UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                   FORM 10-KSB


[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended December 31, 2003, or

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


                           Commission File No. 0-26917


                               BUYERS UNITED, INC.
           (Name of Small Business Issuer as specified in its charter)

                Delaware                               87-0528557
                --------                               ----------
    (State or Other Jurisdiction of                   (IRS Employer
     Incorporation or Organization)                Identification No.)

                14870 Pony Express Road, Bluffdale, Utah 84065
             (Address of Principal Executive Offices and Zip Code)

Issuer's Telephone Number:   (801) 320-3300
                             --------------

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

Securities  registered  under Section 12(g) of the Act: Common Stock,  Par Value
$0.0001

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

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B 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. [ ]

The issuer's revenues for its most recent fiscal year:  $63,312,964.

The aggregate  market value of voting stock held by  non-affiliates  computed on
the basis of the last sale price on March 15, 2004, was $28,739,284.

As of March 15, 2004, the Registrant had outstanding 12,994,079 shares of Common
Stock, par value $0.0001.



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                                TABLE OF CONTENTS


ITEM NUMBER AND CAPTION                                                    Page

Part I

1.    Description of Business                                                3

2.    Description of Property                                               12

3.    Legal Proceedings                                                     13

4.    Submission of Matters to a Vote of Security Holders                   14

Part II

5.    Market for Common Equity and Related Stockholder Matters              14

6.    Management's Discussion and Analysis of Financial Condition
      and Results of Operations                                             15

7.    Financial Statements                                                  18

8.    Changes in and Disagreements with Accountants on Accounting and
      Financial Disclosure                                                  18

8A.   Controls and Procedures                                               18


Part III

9.    Directors, Executive Officers, Promoters and Control Persons;
      Compliance with Section 16(a) of the Exchange Act                     21

10.   Executive Compensation                                                23

11.   Security Ownership of Certain Beneficial Owners and Management
      and Related Stockholder Matters                                       26

12.   Certain Relationships and Related Transactions                        27

13.   Exhibits and Reports on Form 8-K                                      29

14.   Principal Accountant Fees and Services                                31



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                                     PART I

                         ITEM 1. DESCRIPTION OF BUSINESS

General

     Buyers  United,  Inc. is a  telecommunications  company  that offers a wide
range of long distance, toll free, data transmission,  and related communication
service options at competitive  prices, and provides to its customers a standard
of service  it  believes  is  comparable  to other  industry  participants.  The
telecommunications services we offer include the following:

     o     Switched long distance services to business and residential customers
     o     Dedicated access long distance service
     o     Toll-free 800/888/877/866 services
     o     Dedicated data transmission
     o     Private line data services
     o     Calling card services
     o     Conference calling
     o     Automatic call distribution
     o     Interactive voice response
     o     Outbound dialing and voice message broadcasting
     o     Fax to email
     o     Voice mail
     o     Real time account management

      These services can be offered individually, or in a suite of services
tailored to a customer's needs. During 2003 we acquired and integrated into our
operations a voice over Internet protocol network (VoIP Network) that enables us
to offer a number of services in the form of software solutions that are
delivered through our VoIP Network.

     For the past eight years Buyers  United has been engaged in the business of
reselling  telecommunication  services  provided  by others to Buyers  United at
wholesale rates.  Domestic long distance services make up a major portion of our
sales with the other services listed above making smaller  contributions  to our
sales mix.

     Buyers United now services  approximately  150,000 business and residential
consumers  across  America.  We have  refined our  business  model over the past
several years to address specific niche opportunities in the vast communications
industry.  Our brand,  United Carrier  Networks  (UCN),  was adopted in the last
quarter of 2001 for providing our services to business customers.  We previously
used the brand name BuyersOnline to service residential customers.

     Buyers United is now marketing its services  primarily through  independent
agents to business customers.  Our UCN web site supports the marketing effort of
our agents by providing a resource for exploring  and selecting the  specialized
services  and  options  we offer  business  customers.  During  the past year we
acquired  both  business  and  residential  customers  by  purchase  from  other
providers and may consider opportunities for additional purchases in the future,
although at the present time we are not considering any purchase opportunities.

     Buyers United was originally formed as a Utah corporation in 1994. In March
1999, Buyers United changed its corporate domicile from Utah to Delaware through
a merger with a Delaware  corporation  formed for that purpose.  When we changed
the  corporate  domicile  our name became BUI,  Inc.,  and we effected a 1-for-4
reverse split in the issued and outstanding  common stock. On April 20, 2000, we
changed our name to  BuyersOnline.com,  Inc., and on November 20, 2001, our name
was changed again to Buyers United, Inc.

Recent developments

     In March 2004 Buyers United sold 3,782,000  shares of common stock at $2.30
per share, or a total of approximately  $8.7 million,  in a private placement to
institutional  and  accredited  investors.  Net proceeds of the  offering  after
placement fees and expenses were approximately $8.1 million. The net proceeds of
the private  placement are intended to be used for various  corporate  purposes,
including sales and marketing related programs,  funding further  development of

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our VoIP  Network,  reducing  debt,  and for working  capital and other  general
corporate purposes. Buyers United intends to file a registration statement under
the Securities Act of 1933 to permit resale of the shares sold in the offering.

     Buyers  United  entered into an  agreement  to purchase 37  dedicated  long
distance  customers  from Source  Communications,  LLC for  $750,000 in February
2004.  Closing of the  acquisition  was  subject to  complying  with  applicable
federal and state regulation pertaining to transfer of the customers. All of the
regulatory  requirements  were satisfied and the acquisition of the customers is
completed.

     In October  2003,  Buyers United  acquired the exclusive  right to sell and
manage the enhanced telecommunications functions of MyACD, Inc., with a one-year
option to purchase  MyACD.  MyACD develops and  distributes  telephony  software
solutions for call center traffic  management and related  functions that Buyers
United can now offer to its customers over its VoIP Network.  During the term of
the  agreement,  Buyers United has the sole right to manage  sales,  service and
billing of MyACD  services.  Under the agreement  MyACD will continue to provide
enhanced service  development and configuration and Buyers United will reimburse
MyACD for actual costs related to these activities.

     During  August 2003,  Buyers  United  purchased  approximately  12,000 long
distance customers from Glyphics Communications, Inc. for $543,558.

     In December  2002,  Buyers  United  entered  into an  agreement to purchase
assets  of  Acceris   Communications  Inc.  (formerly  I-Link,   Inc.)  and  its
subsidiary,  I-Link  Communications,  Inc.,  and license in perpetuity  software
developed  by Acceris,  all of which  comprise  the VoIP  Network we now own and
operate.  Concurrently with the agreement for the purchase of the assets, Buyers
United  assumed  management of the assets to be acquired  pending the closing of
the purchase.  The transaction was closed in May 2003, with several  outstanding
accounts to reconcile.  The assets acquired include dedicated equipment required
for  operating  the VoIP Network,  customers of I-Link  Communications  serviced
through the network, and certain trademarks. In consideration for the assets and
software  license,  Buyers United issued to Acceris  300,000  shares of Series B
Convertible  Preferred  Stock.  This preferred  stock was converted to 1,500,000
common shares in March 2004 pursuant to an agreement  with Acceris that resolved
the open account issues, allowed Acceris to sell 750,000 of the converted common
shares to the same investors that purchased  Buyers United common stock in March
2004,  and  granted to  Acceris  the right to  include  its common  stock in any
registration statement we file for the March investors.

     On December 20, 2002,  Buyers United  entered into an agreement  with Touch
America,  Inc., a subsidiary  of Touch  America  Holdings,  Inc.,  to purchase a
substantial number of its switched voice telecommunication customers,  including
the carrier  identification code used to service those customers.  In June 2003,
we amended the  purchase  agreement  to acquire  additional  switched  voice and
dedicated  telecommunications customers and correct discrepancies in the list of
customers  originally purchased in December 2002. Buyers United did not purchase
any accounts receivable,  equipment, or other assets of Touch America. The total
purchase  price was $6.5 million.  Buyers  United made an initial  payment of $3
million to Touch America in December 2002 and has made  additional cash payments
totaling $3.4 million  through March 4, 2004. The balance of $93,988 is expected
to be paid in April 2004.

Services and products

     Buyers United is an aggregator and provider of telecommunications services.
As an aggregator we mean that we contract with a number of third party providers
for the right to resell the various telecommunication services and products they
provide,  and then offer all of these various services to our customers.  We are
also a  provider,  in that we operate a  dedicated  VoIP  Network  and  advanced
customer contact  handling/management  software  applications  that enable us to
offer enhanced  services to our customers.  The variety of services and products
we offer enables the customer to buy only those  telecommunications  services it
needs from one source,  combine those services in a customized package,  receive
one bill for those  services,  and make one call to  Buyers  United if a service
problem or billing issue arises.  The separate  services  Buyers United can sell
singly or bundled to meet customer needs include:

     o    Switched long distance service to business and residential  customers.
          This is traditional 1+ long distance  service.  The customer dials the
          long-distance  number and the local exchange carrier switches the call
          to the long  distance  provider we have  designated  for the  customer

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          based on the customer's account  selections.  We bill the customer for
          the long distance  service at the  applicable  retail rate, as well as
          local access fees for the local exchange carrier, taxes, and universal
          service fund charges.

     o    Dedicated  access  long  distance  service.  Some  business  customers
          require  multiple line concurrent long distance access for high volume
          telemarketing or call center operations. Dedicated access connects the
          customer directly to the long distance  carrier,  by-passing the local
          exchange  carrier,  through  a  T-1  or  higher  capacity  local  loop
          connection. We bill the customer for the local loop connection and for
          the long distance service.

     o    Toll-free  800/888/877/866  services. Toll free calling service allows
          clients of our  customer to call into the  customer at the  customer's
          expense,   rather  than  the  client's  expense.  This  is  a  service
          traditionally  used by our business  customers.  We own and assign the
          toll free numbers to our customers and bill our customers for the toll
          free number and the long distance service.

     o    Dedicated data transmission.  This is similar to dedicated access long
          distance  service,  except the primary  use is for data  transmission,
          such as  Internet  access,  and the  local  loop is  connected  to the
          Internet  through one of our  providers.  We bill the customer for the
          local loop connection and for Internet access fees.

     o    Private line data services.  This type of services is provided through
          a T-1 or higher  capacity  circuit,  and encompasses a variety of data
          transmission media,  including Frame Relay,  dedicated Internet access
          or Asynchronous Transfer Mode (ATM) data networks.  Each of these data
          products rely on a shared network  architecture where the bandwidth on
          the  network  backbone  is shared by the users  connected  into  these
          networks.  Customers frequently select these types of networks because
          it is much more cost-effective than installing a private line network,
          or because of the need to access the public Internet.

     o    Calling card services. The calling card feature is often provided with
          our switched and dedicated  long distance  services.  The calling card
          allows  the  customer  to use a toll free  number and PIN to make long
          distance calls from any location on its account.  We bill the customer
          for the long distance service.

     o    Conference  calling.  This service  allows a customer to  interconnect
          simultaneously  a number of  callers  for  conference  purposes.  This
          feature is of particular value to business  customers that have a need
          for multiple members of the organization to speak together from remote
          locations  on a periodic  basis.  The customer is assigned a toll free
          number and PIN that allows each  participant in the conference call to
          access the call simply by dialing  the toll free  number and  entering
          the PIN when prompted.  We bill the customer for the  conference  call
          feature  and the long  distance  minutes  of each  participant  in the
          conference call.

     o    Outbound dialing and voice message  broadcasting.  This is the ability
          to allow a customer to  automatically  dial  outbound and to broadcast
          voice messages to predefined lists.  Customers can pay by the call, by
          the minute or by the port.  They can also link  directly  to their own
          database to automatically  generate call lists with sophisticated call
          scheduling capabilities. They can also choose between autodial (one at
          a time),  powerdial (dial sequentially  through a list), or predictive
          dialers (computer  algorithms with dial ahead to screen out busies, no
          answers, etc.).

     o    Fax to Email.  This service allows a customer to send or receive faxes
          through an Email address with the customer's personal computer.

     o    Voice mail. This feature allows customers to receive,  store, forward,
          and access voice mail messages.

     o    Real  time  service  account  management  on the  Internet.  Real time
          management allows the customer to redirect phone calls received during
          the day to the  customer's  location.  For  example,  the customer can
          access its account through the Internet and direct that phone calls be
          forwarded  to  wherever  the  customer  happens to be during the day -
          office,  home,  cellular phone,  or other location.  With its personal

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          computer, the customer can review billing on its account, make service
          inquiries, or add or remove services, all over the Internet.

     In addition,  Buyers  United  offers a flexible set of advanced call center
traffic   handling/management   applications,   such  as  skills-based  routing,
automated call  distribution,  automated  interactive  voice response,  database
integration  with the call  handling  technology,  multimedia  contact  handling
(voice, fax, email, chat), and management reporting features. These capabilities
have  previously  been available only by purchasing  and  integrating  expensive
equipment at  substantial  installation  expense,  so only the large call center
operations  with 200 or more  agents  on call at any one time  could  afford  to
establish these  capabilities.  Buyers United can deliver the same  capabilities
through a software solution hosted on our VoIP Network at a much lower cost that
makes it possible for the smaller traditional call center to make the transition
to a  full-featured  contact  center with improved  agent  productivity  and the
ability to respond quickly to customer requirements for voice, email, fax and/or
chat contact methods.

     The  Buyers   United   inNetwork(TM)   family  of  products  is  a  set  of
pre-integrated  application  services hosted within our VoIP Network designed to
meet the needs of call centers and other  businesses that demand greater contact
flexibility.  Current products include inContact(TM), a complete set of advanced
contact handling/contact  management software applications (as referenced in the
above  paragraph),  plus additional  features for handling  multi-media  contact
methods  -  voice  plus  email,  fax  or  web  chat.  InControl(TM)  is a  rapid
application  development tool with a visual drag and drop programming  interface
for creating or modifying contact routing processes.

Marketing strategy

     By the end of 2001,  Buyers  United  employed two  distinct  brands for our
telecommunications  services,  "UCN" or "United Carrier Networks" for commercial
and business customers,  and "BOL" or "BuyersOnline" for residential  customers.
We are now focusing on promoting "UCN" or "United  Carrier  Networks" for all of
our service  offerings,  so toward the end of 2003 we discontinued  marketing to
residential customers, and discontinued the BuyersOnline brand name. Our plan is
to change our name to "UCN" or a similar variation in 2004.

     We market our services  primarily  through  independent  sales  agents.  We
engage  independent  telecommunications  agents  around  the  country  who  sell
primarily  to  commercial  and  business   customers.   Independent  agents  are
responsible for a substantial amount of annual U.S.  telecommunication  sales to
commercial and business users. The service  presentation we developed for UCN is
targeted to the  independent  agent,  and is intended to make  available  to the
agent a coordinated  package of services designed to be attractive to commercial
and  business  customers.  With UCN our  marketing  effort  focuses on providing
businesses with the ability to access multiple long distance carriers with which
we have  agreements to resell  services,  allowing the business owners to choose
services provided through various long distance  providers.  A business customer
can choose various services from any or all of the different  telecommunications
providers  we use,  yet  only  have to  contract  through  UCN for the  selected
services.  The  business  customer is not  required to deal with these  carriers
separately. UCN provides a single source for customer service, regardless of how
many  networks the business  uses,  and sends a single  billing  statement  that
combines  all of the services  used from any  combination  of wholesale  service
providers.

     We have been, and should continue to be, successful in engaging independent
agents  because our  package of  services  appeals to  commercial  and  business
customers,  and because of our back  office  support  infrastructure,  incentive
programs,  customer retention efforts,  and additional  product/service  revenue
opportunities.  Buyers United  earned the "2002  Agent's  Choice Award" in March
2003 from the Agent  Alliance,  a  national  trade  association  of  independent
telecom agents.  The award was given in recognition of the  effectiveness of our
customer service and support programs.

     Buyers   United's   early  growth  came  from  the   residential   consumer
long-distance  market. We plan to continue providing our services to residential
customers  using the UCN brand. We do not intend,  however,  to pursue an active
marketing effort in the residential  market because we believe our resources are
better used in pursuing  business  customers.  We had a substantial  increase in
residential  customers  over the  past  year as a result  of the  Touch  America
transaction.

Provisioning

     Buyers United is a reseller of domestic and international long distance and
other  services  provided  by  national  and  regional  providers.  Our  primary
providers are MCI, Qwest,  Global  Crossing,  AT&T,  Dancris,  WilTel,  and CNM.

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Buyers United resells  switched long distance  minutes that it has contracted to
obtain from our  providers at wholesale  rates that averaged 54.0 percent of the
retail rates  charged to customers in 2002 and 53.3 percent in 2003. In 2002 and
2003, retail rates were between $0.02 and $0.08 per minute for switched domestic
long  distance.  International  rates  vary  substantially  on the  basis of the
country  and number  called,  but we believe our rates are  comparable  to rates
available from our competitors.

     The  contracts  with  our  providers  are  standard  and  customary  in the
industry,  requiring  payment  net 30 days  for  minutes  used  in a  month  and
designate  Buyers United as the point of contact for all customer service calls.
These  agreements are for one to three years and are generally  renewable at the
end of each contract  term,  when rates are often  renegotiated  on the basis of
prevailing  rates in the industry.  We are responsible for all customer  billing
and  collections,  so that as far as the  customer is  concerned we are the long
distance service provider. Qwest and Global Crossing accounted for approximately
80 percent of our cost of revenues in 2002 and 70 percent in 2003.

     Buyers United also acquires its other  services from its providers at rates
or fees fixed in our contracts,  which include  dedicated long distance service,
toll-free  800/888/877/866  services,  dedicated data transmission  service, and
calling  cards.  These  services are billed to us at rates or fees stated in our
contracts  with the providers and are payable on the same terms as switched long
distance service.

     We maintain a call center in Bluffdale, Utah for receiving customer service
and billing  inquiries.  Presently we employ  approximately  62 customer service
personnel  to respond to customer  calls,  and our call center  specialists  are
available  from 7:00 a.m. to 10:00 p.m.  Monday  through Friday and 8:00 a.m. to
5:00 p.m. on Saturday.  We also provide  emergency service 24-hours a day, seven
days a week. We place a high priority on customer service, since we believe that
when our rates are  similar to rates  offered by our  competitors,  service is a
primary factor in acquiring and retaining customers.

     The VoIP  Network  enables our  customers to use  existing  telephone,  fax
machine,  pager,  or modem  equipment  to  achieve  high-quality  communications
through  Internet  Protocol  technology.  The VoIP  Network  consists of a fully
integrated  dedicated network of equipment and leased  telecommunications  lines
augmented  by  the  licensed  I-Link  "softswitch"  software.  It  provides  the
necessary  operational  platform for the enhanced  services we began offering in
the  third  quarter  of 2003 and is  adaptable  for use with new or  specialized
service   applications   developed  by  others.  The  VoIP  Network  is  a  data
packet-based  network  that ties  together  local  loop  dial-up  and  broadband
connections via gateways  located in New York, Salt Lake City,  Dallas,  and Los
Angeles. Each of these gateways consists of off-the-shelf  hardware elements and
the softswitch  software.  The  softswitch  software can  distinguish  among and
"handle" voice,  fax, and modem  communications as programmed for the customer's
suite of service selections.  Handle means the voice or data transmission can be
delivered directly,  redirected (to a different  location),  redistributed (to a
different or multiple  recipients),  stored for later delivery, or altered (such
as converting a fax to email).

     The VoIP Network  allows us to provide  cost  advantages  over  traditional
transmission  networks  with respect to both lower  transmission  cost and lower
capital  infrastructure  cost. Lower transmission cost results from transmitting
long distance traffic over the network between our gateways for  retransmission,
which has greater capacity because  transmissions  are converted to data packets
and transmitted  concurrently  over the network bandwidth  capacity.  Access and
transmission  costs for our VoIP network are less than traditional  transmission
networks.   The  second   component  of  cost   advantages   is  lower   capital
infrastructure costs. In a traditional  telecommunications network, each service
-- voicemail, fax mail, conference calling, and single number forwarding -- must
be processed  through one or more separate  hardware  switches.  We offer all of
these  services  through  the  VoIP  Network  as  modified  or as  new  software
applications are added to the network software platform, which is less expensive
than purchasing and maintaining  hardware  switches.  It is this ability to host
different software applications on the VoIP Network to configure the software to
deliver  different   connectivity   solutions  that  enables  us  to  offer  the
inNetwork(TM)  family of products  to call  centers  and other  businesses  that
demand greater contact flexibility.

     We began  integrating  this network with our traditional  provider  network
systems and service  offerings in the first  quarter of 2003 and  completed  the
process in the third  quarter of 2003.  While we believe the VoIP  Network  will
lower our costs of operation in 2004 and generate  internal growth from enhanced
service products,  we cannot predict whether these lower costs or growth will be
significant.

