UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                     --------------------------------------
                                   FORM 10-KSB
                     --------------------------------------

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

                   For the fiscal year ended December 31, 2003

                                       OR

             |_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

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

                        Commission file number 000-26809

                          SMARTVIDEO TECHNOLOGIES, INC.
                 (Name of small business issuer in its charter)
                     ---------------------------------------

                 Delaware                               91-1962104
(State or other jurisdiction of incorporation) (IRS Employer Identification No.)

    1650 Oakbrook Drive, Suite 405, Norcross, Georgia    30093
       (Address of principal executive offices)       (Zip Code)

                             (770) 729-8777 Issuer's
                      telephone number, including area code


          (Former name or former address, if changed since last report

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

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

         Securities registered under Section 12(g) of the Exchange Act:
                          Common stock, $.001 par value


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

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |_|

State issuer's revenues for its most recent fiscal year: $63,451.

The aggregate market value of the voting and non-voting common equity held by
non-affiliates as of March 17, 2004, was approximately $60,291,045.

The total number of shares of the issuer's common stock, $.001 par value,
outstanding on March 17, 2004, was 8,980,277.

Transitional Small Business Disclosure Format:  Yes  |_|     No  |X|



<PAGE>

                          SMARTVIDEO TECHNOLOGIES INC.


                              Index to Form 10-KSB



                                     PART I

Item   1.  Description of Business........................................4
Item   2.  Description of Property........................................8
Item   3.  Legal Proceedings..............................................8
Item   4.  Submission of Matters to a Vote of Security Holders............8


                                     PART II

Item   5.  Market for Common Equity and Related Stockholder
           Matters and Small Business Issuer Purchases of
           Equity Securities..............................................9
Item   6.  Management's Discussion and Analysis of Financial
           Conditions and Results of Operations..........................11
Item   7.  Consolidated Financial Statements.............................27
              Historical Financial Statements
                 Independent Auditors' Report............................28
                 Consolidated Balance Sheet..............................29
                 Consolidated Statements of Operations...................30
                 Consolidated Statements of Changes in
                 Shareholders' Deficit...................................31
                 Consolidated Statements of Cash Flows...................32
                 Notes to Consolidated Financial Statements..............34
Item   8.  Changes In and Disagreements with Accountants on
           Accounting and Financial Disclosure...........................44


Item 8A.   Controls and Procedure........................................44


                                    PART III

Item   9.  Directors and Executive Officers, Promoters and
           Control Persons; Compliance with Section16 (a) of
           the Exchange Act..............................................46
Item 10.   Executive Compensation........................................48
Item 11.   Security Ownership of Certain Beneficial Owners and
           Management and Related Stockholder Matters....................50
Item 12.   Certain Relationships and Related Transactions................51
Item 13.   Exhibits, List and Reports on Form 8-K........................53
Item 14.   Principal Accountant Fees and Services........................54
Signatures...............................................................55






                                       2
<PAGE>




                           FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Report constitute forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934. These
include statements about anticipated financial performance, future revenues or
earnings, business prospects, projected ventures, new products, anticipated
market performance and similar matters. The words "budgeted," "anticipate,"
"project," "estimate," "expect," "may," "believe," "potential" and similar
statements are intended to be among the statements that are forward-looking
statements. Because such statements reflect the reality of risk and uncertainty
that is inherent in our business, actual results may differ materially from
those expressed or implied by such forward-looking statements. Some of these
risks and uncertainty are related to our current business situation and include,
but are not limited to our lack of revenues, our history of operating losses,
our need for additional financing, the uncertainty about our ability to continue
as a going concern and dependence on our current management team. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
are made as of the date this report was filed with the Securities and Exchange
Commission.

Readers are advised that we undertake no obligation to release publicly any
revisions to the forward-looking statements to reflect events or circumstances
after the date hereof or to reflect unanticipated events or developments.






                                       3
<PAGE>




                                     PART I

Item 1.   Description Of Business

In November 2002, we acquired OVT, Inc. d/b/a SmartVideo.  Our business is now
that of SmartVideo and any reference to us, unless otherwise indicated, includes
SmartVideo.  In January 2003, we changed our name from the Armagh Group, Inc. to
SmartVideo  Technologies, Inc. to reflect the new direction of our business.

We provide high quality multimedia solutions allowing live, scheduled, or
on-demand programing to be delivered over the Internet and to the wireless
environment at speeds as low as 23 kilobits per seconds (Kbps). We serve
corporate, governmental, entertainment and educational sectors with multimedia
products and services that include streaming video and audio, interactive
programing, graphics, and animation.

         Need For More Efficient and Effective Communication Means

Meaningful efficient and effective communication is a key ingredient to the
success of an organization.

Traditional telephone communications lack the interactivity between participants
and generally provides for less efficient communication. To achieve a higher
level of effective communications, organizations provide for significant
business travel efforts. Travel costs have increased significantly through the
years and business travel generally limits the number of interactions between
participants and the number of participants who communicate during such travels.
Furthermore, traveling has become less attractive in light of threats of
terrorists attacks and the resulting tightening of security at airports and
other venues as well as the fear of spreading health conditions, such as SARS,
in certain geographical areas. Certain organizations resort to
video-conferencing to communicate which is limited in its effectiveness since it
usually targets smaller select audiences.

Recently, business organizations have been exploring multimedia broadcast
technology using streaming video. Such organizations attempt to harness the
potential of the Internet as an infrastructure to provide multimedia broadcast.
This allows them to effectively and efficiently deliver their messages to their
target audience (e.g., employees, potential and existing customers, vendors,
shareholders). Such organizations are limited in the broadcast of their content
by limitations inherent in the technology used by their audience, such as
dial-up phone connection or oversubscribed DSL and broadband connections.

Most of the existing streaming video technology requires IT departments'
involvement, which are concerned with security, scalability, and management
tools. Additionally, IT departments are cautious in their procurement process
and implementations of traditional multimedia broadcast infrastructures are
costly. Furthermore, IT departments generally prefer using easy-to-implement
technology providing a quick return on investment.

Most of the traditional multimedia broadcast technology lacks the flexibility of
integrating applications and online collaboration and management tools with
audio and video technology. Stand-alone traditional collaboration tools are less
efficient to users because they are not integrated within their computing
environment. We understand that end-users will require online communication and
collaboration tools integrated with applications, such as Microsoft Internet
Explorer, frequently used by end-users.

Existing content providers, such as media conglomerates, are looking for
additional sources of revenues. On-demand television and advertisement skipping
technology have an effect on the traditional advertising market in television.
Analysts predict that the traditional television market will erode substantially
over the next six years. Accordingly, advertisers will be looking for new ways
to reach their target audience. As the quality and pervasiveness of Internet and
video communications increases, the need for offering multimedia content through
low bandwidth connections to small devices, such as wireless appliances and
cellular phones increases. Advertisers will seek to promote their brands through
such means.

