Chief  Executive  Officer and
                    Chief Financial Officer

32.1                Section  906  Certificates  of Chief  Executive  Officer and
                    Chief Financial Officer
--------------------------
(1)  Previously filed on Form 20-F dated April 20, 1999.
(2)  Confidential  treatment has been requested with respect to portions of this
     exhibit  pursuant to an application for  confidential  treatment filed with
     the  Commission  under Rule  24(b)-2(b) of the  Securities  Exchange Act of
     1934, as amended.
(3)  Previously filed on Form 20-F/A dated June 4, 1999.
(4)  Previously filed on Form S-8 dated September 8, 1999.
(5)  Previously filed on Form S-8 dated May 31, 2000.
(6)  Previously filed on Form 20-F dated June 12, 2000.
(7)  Previously filed on Form S-8 dated November 16, 2000.
(8)  Previously filed on Form 10-KSB dated May 8, 2001.
(9)  Previously filed on Form 10-QSB dated August 14, 2001.
(10) Previously filed on Form 10-KSB dated March 28, 2002.
(11) Previously filed on Form 10-QSB dated August 14, 2003.
(12) Previously filed on Form 8-K dated October 2, 2003.



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<PAGE>

(b)  Reports on Form 8-K.

     The Company filed a current report on Form 8-K on October 2, 2003.


ITEM 14.  CONTROLS AND PROCEDURES.

     The Company maintains  disclosure controls and procedures that are designed
to ensure that information  required to be disclosed in the Company's Securities
Exchange  Act of 1934 reports is recorded,  processed,  summarized  and reported
within the time periods  specified  in the SEC's rules and forms,  and that such
information  is  accumulated  and  communicated  to  the  Company's  management,
including  its  Chief  Executive  Officer  and  Chief  Financial   Officer,   as
appropriate, to allow timely decisions regarding required disclosure.

     The Company's  management carried out an evaluation,  under the supervision
and with the participation of the Company's management,  including the Company's
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design  and  operation  of the  Company's  disclosure  controls  and  procedures
pursuant to Exchange Act Rule 13a-14.  Based upon the  foregoing,  the Company's
Chief Executive  Officer and Chief Financial  Officer  concluded that, as of the
end of the period covered by this report, the Company's  disclosure controls and
procedures are effective in connection  with the filing of this Annual Report on
Form 10-KSB for the year ended December 31, 2003.

     There were no changes in the  Company's  internal  control  over  financial
reporting  that occurred  during the fourth quarter ended December 31, 2003 that
could  significantly  affect  these  controls  subsequent  to the  date of their
evaluation,  including any significant  deficiencies  or material  weaknesses of
internal controls that would require corrective action.


ITEM 15.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

     Audit Fees

     The  aggregate  fees  billed by the  Company's  auditors  for  professional
services  rendered  in  connection  with  the  audit  of  the  Company's  annual
consolidated  financial  statements for fiscal years ended December 31, 2003 and
2002 and  reviews  of the  consolidated  financial  statements  included  in the
Company's Forms 10-KSB for fiscal 2003 and 2002 were  approximately  $14,500 and
$33,750, respectively.

     Audit Related Fees

     The aggregate fees billed by the Company's auditors for any additional fees
for  assurance  and  related  services  that  are  reasonably   related  to  the
performance of the audit or review of the Company's financial statements and are
not   reported   under  "Audit  Fees"  above  for  fiscal  2003  and  2002  were
approximately $18,500 and $16,500, respectively.

     Tax Fees

     The  aggregate  fees  billed by the  Company's  auditors  for  professional
services for tax  compliance,  tax advice,  and tax planning for fiscal 2003 and
2002 were approximately $0 and $0, respectively.



                                       59
<PAGE>

     All Other Fees

     The aggregate fees billed by the Company's auditors for all other non-audit
services  rendered  to  the  Company,  such  as  attending  meetings  and  other
miscellaneous financial consulting,  for fiscal 2003 and 2002 were approximately
$0 and $0, respectively.

     The Company's  audit committee has the sole authority to review in advance,
and  grant  any  appropriate  pre-approvals,  of all  non-audit  services  to be
provided by our independent  auditors and, in connection  therewith,  to approve
all fees and other terms of engagement.



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<PAGE>


                                   SIGNATURES


         Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant certifies that it meets all of the requirements for
filing on Form 10-KSB and has duly caused this annual report to be signed on its
behalf by the undersigned, thereunto duly authorized.



                                     MOVING BYTES INC.



Date:  April 9, 2004                 /s/ Mark Smith
                                     ------------------------------------
                                     Mark M. Smith, President and Chief
                                     Financial Officer




Pursuant to the requirements of the Securities Exchange Act of 1934, this report
to be signed  by the  following  persons  on  behalf  of the  Registrant  in the
capacities and on the dates indicated.

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


/s/ J. Erik Mustad             Chief Executive Officer and       April 9, 2004
-------------------------      Director
J. Erik Mustad



/s/ Mark M. Smith              Chief Financial Officer,          April 9, 2004
-------------------------      President and Director
Mark M. Smith                  (principal financing officer)



/s/ Jim Miller                 Director                          April 9, 2004
-------------------------
Jim Miller



/s/ Thomas Wharton             Director                          April 9, 2004
-------------------------
Thomas Wharton





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