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Technology and our business

     Buyers  United  has  always  leveraged  information  technology  to  create
consistent streamlined business processes. Buyers United relies on the following
systems, which represent its current technology initiatives:

     o    Automatic  customer  call  distribution.  This  system  is  a  unified
          solution  for  managing   customer   communications   that  integrates
          telephone,  email,  fax, web text chat, and co-browsing into a unified
          interface.  The  distribution  system enables Buyers United to enhance
          customer  relationships,  reduce costs,  and improve the management of
          all types of business communications.

     o    BuyersUnitedDashboard (BUD) is a customer service software application
          that provides a single  interface for call center  representatives  to
          perform  their  service  tasks.  BUD  utilizes  a  "wizard"  interface
          methodology  that  simplifies  the customer  service  representatives'
          daily  tasks  by  breaking  them  into  smaller  steps.  The  "wizard"
          framework provides increased quality and consistency into our customer
          service model.

     o    CostGuard(R),  is a fully convergent, open and flexible billing system
          designed  to   facilitate   collaboration   among   customer   service
          representatives,  business  affiliates,  and customers.  Customers can
          access  the system  through a standard  web-browser  to  initiate  and
          fulfill  billing  and  service  tasks.   Buyers  United  believes  the
          CostGuard  system provides a consistent and flexible  billing solution
          that supports our current needs and is expandable for future growth.

     o    The  VoIP  Network  employs  an  architecture   emphasizing  security,
          reliability,  and carrier  diversity.  A "Security in Layers" approach
          has been adopted utilizing  security  enforcement  points comprised of
          inspection  firewalls,  packet  filters,  and intrusion  detection and
          prevention  systems.  Measures  have been  implemented  to audit  data
          integrity  and  access.   Significant  subsystems  are  geographically
          dispersed and data  replicated  between sites to protect against fiber
          optic disruption or other environmental event.

     Full  backups  of all our core  data  are  performed  weekly.  Differential
backups are  performed  nightly.  Transaction  log  backups  take place every 30
minutes.  Backups are copied to two file servers in different locations.  We use
SSL encryption to protect all sensitive  areas of our customer  information  and
service-oriented websites. Remote access to our systems is made possible through
a 168 bit encrypted  Virtual Private Network.  System passwords are changed on a
periodic basis and stored in a secure folder with restricted  access.  All local
desktops  are scanned  for viruses on a real-time  basis and report to a central
server.  We believe our backup,  maintenance,  and security systems are adequate
for  preserving  the delivery of service to our  customers  and operation of our
business without significant outages or interruptions. However, an extraordinary
unforeseen  and  catastrophic  event  is  always  possible  that  could  have  a
significant  impact on our business,  and we do not have  business  interruption
insurance on which we could recoup losses resulting from such an event.

Governmental Regulation

Federal Regulation of Telecommunications Services
     Our telecommunications services are subject to federal regulation under the
Telecommunications  Act of 1996 (Telecom  Act).  The Telecom Act was designed to
foster local  exchange  competition  by  establishing  a framework to govern new
competitive  entry in local and long  distance  telecommunications  services and
allow any entity,  including  cable  television  companies  and electric and gas
utilities,   to  compete  in  the   telecommunications   market.   The   ongoing
implementation and interpretation of the Telecom Act remains subject to numerous
federal and state  policy  rulemaking  proceedings  and  judicial  review and we
cannot predict any future impact on our business.

     Pursuant to the Telecom Act, the Federal  Communications  Commission  (FCC)
regulates our interstate and international  telecommunications services. The FCC
imposes more extensive  requirements on incumbent common carriers that have some
degree of market power,  such as the Regional Bell Operating  Companies  (RBOCs)
and other  independent  local  exchange  carriers  (ILECs),  than it  imposes on
companies like ours,  which are  non-dominant  interexchange  carriers that lack
market power. For example, the FCC permits non-dominant  interexchange  carriers
to provide domestic interstate services without prior authorization.

                                       8

<PAGE>

As a non-dominant interexchange carrier, our costs of providing long distance
services could be affected by changes in FCC rules controlling the form and
amount of "access charges" local exchange carriers (which generally include the
RBOCs and ILECs) are permitted to impose on connecting companies to originate
and terminate long distance traffic over their local networks. The FCC currently
has several rulemaking proceedings in which it is considering changes to the
existing interstate access charge system. It has also recently been reported
that the nation's largest local exchange and long distance providers, who have
been engaged in private negotiations for several months, have tentatively
reached an agreement on a proposal that would eliminate or substantially reduce
interstate local access charges. If such an agreement is reached, it would have
to be presented to and approved by the FCC.

     We cannot  predict  the outcome of these or other  federal or state  access
charge proceedings or whether they will have a material impact on us. It is even
more  difficult  to predict the outcome  and impact of private  negotiations  in
which we are not directly involved.  It is recognized,  however, that the access
charge  payments  Buyers  United  must pay to the RBOCs and ILECs are a material
part of its cost to provide services over its network.

     The Telecom Act requires that every telecommunications  carrier contribute,
on an equitable  and  non-discriminatory  basis,  to federal  universal  service
mechanisms  established  by the FCC.  The federal  Universal  Service Fund (USF)
provides  subsidies to defray the costs of telephony services in high-cost areas
for low-income  consumers and helps  subsidize  telecommunications  and Internet
services for qualified schools,  libraries and rural health care providers.  Our
payments to the  federal USF are based on a  percentage  of our  interstate  and
international  retail  telecommunications  revenues and the contribution  factor
issued  by  the  FCC,  which  varies  quarterly.  In  2003,  the  quarterly  USF
contribution  factor averaged around nine percent of billed retail revenue.  The
amounts contributed may be passed through to customers.

     The  FCC  currently  has an  open  rulemaking  proceeding  in  which  it is
considering  converting the current  revenue-based USF contribution  system to a
"connection-based"  system with a fixed,  monthly fee. It is too soon to predict
whether the transition to a connection-based  USF contribution system would have
a financial impact on us.

State Regulation of Telecommunications Services
     State regulatory  agencies have  jurisdiction  when our  telecommunications
services are provided on an intrastate  basis. The state regulatory  environment
varies substantially from state-to-state and in some cases can be more extensive
than FCC regulations.  In most instances, we are required to obtain and maintain
certification  from a state public  utility  commission  (PUC) before  providing
telecommunications  services in that state. Consequently,  we are subject to the
obligations  that the  applicable  state laws place on all  similarly  certified
carriers,  including the regulation of services, payment of regulatory fees, and
preparation and submission of reports. If state regulators or legislators change
current  regulations  or laws it may  negatively  impact our  ability to provide
services.

Regulation of Internet Telephony and the Internet
     The use of the  Internet and private  Internet  Protocol  (IP)  networks to
provide voice communications services is a relatively recent market development.
Although the provision of such services is currently  permitted by United States
law and remains largely  unregulated  within the United States,  several FCC and
state regulatory proceedings aimed at evaluating the future regulatory treatment
of such services have recently been initiated. More aggressive regulation of the
Internet in general, and Internet telephony providers and services specifically,
may materially affect our business,  financial condition,  operating results and
future  prospects,  particularly  if  increased  numbers of  governments  impose
regulations restricting the use and sale of IP telephony services.

Federal
     To date the FCC has reached no conclusion on whether IP telephony  services
constitute  telecommunications  services subject to regulation under the Telecom
Act.  The  FCC  is  now  examining  the  question   whether   certain  forms  of
phone-to-phone Internet telephony are information services or telecommunications
services. Recent actions taken by the FCC and proceedings now pending before the
FCC may affect the regulatory status of Internet telephony.

     o    In February 2004 the FCC ruled that  computer-to-computer IP telephony
          that transmits data packets carrying voice communications via the same
          lines  that  carry  e-mail  and  instant  messages  is an  unregulated
          "information   service"   that  is   subject  to   exclusive   federal
          jurisdiction.   Accordingly,  this  type  of  computer-to-computer  IP
          telephony  service is likely to remain free of  traditional  telephony
          regulation.

                                       9

<PAGE>

     o    Also in  February  2004 the FCC  adopted a broad  Notice  of  Proposed
          Rulemaking    seeking   comment   on   the   appropriate    regulatory
          classification   and   treatment  of   Internet-based   communications
          services, most notably Voice over IP (VoIP).

     o    In  October  2002  AT&T  filed  a  petition  with  the FCC  seeking  a
          declaratory  ruling  that  would  prevent  RBOCs and other  ILECs from
          imposing traditional circuit-switched access charges on phone-to-phone
          IP services.

     o    In September  2003 Vonage  Holdings  Corporation  filed a petition for
          declaratory  ruling  requesting  that  the FCC  find an  order  of the
          Minnesota  Public  Utilities  Commission  requiring Vonage Holdings to
          comply with state laws governing  providers of  traditional  telephone
          service to be  preempted  because  its  broadband  Internet  telephony
          service is an information service.

     o    In January  2004,  Level 3  Communications,  LLC filed a  "forbearance
          petition"  with the FCC  asking  the agency to  reaffirm  that  legacy
          switched access charges do not apply to VoIP.

     We cannot  predict  either the timeframe or outcome of the  foregoing  open
proceedings  before the FCC or what regulations,  if any, the FCC will impose on
providers  of  IP-enabled  voice  communications  services  as a result of these
proceedings.

State
     State governments and their regulatory  authorities may assert jurisdiction
over the provision of intra-state IP-enabled  communications services where they
believe  that their  telecommunications  regulations  are broad  enough to cover
regulation of such services. Of primary concern to the IP-enabled communications
providers  is that  the  imposition  of state  regulation  would  result  in the
provider being subject to local access charges for  intra-state  service,  which
would  significantly  increase  the cost of  service.  While a majority of state
commissions   have  not  imposed   traditional   telecommunications   regulatory
requirements  on IP  telephony  at this  time,  a  number  of  state  regulatory
authorities  have  initiated  proceedings  to examine the  regulatory  status of
Internet telephony services.

     In October 2003 a Federal court in Minnesota issued a permanent  injunction
against the Minnesota  public  utilities  commission to prevent it from imposing
state   regulations  on  a  provider's  VoIP  services  offered  over  broadband
connections.  This  permanent  injunction  was  recently  upheld  in the face of
multiple  challenges.  Prior to the  Minnesota  Federal  court  ruling,  several
states,   including  California,   Washington,   Wisconsin  and  Florida  issued
directives   to  various   VoIP   providers   directing   them  to  register  as
telecommunications  providers.  There can be no assurance that these states will
respect the Minnesota  Federal  court ruling or accept the position  asserted by
VoIP  providers  that they are  information,  as opposed to  telecommunications,
service providers.

Internet Taxation.
     In addition to  regulations  addressing  Internet  telephony  and broadband
services,  other  issues  relating to the  Internet in general  could affect our
ability  to  provide  our  services.   Federal,  state  and  local  governmental
organizations are considering  various  legislative  proposals that might impose
additional  taxes on Internet  services and products.  We cannot predict whether
new taxes will be  imposed  on our  IP-enabled  communications  services  or the
Internet in general and, depending on the type of taxes imposed, whether and how
our services would be affected  thereafter.  Increased  taxation of the Internet
may  decrease  its  growth  and  hinder  technological  development,  which  may
negatively  impact the cost of doing  business  via the  Internet  or  otherwise
materially  adversely  affect our business,  financial  condition and results of
operations.

Competition

     Presently we are an  aggregator  and reseller of long  distance and related
telecommunications  services.  Many of our competitors are substantially  larger
with greater financial and other resources.

     The U.S. long distance  telecommunications  industry is highly  competitive
and significantly influenced by the marketing and pricing practices of the major
industry  participants such as AT&T, Sprint and MCI. Buyers United also competes
with other  national and regional  long distance  carriers  that employ  various
means to attract new  subscribers,  including  television and other  advertising
campaigns,  telemarketing programs,  network marketing, cash payments, and other
incentives.  The ability of Buyers United to compete  effectively will depend on
its ability to provide quality services at competitive prices.

                                       10

<PAGE>


     Buyers  United  competes  on the  basis of  variety  of  services  offered,
customer billing and service,  and price. Since we can access and offer switched
long distance  rates from a number of  providers,  customers can select the rate
plan  best  suited to their  needs  without  having  to shop each long  distance
carrier  separately.  We offer to our customers,  directly and through agents, a
wide  selection of  telecommunications  products.  This  provides the customer a
one-stop shopping opportunity to obtain many of its  telecommunication  services
from one source,  Buyers United.  We believe customers are attracted by the fact
that Buyers United provides many of their services because they receive one bill
and have only one  provider  to call with any billing or service  questions.  We
further believe this aggregated service approach enables us to attract agents to
sell our services. By selling Buyers United services,  agents no longer have the
burden of managing multiple  contracts with many  telecommunications  companies.
Our  agents  can  complete  a sale at the  customer  site and count on  accurate
commissions  for even  complicated  product suites.  Additionally,  agents enjoy
dedicated customer service. We believe customers see positive differences in the
way our services are sold and served  compared to other  providers.  With Buyers
United,  customers  are not  forced  to take  bundled  services  or  enter  into
long-term  contracts  from one  provider,  which we believe  are  typical  sales
practices  of  competitors.  Because our  customer  contracts  are based on user
requirements  rather than bundled  services,  Buyers  United  delivers  only the
requested services at an appropriate capacity and competitive price.

     Building  recognition of our brands is beneficial to attracting  additional
customers and new strategic  alliances.  Our failure to promote and maintain our
brands successfully may result in slower growth, loss of customers,  and loss of
market  share and  strategic  alliances.  Accordingly,  we  intend  to  continue
pursuing an aggressive  brand-enhancement  strategy,  which includes promotional
programs and public relations activities.

Employees

     As of December 31, 2003,  Buyers  United  employed a total of 167 full time
and 28 part time persons. None of our employees is represented by a labor union.
We have not  experienced  any work  stoppages  and  believe  relations  with our
employees are good.

Risk associated with our business

     Our  revenues  and  operating  results  may be  negatively  impacted by the
pricing decisions of our competitors and our providers.

     Our revenues  from period to period depend on the pricing for long distance
service we can obtain from the wholesale  providers of these  services.  We also
must price our services at levels that are competitive in the marketplace.  This
industry has a history of downward  pressure on long distance service rates as a
result of competition among providers.  To acquire and retain customers we offer
these services at prices that are perceived as  competitive in conjunction  with
the other benefits we provide.  Consequently,  falling prices will likely result
in lowering our rates to  customers,  which will reduce  revenues.  On the other
hand,  higher prices charged by our providers will cut into gross profit margins
unless we raise prices to our customers,  which may be difficult for us to do if
our  competitors  are not subject to the same upward pricing  pressures or chose
not to increase prices  notwithstanding such pressure.  To make up for potential
reductions  in either  revenues  or  profits,  it would be  necessary  for us to
continue  to make  significant  increases  in our  customer  base from period to
period, and there is no assurance that that we will be successful in doing so.

      Our substantial debt adversely affects our operations and financial
condition.

     At December  31, 2003  borrowings  and capital  lease  obligations  totaled
approximately  $11.9  million,  which  includes $3.5 million of notes payable to
certain of our directors that pay interest at 12 percent per annum, $4.2 million
of obligations related to the purchase or acquisition of customer accounts,  and
$4.1 million of borrowings under our line of credit. A substantial amount of our
cash flow from operations is used to service our debt rather than to promote and
expand our business,  which adversely  affects  results of operations.  In March
2004, we completed a $8.7 million private equity investment in Buyers United and
will use approximately $3 million for reduction of debt. Nevertheless, we expect
that  servicing the remaining debt through the end of 2004 will continue to be a
use of free cash flow that could be used to develop our business.

     Disruptions in the operation of our technology  could adversely  affect our
operations.

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<PAGE>

     We are dependent on our computer  databases,  billing and account  computer
programs,  Internet  protocol  network,  and computer hardware that houses these
systems to  effectively  operate  our  business  and market  our  services.  Our
customers  and  providers may become  dissatisfied  by any system  failures that
interrupt  our ability to provide our service to them.  Substantial  or repeated
system failures would  significantly  reduce the attractiveness of our services.
Significant  disruption in the operation of these systems would adversely affect
our business and results of operations.

     Our enhanced services are dependent on leased telecommunications lines, and
a significant  disruption or change in these services could adversely affect our
business.

     The enhanced services we offer, such as automatic call distribution, fax to
email, real time account management,  and the inNetwork(TM)  family of products,
are  provided to  customers  through a  dedicated  network of  equipment  we own
connected through leased  telecommunications lines with capacity dedicated to us
that is based on Internet protocol,  which means the communication  initiated by
the  customer  is  converted  to data packs  that are  transmitted  through  the
dedicated  network and managed by our  software  that  resides on our  equipment
attached  to the  network.  We also move a portion  of our voice  long  distance
service over this dedicated network, because it lowers our cost of providing the
service from the cost of using traditional transmission methods.

     We lease  telecommunication  lines and space at co-location  facilities for
our  equipment,  which  represents the backbone of our dedicated  network,  from
third party  suppliers.  If any of these  suppliers  is unable or  unwilling  to
provide or expand their current  levels of service to us that enable us to serve
our customers,  the services we offer would be adversely  affected.  Although we
believe leased telecommunications lines and co-location facilities are available
from alternative  suppliers,  we might not be able to obtain substitute services
from other providers at reasonable or comparable  prices or in a timely fashion.
Any  resulting  disruptions  in the services we offer that are provided over our
dedicated network would likely result in customer  dissatisfaction and adversely
affect our operations. Furthermore, pricing increases by any of the suppliers we
rely  on for the  dedicated  network  could  adversely  affect  our  results  of
operations if we are unable to pass pricing increases through to our customers.

     Our  business  could be  materially  harmed if our  computer  systems  were
damaged.

     Substantially  all of our  dedicated  network  systems  are located at four
locations in Los Angeles,  Salt Lake City,  Dallas,  and New York.  Our customer
service,  billing,  and service management systems are located at out offices in
Bluffdale  and  Draper,   Utah.  Fires,  floods,   earthquakes,   power  losses,
telecommunications  failures,  break-ins  and similar  events could damage these
systems. Computer viruses,  electronic break-ins,  human error, or other similar
disruptive  problems  could also adversely  affect our systems.  We do not carry
business interruption insurance. Accordingly, any significant systems disruption
could have a material adverse effect on our business,  financial condition,  and
results of operations.

     We use the Internet in various  aspects of our  business.  The viability of
the Internet as an information medium and commercial  marketplace will depend in
large  part  upon  the  stability  and  maintenance  of the  infrastructure  for
providing Internet access and carrying Internet traffic.

     Historically  we have  relied on the  Internet  for  customer  service  and
billing.  Failure to develop a reliable network system or timely development and
acceptance of complementary  products,  such as high-speed access systems, could
materially harm our business. In addition, the Internet could lose its viability
due to delays in the  development  or adoption of new  standards  and  protocols
required to handle  increased  levels of Internet  activity or due to  increased
government regulation. If the Internet does not remain a viable conduit for data
and  transactional  traffic  or the  manner  in  which it now  operates  changes
significantly,  then our business and results of  operations  could be adversely
affected.

     A  fundamental   requirement  for  online   communications  is  the  secure
transmission of confidential  information over public  networks.  Our failure to
protect this confidential information could result in liability.

     If third parties succeed in penetrating  our network  security or otherwise
misappropriate our customer information,  we could be subject to liability.  Our
liability  could include claims for  unauthorized  purchases with credit card or
banking information, impersonation or other similar fraud claims, as well as for

                                       12

<PAGE>

other  misuses of personal  information,  including for  unauthorized  marketing
purposes.  These claims could result in litigation and adverse publicity,  which
could have a material adverse effect on our reputation, business, and results of
operations.

     Our growth and results of operations  are not  predictable,  which means an
investment in us has greater risk.

     Buyers United  experienced  significant  growth in 2003,  primarily through
internal growth and the purchase of customer  accounts.  Recent  acquisitions of
assets and customers have  substantially  increased our  operations.  We have no
other customer base  acquisitions  under  consideration and cannot predict if or
when another such acquisition opportunity may present itself.  Consequently,  it
is not possible to predict with any  certainty  the growth of our business  over
the next year,  whether  internally  or  through  acquisitions.  Our  ability to
continue  our  growth  and  profitability  will  depend on a number of  factors,
including our ability to maintain and expand our independent agent network,  the
availability of capital to fund purchases of customers or acquisitions, existing
and emerging competition,  and our ability to maintain sufficient profit margins
despite  pricing  pressures.  Furthermore,  the  growth and  development  of our
business  may be  harmed  if we are  unable to adapt  and  expand  our  systems,
procedures,  and controls to support and manage our growth. All of these factors
indicate there could be fluctuations in our results of operations and volatility
in our stock price that could expose an investor to greater risk.