                                       4
         Our Strategy

         Our strategies for growth are concentrated in the following three key
areas:

        o       To enable our customers to communicate more effectively and at a
                lower cost with their employees, customers, vendors, and
                investors through the use of rich, live and on-demand multimedia
                programs;
        o       To develop strategic relationships with premium, rich media
                content providers who will utilize our products and services to
                create customized value-added technologies and services to
                increase their sales and revenue base; and,
        o       To develop partnering relationships with wide-ranging sales and
                distribution channel leaders already serving our vertical market
                space in a way that assists them in developing new revenue
                streams and opportunities for additional sales and that also
                reduces their dependency on low margin products that may already
                be in the final stages of their product lifecycle.

           Definitions

         To gain a better understanding of our business, we are providing a
         brief explanation of some of the key terms surrounding our products and
         services:

                  Multimedia - Includes streaming video and audio, graphics,
                  animation, and interactive programing, which is delivered to a
                  computer or wireless device via the public Internet.

                  Dial-up - Describes a connection methodology to the Internet;
                  also, describes a class of Internet users. More than 75% of
                  all Internet users fall into this category (excludes the
                  number of Internet users connected to oversubscribed broadband
                  services). This fact alone is significant since dial-up
                  connections are never more than 56Kbps (typically they range
                  somewhere between 32Kbps and 40Kbps. SmartVideo's products and
                  services consistently deliver high quality multimedia content
                  to this class of Internet users - in today's market, our
                  competitors are unable to effectively support this class of
                  Internet user with an equivalent quality of service.

                  Broadband - Describes a class of Internet users who have
                  consistently more than 56Kbps of available Internet bandwidth.
                  Broadband connections include: DSL, cable modem, ISDN, and
                  enterprise. Unfortunately, having a broadband connection at a
                  given location does not guarantee that each personal computer
                  connected to it will have access to all the available
                  bandwidth at a specific point in time (e.g.: A small business
                  has a DSL connection with a total bandwidth capacity of
                  250Kbps. If there are five users connected, the average
                  bandwidth available to each user is only 50Kbps.).

                  Webcast - An Internet broadcast similar to a television
                  broadcast, except the delivery mechanism is the Internet and
                  the viewing appliance is usually a personal computer.

                  Live Webcast - A Webcast which is distributed from a live
                  programming source.

                  On-demand Webcast - A Webcast which is distributed from a
                  pre-recorded source.

                  Content - Generally describes the information or entertainment
                  being Webcast.

                  Streaming media - A subset of multimedia communications which
                  usually includes video, audio, or combinations of both.

                                       5

<PAGE>

         Our Solutions

Our technology enables our customers to deliver high-quality multimedia content
to nearly all Internet users. To deliver an experience that features an
equivalent size and quality video, our competitors are limited to distributing
their content only through broadband connections, which today account for less
than 35% of all Internet connections.

We provide, among other things, live, scheduled and on-demand multimedia
broadcast over the Internet and to wireless appliances and devices at speeds as
low as 23Kbps and at an average 15 frames per second. We manage the video stream
for viewers to maximize the number of frames per second displayed even if the
bandwidth connection is low, such as dial-up connection, or if the connections
are unstable, such as those that may occur when using broadband, DSL, or
cellular connections. We supplement such Webcasts with multimedia and
administrative tools to enhance the broadcast experience to the end-users.

Our products and services incorporate one or more of the following hardware and
software devices: Windows Media, Microsoft SQL Database, Microsoft Web Servers
and File Storage devices. Database and Internet servers other than Microsoft may
be accommodated at a later time when customer demand justifies the technological
investment. SmartVideo's services are compatible with standard Internet
firewalls, routers and security devices. Although our services are designed to
work over public Internet connections, they also perform well in LAN/WAN
environments.

We leverage existing technologies to deliver multimedia broadcasts. To receive
our services, the viewer's computer simply requires an Internet connection,
Microsoft's Windows Media Player and Microsoft Internet Explorer. We can
integrate our services and technologies into existing content originators'
and/or providers' Web content. Our services can deliver complex content to
viewers live, scheduled or on-demand, or in any combination of the three, as
determined by customer requirements. Our services and technologies were
developed using Microsoft Development Products and other Web technologies for
which we are duly licensed.

We provide our customers controlled functionality including navigational tools
and services that enable them to deliver a unique multimedia experience on an
individualized basis to their audience. In effect, we deliver to customers a
complete Internet broadcast environment which allows them to create, acquire,
encode, store, organize, advertise and deliver subscription-based content over
the Internet to virtually any Windows-based computer or hand-held Pocket PC
based device equipped with an Internet connection.

We host our services, which allows us to broadcast multimedia content with
lesser involvement from IT corporate departments and reduces the implementation
costs of using our technology. Additionally, it facilitates customization and
customer control of the users' digital media organization. Furthermore, we
provide usage-based agreements providing a quicker return on investment to our
customers than competitive offerings providing up-front license fees or
retainer-based agreements.


     Competition

We face intense and increasing competition in the multimedia broadcast market.
If we do not compete effectively or if we experience reduced market share from
increased competition, our business will be harmed. In addition, the more
successful we are in the emerging market for multimedia broadcast services, the
more competitors are likely to emerge. Furthermore, the rapid deployment of
broadband technology in North America and overseas erodes our competitive
advantages and may hamper our sales efforts. We believe that the principal
competitive factors in our market include:

                                       6

<PAGE>

        o Service functionality, quality and performance;
        o Ease of use, reliability and security of services;
        o Establishing a significant base of customers and distribution
          partners;
        o Ability to introduce new services to the market in a timely manner;
        o Customer service and support; and
        o Pricing.

 Although we do not currently compete against any one entity with respect to all
aspects of multimedia broadcast products and services, there are various
competitors that provide one or more products and services in the following
categories:

        o Web conferencing, which provides online meeting functionalities
        o Web casting, which provides one to many presentation functionalities
        o Collaboration, which provides for document and application sharing as
          well as user interactivity
        o Live video and streaming multimedia
        o Hosted services
        o Training, which provides e-learning applications
        o On-premise software

Our primary competitors are Internet broadcasters, such as WebEx. Each of these
companies provide services similar to ours and each has a well-established
market presence. We also compete with providers of traditional communications
technologies, such as teleconferencing and videoconferencing, as well as
applications software and tools companies, such as Centra Software, Microsoft
(NetMeeting and Placeware), ON24, Intercall, First Virtual Communications, and
Raindance Communications. There are also smaller competitors that focus on
certain of our individual market segments, such as investor relations Web casts.

Our competitive advantages are primarily in the provision of quality multimedia
broadcast reaching large audiences and pricing.