     Our  inability to promote our name and service could  adversely  affect the
development of our business.

     Building  recognition of our brand name, "UCN", is beneficial to attracting
additional customers,  obtaining favorable reseller agreements with providers of
long distance, and establishing strategic  relationships with independent agents
and  businesses  that can  facilitate  or  enhance  our  service  offerings  and
marketing efforts.  In January 2004 we filed an application with the U.S. Patent
and Trademark  Office to register the mark, but have yet to receive any response
on the  application.  If we fail to obtain  registration of UCN, we may consider
adopting new marks for  promotion,  so we would gain little from  promoting UCN.
Even if we are  successful in  registering  the mark, our failure to promote and
maintain  our brand  name  successfully  may  result in slowed  growth,  loss of
customers, loss of market share, and loss of strategic relationships.  We cannot
assure you that we will be able to promote  our brand names as fully as we would
like,  or that  promoting  our brand name will  enable us to be  competitive  or
improve our results of operations.

     Our  development of enhanced  services could subject us to claims of patent
infringement that would adversely affect our results of operations.

     We offer enhanced  services through our dedicated  network,  such as fax to
email.  This,  and other  enhanced  services,  has been the subject of claims by
certain patent holders that providing the enhanced  services  violates  existing
patent  rights  covering  the  manner  and  method  by which  the  services  are
performed.  We have not  received  any  notice or claim  from any party that any
service we offer violates any such rights.  Should we receive such a notice,  we
expect that the patent  holder  would seek a licensing  arrangement  in which we
would be required to pay a license fee to continue to offer the service, and may
seek license  payment for past sales of the service  using the alleged  patented
technology. Payment of any such license fees would have an adverse impact on the
net revenue generated from sales of the enhanced services.

     Regulation  of IP  telephony  services is  unclear,  so the  imposition  of
significant regulation in the future could adversely affect our operations.

     We deliver  our  enhanced  services  and move other long  distance  service
through our VoIP Network.  At both the Federal and state level,  proceedings and
investigations   are  pending   with   respect  to  whether   IP-enabled   voice
communications  are  telecommunications  services  subject to Federal  and state
regulation.  A determination  that such services are subject to regulation would
likely increase the cost of services we provide,  which would  adversely  affect
our results of operations. Even if a determination is made that our IP delivered
services  are not  subject to current  regulation,  there is no  assurance  that
Federal  or  state   governments  will  not  impose   regulation  on  IP-enabled
communications  in the future that would add substantially to our costs of doing
business.

                                       13

<PAGE>


     Future sales or the potential for sale of a substantial number of shares of
our common  stock could cause the trading  price of our common  stock to decline
and  could  impair  our  ability  to raise  capital  through  subsequent  equity
offerings.

     As  of  March  15,  2004,  we  have  12,994,079   shares  of  common  stock
outstanding, of which 4,608,739 shares are freely tradable, 3,044,794 shares may
be sold subject to the volume,  timing, and other conditions of Rule 144 adopted
under the  Securities  Act of 1933,  808,546  shares may be sold  subject to the
volume,  timing,  and other conditions of Rule 144 beginning May 1, 2004 and the
remaining 4,532,000 shares may be sold subject to the volume,  timing, and other
conditions of Rule 144  beginning  March 15, 2005. We agreed with the holders of
5,340,546 restricted shares to file a registration statement with the Securities
and Exchange  Commission in April 2004 for the purpose of registering  resale of
their shares.

     In addition, we have outstanding warrants, options and convertible notes to
acquire 7,646,583  additional shares that are registered for sale by the holders
in the public market under a  registration  statement  filed with the Securities
and Exchange Commission in September 2003, which has been temporarily  suspended
until  we file  an  amendment  updating  the  registration  statement  with  our
financial statements for 2003 and other information. Assuming all these warrants
and options are  exercised,  there would be  20,640,662  shares of common  stock
issued and  outstanding.  We have also  reserved for future  issuance  6,258,922
additional shares of common stock as follows:

     o    3,929,000  shares  issuable on  conversion  of  outstanding  preferred
          stock;
     o    Up to 2,006,351 shares underlying other warrants and options that were
          granted and remained outstanding as of the date of this filing;
     o    Up to 173,571 shares reserved for issuance under our stock plans; and
     o    Up  to  150,000   shares   reserved  for  issuance  on  conversion  of
          outstanding notes.

     Of  the  3,929,000  shares  of  common  stock  issuable  on  conversion  of
outstanding preferred stock, 3,374,000 may be sold without limitation under Rule
144(k).

     Sales of a  substantial  number of shares of our common stock in the public
markets,  or the perception  that these sales may occur,  could cause the market
price of our stock to decline, which could adversely affect an investment in our
stock and could materially  impair our ability to raise capital through the sale
of additional  equity  securities.  The holders of these  outstanding  warrants,
options,  and convertible  securities have the opportunity to profit from a rise
in the value or market  price of our common  stock and to  exercise  purchase or
conversion  rights when we could obtain equity capital on more  favorable  terms
than those contained in these securities.

                        ITEM 2. DESCRIPTION OF PROPERTIES

     Buyers United leases executive office space in Bluffdale, Utah, a suburb of
Salt Lake City.  The offices  consist of  approximately  30,000 square feet. The
current  monthly  lease rate is $32,307.  The lease for office space  expires in
January 2007,  but we have an option to renew the lease for an additional  three
to five years.

     Through November 2004, Buyers United is leasing 14,339 square feet of space
at 13751 S. Wadsworth Park Drive, Draper, Utah, at a monthly cost of $16,728.

     Buyers United believes that the office space included in both facilities is
adequate for its anticipated needs for at least the next 15 months.

                            ITEM 3. LEGAL PROCEEDINGS

     In June 2001,  Buyers  United  entered  into a joint sales  agreement  with
Infotopia,  Inc., a direct response marketer.  In connection with the agreement,
Infotopia  loaned  $500,000 to Buyers  United.  Subsequent  to entering into the
sales  agreement,  the two  companies  decided  not to pursue  further any joint
activity.  In December  2001,  Buyers  United  negotiated  a  settlement  of the
$500,000  loan in which Buyers  United paid $120,000 and issued 35,000 shares of
common stock in exchange for canceling the  outstanding  obligation plus $25,921
in accrued interest. The stock had a fair market value of $22,401.  Accordingly,
based on these amounts,  we recorded a gain on the early  extinguishments of the
debt  in the  amount  of  $383,520.  However,  unbeknownst  to us,  during  2001
Infotopia  allegedly  entered into a General  Security  Agreement with Sea Spray

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<PAGE>

Holdings,  Ltd.,  which  purportedly  included  the loan  obligation.  Sea Spray
asserted  that  it had a  perfected  security  interest  in the  obligation  and
demanded payment as  successor-in-interest to Infotopia. We denied the claim and
filed an  arbitration  proceeding to resolve the issue.  Sea Spray  attempted to
pursue its claim in New York state court,  which we removed to federal  court in
New York, and the federal court dismissed the action pursuant to an order to the
effect  Sea Spray  must  pursue its  claims in the  arbitration  proceeding.  An
arbitration hearing was held in December 2003, at which Sea Spray failed to make
any appearance or submission after receiving all required notice. The arbitrator
entered a default in favor of Buyers United and its award further found in favor
of Buyers  United as a matter of the evidence  presented and as a matter of law.
In our view  this  matter  has been  resolved  fully in our favor and we have no
obligation or liability to Sea Spray.

     Buyers  United is the  subject of certain  other  legal  matters,  which it
considers  incidental  to  its  business  activities.   It  is  the  opinion  of
management,  after discussion with legal counsel,  that the ultimate disposition
of these  other  matters  will  not  have a  material  impact  on the  financial
position, liquidity or results of operations of Buyers United.

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

     No matter was  submitted to a vote of security  holders  during the quarter
ended December 31, 2003.

                                     PART II

        ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS;
                     RECENT SALES OF UNREGISTERED SECURITIES

Market price and stockholder matters

     The common stock of Buyers  United trades in the  over-the-counter  market.
The following table sets forth for the respective  periods  indicated the prices
of the common stock in the  over-the-counter  market, as reported and summarized
on the OTC Bulletin  Board.  Such prices are based on  inter-dealer  bid and ask
prices,  without  markup,  markdown,  commissions,  or  adjustments  and may not
represent actual transactions.

Calendar Quarter Ended:            High Bid ($)               Low Bid ($)
-----------------------            ------------               -----------
March 31, 2002                         1.30                      0.61
June 30, 2002                          2.00                      1.10
September 30, 2002                     1.93                      1.30
December 31, 2002                      2.00                      1.25

Calendar Quarter Ended:            High Bid ($)               Low Bid ($)
-----------------------            ------------               -----------
March 31, 2003                         2.45                      1.52
June 30, 2003                          2.22                      1.20
September 30, 2003                     2.95                      1.71
December 31, 2003                      3.05                      2.00

     Since  inception,  no dividends have been paid on the common stock.  Buyers
United intends to retain any earnings for use in its business activities,  so it
is not expected that any dividends on the common stock will be declared and paid
in the  foreseeable  future.  As of  March  15,  2004,  there  were  outstanding
1,827,500  shares of Series A Convertible  Preferred Stock and 420,300 shares of
Series B Convertible  Preferred Stock.  Under the terms of this preferred stock,
Buyers  United  cannot make any  distributions  on its common stock  without the
approval of a majority of the preferred  stockholders.  At March 15, 2004, there
were approximately 4,250 holders of record of the common stock.

Repurchases of common stock

     In  December  2003,  a holder of  100,000  shares  of Series B  Convertible
Preferred Stock converted all of those shares to 500,000 shares of common stock.
In January  2004,  the holder sold those  common  shares plus 14,560  additional
shares,  or a total of  514,560  shares,  to Buyers  United  for  $500,000  in a
privately negotiated transaction.

                                       15

<PAGE>


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

Overview

     Buyers  United is a domestic  telecommunications  company  that  offers and
sells a wide  range of long  distance  and  related  communication  services  to
business and residential  customers.  In the past we functioned as an aggregator
and reseller of  telecommunications  services  provided by others.  We intend to
continue to pursue and develop this type of business.  However, in December 2002
Buyers United  entered into  agreements to purchase and manage assets of Acceris
Communications  Inc.  (formerly  I-Link,   Inc.)  and  its  subsidiary,   I-Link
Communications, Inc., and license in perpetuity software developed by I-Link for
the operation of a Voice over  Internet  Protocol  communications  network (VoIP
Network).  We closed the  transactions  in May 2003.  With these newly  acquired
assets we can now develop and offer as a provider enhanced services, such as fax
to email,  and transmit data and other  communication  services for a portion of
the journey  over our VoIP  Network  rather than  entirely  through  third party
providers.  In October 2003,  Buyers United acquired the exclusive right to sell
and manage the  enhanced  telecommunications  functions  of MyACD,  Inc.  with a
one-year option to purchase it at a price of  approximately  $6.8 million.  With
the MyACD  technology  we can offer a new product  approach  that  combines  our
national VoIP Network with on-demand  proprietary telephony software for contact
handling/management  applications.  We are  changing  the way  mission  critical
applications are delivered and priced for the contact center marketplace, or for
any business or  department  seeking to improve how it manages the  productivity
and quality of its customer contact opportunities.

     In December  2002,  Buyers United also entered into an agreement with Touch
America,  Inc., a subsidiary  of Touch  America  Holdings,  Inc.,  to purchase a
substantial number of its switched voice telecommunication customers,  including
the carrier  identification code used to service those customers.  In June 2003,
we amended the  purchase  agreement  to acquire  additional  switched  voice and
dedicated  telecommunications customers and correct discrepancies in the list of
customers  originally  purchased in December  2002. The total purchase price was
$6.5  million.  Buyers  United made an initial  payment of $3.0 million to Touch
America in December 2002 and has made  additional  cash  payments  totaling $3.4
million  through March 4, 2004. The balance of $93,988 is expected to be paid in
April 2004.

     During  August 2003,  Buyers  United  purchased  approximately  12,000 long
distance customers from Glyphics Communications, Inc. for $543,558.

     Buyers  United  entered into an  agreement  to purchase 37  dedicated  long
distance  customers  from Source  Communications,  LLC for  $750,000 in February
2004.  Closing of the  acquisition  was  subject to  complying  with  applicable
federal and state regulation pertaining to transfer of the customers. All of the
regulatory  requirements  were satisfied and the acquisition of the customers is
completed

     We  generate  internal  growth  by  pursuing  multiple  marketing  avenues,
including using independent agents,  marketing through the Internet, and selling
through our direct sales force. We intend to expand and develop our direct sales
force  and   value-added   reseller   programs  during  2004.  Our  purchase  of
telecommunication  customers of Touch America resulted in a significant increase
in our customer base during 2003. We believe continuing  financial  difficulties
and uncertainty in the  telecommunications  industry may result in opportunities
to acquire customers from unrelated companies,  such as our recent February 2004
purchase of dedicated long-distance customers from Source Communications, and we
intend to remain open to these opportunities. However, at the present we are not
evaluating any new acquisitions.

Results of operations

Revenues

     For the year ended December 31, 2003 revenues increased to $63.3 million, a
110 percent  increase  compared to revenues for the year ended December 31, 2002
of $30.2 million.  While a significant portion of the increase in revenue is due
to the acquisition of customer  accounts,  we also generated  growth  internally
from ongoing promotional efforts, primarily involving independent agents.

                                       16

<PAGE>

     For the year ended  December 31, 2002,  revenues  increased  110 percent to
$30.2 million as compared to $14.3 million for the year ended December 31, 2001.
The change was due to a  substantial  increase in our customer  base.  These new
customers were  generated  through  independent  sales agents and referrals from
unrelated Internet marketing companies.

Costs of Revenues

     Costs of revenues for the year ended  December 31, 2003  increased to $34.6
million,  a 112 percent increase as compared to $16.3 million for the year ended
December 31, 2002. As a percentage of revenue,  costs  increased to 54.6 percent
in 2003 compared to 54.0 percent for same period in 2002.  The decrease in gross
margin for the year ended  December 31, 2003 as compared to the previous year is
the result of costs related to an increase in customers using dedicated  circuit
services.  This type of service  typically has lower profit margins,  but higher
volumes,  than other types of long distance  services.  Also  contributing  to a
lower gross margin was the  combination of costs related to integration  efforts
involved in the I-Link  acquisition and higher costs of Touch America customers.
Buyers  United agreed with Touch  America on certain  wholesale  prices during a
phase-in   period  after  acquiring  the  customers.   However,   Buyers  United
immediately  began  switching new customers over to other  lower-cost  wholesale
providers.  The higher Touch America costs were offset slightly by a decrease in
other costs for long-distance minutes.

     Costs of revenues for the year ended  December 31, 2002 were $16.3 million,
or 54 percent of revenue, as compared to costs of $9.3 million, or 65 percent of
revenue,  for the year ended  December 31,  2001.  During  2002,  Buyers  United
increased volume and new customer sign-ups with two of our largest long-distance
wholesale carriers resulting in decreased rates for long-distance minutes and an
increase in gross margin for the year.

General and administrative

     General  and  administrative  costs for the year ended  December  31,  2003
increased  101 percent to $14.8  million  compared to $7.4  million for the year
ended  December 31, 2002.  The increase in costs is due to expenses  required to
support Buyers United's  significant  revenue growth,  and costs associated with
the  I-Link,  Touch  America  and the MyACD  transactions.  To meet the needs of
increased  revenue levels we hired  additional  customer  service and collection
personnel.  In addition,  several  employees  of I-Link were  retained by Buyers
United in order to  effectively  maintain the VoIP  Network,  as well as provide
customer support and billing services. Buyers United also assumed certain office
lease obligations of I-Link, which resulted in additional occupancy expenses.

     General and  administrative  expenses for the year ended  December 31, 2002
increased  20 percent to $7.4  million or 24 percent of revenue as  compared  to
$6.1 million or 43 percent of revenue for the year ended  December 31, 2001. The
increase  resulted  from  increases in bad debt  expense,  customer  service and
support  expenses and billing costs,  all incidental to the increase in revenue.
These increases were offset by decreased  costs of maintenance and  depreciation
expense from the termination of high-cost  equipment leases and the write-off of
obsolete web-site development costs during 2001.

Selling and promotion

     Selling and promotion expenses increased 133 percent to $10.8 million or 17
percent of revenue for the year ended December 31, 2003 compared to $4.6 million
or 15 percent of revenue for the year ended  December  31,  2002.  The  increase
resulted  from  higher  commissions  paid  on  increased  revenue.  Selling  and
promotion costs for 2003 include higher  amortization  expenses  associated with
the customer lists acquired during 2003.

     Selling and  promotion  expenses for the year ended  December 31, 2002 were
$4.6 million or 15 percent of revenue,  an increase of 40 percent over the prior
year's  expenses of $3.3 million or 23 percent of revenue.  The increase was the
result of higher expenses for sales  commissions,  sales support staff,  and the
amortization of deferred  customer  referral fees. These increases were directly
related to the increase in revenue during the 2002 year.

Other income (expense)

     Interest  expense for the year ended  December  31,  2003 was $1.9  million
compared to $1.5  million for the  comparative  period in 2002.  The increase in
interest expense was the result of higher debt balances  outstanding  throughout
2003 compared to 2002.

                                       17

<PAGE>

     Interest  expense for 2002 was $1.5  million as  compared  to $997,882  for
2001, an increase of 55 percent. The increase is attributable to the significant
amount of additional  debt financing  Buyers United had  outstanding  throughout
2002,  which we raised to fund  operations and an online  marketing  opportunity
with an unrelated Internet marketing company.

Liquidity and capital resources

     Buyers United's current ratio as of December 31, 2003 increased slightly to
0.52:1 from 0.51:1 at December 31, 2002.  The  components of current  assets and
current liabilities that changed  significantly since the end of 2002 were cash,
accounts receivable,  line of credit, the current portion of long-term debt, and
accrued liabilities.

     The increase in cash and the line of credit was the result of a significant
draw against the line of credit that took place during the last week of December
2003. Accounts receivable,  accrued commission and rebates, accrued liabilities,
and  accounts  payable all  increased  as a result of higher  revenues  reported
during 2003 as compared to the same period in 2002. Accrued dividends  increased
as a result of the additional  shares of preferred stock issued to I-Link,  Inc.
in connection with completing the acquisition of the VoIP Network.

     The current portion of long-term debt increased $1.7 million or 28 percent,
due to several  long-term  notes  maturing and becoming due and payable in 2004.
The long-term  portion of notes payable decreased by $3.2 million due to the net
effect of the following items:

     o    Ongoing payments on acquisition notes.

     o    The partial payoff and replacement of a $1.1 million  promissory note,
          previously  due  February  28, 2003.  Buyers  United  retired the note
          payable by paying  $250,000 in cash and issuing a new promissory  note
          for  $800,000.  In addition,  Buyers  United  issued  50,000 shares of
          common stock in connection with the original  agreement.  The new note
          is  unsecured  and bears  interest at ten  percent,  payable  monthly.
          Principal  is also  payable  monthly  based on 20 percent of  billings
          during each monthly billing period from designated customers.

     o    In January and February 2003, Buyers United received $500,000 from the
          issuance  of  promissory  notes  payable,  $400,000 of which came from
          three Directors of Buyers United. The unsecured notes bear interest at
          12 percent and are due in 2004 through early 2005.

     o    In May and  June  2003,  Buyers  United  received  $500,000  from  the
          issuance  of  promissory  notes  payable.  The  notes are  secured  by
          computer  and  telecommunications   equipment,  bear  interest  at  12
          percent, and are due in May and June 2006.

     o    During  June 2003,  the  Company  initiated  a program  to  repurchase
          outstanding  common  stock  from  shareholders  of record  with  total
          holdings  of 100 or fewer  shares.  The  offering  price per share was
          $1.75.  The  program  ended in  September  2003 after the  Company had
          repurchased 2,774 shares.

     o    In June 2003 Buyers United issued $1.4 million in promissory notes for
          cash used primarily for purchasing  customers from Touch America.  The
          notes are unsecured and bear interest at ten percent,  with  principal
          and interest  payable  monthly.  The principal  paid each month equals
          approximately  20 percent of billings  collected  during each  monthly
          billing  period from the acquired Touch America  customers.  After all
          principal  is  repaid,   note   holders   will   continue  to  receive
          approximately ten percent of such collected billings. There was a five
          percent  commission  paid to the sales  agent in  connection  with the
          issuance of the notes.