Three of our customers represent 79% of our net revenues in 2003. While such
customers represent a significant portion of our revenues to date, we do not
solely rely on such customers to achieve profitability. We intend to increase
our customer base by focusing on our competitive advantages.

     History

We incorporated in Florida on August 17, 1984, and on December 19, 2000, changed
our corporate domicile to Delaware.

In November 2002, we acquired all of the issued and outstanding equity
securities of OVT, Inc., d/b/a SmartVideo, in exchange for 12,000,000 shares of
our Series A preferred stock plus 916,666 shares of our common stock. Each
Series A preferred share may be converted into one share of our common stock at
any time after November 26, 2003. Each Series A preferred share is entitled to
one vote on any matter for which our shareholders may vote generally. The
agreement relating to the acquisition of SmartVideo provides, among other
things, that if OVT fails to attain pre-tax earnings for the fiscal year of OVT
ended September 30, 2003, of $220,000, 3,000,000 of the Series A preferred
shares will be forfeited by the holders of the Series A preferred shares.
Additionally, the agreement provided that Armagh was to fund additional working
capital needs by infusing $500,000 within 15 days of closing. The Company has
not received such additional working capital funds. The holders of the Series A
preferred shares and the independent director of the Company are in discussion
regarding the forfeiture of the 3,000,000 Series A preferred shares and the
issuance of the 916,666 shares of common stock.

                                       7

<PAGE>

In January 2003, we changed our name from Armagh Group, Inc. to SmartVideo
Technologies, Inc.


Research and Development

The Company focuses its research and development efforts on developing new
products and core technologies for its markets and further enhancing the
functionality, reliability, performance and flexibility of existing products.
The Company solicits extensive input concerning product development from users,
both directly from end-customers and indirectly through its resellers.

During 2003 and 2002, the Company incurred research and development expenses of
approximately $150,000 and $0, respectively. During 2002, we filed an
application for one patent.


Sales and Marketing and Support

The Company markets its products and services to end-users directly through an
independent sales force and indirectly through resellers. Our sales force also
support resellers' efforts in marketing our offerings.

The Company markets its products and services in the United States and Canada.
We intend to pursue our marketing efforts in other geographical markets by
engaging with local agents and resellers.

Our support services are provided as the end-users use our products and
services. Our support services typically consist of advising customers with
infrastructure requirements and assisting them in certain multimedia content
specification requirements.


Employees

As of December 31, 2003, the Company had 12 employees. The Company believes its
relations with employees are good.

Item 2.  Description of Property

The Company maintains its headquarters in Norcross, Georgia. The Company
occupies leased office space totaling approximately 8,000 square feet. Our
office space is adequate for our current operations.

Item 3.  Legal Proceedings

We are not a party to, and none of our property is subject to, any pending or
threatened legal proceeding.

Mr. Hamouth, a former advisor of the Company who held more than 10% of shares of
our common stock during 2003, has acquired and disposed of approximately 60,000
shares of common stock within six-month periods which are subject to
"short-swing" trade liabilities under Section 16(b) of the Securities and
Exchange Act of 1934. The Company believes that Mr. Hamouth's liability under
Section 16(b) is at least $150,000. The Company intends to file a complaint
against Mr. Hamouth based on his violations of Section 16(b).

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

None

                                       8
<PAGE>




                                     PART II


Item 5.  Market for Common Equity And Related Stockholder Matters and
Small Business Issuer Purchases of Equity Securities

Our common stock is traded on the OTC Bulletin Board. During 2001, our common
stock traded under the symbol "ASPQ." From May 6, 2002 through September 17,
2002, our common stock traded under the symbol "SETI". From September 18, 2002
through January 6, 2003, our common stock traded under the symbol "AMGH". Since
January 7, 2003, our common stock has traded under the symbol "SMVD". In
December 2002 a majority our shareholders approved a one-for-three reverse split
of our common stock which was effective January 6, 2003. The following is a
summary of the high and low closing prices of our common stock on the OTC
Bulletin Board during the periods presented. The prices have been adjusted
retroactively to reflect the one-for-three reverse stock split. Such prices
represent inter-dealer prices, without retail mark-up, mark down or commissions,
and may not necessarily represent actual transactions.

                                                 High            Low
        Fiscal Year 2002
        ----------------
        First Quarter                            $4.71           $2.85
        Second Quarter                           $6.27           $0.93
        Third Quarter                            $2.25           $0.27
        Fourth Quarter                           $1.59           $0.36

        Fiscal Year 2003
        ----------------
        First Quarter                            $2.30           $1.35
        Second Quarter                           $2.10           $1.01
        Third Quarter                            $3.95           $1.65
        Fourth Quarter                           $6.30           $2.90


As of March 17, 2004, we had approximately 79 stockholders of record (including
nominees and brokers holding street accounts) of our common stock and 3
stockholders of record of our preferred shares.

We have never paid dividends on our shares. We intend to retain any earnings for
use in our operations and do not anticipate paying any dividends in the
foreseeable future.

Securities Authorized for Issuance Under Equity Compensation Plans
<TABLE>
<CAPTION>

------------------------------- ---------------------------- ---------------------------- ----------------------------
 2004 Equity Incentive Plan,    Number of securities to be    Weighted-average exercise        Number of options
     at December 31, 2003         issued upon exercise of       price of outstanding        remaining available for
                                   outstanding options,         options, warrants and        future issuance under
                                    warrants and rights                rights              equity compensation plans
------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity compensation plans
<S>     <C>    <C>    <C>    <C>    <C>    <C>
approved by security holders              N/A                          N/A                          N/A
------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity compensation plans not
approved by security holders(1)            0                           N/A                       2,000,000
------------------------------- ---------------------------- ---------------------------- ----------------------------
Total                                      0                           N/A                       2,000,000
------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>

                                       9

<PAGE>

(1)      The  Company  adopted  the 2004 Stock  Incentive  Plan  effective
         January 1, 2004.  The  Company  will  submit the 2004 Stock Incentive
         Plan for shareholders' approval at its next Annual Meeting of
         Shareholders.


Preferred stock

In November 2002, we acquired all of the issued and outstanding equity
securities of OVT, Inc., d/b/a SmartVideo, in exchange for 12,000,000 shares of
our Series A preferred stock. Each Series A preferred share may be converted
into one share of our common stock at any time after November 26, 2003. Each
Series A preferred share is entitled to one vote on any matter for which our
shareholders may vote generally. The Series A preferred shares will participate
on an equal basis with our common shares with respect to any dividends or upon
liquidation.


Recent Sales of Unregistered Securities

During April 2003, we issued 223,929 shares of our common stock pursuant to the
conversion by three holders of the Company's 10% Convertible Promissory Notes,
for which the Company had originally received gross proceeds of $166,000.

During May 2003, we issued 15,000 shares of our common stock to an individual
for $15,000. In connection with the issuance of such shares, the Company has
also issued 15,000 warrants to such individual. Each warrant is convertible into
one share of the Company's common stock at an exercise price of $2.50 per share.
The warrants expire in 2008.

During June 2003, we issued 105,000 shares of our common stock to three
individuals for $105,000. In connection with the issuance of such shares, the
Company has also issued 105,000 warrants to such individuals. Each warrant is
convertible into one share of the Company's common stock at an exercise price of
$2.50 per share. The warrants expire in 2008.

During August 2003, we issued 205,833 shares of our common stock to four
individuals for $205,833. In connection with the issuance of such shares, the
Company has also issued 205,833 warrants to such individuals. Each warrant is
convertible into one share of the Company's common stock at an exercise price of
$2.50 per share. The warrants expire in 2008.

During September 2003, we issued 100,000 shares of our common stock to one
individual for $100,000. In connection with the issuance of such shares, the
Company has also issued 205,833 warrants to such individual. Each warrant is
convertible into one share of the Company's common stock at an exercise price of
$2.50 per share. The warrants expire in 2008. Additionally, we issued 53,000
shares to two shareholders who were originally holders of the Company's 10%
Convertible Promissory Notes in relation with rights associated with such notes.
The Company did not receive any cash consideration in connection with the
issuance of such shares.

During October 2003, we issued 25,000 shares of our common stock to one
individual for $25,000. In connection with the issuance of such shares, the
Company has also issued 25,000 warrants to such individual. Each warrant is
convertible into one share of the Company's common stock at an exercise price of
$2.50 per share. The warrants expire in 2008. Additionally, during October 2003,
we issued 55,000 shares of our common stock to 9 persons unrelated to the
Company in lieu of repayment of advances payable by the Company to Mr. William
Dunavant, an employee and a holder of preferred shares. The advance payable
amounted to approximately $50,000.

                                       10

<PAGE>

During November 2003, we issued 442,500 shares of our common stock to six
individuals for $442,500. In connection with the issuance of such shares, the
Company has also issued 392,500 warrants to five of such individuals. Each
warrant is convertible into one share of the Company's common stock at an
exercise price of $2.50 per share. The warrants expire in 2008.

In connection with the combined sale of common stock and warrants described
above, the Company granted each investor (except for one person) certain
piggy-back registration rights covering the shares of common stock and shares
underlying the warrants acquired by each investor.

During December 2003, we issued 365,000 shares of our common stock to five
individuals for $365,000.

The sale of the aforementioned securities were exempt transactions under Section
4(2) of the Securities Act of 1933 as transaction by an issuer not involving a
public offering. At the time of sale, the persons who acquired these securities
were all fully informed and advised about matters concerning us, including our
business, financial affairs and other matters. The shareholders acquired the
securities for their own account or their designee.


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

Overview

The acquisition of SmartVideo was treated as a reverse acquisition for financial
reporting purposes. As such, our financial statements have been prepared as if
SmartVideo had acquired us. Although SmartVideo is a wholly owned subsidiary of
us, the results of operations prior to November 26, 2002, included in our
consolidated financial statements, are limited to the operating results of
SmartVideo. The results of operations subsequent to November 26, 2002, are the
consolidated operating results of SmartVideo and us. The equity section of the
balance sheet and our net loss per share has been retroactively restated to
reflect the reverse acquisition.

During the quarter ended March 31, 2004, the Company  re-evaluated  its 2003 and
2002  annual  financial  statements.  As a result of such  review,  the  Company
determined,  in good faith,  it applied the improper  accounting  treatment with
respect to deferred  compensation  attributable to the stock-based  compensation
generated  from the  Company's  grant of shares of its common  stock to a former
advisor in November  2002.  Consequently,  the Company is amending and restating
their December 31, 2002 annual  financial  statements,  March 31, 2003 quarterly
financial statements, June 30, 2003 quarterly financial statements and September
30 quarterly financial statements. The restatement has no impact on its 2003 and
2002  consolidated  statement  of  operations  including  its net losses and net
losses per share.

In connection with the engagement of a new accounting firm and the review of the
Company's financial statements, the Company has concluded that it was preferable
to account for the value of the deferred compensation, which amounted to
approximately $1.4 million at the time of grant, as a contra-equity account
instead of a prepaid expense, as originally recorded. Accordingly, the Company
has adjusted its balance sheet at December 31, 2002, to decrease the prepaid
expenses by approximately $1,315,000 with a corresponding increase in the
deferred compensation shown as a contra-equity account. The adjustment has no
impact on the balance sheet as of December 31, 2003.

We formally launched our products and services in 2003. We have limited revenues
and our net loss amounted to $3.9 million in 2003. We are dependent on
additional financing to continue to operate as a going concern.


                                       11

<PAGE>

Critical Accounting Policies and Estimates

Our discussion and analysis of financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent liabilities. We base these
estimates on our historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, and these estimates form the
basis for our judgments concerning the carrying values of assets and liabilities
that are not readily apparent from other sources. We periodically evaluate these
estimates and judgments based on available information and experience. Actual
results will differ from our estimates under different assumptions and
conditions. If actual results significantly differ from our estimates, our
financial condition and results of operations could be materially impacted.

We believe that the accounting policies described below are critical to
understanding our business, results of operations and financial condition
because they involve more significant judgments and estimates used in the
preparation of our consolidated financial statements. An accounting policy is
deemed to be critical if it requires an accounting estimate to be made based on
assumptions about matters that are highly uncertain at the time the estimate is
made, and if different estimates that could have been used, or changes in the
accounting estimates that are reasonably likely to occur periodically, could
materially impact our consolidated financial statements. We have discussed the
development, selection and application of our critical accounting policies with
the audit committee of our Board of Directors, and our audit committee has
reviewed our disclosure relating to our critical accounting policies in this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Revenue Recognition

The accounting related to revenue recognition in the multimedia broadcast
industry is complex and affected by interpretations of the rules and an
understanding of industry practices, both of which are subject to change. As a
result, revenue recognition accounting rules require us to make significant
judgments.

The Company typically provides its end-users with volume-based arrangements of
its Internet multimedia broadcast products and services, and in certain
circumstances, subject to minimum monthly usage. From time to time, the Company
sells hardware related to multimedia broadcasts to resellers.

Revenue is recognized when earned and the Company has no continuing involvement
in the delivery of products or services, which is generally when the multimedia
broadcasts are viewed or when the hardware is delivered.