     Buyers United has a line of credit  agreement with RFC Capital  Corporation
that expires in January  2006.  The available  borrowing  limit is $5.0 million.
Interest  accrues  at prime  plus three  percent,  which was 7.00  percent as of
December 31, 2003. During 2002, the interest rate on the line was prime plus six
percent,  which was 10.25 percent as of December 31, 2002.  The facility  allows
the Company to obtain financing on its eligible accounts  receivable,  including
unbilled   receivables   and  regular   monthly   billings.   The   facility  is
collateralized  by the  underlying  receivables.  On December 31,  2003,  Buyers
United had  financed the maximum  amount  available  based on eligible  accounts
receivable  at that time.  This  amount,  less draws by RFC applied  against the

                                       18

<PAGE>

outstanding amount, aggregated $4.1 million. The facility requires Buyers United
to maintain a restricted cash account for the collection of the receivables.  As
of  December  31,  2003,  Buyers  United  had $1.2  million of  restricted  cash
associated with the RFC arrangement.

     On September 10, 2003, Buyers United filed a registration statement on Form
SB-2 with the  Securities  and Exchange  Commission to register for resale up to
approximately  8.8  million  shares  of  common  stock  underlying   outstanding
warrants,  options  and  convertible  debt.  During  2003,  investors  exercised
warrants  to  purchase  522,500  shares of common  stock  providing  cash to the
Company of approximately $1.0 million. In March 2004 the registration  statement
was temporarily  suspended until the Company can file an amendment  updating the
registration  statement  with its 2003 audited  financial  statements  and other
information.

     On March 15, 2004,  Buyers United sold 3,782,000  shares of common stock at
$2.30 per share, or a total of approximately  $8.7 million.  Net proceeds of the
offering after placement fees and expenses are approximately  $8.1 million.  The
net  proceeds  of the  private  placement  are  intended  to be used for various
corporate  purposes,  including sales and marketing  related  programs,  funding
further development of our VoIP Network,  reducing debt, and for working capital
and other general corporate purposes.

     The following table sets forth our  capitalization as of December 31, 2003,
and as adjusted to give effect to:

     o    Receipt of the estimated  net proceeds  from our private  placement of
          3,782,000 shares of common stock at $2.30 per share; and

     o    Conversion of 300,000 shares of Series B Convertible  Preferred  Stock
          by Acceris Communications, Inc.
<TABLE>
<CAPTION>
                                                                     December 31,   As Adjusted
                                                                         2003           (1)
                                                                     ------------   -----------

<S>                                                                  <C>            <C>
Stockholders' equity (deficit):
   Preferred stock, $0.0001 par value; 15,000,000 shares authorized
    Series A 8% cumulative preferred stock
      1,865,000 shares issued and outstanding (liquidation value
      of $3,730,000)                                                 $        187   $       187
     Series B 8% cumulative preferred stock
      721,729 sharesissued and outstanding (liquidation value
      of $7,217,290); as adjusted, 421,729 shares issued and
      outstanding, (liquidation value of $4,217,290)                           72            42
   Common stock,  $0.0001 par value,  100,000,000 shares authorized;
    7,604,584 shares issued and outstanding; as adjusted,
    12,886,584 shares issued and outstanding                                  760         1,288
   Additional paid in capital                                          20,193,148    28,295,023
   Warrants and options outstanding                                     3,928,110     3,928,110
   Accumulated deficit                                                (25,749,527)  (25,749,527)
                                                                     ------------   -----------
        Total stockholders' equity (deficit)                         $ (1,627,250)  $ 6,475,123
                                                                     ============   ===========
</TABLE>
---------------------------

(1)  The adjusted  figures do not give effect to the issuance of up to 7,972,583
     additional common shares on exercise or conversion of outstanding warrants,
     options,  and convertible notes that are registered for sale by the holders
     under a  registration  statement  filed with the  Securities  and  Exchange
     Commission,  up to 1,600,476 shares  underlying other warrants and options,
     up  to  150,000  shares  reserved  for  issuance  on  conversion  of  other
     outstanding  notes,  or up to 3,973,645  shares  issuable on  conversion of
     outstanding preferred stock.

                                       19

<PAGE>


Critical accounting policies and estimates

     Revenue  Recognition:  Buyers  United's  revenue  recognition  policy  with
respect to reseller  agreements is to record gross revenues and receivables from
customers when Buyers United acts as principal in the  transaction;  takes title
to the products or  services;  and has risks and rewards of  ownership,  such as
risk of loss for  collection,  delivery,  or  returns.  Revenues  from  sales of
services are recognized upon providing the services to the customers.

     Accounts   Receivable  and  Allowance  for  Doubtful   Accounts:   Accounts
receivable is comprised of amounts  billed and billable to customers,  net of an
allowance for  uncollectible  amounts.  The  allowance for doubtful  accounts is
estimated by  management  and is based on specific  information  about  customer
accounts, past loss experience,  and general economic conditions.  An account is
written  off by  management  when  deemed  uncollectible,  although  collections
efforts may continue.

     Property and  Equipment:  Property and equipment are stated at cost.  Major
additions and improvements are capitalized,  while minor repairs and maintenance
costs are expensed when incurred. In accordance with Statement of Position 98-1,
"Accounting  for the  Costs of  Computer  Software  Developed  or  Obtained  for
Internal  Use,"  Buyers  United  capitalizes  certain  costs  incurred  for  the
development of internal use software.  These costs include the costs  associated
with coding, software configuration, upgrades, and enhancements.

     Advertising   Costs:   Buyers  United   advertises  its  services   through
traditional  venues such as print media to the general public.  Costs associated
with these advertising efforts are expensed as incurred.

Forward-looking statements

     The Private Securities Litigation Reform Act of 1985 provides a safe harbor
for forward-looking statements made by Buyers United. All statements, other than
statements  of  historical  fact,  which  address  activities,  actions,  goals,
prospects, or new developments that Buyers United expects or anticipates will or
may occur in the future,  including  such things as expansion  and growth of its
operations and other such matters are forward-looking  statements.  Any one or a
combination of factors could  materially  affect Buyers United's  operations and
financial  condition.   These  factors  include  the  availability  of  capital,
competitive  pressures,  success or failure of  marketing  programs,  changes in
pricing and availability of services and products offered to members,  legal and
regulatory  initiatives  affecting long distance service,  and conditions in the
capital markets.  Forward-looking  statements made by Buyers United are based on
knowledge  of its business  and the  environment  in which it operates as of the
date of this  report.  Because of the  factors  listed  above,  as well as other
factors  beyond  its  control,  actual  results  may  differ  from  those in the
forward-looking statements.

                          ITEM 7. FINANCIAL STATEMENTS

     The financial  statements of Buyers United appear at the end of this report
beginning with the Index to Financial Statements on page F-1.

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

     Effective  February 2002, Buyers United changed its accountants from Arthur
Andersen LLP to Crowe Chizek LLC.

                        ITEM 8A. CONTROLS AND PROCEDURES

     With the  participation  of management,  Buyers  United's  chief  executive
officer and chief  financial  officer  evaluated  its  disclosure  controls  and
procedures  on March 17, 2004.  Based on this  evaluation,  the chief  executive
officer and the chief financial officer  concluded that the disclosure  controls
and procedures are effective in connection  with Buyers  United's  filing of its
annual report on Form 10-KSB for the year ended December 31, 2003.

     Subsequent  to March  17,  2004,  through  the date of this  filing of Form
10-KSB for the year ended  December  31,  2003,  there have been no  significant
changes in Buyers  United's  internal  controls or in other  factors  that could
significantly affect these controls,  including any significant  deficiencies or
material weaknesses of internal controls that would require corrective action.

                                       20

<PAGE>


                                    PART III

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

Directors and Officers

     The following  table sets forth the names,  ages, and positions with Buyers
United for each of the directors and officers.

          Name             Age             Positions                     Since

Theodore Stern             74   Chairman of the Board, Chief             1999
                                Executive Officer and Director

Gary Smith                 69   Director                                 1999

Edward Dallin Bagley       65   Director                                 1999

Steve Barnett              62   Director                                 2000

Paul Jarman                34   President and Director                   1997

David R. Grow              47   Chief Financial Officer                  2003

G. Douglas Smith           34   Executive Vice President                 1997

Kenneth D. Krogue          38   Executive Vice President                 1997


     All directors hold office until the next annual meeting of stockholders and
until their successors are elected and qualify. Officers serve at the discretion
of our Board.  The following is information  on the business  experience of each
director and officer.

     Theodore  Stern  became  a  director  of  Buyers  United  in June  1999 and
subsequently the Chief Executive Officer in September 2000. Mr. Stern has served
as a director of Northern Power Systems of Waitsfield,  Vermont,  a manufacturer
of renewable  generation  systems,  since September  1998.  During the last five
years  Mr.  Stern  has  been  self-employed  as a  consultant  to  manufacturing
companies.

     Gary Smith became a director of Buyers United in June 1999. During the past
five years he has been self-employed as a business consultant.

     Edward  Dallin  Bagley  became a director of Buyers United in June 1999. He
has been  self-employed  as an attorney  and  investor  for the past five years.
During that time he has also served as a director of Tunex International,  Inc.,
an automotive tune-up franchise company based in Salt Lake City, Utah, and Clear
One  Communications,  Inc., a manufacturer of electronic  products based in Salt
Lake City, Utah.

     Steve  Barnett  has  been  self-employed  for  the  past  five  years  as a
consultant to manufacturing and distribution  companies on improving  operations
and   business   restructuring.   He  has   continued  to  purchase  and  manage
privately-held  manufacturing  companies,  as well as  serving  on the boards of
non-owned private companies in connection with his consulting services. For over
five years, Mr. Barnett has been a director of Chicago's  Jewish  Federation and
Jewish United Fund, and a Vice Chairman of the Board of Directors since 1997. He
is also a Director of Bank Leumi USA.

     Paul Jarman has served as an officer of Buyers  United during the past five
years,  first as an Executive  Vice  President and as President  since  December
2002.

                                       21

<PAGE>

     David R. Grow, a Certified Public Accountant,  joined Buyers United in June
2003 and currently serves as its Chief Financial  Officer.  From January 2002 to
June 2003,  Mr.  Grow  served as the Chief  Financial  Officer and member of the
Board of Directors of Spectrum  Engineers,  Inc.,  a mechanical  and  electrical
engineering firm in Salt Lake City, Utah. From February 2000 to January 2002, he
served as the Chief  Financial  Officer and member of the Board of  Directors of
webBASIS,  Inc.,  a  web-based  software  development  company  in  Bakersfield,
California.  During the two-year period prior to February 2000, he served as the
Chief Financial Officer of Daw Technologies,  Inc., a manufacturer and installer
of cleanrooms for the semiconductor industry, based in Salt Lake City, Utah.

     G. Douglas Smith has served as an Executive Vice President of Buyers United
during the past five years.

     Kenneth D.  Krogue  has served as an  Executive  Vice  President  of Buyers
United during the past five years.

Board Meetings and Committees

     The Board  met 13 times  during  the year  ended  December  31,  2003.  All
directors  attended  at least 75 percent of the  meetings  of the Board.  During
2000,  the Board  formed the  Compensation  Committee,  the members of which are
Edward Dallin Bagley (Chairman), Steve Barnett, and Gary Smith. The Compensation
Committee  considers  salary and benefit matters for the executive  officers and
key personnel of the Company. The Compensation Committee met five times in 2003,
and all director  members of the  committee  attended at least 75 percent of the
meetings.  In 2000,  the Board also formed the Audit  Committee,  the members of
which are Steve Barnett (Chairman) and Edward Dallin Bagley. The Audit Committee
is  responsible  for  financial  reporting  matters,   internal  controls,   and
compliance  with the Company's  financial  polices,  and meets with its auditors
when  appropriate.  The  Audit  Committee  met twice in 2003,  and all  director
members of the committee  attended the meetings.  The Board has determined  that
Steve  Barnett is serving as the audit  committee  financial  expert  within the
meaning of Item 401(e) of Regulation S-B.

Board Compensation

     Each Director  received a monthly  director fee of $1,000 during 2003.  The
past practice of the Board is to compensate  directors for their annual  service
by issuing to each of them  options to purchase  25,000  shares of common  stock
exercisable  over a term of five years from the date of issue.  Pursuant to this
practice,  each director  received 25,000 options in March 2002 with an exercise
price of $2.50 per share,  and in November 2002 (for year 2003) with an exercise
price of $2.00 per  share.  It has also been the past  practice  of the Board to
compensate the Chairman of the Board,  and beginning with those issued for 2003,
the Chairman of the Audit Committee, for their annual service by issuing to each
of them options to purchase  15,000  shares of common stock  exercisable  over a
term of five years from the date of issue.  Pursuant to this practice,  Theodore
Stern  received  as  Chairman  of the Board  15,000  options  in March  2002 and
November 2002, with exercise prices of $2.50 and $2.00 per share,  respectively.
Steve  Barnett  received as Chairman of the Audit  Committee  15,000  options in
November 2002 (for year 2003) with an exercise price of $2.00 per share.

     The  Director  Stock  Option  Plan was adopted by the Board in May 2003 and
approved  by the  stockholders  in June 2003.  The  purposes  of the plan are to
attract, motivate and retain experienced and knowledgeable directors by offering
them  opportunities to increase their stock ownership interest in Buyers United.
Each person  serving as a director on the date options are issued under the plan
is eligible  to  participate.  The persons  serving as Chairman of the Board and
Chairman  of the  Audit  Committee  on the date  options  are  issued  for those
positions under the plan are eligible to participate.

     The Board has authorized the issuance or delivery of options to purchase an
aggregate  of  1,000,000  shares of common  stock  under  the plan,  subject  to
customary  antidilution  and other  adjustments  provided for in the plan.  Each
person  serving as a director  on March 1 of each year is entitled to receive an
option to purchase  25,000 common shares at an exercise price per share equal to
the  average  fair  market  value on that  date,  but in no event  less than the
conversion price for the Series B Convertible  Preferred Stock of Buyers United,
which is now $2.00 per share.  On the dates the Board  appoints  the Chairman of
the Board and Chairman of the Audit  Committee to serve for the next year,  each
person so appointed is entitled to receive an option to purchase  15,000  common
shares at an exercise  price per share equal to the average fair market value on
that  date,  but in no event  less than the  conversion  price for the  Series B
Convertible  Preferred Stock of Buyers United. Each option issued under the plan
is exercisable  over a term of five years.  The number of options  issuable each
year under the plan, as well as options  outstanding  under the plan, is subject
to  customary  antidilution  and  other  adjustments  provided  for in the plan.

                                       22

<PAGE>

Options  issued under the plan are not exclusive and the plan does not limit the
authority of the Board or its  committees to grant awards or authorize any other
compensation,  with or  without  reference  to  shares,  under any other plan or
authority.

     The plan is  administered  by a  committee,  which is  either  the Board of
Directors or a committee  appointed by the Board for such purpose.  The Board of
Directors has not  appointed a committee to  administer  the plan, so the entire
Board is now the committee administering the plan. Subject to the limitations of
the plan,  the  committee has broad  authority  under the plan,  including,  for
example, the authority:

     o    To construe and interpret this plan;
     o    To make all other determinations required by this plan;
     o    To maintain all the necessary  records for the  administration of this
          plan; and
     o    To make and publish forms,  rules and procedures for administration of
          the plan.

     In 2004  the  Board,  and each of our  directors  individually,  agreed  to
renounce  their  right to receive  options  under th plan for 2004,  and instead
receive options outside the plan for a lower number of shares. Accordingly,  the
Board  approved  in January  2004 the  issuance  to each  director of options to
purchase  10,000  shares of common stock and to Steve Barnett as chairman of the
Audit Committee options to purchase 5,000 additional  shares. All of the options
are  exercisable  over a term of five  years at $3.05 per  share,  which was the
market price for our common stock in the public market on the date of grant.

Code of Ethics

     Buyers  United  has  adopted  a Code  of  Ethics  applicable  to its  chief
executive officer and chief financial officer, a copy of which is included as an
exhibit to this report.

Section 16(a) Filing Compliance

     Section 16(a) of the Securities  Exchange Act of 1934 requires officers and
directors of Buyers  United and persons who own more than ten percent (10%) of a
registered  class of its equity  securities  to file  reports of  ownership  and
changes in their ownership on Forms 3, 4, and 5 with the Securities and Exchange
Commission,  and forward copies of such filings to Buyers  United.  Based on the
copies of filings received by Buyers United,  during the most recent fiscal year
the directors, officers, and beneficial owners of more than ten percent (10%) of
the equity securities of Buyers United registered  pursuant to Section 12 of the
Exchange Act have filed on a timely basis all required Forms 3, 4, and 5 and any
amendments thereto except for Dallin Bagley, who filed one Form 4 late.

                         ITEM 10. EXECUTIVE COMPENSATION

Annual Compensation

     The table on the following  page sets forth certain  information  regarding
the annual and long-term  compensation  for services in all capacities to Buyers
United for the prior fiscal years ended  December 31, 2003,  2002,  and 2001, of
those persons who were either (i) the chief  executive  officer  during the last
completed  fiscal  year or (ii) one of the other  four most  highly  compensated
executive  officers as of the end of the last completed fiscal year whose annual
salary  and  bonuses  exceeded  $100,000  (collectively,  the  "Named  Executive
Officers").

                                       23

<PAGE>



                                     Annual       Long Term
                                  Compensation   Compensation
                                  ------------ ----------------
                                                  Securities
                                                  Underlying       All Other
Name and Principal Position  Year  Salary ($)  Options/SARs (#) Compensation ($)
---------------------------  ----  ----------  ---------------- ----------------

Theodore Stern               2003      -0-          36,300           74,750
  Chairman and Chief         2002      -0-          80,000           70,000
  Executive Officer          2001      -0-          40,000           70,000

Paul Jarman                  2003    132,808         -0-             18,463
  President and Director     2002    125,000        11,668           21,481
                             2001    122,710         -0-             57,067

G. Douglas Smith             2003    132,808         -0-             18,463
  Executive Vice President   2002    125,000         7,668           21,252
                             2001    124,405       178,334            -0-

Kenneth D. Krogue            2003    137,698         -0-             18,463
  Executive Vice President   2002    123,538       106,739           22,282
                             2001    109,851        40,000           13,866

Stock Options

     The following table sets forth certain  information  with respect to grants
of stock options during 2003 to the Named Executive Officers.
<TABLE>
<CAPTION>
                                               % of total
                               Number of      Options/SARs
                               Securities      Granted to
                               Underlying     Employees in     Exercise or     Expiration
Name and Principal Position  Options Granted  Fiscal Year   Base Price ($/Sh)     Date
---------------------------  ---------------  ------------  -----------------  ------------
<S>                          <C>              <C>           <C>                <C>
Theodore Stern                     -0-               -               -                  -
 Chairman, Chief
 Executive Officer

Paul Jarman                       12,000           1.8           $2.42           01/15/08
 President and Director           12,500           1.8           $2.40           09/24/08
                                 150,000          21.9           $2.50           11/11/08

G. Douglas Smith                   -0-               -               -                  -
 Executive Vice President

Kenneth D. Krogue                  -0-               -               -                  -
 Executive Vice President
</TABLE>

                                       24

<PAGE>


     The  following  table  sets  forth  certain  information  with  respect  to
unexercised options held by the Named Executive Officers. No outstanding options
held by the Named Executive Officers were exercised in 2003.

                              Number of Securities      Value of Unexercised
                             Underlying Unexercised     In-the-Money Options
                                     Options           At Fiscal Year End ($)
                             at Fiscal Year End (#)              (1)
                                   Exercisable/              Exercisable/
Name and Principal Position       Unexercisable             Unexercisable
---------------------------  ----------------------    ----------------------

Theodore Stern                    172,500 / -0-             $88,200 / -0-
  Chairman, Chief
  Executive Officer

Paul Jarman                     452,966 / 150,000        $152,848 / $82,500
  President and Director

G. Douglas Smith                  624,916 / -0-            $262,218 / -0-
  Executive Vice President

Kenneth D. Krogue                 333,770 / -0-            $199,664 / -0-
  Executive Vice President
---------------------------

(1)  This value is  determined on the basis of the  difference  between the fair
     market  value of the  securities  underlying  the options and the  exercise
     price at December 31, 2003. The fair market value of Buyers United's common
     stock at  December  31, 2003 is  determined  by the last sale price on that
     date, which was $3.05 per share.

Description of Long Term Stock Incentive Plan

     The  purpose  of the Long Term  Stock  Incentive  Plan (the  "Plan")  is to
provide  directors,   officers,   employees,  and  consultants  with  additional
incentives by increasing their ownership interests in Buyers United.  Directors,
officers, and other employees of Buyers United and its subsidiaries are eligible
to  participate  in the Plan. In addition,  awards may be granted to consultants
providing  valuable  services to Buyers United.  As of December 31, 2003, Buyers
United  and  its  affiliates  employed  approximately  190  individuals  who are
eligible to  participate  in the Plan.  The Board grants  awards under the Plan.
Awards may include incentive stock options,  non-qualified stock options,  stock
appreciation  rights,  stock units,  restricted  stock,  restricted stock units,
performance shares, performance units, or cash awards.

     The Board has discretion to determine the terms of an award under the Plan,
including  the type of award,  number of shares or units  covered  by the award,
option price, term, vesting schedule,  and  post-termination  exercise period or
payment. Notwithstanding this discretion: (i) the number of shares subject to an
award  granted to any  individual  in any calendar  year may not exceed  100,000
shares; (ii) the option price per share of common stock may not be less than 100
percent of the fair market value of such share at the time of grant or less than
110% of the fair market value of such shares if the option is an incentive stock
option  granted to a  stockholder  owning more than ten percent of the  combined
voting power of all classes of the stock of Buyers United (a "10% stockholder");
and (iii) the term of any  incentive  stock  option may not exceed 10 years,  or
five years if the option is granted to a 10%  stockholder.  As of  December  31,
2003,  awards in the form of  qualified  incentive  stock  options to purchase a
total of 863,639 shares were outstanding under the Plan.

     A maximum of 1,200,000 shares of common stock may be subject to outstanding
awards,  determined  immediately  after the  grant of any award  under the Plan.
Shares of common  stock,  which are  attributable  to awards that have  expired,
terminated,  or been  canceled  or  forfeited  during  any  calendar  year,  are
available for issuance or use in connection with future awards.

     The Plan was effective  March 11, 1999, and is not limited in duration.  No
incentive  stock  option may be granted  more than 10 years after the  effective
date.  The  Plan  may be  amended  by  the  Board  without  the  consent  of the
stockholders,  except that  stockholder  approval is required for any  amendment
that  materially  increases the aggregate  number of shares of stock that may be

                                       25

<PAGE>

issued under the plan or materially  modifies the requirements as to eligibility
for participation in the Plan.

       ITEM 11. SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table  sets  forth,  as of March 15,  2004,  the number and
percentage  of the  outstanding  shares of common stock and warrants and options
that,  according to the information supplied to Buyers United, were beneficially
owned by (i) each  person  who is  currently  a  director,  (ii) each  executive
officer,  (iii) all current directors and executive officers as a group and (iv)
each person who, to the knowledge of Buyers United,  is the beneficial  owner of
more than five  percent of the  outstanding  common  stock.  Except as otherwise
indicated, the persons named in the table have sole voting and dispositive power
with respect to all shares  beneficially  owned,  subject to community  property
laws where applicable.

                                            Common       Percent
Name and Address                            Shares     of Class (1)
----------------                            ------     ------------
Principal stockholders:
----------------------

I-Link Incorporated                         808,546         6.2
9775 Business Park Avenue
San Diego, CA 92131

Officers and Directors:
----------------------
Theodore Stern (2)                        2,694,435        18.1
2970 One PPG Place
Pittsburgh, PA 15222

Gary Smith (2)(3)                           520,084         4.0
14870 Pony Express Road
Bluffdale, UT 84065

Edward Dallin Bagley (2)                  1,371,954         9.9
2350 Oakhill Drive
Salt Lake City, UT 84121

Steve Barnett (2)                           394,949         3.0
666 Dundee Road, Suite 1704
Northbrook, IL 60062

Paul Jarman (2)                             742,052         5.5
14870 Pony Express Road
Bluffdale, UT 84065

David R. Grow (2)                           150,000         1.2
14870 Pony Express Road
Bluffdale, UT 84065

G. Douglas Smith (2)(3)                     688,768         5.1
14870 Pony Express Road
Bluffdale, UT 84065

Kenneth D. Krogue (2)                       352,226         2.6
14870 Pony Express Road
Bluffdale, UT 84065

All Executive officers and                6,614,468        37.9
  Directors as a Group (8 persons)

                                       26

<PAGE>


(1)  These  figures   represent  the   percentage  of  ownership  of  the  named
     individuals assuming each of them alone has exercised his or her options or
     conversion  rights to purchase common shares,  and percentage  ownership of
     all officers and directors as a group, assuming all purchase and conversion
     rights held by such individuals are exercised.

(2)  These  figures  include:  for Mr.  Stern  Series  A and B  Preferred  Stock
     convertible to 377,500 shares of common stock, warrants to purchase 680,000
     shares of common stock at exercise  prices  ranging from $2.00 to $2.50 per
     share,  options to  purchase  102,500  shares of common  stock at  exercise
     prices ranging from $2.50 to $5.06 per share, and 766,250 common shares for
     which  outstanding  promissory  notes are  convertible  at rates of between
     $2.50 and $2.00;  for Mr. Gary Smith options to purchase  122,500 shares at
     prices ranging from $2.00 to $5.06 per share; for Mr. Bagley Series A and B
     Preferred Stock convertible to 157,500 shares of common stock,  warrants to
     purchase  275,000  shares of common stock at exercise  prices  ranging from
     $2.00 to $2.50 per share, options to purchase 47,500 shares of common stock
     at exercise  prices ranging from $3.05 to $5.06,  and 375,000 common shares
     for which outstanding promissory notes are convertible at the rate of $2.00
     per share;  for Mr. Barnett Series A Preferred Stock  convertible to 20,000
     shares of common stock and options to purchase  130,000  shares at exercise
     prices  ranging from $2.00 to $5.06 per share;  for Mr.  Jarman  options to
     purchase  452,966  shares of common stock at exercise  prices  ranging from
     $2.00 to $5.39 per share;  for Mr. G.  Douglas  Smith  options to  purchase
     624,916  shares of common  stock at exercise  prices  ranging from $2.00 to
     $5.39 per share;  for Mr. Grow options to purchase 150,000 shares of common
     stock at exercise prices ranging from of $2.00 to $3.05; and for Mr. Krogue
     options to  purchase  333,770  shares of common  stock at  exercise  prices
     ranging from $2.00 to $2.70 per share.

(3)  Gary Smith is G. Douglas Smith's father.


           ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The  following  discussion  includes  certain   relationships  and  related
transactions  that occurred  during Buyers  United's fiscal years ended December
31, 2003 and 2002.

Transactions with Theodore Stern

     Beginning in December 2000 and continuing into 2003,  Theodore  Stern,  the
Chairman of the Board of Directors and Chief  Executive  Officer,  made loans to
Buyers United for working  capital  purposes.  All of the loans bear interest at
the  rate  of 12  percent  per  annum  payable  monthly  and are  unsecured.  In
consideration  for many of the loans,  we issued  common  stock to Mr. Stern and
recorded the value of the stock at the market price on the date of issuance. The
following table shows the date and principal  amount of the loans,  the maturity
dates,  the number of shares of common  stock  issued in  consideration  for the
loans, and the value of the common stock:
<TABLE>
<CAPTION>

Date of Loan       Maturity Date    Principal Amount ($)  Number of Shares  Value of Shares ($)
------------       -------------    --------------------  ----------------  -------------------

<S>                <C>              <C>                   <C>               <C>
December 7, 2000   July 5, 2004          100,000              10,000             16,562
January 4, 2001    July 5, 2004          180,000              20,000             22,500
January 19, 2001   July 5, 2004          100,000              10,000             15,625
February 15, 2001  July 5, 2004           10,000               1,000              1,500
March 26, 2001     July 5, 2004          100,000              10,000             10,312
June 5, 2001       July 5, 2004          500,000*             50,000             60,000
June 15, 2001      July 5, 2004          150,000*             15,000             18,750
June 21, 2001      July 5, 2004          100,000*             10,000             12,500
June 26, 2001      July 5, 2004           50,000*              5,000              6,250
July 6, 2001       July 5, 2004          100,000*             10,000             11,000
July 18, 2001      July 5, 2004          150,000*             15,000             12,750
August 30, 2001    July 5, 2004          275,000*             27,500             22,000
September 5, 2001  July 5, 2004          100,000*             10,000              8,500
September 19, 2001 July 5, 2004          100,000*             10,000              6,800
October 15, 2001   July 5, 2004           50,000*             10,000              6,100
December 12, 2001  July 5, 2004          100,000*             10,000              6,400

                                       27

<PAGE>

January 18, 2002   July 5, 2004          100,000*             10,000             10,000
December 20, 2002  December 20, 2004     112,500**               -0-                -0-
February 28, 2003  July 1, 2004          100,000***              -0-                -0-
July 5, 2003       July 5, 2005           86,563***              -0-                -0-
July 5, 2003       July 5, 2005          348,825                 -0-                -0-
---------------------------
</TABLE>

*     Indicates the note is convertible into common stock at a rate of $2.50
**    Indicates the note is convertible into common stock at a rate of $2.00
***   This note was repaid in 2003

     In October 2000, the Board approved a consulting  agreement with Mr. Stern.
Pursuant to this  contractual  arrangement  Mr. Stern  receives a monthly fee of
$6,250 and expense  allowance of $500 in connection with duties performed as our
Chief Executive Officer.  He earned,  respectively,  $74,750 and $70,000 in 2003
and 2002 under this  arrangement,  and $6,250 remained unpaid as of December 31,
2003.

     In  November  2001,  we  agreed  to issue  50,000  shares  to Mr.  Stern in
consideration  of  extending  the  maturity  date of the June 5,  2001  $500,000
promissory  note to July 5,  2003.  The  value of the  shares  was  recorded  at
$31,500.  On December 4, 2001, we agreed to issue 156,500 shares to Mr. Stern in
consideration  of extending the maturity date of the remaining  $1,565,000  then
owing in notes payable listed above to July 5, 2003. The value of the shares was
recorded at  $93,900.  All these  notes were later  extended  further to July 5,
2004, but no additional compensation was paid to Mr. Stern.

     In September  2001,  Buyers  United  issued  25,000  shares to Mr. Stern in
consideration  for Mr.  Stern's  personal  guaranty of Buyers  United's  payment
obligations under a new contract with Global Crossing Communications, Inc., that
provides  telecommunication services to us for resale. The shares were valued at
$17,500 based on the then current market price.

     In February 2002, Mr. Stern gave his personal guaranty of up to $250,000 of
obligations  arising  under our  resale  contract  with MCI  WorldCom,  Inc.  In
consideration  for providing the guaranty,  we issued 25,000 shares to Mr. Stern
valued at $30,750 based on the then current market price.

     In December 2002, Mr. Stern participated in providing funding for a deposit
in connection with acquiring customers from Touch America, Inc. The total amount
raised was $3,187,500, of which total Mr. Stern contributed $137,500 under terms
identical to the other  unaffiliated  investors.  All the  unsecured  promissory
notes bear interest at 10 percent, payable monthly.  Principal payments are also
due monthly,  based on 10 percent of the net billings  collected  from the Touch
America  customers  during  the prior  calendar  month,  and the  notes  have no
maturity  date. As of December 31, 2003, we had repaid  $84,854 of the principal
on this note.

     On January 15, 2003, Mr. Stern gave his personal guaranty of up to $250,000
of obligations arising under a resale contract with Williams Communications.  In
consideration  for providing the guaranty,  we issued 15,000 shares to Mr. Stern
valued at $36,300 based on the then current market price.

Transactions with other related parties

     In October 2000, the Board approved a two-year consulting  arrangement with
Gary  Smith,  a member of the Board.  No fees were  actually  paid to Mr.  Smith
during 2000,  and up through  October 2002,  Mr. Smith was paid $110,000 in fees
under his consulting arrangement.

     On January 15, 2002, Paul Jarman,  G. Douglas Smith,  and Kenneth D. Krogue
made unsecured loans to Buyers United in the total principal  amount of $79,998,
due July 15, 2003 and bearing  interest at the rate of 12 percent per annum.  In
consideration  for making the loans,  Buyers  United  agreed to issue a total of
7,998 shares to these individuals  valued at $8,798 based on the market price on
the date of issuance. These loans were repaid in July 2003.

     At the end of 2002 and during the first part of 2003,  Edward Dallin Bagley
made two-year unsecured loans to Buyers United aggregating  $750,000.  The notes
bear interest at 12 percent payable  monthly,  and are convertible  into 375,000
shares of common stock (conversion rate of $2.00 per share).

                                       28

<PAGE>


     In February 2003,  Buyers United issued a 12 percent  unsecured  promissory
note to Steve  Barnett in exchange  for a loan of  $50,000.  Interest is payable
monthly and the loan matures on July 1, 2004.

                  ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

Exhibits

     Copies of the  following  documents  are  included as exhibits to this Form
10-KSB pursuant to Item 601 of Regulation S-B.

 Exhibit
   No.         Title of Document
 -------       -----------------

   3.1         Certificate of Incorporation, as amended

   3.2         Certificate of Designation of Preferred Stock (1)

   3.3         By-Laws (1)

   3.4         Series B Preferred Stock Designation (2)

   10.1        Form of Warrant issued to lenders (2)

   10.2        Form of Warrant issued as part of units with Series B
                 Preferred Stock (2)

   10.3        Form of option for employees and directors (3)

   10.4        Long-Term Stock Incentive Plan (1)

   10.5        Asset Purchase Agreement dated December 6, 2002, with I-Link
                 Communications, Inc. and I-Link Incorporated, without
                 exhibits (4)

   10.6        Reconciliation Agreement dated March 9, 2004 with Acceris
                 Communications and I-Link Communications (7)

   10.7        Asset Purchase Agreement dated December 20, 2002 with Touch
                 America, Inc., without exhibits (4)

   10.8        Amendment No. 1 to the Asset Purchase Agreement dated December
                 20, 2002 that was made June 6, 2003 by Buyers United and Touch
                 America (5)

   10.9        Form of note agreement issued April to August 2002 to
                 Noteholders (4)

  10.10        Form of warrant agreement issued to certain noteholders (4)

  10.11        Form of note agreement issued on December 20, 2002 to the
                 noteholders who provided financing for the Touch America
                 deposit, including as exhibits the form of note and warrant
                 issued (4)

  10.12        Cooperation and Management Agreement between Buyers United and
               MyACD, Inc., dated October 1, 2003, excludidng:
                   Schedule I - Buyers United Existing Customers;
                   Schedule II - MyACD Customers;
                   Schedule III - Enhanced Services Marketing Budget;
                   Schedule IV - Monthly Budget Payments; and
                   Schedule V - Revised Wholesale Services Agreement Pricing (6)

                                       29

<PAGE>

  10.13        Purchase Option Agreement between Buyers United, Michael L.
               Shelton and David O. Peterson dated October 1, 2003, excluding:
                   Exhibit A - Form of Term Note;
                   Exhibit B - Form of Security and Pledge Agreement;
                   Exhibit C - Form of Term Note;
                   Exhibit D - Form of Security and Pledge Agreement;
                   Exhibit E - Form of Employment Agreement;
                   Exhibit F - Form of Stock Option Grant; and
                   Exhibit G - Form of Employment Agreement (6)

  10.14        Form of Securities Purchase Agreement dated March 10, 2004 (7)

  10.15        Form of registration Rights Agreement dated March 10, 2004 (7)

   14.1        Code of Ethics

   21.1        List of Subsidiaries

   31.1        Certification  of  the  Chief  Executive   Officer  pursuant  to
               Section 302 of the Sarbanes-Oxley Act of 2002

   31.2        Certification  of  the  Chief  Financial   Officer  pursuant  to
               Section 302 of the Sarbanes-Oxley Act of 2002

   32.1        Certifications   of  the  Chief  Executive   Officer  and  Chief
               Financial Officer pursuant to Section 906 of the  Sarbanes-Oxley
               Act of 2002

(1)  These  documents  were filed as exhibits to the  Registration  Statement on
     Form  10-SB  filed by  Buyers  United  with  the  Securities  and  Exchange
     Commission  on  August  3,  1999,  and  are  incorporated  herein  by  this
     reference.

(2)  These  documents were filed as exhibits to the annual report on Form 10-KSB
     for 2000 filed by Buyers United with the Securities and Exchange Commission
     on April 10, 2001, and are incorporated herein by this reference.

(3)  This  document was filed as an exhibit to the annual  report on Form 10-KSB
     for 2001 filed by Buyers United with the Securities and Exchange Commission
     on April 16, 2002, and is incorporated herein by this reference.

(4)  These  documents were filed as exhibits to the annual report on Form 10-KSB
     for 2002 filed by Buyers United with the Securities and Exchange Commission
     on April 14, 2003, and are incorporated herein by this reference.

(5)  This  document  was filed as an  exhibit  to the  quarterly  report on Form
     10-QSB for June 30,  2003 filed by Buyers  United with the  Securities  and
     Exchange  Commission on August 14, 2003, and is incorporated herein by this
     reference.

(6)  These  documents  were filed as  exhibits to the  quarterly  report on Form
     10-QSB for September  30, 2003 filed by Buyers  United with the  Securities
     and Exchange  Commission on November 14, 2003, and are incorporated  herein
     by this reference.

(7)  These  documents  were filed as exhibits to the current  report on Form 8-K
     filed by Buyers United with the Securities and Exchange Commission on March
     17, 2004, and are incorporated herein by this reference.

Form 8-K Filings

There were no filings on Form 8-K during the three  months  ended  December  31,
2003.

                                       30

<PAGE>


               ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The aggregate fees and expenses  billed by our principal  accounting  firm,
Crowe Chizek and Company LLC for fees and expenses billed for fiscal years ended
December 31, 2003 and 2002 are as follows:

                                       2003                      2002
                                    --------                   --------

Audit fees                          $ 77,890                   $ 99,361
Audit related fees                    69,585                     22,765
                                    --------                   --------
      Total audit and related fees   147,475                    122,126

Tax fees                              53,700                     24,800
                                    --------                   --------
      Total fees                    $201,175                   $146,926
                                    ========                   ========

     Audit  related fees were for reviews of our filings on Form 10-QSB for 2003
and 2002, meetings with the Audit Committee,  and work required by our filing of
a registration  statement on Form SB-2 for selling security holders in September
2003.

     Each of the permitted non-audit services has been pre-approved by the Audit
Committee or the Audit Committee's  Chairman pursuant to delegated  authority by
the Audit  Committee,  other than de minimus  non-audit  services  for which the
pre-approval   requirements   are  waived  in  accordance  with  the  rules  and
regulations of the Securities and Exchange Commission.

     The  Audit  Committee  charter  provides  that  the  Audit  Committee  will
pre-approve  audit  services  and  non-audit  services  to be  provided  by  our
independent  auditors before the accountant is engaged to render these services.
The Audit Committee may consult with management in the decision-making  process,
but may not delegate  this  authority to  management.  The Audit  Committee  may
delegate its authority to pre-approve services to one or more committee members,
provided that the designees  present the  pre-approvals to the full committee at
the next committee meeting.

                                       31

<PAGE>


                                   SIGNATURES

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


                                 BUYERS UNITED, INC.

Date:  March 29, 2004            By: /s/ Theodore Stern, Chief Executive Officer
                                     -------------------------------------------




Date:  March 29, 2004            By: /s/ David R. Grow, Chief Financial Officer
                                     -------------------------------------------


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


Date:  March 29, 2004                    /s/ Theodore Stern, Director
                                         ----------------------------


Date:  March 29, 2004                    /s/ Steve Barnett, Director
                                         ---------------------------


Date:  March 29, 2004                    /s/ Gary Smith, Director
                                         ------------------------


Date:  March 29, 2004                    /s/ Edward Dallin Bagley, Director
                                         ----------------------------------


Date:  March 29, 2004                    /s/ Paul Jarman, Director
                                         -------------------------




                                       32

<PAGE>


                       BUYERS UNITED, INC. AND SUBSIDIARY

                        Consolidated Financial Statements

                                TABLE OF CONTENTS


Report of Independent Auditors ......................................... F - 2

Consolidated Balance Sheet.............................................. F - 3

Consolidated Statements of Operations .................................. F - 4

Consolidated Statements of Stockholders' Deficit ....................... F - 5

Consolidated Statements of Cash Flows .................................. F - 7

Notes to Consolidated Financial Statements ............................. F - 9




                                      F-1

<PAGE>



                         REPORT OF INDEPENDENT AUDITORS



Board of Directors and Shareholders
Buyers United, Inc. and Subsidiary
Salt Lake City, Utah


We have audited the  accompanying  consolidated  balance sheet of Buyers United,
Inc.  and  Subsidiary  as of  December  31,  2003 and the  related  consolidated
statements of operations,  stockholders' deficit, and cash flows for each of the
two years in the period ended December 31, 2003. These financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with 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 Buyers United, Inc.
and  Subsidiary as of December 31, 2003 and the results of their  operations and
their cash flows for each of the two years in the period ended December 31, 2003
in conformity with accounting principles generally accepted in the United States
of America.




                                          Crowe Chizek and Company LLC

Oak Brook, Illinois
March 11, 2004, except for Note 14
  as to which the date is March 15, 2004


                                      F-2

<PAGE>


                               BUYERS UNITED, INC.