Results of Operations

         Year Ended December 31, 2003 compared to 2002

Net Revenues

Net revenues consist typically of license fees from volume-based arrangements of
its Internet multimedia broadcast products and services, and in certain
circumstances, subject to minimum monthly usage. Additionally, the Company does
provide for hardware to certain resellers and end-users to facilitate the
broadcast of multimedia broadcasts. The increase in net revenues in 2003 of
approximately $60,000 when compared to 2002 is primarily due to increased
minutes viewed of Internet multimedia broadcasts and, to a lesser extent, to the
sale of hardware used in multimedia broadcasts to a reseller.

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Cost of Revenues

Cost of revenues consists primarily of expenses related to the maintenance of
certain facilities and equipment at a third-party data center. The increase in
cost of revenues in 2003 of approximately $300,000 when compared to 2002 is
primarily due to the costs of using and maintaining such facilities and
equipment which began in 2003.

Research and Development

Research and development expenses consist primarily of compensation paid to our
development personnel. The increase in research and development expenses in 2003
of approximately $150,000 when compared to 2002 is primarily due to the
allocation of three full-time employees to enhance our existing product
offerings.

Sales and General and Administrative Expenses

Sales and general and administrative expenses consist primarily of professional
fees, compensation paid to our employees, travel expenses related to the
marketing of our product and services, lease payments related to the use of our
corporate facilities and other general and administrative expenses. The increase
in general and administrative expenses in 2003 of approximately $1.2 million
when compared to 2002 is primarily due to consulting and professional fees,
including legal fees, incurred in connection with matters related to being a
publicly-traded company, salaries related to the hiring of additional employees
to manage the growth of our operations and increase in salaries of existing
employees, higher travel expenses associated with increased marketing efforts of
our products and services as well as higher rental expenses for our corporate
facilities which were provided at no cost prior to 2003.

Service Fees

Services fees consist primarily of expenses associated with the issuance of
shares associated with our development stage. The decrease in service fees of
$240,000 is primarily related to the issuance of shares to a consultant in 2002
for that amount. The Company did not enter in a similar arrangement other than
those accounted for as deferred compensation.

Amortization of Deferred Compensation

Amortization of deferred compensation consist of expenses associated with the
issuance of shares to a former advisor prior to our November 2002 merger for
future services provided to our Company. The initial agreement called for a
24-month assignment. In September 2003, we terminated this agreement earlier
than its initial provided term. The increase in deferred compensation of
approximately $1.2 million is primarily related to the accelerated amortization
of the deferred compensation due to the early termination of the agreement and
the recurring amortization charge for services provided from January to
September 2003. During 2002, we recorded less than two months or recurring
deferred compensation charges in connection with this agreement.

Interest Expense

Interest expense consists of beneficial conversion features associated with the
issuance of convertible promissory notes, additional consideration in connection
with the issuance of shares provided to shareholders in connection with rights
of convertible promissory notes and to a preferred shareholder associated with
the repayment of an advance payable to such shareholder, and interest expense
associated with various notes payable. The increase in interest expense in 2003
of approximately $600,000 is primarily due to beneficial conversion features of

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approximately $310,000 recognized upon the issuance of higher amounts of
convertible promissory notes in 2003 than in 2002, issued at lower convertible
ratios when compared to the fair value of the common stock. Additionally, the
Company provided additional consideration valued in 2003 at approximately
$180,000 to two shareholders in connection with their rights under the
convertible promissory notes. Furthermore, the Company provided additional
consideration to a preferred shareholder, who is also an employee, of
approximately $120,000 in issuing shares in lieu of repayment of an advance
payable. The Company did not provide additional consideration in connection with
the issuance of shares to shareholders or employees in 2002.

Liquidity and Capital Resources

To date, we have generated only minimal  revenues.  As a result,  our operations
are not an adequate source of cash to fund future  operations.  To fund our cash
requirements,  we have relied on proceeds from a combination of private sales of
our common stock and issuance of convertible  promissory  notes as well as loans
from shareholders and other related entities. We used approximately $1.5 million
in our operating  activities  during 2003. These cash uses are primarily related
to a net loss of approximately  $3.9 million,  adjusted for, among other things,
additional consideration related to the issuance of common stock to shareholders
aggregating approximately $290,000, beneficial conversion feature of convertible
amounting  to  $308,000  and  the  amortization  of  deferred   compensation  of
approximately $1.3 million. This net loss was partially funded by an increase in
accounts payable and accrued expenses of approximately  $310,000.  Our investing
activity consisted solely of purchasing equipment for approximately  $100,000 in
2003. We generated  approximately $1.9 million in financing activity,  primarily
by issuing  shares of common  stock for  approximately  $1.6 million in cash and
issuing convertible promissory notes for approximately $330,000. We will require
additional  financing  for the  foreseeable  future to  sustain  and  expand our
operations  and continue as a going  concern.  There are no assurance  that such
financing  will be available to us or, if it is available,  that we will be able
to  structure  such  financing  on  terms  acceptable  to us and that it will be
sufficient  to fund  our  cash  requirements  until  we can  reach  a  level  of
profitable  operations  and positive cash flows.  If we are unable to obtain the
financing necessary to support our operations,  we will be unable to continue as
a going concern. We currently have no commitments for any additional capital.

Going Concern

We have incurred recurring losses and negative cash flows since our inception.
As of December 31, 2003, we had an accumulated deficit of approximately $5.4
million and a working capital deficit of approximately $970,000. These matters
raise substantial doubt about our ability to continue as a going concern.
Accordingly, we are unable to fund operating and other expenses, working capital
and capital expenditures from our operations and we find it necessary to secure
additional financing. We intend to secure substantial additional financing in
the near future. There can be no assurance that we will be able to obtain such
financing on acceptable terms, or at all. If adequate funds are not available or
are not available on acceptable terms, we may not be able to pursue our business
objectives. This inability could seriously harm our business, results of
operations and financial condition.

Recent Accounting Pronouncements

In December 2002, Statement of Financial Accounting Standards No. 148,
"Accounting for Stock-Based Compensation--Transition and Disclosure," ("SFAS
148") was issued. SFAS 148 amends Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation," ("SFAS 123") to provide
alternative methods of transition for a voluntary change to the fair value
method of accounting for stock-based employee compensation. In addition, SFAS
148 amends the disclosure requirements of SFAS 123 to require prominent

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<PAGE>

disclosures in both annual and interim financial statements about the method of
accounting for stock- based employee compensation and the effect of the method
used on the reported results. The provisions of SFAS 148 are effective for
financial statements for fiscal years ending after December 15, 2002, and
interim periods beginning after December 15, 2002. The adoption of the
disclosure requirements of this statement did not impact our financial position,
results of operations or cash flows.

In December 2002, the Emerging Issues Task Force issued a consensus on Issue No.
00-21, "Revenue Arrangements with Multiple Deliverables" (EITF 00-21). EITF
00-21 mandates how to identify whether goods or services or both are delivered
separately in a bundled sales or licensing arrangement should be accounted for
as separate units of accounting. The consensus is effective for revenue
arrangements entered into in reporting periods beginning after June 15, 2003.
The adoption of EITF 00-21 did not have a significant effect on our financial
position or results of operations.