                           CONSOLIDATED BALANCE SHEET

                                December 31, 2003
<TABLE>
<CAPTION>

                            ASSETS
Current assets:
<S>                                                                      <C>
      Cash and cash equivalents                                          $  3,055,384
      Restricted cash                                                       1,569,336
      Accounts receivable, net of allowance for uncollectible
        accounts of $2,931,000                                              8,162,483
      Other current assets                                                    243,844
                                                                         ------------
            Total current assets                                           13,031,047

Property and equipment, net                                                 2,424,642
Intangible assets, net                                                      8,018,682
Other assets                                                                  496,787
                                                                         ------------

            Total assets                                                 $ 23,971,158
                                                                         ============

            LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
      Line of credit                                                     $  4,093,782
      Current portion of long-term debt and capital lease obligations       7,781,484
      Accounts payable                                                     11,248,152
      Accrued liabilities                                                   1,828,864
                                                                         ------------
            Total current liabilities                                      24,952,282

Long-term debt and capital lease obligations                                  646,126
                                                                         ------------

            Total liabilities                                              25,598,408

Stockholders' deficit:
      Preferred stock, $0.0001 par value, 15,000,000 shares authorized;
        Series A 8% cumulative convertible preferred stock; 1,865,000
           shares issued and outstanding (liquidation value of $3,730,000)        187
        Series B 8% cumulative convertible preferred stock; 721,729
           shares issued and outstanding (liquidation value of $7,217,290)         72
      Common stock, $0.0001 par value; 100,000,000 shares authorized;
           7,604,584 shares issued and outstanding                                760
      Additional paid-in capital                                           20,193,148
      Warrants and options outstanding                                      3,928,110
      Accumulated deficit                                                 (25,749,527)
                                                                         ------------
            Total stockholders' deficit                                    (1,627,250)
                                                                         ------------

            Total liabilities and stockholders' deficit                  $ 23,971,158
                                                                         ============
</TABLE>

                             See accompanying notes

                                      F-3

<PAGE>



                               BUYERS UNITED, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS



                                                     Year Ended December 31,
                                                    --------------------------
                                                        2003          2002

Revenues                                            $ 63,312,964  $ 30,163,450

Operating expenses:
      Costs of revenues                               34,597,486    16,295,201
      General and administrative                      14,830,565     7,365,569
      Selling and promotion                           10,839,529     4,646,029
                                                    --------------------------
            Total operating expenses                  60,267,580    28,306,799
                                                    --------------------------

            Income from operations                     3,045,384     1,856,651

Other income (expense):
      Interest income                                     13,513        17,980
      Interest expense                                (1,884,258)   (1,544,448)
                                                    --------------------------
            Total other expense, net                  (1,870,745)   (1,526,468)
                                                    --------------------------

            Net income                              $  1,174,639  $    330,183

8% Preferred dividends on Series A and B preferred
 stock                                                  (873,495)     (749,725)
                                                    --------------------------

            Net income (loss) applicable to common
             stockholders                           $    301,144  $   (419,542)
                                                    ==========================



Net income (loss) per common share:
            Basic                                   $       0.05  $      (0.07)
            Diluted                                         0.04         (0.07)



Weighted average common shares outstanding:
            Basic                                      6,378,047     5,740,811
            Diluted                                    6,847,646     5,740,811




                             See accompanying notes

                                      F-4

<PAGE>



                          BUYERS UNITED, INC. AND SUBSIDIARY

                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>

                                                                              Preferred Stock     Common Stock     Additional
                                                                             -----------------  -----------------   Paid-in
                                                                              Shares    Amount    Shares   Amount   Capital
                                                                             ---------  ------  ---------  ------  -----------

<S>                                                                          <C>        <C>     <C>        <C>     <C>
Balance at December 31, 2001                                                 2,433,800  $  244  5,312,629  $  531  $15,190,855

      Conversion of preferred shares to common                                 (15,000)     (2)    55,000       6           (4)
      Issuance of common shares in connection with notes payable                    -       -      17,998       2       18,796
      Issuance of warrants for services and with consulting agreements              -       -          -       -            -
      Amortization of deferred consulting fees                                      -       -          -       -            -
      Issuance of warrants with notes payable                                       -       -          -       -            -
      Issuance of common stock for debt guarantee                                   -       -      25,000       3       30,747
      Imputed interest on notes payable                                             -       -          -       -        28,686
      Cancellation of warrants issued for services                                  -       -          -       -            -
      Preferred stock dividends                                                     -       -          -       -            -
      Issuance of common shares as payment of preferred stock dividends             -       -     574,635      57      750,296
      Net income                                                                    -       -          -       -            -
                                                                             ---------  ------  ---------  ------  -----------

Balance at December 31, 2002                                                 2,418,800     242  5,985,262     599   16,019,376


      Conversion of preferred shares to common                                (116,000)    (11)   580,000      58          (47)
      Issuance of preferred stock in connection with the I-Link acquisition    283,929      28         -       -     1,613,855
      Exercise warrants to purchase Common Stock, net of issuance costs             -       -     522,500      52    1,395,020
      Exercise employee options to purchase Common Stock                            -       -      27,500       3       54,997
      Issuance of common shares in connection with notes repayment                  -       -      50,000       5           (5)
      Repurchase shares from stockholders                                           -       -      (2,774)     -        (4,851)
      Amortization of deferred consulting fees                                      -       -          -       -            -
      Issuance of warrants for services                                             -       -          -       -            -
      Issuance of common stock for debt guarantee                                   -       -      15,000       1       36,298
      Imputed interest on notes payable                                             -       -          -       -         5,312
      Cancellation of warrants issued for services                                  -       -          -       -       304,690
      Preferred stock dividends                                                     -       -          -       -            -
      Issuance of common shares as payment of preferred stock dividends             -       -     427,096      42      768,503
      Net income                                                                    -       -          -       -            -
                                                                             ---------  ------  ---------  ------  -----------

 Balance at December 31, 2003                                                2,586,729  $  259  7,604,584  $  760  $20,193,148
                                                                             =========  ======  =========  ======  ===========
</TABLE>

                                   -continued-

                                      F-5

<PAGE>



                          BUYERS UNITED, INC. AND SUBSIDIARY

                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
                                                                           Warrants/   Deferred
                                                                            Options   Consulting  Accumulated
                                                                          Outstanding    Fees       Deficit       Total
                                                                           ----------  --------  ------------  -----------

<S>                                                                        <C>         <C>       <C>           <C>
Balance at December 31, 2001                                               $4,383,334  $(98,406) $(25,631,129) $(6,154,571)

      Conversion of preferred shares to common                                     -         -             -            -
      Issuance of common shares in connection with notes payable                   -         -             -        18,798
      Issuance of warrants for services and with consulting agreements        102,118        -             -       102,118
      Amortization of deferred consulting fees                                     -     73,232            -        73,232
      Issuance of warrants with notes payable                                 232,259        -             -       232,259
      Issuance of common stock for debt guarantee                                  -         -             -        30,750
      Imputed interest on notes payable                                            -         -             -        28,686
      Cancellation of warrants issued for services                           (125,197)       -             -      (125,197)
      Preferred stock dividends                                                    -         -       (749,725)    (749,725)
      Issuance of common shares as payment of preferred stock dividends            -         -             -       750,353
      Net income                                                                   -         -        330,183      330,183
                                                                           ----------  --------  ------------  -----------

Balance at December 31, 2002                                                4,592,514   (25,174)  (26,050,671)  (5,463,114)


      Conversion of preferred shares to common                                     -         -             -            -
      Issuance of preferred stock in connection with the I-Link acquisition        -         -             -     1,613,883
      Exercise warrants to purchase Common Stock, net of issuance costs      (385,055)       -             -     1,010,017
      Exercise employee options to purchase Common Stock                           -         -             -        55,000
      Issuance of common shares in connection with notes repayment                 -         -             -            -
      Repurchase shares from stockholders                                          -         -             -        (4,851)
      Amortization of deferred consulting fees                                     -     25,174            -        25,174
      Issuance of warrants for services                                        25,341        -             -        25,341
      Issuance of common stock for debt guarantee                                  -         -             -        36,299
      Imputed interest on notes payable                                            -         -             -         5,312
      Cancellation of warrants issued for services                           (304,690)       -             -            -
      Preferred stock dividends                                                    -         -       (873,495)    (873,495)
      Issuance of common shares as payment of preferred stock dividends            -         -             -       768,545
      Net income                                                                   -         -      1,174,639    1,174,639
                                                                           ----------  --------  ------------  -----------

Balance at December 31, 2003                                               $3,928,110  $     -   $(25,749,527) $(1,627,250)
                                                                           ==========  ========  ============  ===========
</TABLE>



                             See accompanying notes

                                      F-6

<PAGE>



                               BUYERS UNITED, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                               Year Ended December 31,
                                                                              -------------------------
                                                                                  2003         2002
                                                                              ------------ ------------
<S>                                                                           <C>          <C>
Cash flows from operating activities:
      Net income                                                              $ 1,174,639  $   330,183
      Adjustments to reconcile net income to netcash used in
        operating activities:
            Depreciation and amortization                                       3,863,516    1,191,196
            Amortization included in interest expense resulting from
              issuing stock with notes                                              5,312       28,686
            Amortization of discount on notes payable                             414,301      237,444
            Amortization of note financing costs                                  115,182      174,977
            Amortization of deferred consulting fees                               25,174       73,232
            Expense related to the grant of options to purchase common shares          -       (23,079)
            Changes in operating assets and liabilities:
                  Accounts receivable                                          (2,512,269)  (3,378,341)
                  Other assets                                                   (697,427)  (2,379,009)
                  Checks in excess of available cash balances                          -      (186,866)
                  Accounts payable                                              4,711,897    1,821,236
                  Accrued liabilities                                             278,315      432,183
                                                                              ------------ ------------

                        Net cash provided by (used in) operating activities     7,378,640   (1,678,158)
                                                                              ------------ ------------

Cash flows from investing activities:
      Increase in other assets                                                   (167,360)    (194,915)
      Purchases of property and equipment                                      (1,574,986)    (317,399)
      Purchase of customer accounts                                                    -    (3,000,000)
                                                                              ------------ ------------

                        Net cash used in investing activities                  (1,742,346)  (3,512,314)
                                                                              ------------ ------------

Cash flows from financing activities:
      Restricted cash                                                            (985,334)     106,310
      Net borrowings and payments under line of credit                          2,817,530      702,080
      Borrowings under notes payable, net of debt issuance costs                2,299,955    7,818,850
      Principal payments on notes payable and other long-term obligations      (8,767,587)  (2,499,508)
      Exercise of warrants and employee options, net of offering costs          1,065,018           -
      Repurchase of shares from stockholders with less than 100 shares             (4,852)          -
                                                                              ------------ ------------

                        Net cash provided by (used in) financing activities    (3,575,270)   6,127,732
                                                                              ------------ ------------


Net increase in cash and cash equivalents                                       2,061,024      937,260
Cash at the beginning of the period                                               994,360       57,100
                                                                              ------------ ------------

Cash at the end of the period                                                 $ 3,055,384  $   994,360
                                                                              ============ ============
</TABLE>


                             See accompanying notes

                                      F-7

<PAGE>



                               BUYERS UNITED, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
                                                                        ----------------------
                                                                           2003         2002
                                                                        ----------  ----------

<S>                                                                     <C>         <C>
Supplemental cash flow information:
      Cash paid for interest                                            $1,208,543  $  890,490


Supplemental schedule of noncash investing and financing activities:
      Issuance of common shares in payment of preferred stock dividend  $  768,574  $  750,353
      Issuance of common shares in payment of deferred financing costs           -      18,793
      Issuance of common shares for officer's personal guaranty             36,300      30,750
      Issuance of warrants with promissory notes                                 -     232,259
      Accrual of dividend payable on preferred stock                       873,495     749,725
      Retire and replace note payable                                      800,000          -
      Acquire customers from Touch America                               3,411,421          -
      Acquire customers from Glyphics, Inc.                                543,558          -
      Issuance of preferred stock to acquire VoIP Network assets         1,705,236          -
      Convert accrued interest to note payable                             435,388          -
      Capital expenditures financed with capital lease obligation          100,691          -
</TABLE>



















                             See accompanying notes

                                      F-8

<PAGE>


NOTE 1 -  DESCRIPTION  OF THE  COMPANY  AND  SUMMARY OF  SIGNIFICANT  ACCOUNTING
POLICIES

Organization

Buyers United,  Inc. ("the Company") was  incorporated on August 23, 1994 in the
state of Utah and was  reincorporated in the state of Delaware on April 9, 1999.
During 2003, the Company established a wholly-owned  subsidiary in  Virginia for
the purpose of conducting business in that state.

Buyers United is an aggregator and provider of telecommunications  services. The
Company contracts with a number of third party providers for the right to resell
the various  telecommunication  services and  products  they  provide,  and then
offers all of these various services to its customers. The Company also operates
a dedicated  VoIP Network,  and advanced  customer  contact  handling/management
software  applications  that enable it to offer enhanced  services to customers.
The variety of services and products the Company  offers  allows the customer to
buy only those  telecommunications  services it needs from one  source,  combine
those services in a customized package, receive one bill for those services, and
make one call to Buyers United if a service problem or billing issue arises.

Summary of Significant Accounting Policies

Principles of Consolidation:  The accompanying consolidated financial statements
include the accounts of Buyers United, Inc. and its wholly-owned subsidiary. All
significant  intercompany  accounts and  transactions  have been eliminated upon
consolidation.

Use of Estimates in the Preparation of Financial Statements:  The preparation of
financial statements in conformity with accounting principles generally accepted
in the United  States of  America  requires  management  to make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from these estimates.  Significant
estimates  include the allowance for doubtful  accounts and attrition rates used
to determine the estimated useful lives of customer lists acquired.

Revenue  Recognition:  The Company's revenue  recognition policy with respect to
reseller  agreements is to record gross revenues and receivables  from customers
when the  Company  acts as  principal  in the  transaction;  takes  title to the
products or services;  and has risks and rewards of  ownership,  such as risk of
loss for collection,  delivery, or returns.  Revenues from sales of services are
recognized upon providing the services to the customers.

Cash and cash equivalents: All highly liquid assets with an original maturity of
three months or less are considered to be cash equivalents.

Restricted  Cash: In accordance  with the Company's  agreements with RFC Capital
Corp. (Note 5) and with certain vendors, the Company maintains a restricted cash
account for the  collection  of the  Company's  receivables.  As of December 31,
2003, the Company had $1.6 million of cash that was restricted.

Accounts Receivable and Allowance for Doubtful Accounts:  Accounts receivable is
comprised of amounts  billed and billable to customers,  net of an allowance for
uncollectible  amounts.  The  accounts  receivable  balance  outstanding  as  of
December 31, 2003 is comprised of the following:

            Billed amounts                              $ 9,863,111
            Unbilled amounts                              1,230,372
                                                         ----------
                                                         11,093,483
            Less: allowance for uncollectible accounts   (2,931,000)
                                                         ----------

                                                        $ 8,162,483

Finance  charges are assessed to accounts once the amount owed is past due based
on their  specific  terms.  The allowance for doubtful  accounts is estimated by
management and is based on specific  information about customer  accounts,  past
loss experience,  and general economic conditions.  An account is written off by
management when deemed uncollectible, although collections efforts may continue.

                                      F-9

<PAGE>


Property  and  Equipment:  Property  and  equipment  are  stated at cost.  Major
additions and improvements are capitalized,  while minor repairs and maintenance
costs are expensed when incurred. In accordance with Statement of Position 98-1,
"Accounting  for the  Costs of  Computer  Software  Developed  or  Obtained  for
Internal  Use,"  the  Company   capitalizes   certain  costs  incurred  for  the
development of internal use software.  These costs include the costs  associated
with coding, software configuration,  upgrades, and enhancements.  Of such costs
the Company  capitalized  approximately  $118,000 and  $127,000  during 2003 and
2002, respectively.

Depreciation and amortization are computed using the  straight-line  method over
the estimated useful lives of the related assets as follows:

Computer and office equipment                 2 to 3 years
Internal-use software                            2 years
Furniture and fixtures                        3 to 7 years

Advertising  Costs:  The Company  advertises  its services  through  traditional
venues such as print media to the general  public.  Costs  associated with these
advertising  efforts are expensed as incurred,  and were $27,438 and $29,781 for
the years ended December 31, 2003 and 2002, respectively.

Fair Value of  Financial  Instruments:  The  carrying  amounts  reported  in the
accompanying  consolidated  balance  sheet for cash,  receivables,  and accounts
payable   approximate  fair  values  because  of  the  immediate  or  short-term
maturities of these financial instruments. The fair value of the Company's notes
payable and preferred stock also  approximate  fair value based on current rates
for similar debt and fixed-rate instruments.

Debt Issuance Costs: As an inducement to various  investors,  shareholders,  and
board members to lend monies to the Company, shares of common stock and warrants
to purchase shares of common stock were issued to them. The fair market value of
those shares at the date of issuance has been capitalized as debt issuance costs
and is being  amortized over the life of the loans.  Amortization of these costs
for the years  ended  December  31,  2003 and 2002 was  $414,298  and  $237,446,
respectively, and are included in interest expense.

Stock-Based Compensation:  Employee compensation expense via stock option grants
is reported  using the  intrinsic  method.  No stock  option-based  compensation
expense is included in net income (loss) as all options  granted had an exercise
price equal to or greater than the market price of the  underlying  common stock
at the date of grant.  The following table  illustrates the effect on net income
(loss) and  earnings  (loss) per share if expense  was  measured  using the fair
value  recognition  provisions  of SFAS No.  123,  "Accounting  for  Stock-Based
Compensation":



                                                           2003         2002
                                                        ---------   -----------
  Net income (loss) applicable to common stockholders:
  ---------------------------------------------------
         As reported                                    $ 301,144   $  (419,542)
         Pro forma stock option-based compensation       (307,747)     (748,857)
                                                        ---------   -----------
         Pro forma net loss applicable
           to common stockholders                       $  (6,603)  $(1,168,399)
                                                        =========   ===========

  Net income (loss) per common share:
  ----------------------------------
         As reported:
           Basic                                        $    0.05   $     (0.07)
           Diluted                                           0.04         (0.07)

         Pro forma
           Basic                                        $      -    $     (0.20)
           Diluted                                             -          (0.20)

The fair value of the options  granted during 2003 and 2002 was estimated at the
date of grant using the following weighted average assumptions:

                                      F-10

<PAGE>


                                                          2003         2002
                                                          ----         ----

            Risk-free interest rate                       2.89%        3.71%
            Dividend yield                                  -            -
            Expected volatility                            75%          104%
            Weighted average expected life              4.8 years     4.7 years

The  weighted  average  fair  values of options  granted  during the years ended
December  31,  2003 and 2002 was $1.42 and  $1.01,  respectively.  The pro forma
effects  of  applying  SFAS  No.  123  are not  indicative  of  future  amounts.
Additional awards in future years are anticipated.

Income  Taxes:  The Company  recognizes  a liability  or asset for the  deferred
income tax  consequences of all temporary  differences  between the tax bases of
assets and  liabilities and their reported  amounts in the financial  statements
that will  result in taxable  or  deductible  amounts  in future  years when the
reported  amounts of the assets and liabilities are recovered or settled.  These
deferred  income tax assets or  liabilities  are measured  using the enacted tax
rates that will be in effect  when the  differences  are  expected  to  reverse.
Recognition  of  deferred  tax  assets  is  limited  to  amounts  considered  by
management to be more likely than not of realization in future periods.

Net Income  (Loss) Per Common  Share : Basic net income  (loss) per common share
("Basic  EPS")  excludes  dilution and is computed by dividing net income (loss)
applicable  to common  shareholders  by the  weighted  average  number of common
shares  outstanding  during the year. Diluted net income (loss) per common share
("Diluted  EPS")  reflects  the  potential  dilution  that could  occur if stock
options or other  common stock  equivalents  were  exercised  or converted  into
common  stock.  The  computation  of  Diluted  EPS does not assume  exercise  or
conversion of securities that would have an antidilutive  effect on net loss per
common share.

As of December 31, 2003,  outstanding options of employees and directors,  along
with warrants held by investors which together  aggregated 469,599 in accordance
with  the  Treasury  Stock  method  were  included  in the  computation  of EPS.
5,457,760 shares of common stock issuable upon the conversion of preferred stock
were  excluded  from  the  computation  of  diluted  EPS  as  their  effect  was
antidilutive.

As of December  31, 2002,  outstanding  options of  employees  and  directors to
purchase  3,592,721  shares of common  stock;  4,634,000  shares of common stock
issuable upon the conversion of preferred  stock; and 5,529,282 shares of common
stock  issuable  upon  exercise of warrants  to purchase  common  stock were not
included in the computation of Diluted EPS because they would be antidilutive.

Recent Accounting Pronouncements:

In April 2002,  the FASB issued SFAS No. 145,  "Rescission  of FASB Statement 4,
44, and 64,  Amendment of FASB Statements 13, and Technical  Corrections."  SFAS
No.  145  rescinds  the  provisions  of SFAS No. 4 that  requires  companies  to
classify  certain gains and losses from debt  extinguishments  as  extraordinary
items and amends the  provisions  of SFAS No. 13 to require that  certain  lease
modifications be treated as sale/leaseback transactions.  The provisions of SFAS
No. 145 related to  classification  of debt  extinguishments  are  effective for
fiscal  years  beginning  after May 15,  2002.  Commencing  January  1, 2003 the
Company will classify debt extinguishments  costs within income from operations.
The provisions of SFAS No. 145 related to lease  modifications are effective for
transactions  occurring  after May 15, 2002.  The adoption of this  statement on
January  2,  2003 did not have a  material  impact  on the  Company's  financial
position or results of operations.

In  December  2002 the FASB  issued  SFAS No. 148  "Accounting  for Stock  Based
Compensation - Transition and  Disclosure."  This statement amends SFAS No. 123,
"Accounting  for Stock-Based  Compensation"  to provide  alternative  methods of
transition  for a voluntary  change to the fair value based method of accounting
for  stock-based  employee   compensation.   This  amendment  also  changes  the
disclosure requirements of SFAS No. 123 to require more prominent disclosures in
both annual and interim financial statements about the methods of accounting for
stock-based employee compensation and the effects of the method used on reported
amounts.  SFAS No. 148 is effective  for fiscal years ending after  December 15,
2002.  The Company has opted to continue  accounting for stock options under the
intrinsic  value  method  prescribed  in APB  Opinion No. 25 for the years ended
December  31, 2003 and 2002.  In  addition,  the Company has  complied  with the
prominent disclosure requirements of SFAS No. 148.

                                      F-11

<PAGE>

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 No. 150 modifies the accounting for certain  financial  instruments
that, under previous guidance, issuers could account for as equity. SFAS No. 150
requires that those  instruments be classified as  liabilities.  SFAS No. 150 is
effective for financial instruments entered into or modified after May 31, 2003,
and  otherwise is effective at the  beginning of the first  interim  period that
began after June 15, 2003. It is to be  implemented  by reporting the cumulative
effect of a change in an accounting principle for financial  instruments created
before the issuance date of SFAS No. 150 and still  existing at the beginning of
the interim  period of adoption.  Restatement  is not  permitted.  The Company's
adoption of this Statement on July 1, 2003 did not have a material impact on its
consolidated results of operations or financial position.


NOTE 2 - ACQUISITIONS

In October 2003,  Buyers United  acquired the exclusive right to sell and manage
the enhanced  telecommunications  functions  of MyACD,  Inc.  ("MyACD"),  with a
one-year option to purchase it at a predetermined  price. During the term of the
agreement, Buyers United has the sole right to manage sales, service and billing
of MyACD services.  Under the agreement MyACD will continue to provide  enhanced
service development and configuration and Buyers United will reimburse MyACD for
actual costs related to these activities.

During August 2003, Buyers United purchased  approximately  12,000 long distance
customers from Glyphics Communications, Inc. for $543,558.

On December  20,  2002,  Buyers  United  entered  into an  agreement  with Touch
America,  Inc., a subsidiary  of Touch  America  Holdings,  Inc.,  to purchase a
substantial number of its switched voice telecommunication customers,  including
the carrier  identification code used to service those customers.  In June 2003,
the Company amended the purchase agreement to acquire additional  switched voice
and dedicated telecommunications customers and correct discrepancies in the list
of  customers  originally  purchased  in December  2002.  Buyers  United did not
purchase any accounts receivable,  equipment,  or other assets of Touch America.
The total purchase price was $6.5 million. Buyers United made an initial payment
of $3 million to Touch  America in December  2002 and has made  additional  cash
payments  totaling $3.4 million through March 4, 2004. The balance of $93,988 is
expected to be paid in April 2004.

On December 6, 2002, Buyers United entered into the Asset Purchase Agreement and
Software  License  Agreement  to  purchase  assets  of  I-Link,  Inc.,  and  its
subsidiary,  I-Link  Communications,  Inc.,  and license in perpetuity  software
developed by I-Link for the operation of a Voice over Internet Protocol ("VoIP")
Network.  Customer  billings and related expenses incurred pursuant to a related
Management  Agreement  between the  parties  were  included  in Buyers  United's
general and administrative  expenses beginning December 6, 2002. The transaction
closed  effective  May 1, 2003,  at which time the  Company  began to  recognize
revenue earned and expenses incurred.

The assets acquired include dedicated  equipment required for operating the VoIP
Network,   customers   of  I-Link   serviced   through  the   network,   carrier
identifications  codes, and certain trademarks.  In consideration for the assets
and software license,  Buyers United issued to I-Link 246,430 shares of Series B
Convertible  Preferred  Stock with a fair market value of $1.4 million,  assumed
certain liabilities, and agreed to issue an additional 53,570 shares of Series B
Convertible  Preferred  Stock in equal  monthly  installments  over a term of 10
months  commencing June 1, 2003,  subject to satisfaction of certain  conditions
pertaining to provisioning of one of the former I-Link customers acquired in the
transaction.

In connection with the closing,  the parties together with Counsel  Corporation,
an Ontario  corporation,  and  Counsel  Communications  LLC, a Delaware  limited
liability  company,  both  affiliates  of I-Link,  entered into a  Reimbursement
Agreement pursuant to which Counsel  Corporation,  Counsel  Communications,  and
I-Link agreed to reimburse  Buyers United for any loss  sustained as a result of
any claims asserted against the assets acquired from I-Link by certain creditors
of I-Link.  Out of the shares it received in the transaction I-Link deposited in
escrow 40,000 shares that may be applied to reimburse any such loss.  This is in
addition  to 25,000  shares  I-Link  received in the  transaction  that has been
deposited in escrow under the Asset Purchase Agreement to satisfy any claims for
indemnification under the Asset Purchase Agreement. During 2004, these remaining
65,000 shares were delivered to Counsel Corporation.

                                      F-12

<PAGE>

The  following  table  presents a summary of the  estimated  fair  values of the
assets acquired and liabilities assumed as of December 31, 2003:

            Computer and telecommunications switching equipment      $  754,966
            Customer list                                               553,898
            License on technology and patents                         1,182,933
            Carrier identification code                                 135,933
            Deposit with a vendor                                       110,000
                                                                     ----------

               Total assets acquired                                  2,737,730
                                                                     ----------

            Accounts payable and accrued liabilities                    737,829
            Acquisition costs                                           294,665
                                                                     ----------
                Total liabilities assumed                             1,032,494
                                                                     ----------

                Net assets acquired                                  $1,705,236
                                                                     ==========

The customer  list and licensed  technology  will be amortized  over a period of
four years.

The following unaudited pro forma financial  information  presents results as if
the acquisition had occurred at the beginning of the respective periods:

                                                             Year ended
                                                            December 31,
                                                      ------------------------
                                                         2003         2002
                                                      -----------  -----------
      Net revenue                                     $65,498,766  $37,965,060
      Net income (loss) applicable to
        common stockholders                           $    19,175  $(5,806,566)

      Basic and diluted net income (loss) per share   $        -   $     (1.01)

These pro forma  results have been  prepared for  comparative  purposes only and
include certain adjustments such as additional  amortization expense as a result
of identifiable tangible and intangible assets arising from the acquisition. The
pro forma  results  are not  necessarily  indicative  either of the  results  of
operations that actually would have resulted had the acquisition  been in effect
at the beginning of the respective  periods, or of results to be achieved in the
future.

NOTE 3 - PROPERTY AND EQUIPMENT

At December 31, 2003, property and equipment consisted of the following:

      Computer and office equipment                $3,724,164
      Internal-use software                           268,723
      Furniture and fixtures                          302,027
                                                   ----------
                                                    4,294,914
      Accumulated depreciation and amortization    (1,870,272)
                                                   ----------

                                                   $2,424,642
                                                   ==========

NOTE 4 - INTANGIBLE ASSETS

At December 31, 2003, intangible assets consisted of the following:

                                        Gross       Accumulated   Intangible
                                        asset       amortization  assets, net
                                    -------------   -----------   -----------
      Customer lists                $  10,760,307   $ 3,840,679   $ 6,919,628
      Technology and patents            1,318,865       219,811     1,099,054
                                    -------------   -----------   -----------

                                    $  12,079,172   $ 4,060,490   $ 8,018,682
                                    =============   ===========   ===========

                                      F-13

<PAGE>


The  Company   participated  in  a  direct  response   marketing  campaign  with
LowerMyBills.com,  Inc. (LMB), a web-based comparison shopping service. The fees
associated  with this  advertising  campaign were deferred and  aggregated  $2.8
million until June 2003, when the Company ceased  participating  in the program.
Amortization  expense for these customers in 2003 and 2002, was $1.2 million and
$761,091, respectively.

The Company also acquired new customer  lists related to I-Link,  Touch America,
and Glyphics in 2003, which are predominantly  corporate customers. In addition,
the  Company  acquired  technology  and  licenses  related  to  I-Link  in 2003.
Amortization  expense during 2003 for the additional customers was $1.9 million,
and was $219,811 for the technology and licenses.

The Company estimates the useful lives of its acquired customer lists based upon
attrition rates experienced by the Company.  Historically,  management estimated
the useful  lives  between 24 to 36 months  based upon the type of customer  and
service  provided.  Based upon recent  attrition  information  which showed that
customers were averaging  longer lives, the Company changed the estimated useful
lives for its customer  lists  prospectively  in the fourth quarter of 2003. LMB
customer lives were  increased  from 24 to 36 months.  The impact of this change
was a $204,500  decrease in amortization  expense in the fourth quarter of 2003.
The customer lives of Touch America, I-Link and Glyphics were changed from 30 or
36 months to 48 months.  The impact of this  change was a $306,053  decrease  in
amortization expense in the fourth quarter of 2003.

Amortization  expense for all  intangible  assets  during the  four-year  period
ending  December 31, 2007 is estimated to be $2.7 million,  $2.5  million,  $2.2
million, and $600,000, respectively.


NOTE 5 - LINE OF CREDIT

Buyers United has a line of credit  agreement with RFC Capital  Corporation that
expires in January 2006. The available  borrowing limit is $5 million.  Interest
accrues at prime plus three  percent,  which was 7.00% as of December  31, 2003.
During 2002, the interest rate on the line was prime plus six percent, which was
10.25% as of  December  31,  2002.  The  facility  allows the  Company to obtain
financing on its eligible accounts  receivable,  including unbilled  receivables
and regular monthly  billings.  The facility is collateralized by the underlying
receivables. On December 31, 2003, Buyers United had financed the maximum amount
available based on eligible accounts  receivable at that time. This amount, less
draws by RFC applied  against the outstanding  amount,  aggregated $4.1 million.
The facility  requires  Buyers United to maintain a restricted  cash account for
the collection of the  receivables.  As of December 31, 2003,  Buyers United had
$1.2 million of restricted cash associated with the RFC arrangement.


NOTE 6 - ACCRUED LIABILITIES

At December 31, 2003, accrued liabilities consisted of the following:

      Accrued commissions              $  669,523
      Accrued dividends                   478,599
      Other                               680,742
                                       ----------
                                       $1,828,864
                                       ==========

NOTE 7 - LONG-TERM DEBT AND NOTES PAYABLE

Long-term debt consists of the following:

      Unsecured notes payable to  the Chairman of the
      Board, bearing interest  at 12 percent, payable
      monthly. Principal  and unpaid interest are due
      and payable in July  2004, except  for $112,500
      which  matures  in December 2004,  and $348,825
      which matures in July 2005.                              $2,726,325

      Unsecured   notes  payable  to  two   Directors
      bearing   interest   at   12  percent,  payable
      monthly. Maturity  dates  vary, from  July 2004
      through January 2005.                                       800,000

                                      F-14

<PAGE>


      Unsecured  note  payable  to  a  relative  of a
      Director,   bearing   interest  at  12  percent
      payable    monthly.    Principal   and   unpaid
      interest due in January 2005.                              100,000

      Promissory   note  payable  to  an   individual
      bearing   interest  at  12   percent,   payable
      monthly.   Secured  by   equipment.   Principal
      and unpaid interest due in July 2004.                      293,333

      Promissory  notes  payable  to two  individuals
      bearing   interest  at  12   percent,   payable
      monthly.   Secured  by   equipment.   Principal
      and unpaid interest due in the summer of 2006.             191,954

      Unsecured promissory  notes bearing interest at
      ten percent  and  12 percent,  payable monthly.
      Principal  payments  due monthly,  based  on 20
      percent  to  40 percent  of billings  collected
      from specifically-designated customers referred
      from   LowerMyBills.com,   Inc.  ("LMB").   The
      majority of  these notes have no maturity date.
      The Company  believes that all of the principal
      will be repaid during  2004, based  on expected
      cash collections from these customers.                     475,223

      Unsecured  promissory notes bearing interest at
      ten   percent,   payable   monthly.   Principal
      payments  due monthly,  based on ten percent of
      billings collected from customers acquired from
      Touch   America,  Inc.   These  notes  have  no
      maturity  date.  The Company believes  that all
      principal  will be  repaid  in 2005,  based  on
      expected cash collections from these customers.          2,358,412

      Unsecured  promissory note bearing  interest at
      10 percent, payable monthly. Principal payments
      due monthly,  based on 30  percent of  billings
      collected from customers recently acquired from
      Glyphics,  Inc. The  note has no maturity date.
      The Company believes that all principal will be
      repaid by  the end of 2004,  based  on expected
      cash collections from these customers.                     631,211

      Note  payable  to  Touch  America,  Inc.,  with
      interest   imputed  at  four  percent,  payable
      monthly. Principal  payments due monthly, based
      on  7.2  percent  of  billings  collected  from
      customers acquired from Touch America, Inc. The
      obligation  has no  maturity  date. The Company
      expects that  all principal  will be  repaid by
      April 2004, based  on expected cash collections
      from these customers.                                      473,437

      Other                                                      295,238

      Capital leases                                              82,477
                                                              ----------

                                                               8,427,610
      Less current portion                                    (7,781,484)
                                                              ----------

                                                              $  646,126
                                                              ==========
Long-term debt maturities are as follows:

                  2004                             $7,781,484
                  2005                                623,719
                  2006                                 22,407
                                                   ----------
                                                    8,427,610
                  Less current maturities          (7,781,484)
                                                   ----------

                                                   $  646,126
                                                   ==========

                                      F-15

<PAGE>


On February  28,  2003,  the Company  retired its $1.1  million  note payable by
paying  $250,000  in cash and issuing a new  promissory  note for  $800,000.  In
addition,  the Company  issued 50,000 shares of common stock in connection  with
the original  agreement.  At December 31, 2003,  the amount  remaining due, less
issuance costs, was $631,211 (see above).

In connection with some of the LMB-related  unsecured promissory notes, two-year
warrants  to  purchase  562,950  shares of common  stock at $2.50 per share were
issued to the  noteholders.  Warrants for an additional  94,950 shares have also
been issued to the sales  agents.  The  estimated  fair value of the warrants of
$264,717,  based on using the Black-Scholes  pricing model, was allocated to the
warrants  and  recorded as a discount to the  carrying  value of the notes.  The
Company paid approximately  $232,000 in commissions to sales agents. The Company
paid  approximately  $152,000 in commissions to sales agents in connection  with
the Touch America-related unsecured promissory notes. All these commission costs
are also  included in the  discounts  to the  carrying  value of the notes.  The
discount is being  amortized  to interest  expense  over the  respective  notes'
estimated payment terms.

NOTE 8 - LEASES

Buyers United leases executive office space in Bluffdale, Utah, a suburb of Salt
Lake City. The offices consist of approximately  30,000 square feet. The current
monthly  lease rate is $32,307.  The lease for office  space  expires in January
2007,  but the Company has an option to renew the lease for an additional  three
to five years.  Through  November  2004,  Buyers United is leasing 14,339 square
feet of space at 13751 S. Wadsworth Park Drive,  Draper, Utah, at a monthly cost
of $16,728.

The Company also has one capital lease for computer software. The following is a
schedule of future minimum payments under the leases as of December 31, 2003:



                                                         Capital       Operating
   Year ending December 31,                               leases        leases
                                                         --------     ----------
  2004 . . . . . . . . . . . . . . . . . . . . . . . .   $ 34,690     $  571,692
  2005 . . . . . . . . . . . . . . . . . . . . . . . .     34,690        397,373
  2006 . . . . . . . . . . . . . . . . . . . . . . . .     23,128        407,307
  2007 . . . . . . . . . . . . . . . . . . . . . . . .         -         417,490
                                                         --------     ----------

      Total future minimum lease payments  . . . . . .     92,508     $1,793,862
                                                                      ==========
  Less amount representing interest  . . . . . . . . .    (10,031)
                                                         --------
      Total obligations under capital leases . . . . .     82,477
  Less current portion . . . . . . . . . . . . . . . .    (28,752)
                                                         --------
      Capital lease obligations, net of current portion  $ 53,725
                                                         ========

Rent  expense  was  approximately  $519,500  and  $348,300  for the years  ended
December 31, 2003 and 2002, respectively.

NOTE 9 - INCOME TAXES

The components of the Company's net deferred  income tax assets and  liabilities
are as follows:

  Deferred income tax assets:
  --------------------------
      Net operating loss carryforwards                  $5,001,000
      Reserves and accrued liabilities                   1,275,000
                                                        ----------

            Total deferred income tax assets             6,276,000
            Valuation allowance                         (5,897,000)
                                                        ----------

            Net deferred income tax asset                  379,000
                                                        ----------

  Deferred income tax liabilities:
  -------------------------------
      Tax depreciation in excess of book depreciation     (379,000)
                                                        ----------

            Net deferred income tax liability             (379,000)
                                                        ----------

            Net deferred income taxes                   $       -
                                                        ==========

                                      F-16

<PAGE>


As of December 31, 2003,  the Company had net operating loss  carryforwards  for
federal income tax reporting purposes of approximately $13,336,000.  The tax net
operating loss carryforwards will expire beginning in 2012.

Inasmuch as the Company's history includes  accumulated net operating losses, it
is  uncertain  as to  whether  the  Company's  deferred  tax  asset can be fully
realized.  Accordingly,  a valuation  allowance  has been recorded to reduce the
deferred  income tax  assets.  The net  change in the  valuation  allowance  for
deferred  tax assets  during the year ended  December 31, 2003 was a decrease of
$416,000.  During  2003 and 2002 no income  tax  expense  was  recorded  due the
reduction of the valuation allowance.


NOTE 10 - CAPITAL TRANSACTIONS

Preferred  Stock: The Board of Directors is authorized to classify any shares of
the Company's  authorized  but unissued  preferred  stock in one or more series.
With respect to each series,  the Board of Directors is  authorized to determine
the number of shares that constitutes such series; the rate of dividend, if any,
payable on shares of such  series;  whether the shares of such  series  shall be
cumulative,  non-cumulative,  or partially  cumulative  as to dividends  and the
dates from which any cumulative dividends are to accumulate;  whether the shares
of such series may be redeemed, and, if so, the price or prices at which and the
terms and conditions on which shares of such series may be redeemed;  the amount
payable upon shares of such series in the event of the voluntary or  involuntary
dissolution,  liquidation,  or winding up of the  affairs  of the  Company;  the
sinking fund  provisions,  if any, for the  redemption of shares of such series;
the  voting  rights,  if any,  of the  shares  of such  series;  the  terms  and
conditions,  if any, on which shares of such series may be converted into shares
of capital stock of the Company of any other class or series; whether the shares
of such series are to be preferred  over shares of capital  stock of the Company
of any  other  class  or  series  as to  dividends  or  upon  the  voluntary  or
involuntary  dissolution,  liquidation,  or  termination  of the  affairs of the
Company or otherwise; and any other characteristics,  preferences,  limitations,
rights, privileges, immunities, or terms.

Series A 8 percent  Cumulative  Convertible  Preferred  Stock:  During 1999, the
Board of Directors  authorized  the  issuance of 2,000,000  shares of Series A 8
percent Cumulative  Convertible  Preferred Stock ("Series A Preferred Stock") at
an offering  price of $2.00 per share.  Gross proceeds of $4 million were raised
upon sale of the shares.

The Series A Preferred  Stock is  convertible to common stock at any time at the
election of the holder and, under limited circumstances,  at the election of the
Company.  The conversion rate is one for one, subject to adjustment in the event
of a recapitalization,  reorganization,  or other corporate  restructuring or in
the event that the Company shall sell or otherwise  issue  securities at a price
below  $2.00 per  share or the then  adjusted  conversion  price.  The  Series A
Preferred Stock can be redeemed at the Company's election at any time commencing
January  1,  2005 at a  redemption  price of $2.00 per  share  plus all  accrued
dividends as of the redemption date. During 2002 certain stockholders  converted
5,000 Series A preferred shares into common shares.