In January 2003, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 46, "Consolidation of Variable Interest Entities," ("FIN
46"). The interpretation provides guidance for determining when a primary
beneficiary should consolidate a variable interest entity, or equivalent
structure, that functions to support the activities of the primary beneficiary.
The interpretation is effective as of the beginning of the first interim or
annual reporting period beginning after June 15, 2003, for variable interest
entities created before February 1, 2003. The adoption of this statement is not
expected to impact our financial position, results of operations or cash flows.

In April 2003, the FASB issued SFAS Statement No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities," which amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under FASB
Statement No. 133, Accounting for Derivative instruments and Hedging Activities.
This Statement is effective for contracts entered into or modified after June
30, 2003, except for certain hedging relationships designated after June 30,
2003. Most provisions of this Statement should be applied prospectively. The
Company does not expect the adoption of SFAS No. 149 to have a material impact
on its financial statements.

In May 2003, the FASB issued SFAS Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." This
Statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). This
statement 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 beginning after June 15, 2003, except for mandatory redeemable financial
instruments of nonpublic entities, if applicable. 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 the Statement and
still existing at the beginning of the interim period of adoption. The Company
does not expect the adoption of SFAS No. 150 to have a material impact on its
financial statements.


Certain Factors Which May Impact Future Results

In addition to the other information in this report, the following factors
should be considered in evaluating our financial condition and prospects. These
factors may have a significant impact on our business and future operating
results.


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<PAGE>

We have incurred losses and negative cash flow since inception and have an
accumulated deficit at December 31, 2003, raising substantial doubt about our
ability to continue as a going concern

The accompanying consolidated financial statements have been prepared under the
assumption that we will continue to operate as a going concern. We have incurred
losses from inception, have an accumulated deficit and have experienced negative
cash flows from operations since inception. These matters raise substantial
doubt about our ability to continue as a going concern.

We will require additional capital to fund our operations. We intend to secure
substantial additional financing in the near future to adequately fund our
operations for the foreseeable future. However, there can be no assurance that
capital, if any, will be available to us on acceptable terms.

The accompanying consolidated financial statements do not include any
adjustments that may result from the outcome of this uncertainty.

We have a limited operating history, making it difficult for you to evaluate our
business and your investment

We formally launched our products and services in 2003. We have minimal revenues
from services. We therefore still have a very limited operating history upon
which you may evaluate our operations and future prospects, as well as limited
insights into emerging trends that may affect our business. Additionally, the
income potential of our business and from our markets is unproven. Because of
the emerging nature of the industry, our executives have limited experience in
it. As a young company operating in an emerging market, we face risks and
uncertainties relating to our ability to implement our business plan
successfully. You must consider these risks, uncertainties and difficulties in
evaluating our potential for future profitability.

Our quarterly financial results will continue to fluctuate making it difficult
to forecast our operating results

Our quarterly operating results have fluctuated in the past and we expect our
revenues and operating results may vary significantly from quarter to quarter
due to a number of factors, many of which are beyond our control, including:

        o Variability in demand and usage for our product and services;

        o Market acceptance of new and existing services offered by us, our
          competitors and potential competitors; and

        o Governmental regulations affecting the use of the Internet, including
          regulations concerning intellectual property rights and security
          features.

Our limited operating history and unproven business model further contribute to
the difficulty of making meaningful quarterly comparisons. Our current and
future levels of expenditures are based primarily on our growth plans and
estimates of expected future revenues. Such expenditures are primarily fixed in
the short term and our sales cycle can be lengthy. Accordingly, we may not be
able to adjust spending or generate new revenue sources timely to compensate for
any shortfall in revenues. If our operating results fall below the expectation
of investors, our stock price will likely decline significantly.



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<PAGE>

We need to raise additional capital in the future, and if we are unable to
secure adequate funds on terms acceptable to us, we will be unable to execute
our business plan and current stockholders may experience significant dilution.

As of December 31, 2003, we had approximately $300,000 in cash. Our existing
cash is insufficient to fund our operations and meet our working capital and
capital expenditure requirements for 2004. Accordingly, we are unable to fund
operating and other expenses, working capital and capital expenditures from our
operations and we find it necessary to secure additional financing. There can be
no assurance that we will be able to obtain such financing on acceptable terms,
or at all. If adequate funds are not available or are not available on
acceptable terms, we may not be able to pursue our business objectives. This
inability could seriously harm our business, results of operations and financial
condition.

Furthermore, the Company is in default on its note payable to a former
shareholder of its wholly owned subsidiary. The note payable is secured by
2,500,000 shares of such subsidiary's common stock. The Company requires
substantial additional financing for the development and marketing of its
existing and future products and services. The Company intends to secure
substantial additional financing in the near future. There are no assurances
that the Company will obtain sufficient additional financing, that such
financing terms will be satisfactory to the Company and that the Company's
operations will be profitable in the foreseeable future. If the Company does not
secure substantial additional funding to meet its liabilities, including the
aforementioned note payable, it may have to issue additional shares of its
subsidiary's common stock.

If additional funds are raised through the issuance of equity or convertible
debt securities, the percentage ownership of our current stockholders will be
reduced and these securities may have rights and preferences superior to that of
our current stockholders. If we raise capital through debt financing, we may be
forced to accept restrictions affecting our liquidity, including restrictions on
our ability to incur additional indebtedness or pay dividends.

Because we expect to continue to incur net losses, we may not be able to
implement our business strategy and the price of our stock may decline.

As of December 31, 2003, we had an accumulated deficit of approximately $5.4
million. We have incurred net losses quarterly from inception through December
31, 2003, and we expect to continue to incur net losses for the foreseeable
future.

Accordingly, our ability to operate our business and implement our business
strategy may be hampered by negative cash flows in the future, and the value of
our stock may decline as a result. Our capital requirements may vary materially
from those currently planned if, for example, we incur unforeseen capital
expenditures, unforeseen operating expenses or make investments to maintain our
competitive position. If this is the case, we may have to delay or abandon some
or all of our development plans or otherwise forego market opportunities. We
will need to generate significant additional revenues to be profitable in the
future and we may not generate sufficient revenues to be profitable on either a
quarterly or annual basis in the future. To address the risks and uncertainties
facing our business strategy, we must, among other things:

        o Achieve broad customer adoption and acceptance of our products and
          services;

        o Successfully raise additional capital in the future;

        o Successfully integrate, leverage and expand our sales force;

        o Successfully scale our current operations;

        o Implement and execute our business and marketing strategies;

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<PAGE>

        o Address intellectual property rights issues that effect our business;

        o Develop and maintain strategic relationships to enhance the
          development  and  marketing  our existing and new products and
          services; and

        o Respond to competitive developments in the digital media
          infrastructure industry.