Series B 8 percent  Cumulative  Convertible  Preferred Stock: In September 2000,
the Board of Directors  authorized the issuance of 1,234,500  shares of Series B
8%  Cumulative  Convertible  Preferred  Stock  ("Series B Preferred  Stock") and
related  warrants to purchase  common shares at an offering  price of $10.00 per
unit.  Each unit  consists  of one share of  Series B  Preferred  Stock and five
warrants to purchase one share of common stock at an exercise price of $2.50 per
share. During 2000, various investors made loans to the Company and subsequently
elected to  exchange  their  promissory  notes for  units.  In  addition  to the
converted  loans of $2.5  million,  the  Company  raised $2 million  through the
issuance  of units  through  December  31,  2000 and $1.1  million  through  the
issuance of units in 2001.

In connection  with the unit  offering,  the Company agreed to pay the Placement
Agent a sales  commission  and expense  allowance  aggregating 13 percent of the
gross proceeds from the sale of the Series B Preferred Stock, in addition to ten
percent of the gross proceeds of certain related bridge  financing.  The Company
also incurred  approximately  $23,000 of direct  expenses in connection with the
offering.  As  additional  consideration,  the  Company  agreed  to issue to the
Placement  Agent  warrants to purchase  319,300  shares of the Company's  common
stock at an exercise price of $2.50 per share.

As part of the Series B Preferred Stock offering,  the Company issued  2,269,000
warrants to purchase common stock at $2.50 per share. The Company  allocated the
net proceeds  from the  offering of $4.2 million  between the Series B Preferred
Stock and the warrants  based on estimated  relative  fair values.  The Series B
Preferred Stock was recorded at $2.4 million,  and the warrants were recorded at

                                      F-17

<PAGE>

$1.8 million.  The estimated fair value of the warrants was determined using the
Black-Scholes  pricing  model.  The Series B Preferred  Stock is  convertible to
common  stock at any time at the  election  of the  holder  and,  under  limited
circumstances,  at the election of the Company.  The conversion rate is five for
one, subject to adjustment in the event of a  recapitalization,  reorganization,
or other corporate  restructuring or in the event that the Company shall sell or
otherwise issue securities at a price below $2.00 per share or the then adjusted
conversion price.

During the three months ended March 31, 2001,  the Company  issued an additional
110,000 shares of preferred stock and 550,000 warrants to purchase common stock.
The Company allocated the net proceeds from the offering of $1.1 million between
the Series B Preferred  Stock and the warrants based on estimated  relative fair
values.  Accordingly,  the stock was recorded at $794,822, and the warrants were
recorded at $302,401.  In connection with these additional Series B shares,  the
intrinsic value of the beneficial conversion feature of $20,498 was reflected in
the accompanying  2001  consolidated  financial  statements as a preferred stock
dividend  and as an  increase  to  additional  paid in  capital.  The  Series  B
Preferred Stock Offering closed on April 13, 2001.

In May 2002 the Board of Directors  approved a plan to modify the exercise price
on certain  Preferred Stock and promissory  note-related  warrants from $2.50 to
$2.00 per share,  extend the expiration  date of certain  warrants from December
31, 2002 to December 31, 2004,  and amend the  redemption  provisions of certain
warrants so that the  warrants  could be called for  redemption  when the market
price for the Company's  common stock is $4.00 per share,  rather than $6.00 per
share.

On December 6, 2002, Buyers United entered into the Asset Purchase Agreement and
Software  License  Agreement  to  purchase  certain  assets and  assume  certain
liabilities of I-Link, Inc., and its subsidiary, I-Link Communications,  Inc. In
consideration,  Buyers  United  issued  to  I-Link  246,430  shares  of Series B
Convertible Preferred Stock with a fair market value of $1.4 million, and agreed
to issue an additional 53,570 shares of Series B Convertible  Preferred Stock in
equal monthly installments over a term of 10 months commencing June 1, 2003. The
final installment was issued March 1, 2004.

During  2003,  six of the  stockholders  converted  a total of 116,000  Series B
preferred   shares  into  580,000  common  shares.   During  2002,  one  of  the
stockholders  converted  10,000  Series B preferred  shares  into 50,000  common
shares.

Both Series A and B Preferred  Stock  still  outstanding  can be redeemed at the
Company's  election at any time  commencing  January 1, 2005, at the  applicable
redemption price plus all accrued dividends as of the redemption date.

Cumulative  dividends  accrue on both Series A and B Preferred Stock at the rate
of 8% per annum from the date of original issue and are payable semi-annually on
June 30 and  December  31 of each year out of funds  legally  available  for the
payment of  dividends.  Dividends  are  payable  in cash or common  stock at the
election of the Company.  If paid in common  stock,  the number of shares issued
will be based on the average of the closing bid prices for the common stock over
the five trading days  immediately  prior to the dividend  payment  date. If the
Company fails to pay any dividend within 60 days of its due date, the conversion
price (see below) is adjusted  downward by $0.25 per share for each  occurrence.
During  the years  ended  December  31,  2003 and  2002,  the  Company  declared
dividends  aggregating  $873,495  and  $749,725,  respectively,  and to  satisfy
payment  obligations,  issued a total of 427,096  and  574,635  shares of common
stock, respectively.  As of December 31, 2003, the Company had accrued dividends
payable in the amount of $478,599.  In February  2004,  the Company  settled the
dividend payable by issuing 171,055 shares of common stock.

The Series A and B Preferred  Stock has no voting rights,  except as required by
the General  Corporation  Laws of Delaware  that require  class votes on certain
corporate  matters  and  matters  affecting  the  rights of the  holders  of the
Preferred  Stock. The Preferred Stock is senior in right of payment in the event
of  liquidation  and with respect to dividends to the common stock and all other
subsequent  preferred  stock  issuances  that may be  authorized.  The  Series A
Preferred Stock has a liquidation preference of $2.00 per share and the Series B
Preferred Stock has a liquidation preference of $10.00 per share.

Issuances of Common Stock:  During January 2002 the Company issued 17,998 shares
of common stock in connection with the issuance of $179,998 of promissory notes,
at an aggregated fair market value of $18,798.

During  February  2002 the Company  issued  25,000 shares of stock to one of its
directors  for providing a credit  guaranty  with respect to business  expansion
activities. The fair market value of shares issuances was $30,750.

                                      F-18

<PAGE>

In March 2001, the Company entered into three-year  marketing contracts with one
of its  Series B  Preferred  stockholders.  Under  the  terms of the  contracts,
100,000 shares of common stock were issued with a fair market value of $125,000.
This amount was recorded on the balance sheet as a deferred  consulting  fee and
included in  operating  expenses on a  straight-line  basis over the life of the
contracts.  During 2001,  $39,931 was recorded in promotion expenses as a result
of this  amortization.  Consideration  granted under the  contracts'  terms also
included options to purchase up to 150,000  additional shares of common stock at
$2.50 per share.  These  options vest  gradually  over the term of the contract.
These  options are  accounted for as variable plan options since the issuance of
these  options was under the premise that the grantee will be providing  current
and future services for the Company. Accordingly, using the Black-Scholes option
pricing model, $29,581 in consulting expense was recorded to reflect the vesting
of these options through December 31, 2001. During 2002 an additional $48,060 of
deferred consulting fees were amortized and included in promotion expenses,  and
another  $95,615 in  consulting  expense was  recorded to reflect the vesting of
additional options.  However, at the end of 2002 the Company and the stockholder
agreed to cancel  one of the  marketing  contracts  and to  rescind  the  as-yet
unearned  options.  Accordingly,  the Company included in promotion  expenses an
additional  $25,174 of  remaining  unamortized  deferred  consulting  fees,  and
recorded income of $125,197 to reflect the cancellation of the unearned options.

In  January  2003  the  Company  issued  15,000  shares  of  stock to one of its
directors   for   providing  a  credit   guaranty   to  one  of  its   wholesale
telecommunication  service  providers.  The fair  market  value of the stock was
$36,300.

During June 2003,  the Company  initiated  a program to  repurchase  outstanding
common  stock from  shareholders  of record with total  holdings of 100 or fewer
shares.  The offering price per share was $1.75.  The program ended in September
2003 after the Company had repurchased 2,774 shares.

Warrants to Purchase  Common  Shares:  As mentioned  above,  the Company  issued
warrants  in  connection  with its  Series B  preferred  stock  offering  and in
connection with certain marketing contracts.

In connection with some of the LMB-related  unsecured promissory notes, two-year
warrants to purchase a total  562,950  shares of common stock at $2.50 per share
were issued to the  noteholders  during the two years ended  December  31, 2002.
Warrants for an  additional  97,950 shares were also issued to the sales agents.
The  estimated  fair  value of the  warrants  of  $264,717,  based on using  the
Black-Scholes  pricing  model,  was  allocated to the warrants and recorded as a
discount to the carrying value of the notes.  The discount is being amortized to
interest expense over the estimated term of the notes.

In November 2003 the Company issued 25,000 warrants to a consulting company. The
estimated   fair  value  of  the  warrants  of  $25,341,   based  on  using  the
Black-Scholes  pricing  model,  will be amortized  over the life of the contract
into general and administrative expense.

During 2003,  investors  exercised warrants to purchase 522,500 shares of Common
Stock, in exchange for proceeds which aggregated $1,043,750.

All of the warrants were  exercisable at December 31, 2003. The following tables
summarize the warrant activity for 2003 and 2002:

                                                                   Weighted
                                                                   Average
                                                    Price          Exercise
                                  Warrants          Range           Price
                                 ---------      -------------      --------

   Balance at December 31, 2001  5,345,732      $1.25 - $5.13       $2.44
      Cancelled or expired        (250,000)     $2.50 - $2.85       $2.64
      Issued                       433,550      $2.00 - $2.50       $2.01
                                 ---------
   Balance at December 31, 2002  5,529,282      $1.25 - $2.95       $2.00
      Cancelled or expired        (181,750)     $2.00 - $2.95       $2.49
      Exercised                   (522,500)     $1.25 - $2.50       $2.00
      Issued                        25,000          $2.50           $2.50
                                 ---------

   Balance at December 31, 2003  4,850,032      $1.25 - $2.50       $2.05
                                 =========

                                      F-19

<PAGE>

Stock Options:

Long-Term  Stock   Incentive  Plan:   Effective  March  11,  1999,  the  Company
established the Buyers United International, Inc. Long-Term Stock Incentive Plan
("the Stock Plan"). The Stock Plan provides for a maximum of 1,200,000 shares of
common  stock  of  the  Company  to  be  awarded  to   participants   and  their
beneficiaries. A Committee, as determined by the Board of Directors,  determines
and  designates  the eligible  participants  and awards to be granted  under the
Stock Plan.  The  Committee may grant  incentive  stock  options;  non-qualified
options;  stock  appreciation  rights  ("SAR");  and on a limited  basis,  stock
awards. The terms and exercise prices of options and SARs will be established by
the Committee;  except that the exercise  prices cannot be less than 100 percent
of the fair market value of a share of common stock on the date of grant.  As of
December 31, 2003, incentive stock options to purchase a total of 893,653 shares
were outstanding.

Other  Options:  The  Company's  Board of  Directors  has from time to time also
authorized the grant of stock options to directors, officers, key employees, and
consultants as compensation and in connection with obtaining financing.

In virtually all cases, employee options vest over a period of from one to three
years,  and  expire  from four to five  years  after the date the  options  were
granted.  The following  tables summarize the all stock option activity for 2003
and 2002:

                                                                   Weighted
                                                                   Average
                                                    Price          Exercise
                                  Options           Range           Price
                                 ---------      -------------      --------
   Balance at December 31, 2001  2,818,585      $2.00 - $9.00       $2.69
      Granted                      902,913      $2.00 - $2.50       $2.31
      Cancelled or expired        (128,777)     $2.00 - $9.00       $3.11
                                 ---------
   Balance at December 31, 2002  3,592,721      $2.00 - $5.39       $2.58
      Granted                      683,500      $2.00 - $2.64       $2.33
      Exercised                    (27,500)         2.00            $2.00
      Cancelled or expired        (816,944)     $2.00 - $4.00       $2.20
                                 ---------
   Balance at December 31, 2003  3,431,777      $2.00 - $5.39       $2.62
                                 =========

A summary of the options  outstanding  and options  exercisable  at December 31,
2003 is as follows:

                                                               Options
                    Options Outstanding                       Exercisable
   --------------------------------------------------- ------------------------
                                    Average   Weighted    Options      Weighted
     Range of                      Remaining  Average  Exercisable at  Average
     Exercise          Options    Contractual Exercise  December 31,   Exercise
      Prices         Outstanding      Life      Price       2003        Price
   -------------     -----------  ----------- -------- -------------- ---------

   $2.00 - $3.99     3,207,926     3.6 years  $  2.45    2,512,261     $  2.49
   $4.00 - $5.39       223,851     2.3 years     5.13      223,851        5.13
                    ----------                          ----------

                     3,431,777     3.5 years  $  2.62    2,736,112     $  2.70
                    ==========                          ==========

Registration  Statement on Form SB-2: On September 10, 2003, the Company filed a
registration  statement on Form SB-2 with the Securities and Exchange Commission
to register for resale up to  8,779,333  shares of Common Stock that may be sold
from time to time by certain selling security holders listed in the registration
statement. At December 31, 2003 the selling security holders owned:

     o    Warrants to purchase 99,375 shares at a price of $1.25 per share
     o    Warrants to purchase 3,966,856 shares at a price of $2.00 per share
     o    Warrants to purchase 528,450 shares at a price of $2.50 per share
     o    Options to purchase  2,086,652  shares at prices ranging from $2.00 to
          $5.392 per share
     o    Convertible notes in the amount of $1,162,500 convertible at $2.00 per
          share
     o    Convertible notes in the amount of $1,775,000 convertible at $2.50 per
          share

                                      F-20

<PAGE>


Buyers  United will  receive the  proceeds  from  exercise of the  warrants  and
options and will  benefit from  extinguishment  of the debt  represented  by the
convertible  notes, but will not receive any proceeds or benefit from the resale
of the shares by the selling security holders.

In March 2004 the  registration  statement was  temporarily  suspended until the
Company can file an amendment updating the registration  statement with its 2003
audited financial statements and other information.


NOTE 11 - RELATED PARTY TRANSACTIONS

During 2003 and 2002,  certain board members and stockholders  performed various
services  to the  Company.  These  services  included,  but were not limited to,
consulting,  marketing  and capital  and debt  raising  activities.  The Company
incurred  $74,750 and $109,259 in fees  associated  with these  services for the
years  ended  December  31,  2003 and 2002,  respectively.  Amounts  outstanding
related to these  services  were $12,800 and $14,300 at December  31, 2003,  and
2002,  respectively.  There  are  also  several  debt  arrangements  more  fully
described in Note 7. Interest  expense on  obligations  owed to related  parties
during 2003 and 2002, respectively, was $414,523 and $453,361.


NOTE 12 - MAJOR SUPPLIERS

Approximately  70% and 80% of the Company's  cost of revenue for the years ended
December   31,   2003  and   2002,   respectively,   was   generated   from  two
telecommunication   providers.  As  of  December  31,  2003,  the  Company  owed
approximately  $3 million to these two  providers.  The Company has entered into
contractual  agreements  with these vendors.  During 2002 one of these providers
had filed for bankruptcy  protection under Chapter 11, and the other provider is
currently  being  scrutinized  by the Securities  and Exchange  Commission  over
certain  accounting  matters.   Although  the  Company  has  not  experienced  a
disruption  of service and feels it could  replace  either of these sources with
other wholesale telecommunication service providers, the effect on the Company's
operations of  potentially  losing either or both of these service  providers is
unknown.


NOTE 13 - COMMITMENTS AND CONTINGENCIES

In June 2001, Buyers United entered into a joint sales agreement with Infotopia,
Inc., a direct response  marketer.  In connection with the agreement,  Infotopia
loaned  $500,000  to  Buyers  United.  Subsequent  to  entering  into the  sales
agreement,  the two companies  decided not to pursue further any joint activity.
In December 2001,  Buyers United negotiated a settlement of the $500,000 loan in
which Buyers  United paid  $120,000 and issued  35,000 shares of common stock in
exchange  for  canceling  the  outstanding  obligation  plus  $25,921 in accrued
interest.  The stock had a fair market value of $22,401.  Accordingly,  based on
these amounts,  the Company recorded a gain on the early  extinguishments of the
debt in the amount of $383,520. However, unbeknownst to the Company, during 2001
Infotopia  allegedly  entered into a General  Security  Agreement with Sea Spray
Holdings,  Ltd.,  which  purportedly  included  the loan  obligation.  Sea Spray
asserted  that  it had a  perfected  security  interest  in the  obligation  and
demanded payment as  successor-in-interest  to Infotopia. The Company denied the
claim and filed an  arbitration  proceeding  to  resolve  the  issue.  Sea Spray
attempted to pursue its claim in New York state court, which the Company removed
to  federal  court in New York,  and the  federal  court  dismissed  the  action
pursuant  to an order to the  effect  Sea Spray  must  pursue  its claims in the
arbitration  proceeding.  An  arbitration  hearing was held in December 2003, at
which Sea Spray failed to make any appearance or submission  after receiving all
required notice.  The arbitrator entered a default in favor of Buyers United and
its award  further  found in favor of Buyers  United as a matter of the evidence
presented  and as a matter of law.  The  Company  believes  this matter has been
resolved  fully in its favor and that is has no  obligation  or liability to Sea
Spray.

Buyers United is the subject of certain other legal matters,  which it considers
incidental to its business  activities.  It is the opinion of management,  after
discussion  with legal  counsel,  that the ultimate  disposition  of these other
matters will not have a material impact on the financial position,  liquidity or
results of operations of Buyers United.

In connection with the MyACD agreements, MyACD will continue to provide enhanced
service  development and  configuration,  and Buyers United will reimburse MyACD
for actual costs related to these activities.

                                      F-21

<PAGE>


NOTE 14 - SUBSEQUENT EVENTS

In January and February 2004, three Directors had exercised  options to purchase
a total of  255,000  shares of Common  Stock.  Total  proceeds  received  by the
Company in connection with these exercises was $555,000.

During the first three  months of 2004,  investors  have  exercised  warrants to
purchase a total of 71,000 shares of Common Stock.  Total  proceeds  received in
these transactions was $146,000.

In December 2003, a holder of 100,000  shares of Series B Convertible  Preferred
Stock  converted  all of those  shares to  500,000  shares of common  stock.  In
January 2004, the holder sold those common shares plus 14,560 additional shares,
or a total of 514,560  shares,  to Buyers  United for  $500,000  in a  privately
negotiated transaction.

Buyers United  entered into an agreement to purchase 37 dedicated  long distance
customers from Source Communications, LLC for $750,000 in February 2004. Closing
of the acquisition  was subject to complying with  applicable  federal and state
regulation  pertaining  to  transfer  of the  customers.  All of the  regulatory
requirements were satisfied and the acquisition of the customers is completed

On March 15, 2004 the Company closed a private  placement to  institutional  and
accredited investors. The Company sold 3,782,000 shares of common stock at $2.30
per  share,  or a total of  approximately  $8.7  million.  Net  proceeds  of the
offering after placement fees and expenses were approximately $8.1 million.  The
net  proceeds  of the  private  placement  are  intended  to be used for various
corporate  purposes,  including sales and marketing  related  programs,  to fund
further  development  of our VoIP  Network,  reduction of debt,  and for working
capital and other general corporate purposes.

In connection with the placement,  Acceris  Communications Inc., formerly I-link
Incorporated and the holder of 300,000 shares of Series B Convertible  Preferred
Stock,  converted  all of its  preferred  stock to 1.5  million  common  shares.
Acceris subsequently sold 750,000 of those common shares to the investors in the
private  placement at $2.30 per share.  As a result of the  conversion and sale,
Acceris  Communications  now holds 808,546 shares of the Company's common stock,
or  approximately  six  percent  of  the  13  million  shares  of  common  stock
outstanding following completion of the private placement.

The private placement was made only to institutional and accredited investors in
a transaction exempt from the registration requirements of the Securities Act of
1933, as amended (the  "Securities  Act").  The shares of common stock sold have
not been registered  under the Securities Act, or any state securities laws, and
unless so  registered,  may not be offered or sold in the United  States  absent
registration or an applicable  exemption from the  registration  requirements of
the Securities Act and applicable  state securities laws. The Company has agreed
to file a  registration  statement  under the  Securities  Act for resale of the
common stock  purchased by the investors in the private  placement,  the 808,546
shares of common  stock held by  Acceris,  and  164,125  shares of common  stock
issuable under a warrant granted to the placement agent.

                                      F-22