We might not be successful in achieving any or all of these business objectives
in a cost-effective manner, if at all, and the failure to achieve these could
have a serious adverse impact on our business, results of operations and
financial position. Each of these objectives may require significant additional
expenditures on our part. Even if we ultimately do achieve profitability, we may
not be able to sustain or increase profitability, we may not be able to sustain
or increase profitability on a quarterly or annual basis.

Our success is dependent on the performance and retention of our executive
officers and key employees

Our business and operations are substantially dependent on the performance of
our executive officers and key employees, including Richard Bennett, Robert
Walters, and Roger Dunavant, all of whom are employed on an at-will basis and
have worked together for only a relatively short period of time. We do not
maintain "key person" life insurance on any of our executive officers. The loss
of one or several executives could seriously harm our business. Any
reorganization or reduction in the size of our employee base could harm our
ability to attract and retain other valuable employees critical to the success
of our business.


We are dependent on the development and the rate of adoption of multimedia
broadcasts and the delay or failure of this development would seriously harm our
business.

We are dependent on the development and the rate of adoption of multimedia
broadcast services and applications and the delay or failure of this development
would seriously harm our business. The development of commercial services and
applications for multimedia content is in its relatively early stages. If the
Internet does not develop as an effective medium for the distribution of digital
media content to consumers or if businesses predicated on the distribution of
multimedia content are not profitable or are unable to raise necessary operating
capital, then we may not succeed in executing our business plan. Many factors
could inhibit the growth of the distribution of multimedia content, including
concerns about the profitability of Internet-related businesses, uncertainty
about intellectual property rights associated with multimedia, bandwidth
constraints, piracy and privacy.

Our success depends on users having access to the necessary hardware, software
and bandwidth, or data transmission capability, to receive and broadcast high
quality digital media over the Internet. Congestion over the Internet and data
loss may interrupt audio and video streams, resulting in unsatisfying user
experiences. The success of multimedia distribution over the Internet depends on
the continued rollout of broadband access to consumers on an affordable basis.
Widespread adoption of multimedia technology depends on overcoming obstacles to
the deployment and use of digital media software, identifying additional viable
revenue models for digital media-based businesses, improving audio and video
quality and educating customers and users in the use of digital media
technology. If digital media technology fails to overcome these obstacles, our
business could be seriously harmed.

Because digital recorded music formats, such as MP3, do not always contain
mechanisms for tracking the source of ownership of digital recordings, users are
able to download and distribute unauthorized or "pirated" copies of copyrighted
recorded music over the Internet. This piracy is a significant concern to record
companies and artists are reluctant to digitally deliver their recorded music
over the Internet. As long as pirated recordings are available, many consumers
will choose free pirated recordings rather than paying for legitimate
recordings. Accordingly, if this issue is not addressed, our business might be
harmed.

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We depend on a limited number of customers for a majority of our revenues so the
loss of, or delay in payment from, one or a small number of customers could have
a significant impact on our revenues and operating results.

A limited number of customers have accounted for a majority of our revenues and
may continue to do so for the foreseeable future. Additionally, a majority of
our 2003 revenues were from related parties. During 2003, three of our customers
accounted for approximately 79% of our net revenues. We believe that a small
number of customers may continue to account for a significant percentage of our
revenues for the foreseeable future. Furthermore, we cannot successfully
accomplish our business objectives by relying solely on our existing customer
base. Due to high revenue concentration among a limited number of customers, the
cancellation, reduction or delay of a large customer order or our failure to
timely complete or deliver a project during a given quarter is likely to
significantly reduce revenues. In addition, if any significant customer fails to
pay amounts it owes us, or does not pay those amounts on time, our revenues and
operating results could suffer. If we are unsuccessful in increasing and
broadening our customer base, our business will be harmed.

Average selling prices of our products and services may decrease, which may harm
our gross margins

The average selling prices of our products and services may be lower than
expected as a result of competitive pricing pressures, promotional programs and
customers who negotiate price reductions in exchange for longer term purchase
commitments or otherwise. The pricing of services sold to our customers depends
on the duration of the agreement, the specific requirements of the order,
purchase volumes, the sales and service support and other contractual
agreements. We expect to experience pricing pressure and anticipate that the
average selling prices and gross margins for our products may decrease over
product life cycles. We may not be successful in developing and introducing on a
timely basis new products with enhanced features and services that can be sold
at higher gross margins.

We may be liable or alleged to be liable to third parties for video, music,
software, and other content that we encode, distribute, or make available to our
customers

We may be liable or alleged to be liable to third parties for video, music,
software, and other content that we encode, distribute, or make available to our
customers:

        o If the content or the performance of our services violates third party
          copyright, trademark, or other intellectual property rights;

        o If our customers violates the intellectual property rights of others
          by providing content to us or by having us perform digital media
          services; or

        o If content that we encode or otherwise handle for our customers is
          deemed obscene, indecent, or defamatory.

Any alleged liability could harm our business by damaging our reputation,
requiring us to incur legal costs in defense, exposing us to awards of damages
and costs and diverting management's attention which could have an adverse
effect on our business, results of operations and financial condition. Our
customers generally agree to hold us harmless from claims arising from their
failure to have the right to encode or distribute multimedia software and other
content given to us for that purpose. However, customers may contest this
responsibility or not have sufficient resources to defend claims and we have
limited insurance coverage for claims of this nature.

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<PAGE>

Because we host, stream and deploy audio and video content on or from our Web
sites for customers and provide services related to digital media content, we
face potential liability or alleged liability for negligence, infringement of
copyright, patent, or trademark rights, defamation, indecency and other claims
based on the nature and content of the materials we host. Claims of this nature
have been brought and sometimes successfully pressed, against content
distributors. In addition, we could be exposed to liability with respect to the
unauthorized duplication of content or unauthorized use of other parties'
proprietary technology. Any imposition of liability that is not covered by
insurance or is in excess of insurance coverage or any alleged liability could
harm our business.

We cannot assure you that third parties will not claim infringement by us with
respect to past, current, or future technologies. We expect that participants in
our markets will be increasingly subject to infringement claims as the number of
services and competitors in our industry segment grows. In addition, these risks
are difficult to quantify in light of the continuously evolving nature of laws
and regulations governing the Internet. Any claim relating to proprietary
rights, whether meritorious or not, could be time-consuming, result in costly
litigation, cause service upgrade delays or require us to enter into royalty or
licensing agreements, and we can not assure you that we will have adequate
insurance coverage or that royalty or licensing agreements will be available on
terms acceptable to us or at all.

We cannot be certain that we will be able to protect our intellectual property,
and we may be found to infringe on proprietary rights of others, which could
harm our business

Our intellectual property is critical to our business, and we seek to protect
our intellectual property through copyrights, trademarks, patents, trade
secrets, confidentiality provisions in our customer, supplier, potential
investors, and strategic relationship agreements, nondisclosure agreements with
third parties, and invention assignment agreements with our employees and
contractors. We cannot assure you that measures we take to protect our
intellectual property will be successful or that third parties will not develop
alternative solutions that do not infringe upon our intellectual property.

In addition, we could be subject to intellectual property infringement claims by
others. Potential customers may be deterred from distributing content over the
Internet for fear of infringement claims. If, as a result, potential customers
forego distributing traditional media content over the Internet, demand for our
digital media services and applications could be reduced which would harm our
business. Claims against us, and any resultant litigation, should it occur in
regard to any of our digital media services and applications, could subject us
to significant liability for damages including treble damages for willful
infringement. In addition, even if we prevail, litigation could be
time-consuming and expensive to defend and could result in the diversion of our
time and attention. Any claims from third parties may also result in limitations
on our ability to use the intellectual property subject to these claims.
Further, we plan to offer our digital media services and applications to
customers worldwide including customers in foreign countries that may offer less
protection for our intellectual property than the United States. Our failure to
protect against misappropriation of our intellectual property, or claims that we
are infringing the intellectual property of third parties could have a negative
effect on our business, revenues, financial condition and results of operations.

We will rely on strategic relationships to promote our services and for access
to licensed technology; if we fail to develop, maintain or enhance these
relationships, our ability to serve our customers and develop new services and
applications could be harmed

Our ability to provide our services to users of multiple technologies and
platforms depends significantly on our ability to develop, maintain or enhance
our strategic relationships with key streaming media technology companies and
content providers. We will rely on these relationships for licensed technology
and content. Obtaining comprehensive multimedia content licenses is challenging,
as doing so may require us to obtain copyright licenses with various third
parties in the fragmented multimedia recording and publishing industries. These

                                       20

<PAGE>

copyrights often address differing activities related to the delivery of digital
media, including reproduction and performance, some of which may require
separate licensing arrangements from various rights holders such as publishers,
content providers, artists and record labels. The effort to obtain the necessary
rights by such third parties is often significant, and could disrupt, delay, or
prevent us from executing our business plans. Because of the large number of
potential parties from which we must obtain licenses, we may never be able to
obtain a sufficient number of licenses to allow us to provide services that will
meet our customers' expectations.

Due to the evolving nature of our industry, we will need to develop additional
relationships to adapt to changing technologies and standards and to work with
newly emerging companies with whom we do not have pre-existing relationships. We
cannot be certain that we will be successful in developing new relationships or
that our partners will view these relationships as significant to their own
business or that they will continue their commitment to us in the future. If we
are unable to maintain or enhance these relationships, we may have difficulty
strengthening our technology development and increasing the adoption of our
brand and services.

Competition may decrease our market share, revenues, and gross margins

We face intense and increasing competition in the multimedia broadcast market.
If we do not compete effectively or if we experience reduced market share from
increased competition, our business will be harmed. In addition, the more
successful we are in the emerging market for multimedia broadcast services, the
more competitors are likely to emerge. Furthermore, the rapid deployment of
broadband technology in North America and overseas erodes our value statement
and may hamper our sales efforts. We believe that the principal competitive
factors in our market include:

        o Service functionality, quality and performance;

        o Ease of use, reliability and security of services;

        o Establishing a significant base of customers and distribution
          partners;

        o Ability to introduce new services to the market in a timely manner;

        o Customer service and support; and

        o Pricing.

Although we do not currently compete against any one entity with respect to all
aspects of multimedia broadcast products and services, there are various
competitors that provide various products and services in the following
categories:

        o Web conferencing, which provides online meeting functionalities

        o Web casting, which provides one to many presentation functionalities

        o Collaboration, which provides for document and application sharing as
          well as user interactivity

        o Live Video and streaming multimedia

        o Hosted services

        o Training, which provides e-learning applications

        o On-premise software

Our primary competitors are Internet broadcasters, such as WebEx. Each of these
companies provide services similar to ours and each has a well-established
market presence. We also compete with providers of traditional communications
technologies, such as teleconferencing and videoconferencing, as well as
applications software and tools companies, such as Centra Software, Microsoft
(NetMeeting and Placeware), ON24, Intercall, First Virtual Communications, and

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<PAGE>

Raindance Communications. There are also smaller competitors that focus on
certain of our individual market segments, such as investor relations Webcasts.

There are a number of companies that provide outsourced digital media services.
As the multimedia broadcast market continues to develop, we expect to see
increased competition from traditional telecommunication service providers or
resellers of those services. We also face competition from the in-house encoding
services, streaming networks and content management systems and encoding
services.

All of our competitors have substantially more capital, longer operating
histories, greater brand recognition, larger customer bases and significantly
greater financial, technical and marketing resources than we do. These
competitors may also engage in more extensive development of their technologies,
adopt more aggressive pricing policies and establish more comprehensive
marketing and advertising campaigns than we can. Our competitors may develop
products and service offerings that we do not offer or that are more
sophisticated or more cost effective than our own. For these and other reasons,
our competitors' products and services may achieve greater acceptance in the
marketplace than our own, limiting our ability to gain market share and customer
loyalty and to generate sufficient revenues to achieve a profitable level of
operations. Our failure to adequately address any of the above factors could
harm our business and operating results.

Our industry is experiencing consolidation that may intensify competition

The Internet and multimedia broadcast services industries are undergoing
substantial change that has resulted in increasing consolidation and a
proliferation of strategic transactions. Many companies in these industries have
been going out of business or are being acquired by larger entities. As a
result, we are increasingly competing with larger competitors that have
substantially greater resources than we do. We expect this consolidation and
strategic partnering to continue. Acquisitions or strategic relationships could
harm us in a number of ways. For example:

        o Competitors could acquire or enter into relationships with companies
          with which we have strategic relationships and discontinue our
          relationship, resulting in the loss of distribution opportunities for
          our products and services or the loss of certain enhancements or
          value-added features to our products and services;

        o Competitors could obtain exclusive access to desirable multimedia
          content and prevent that content from being available in certain
          formats, thus decreasing the use of our products and services to
          distribute and experience the content that audiences most desire, and
          hurting our ability to attract customers;

        o A competitor could be acquired by a party with significant resources
          and experience that could increase the ability of the competitor to
          compete with our products and services; and

        o Other companies with related interests could combine to form new,
          formidable competition, which could preclude us from obtaining access
          to certain markets or content; or which could dramatically change the
          market for our products and services.

Any of these results could put us at a competitive disadvantage that could cause
us to lose customers, revenue and market share. They could also force us to
expend greater resources to meet the competitive threat, which could also harm
our operating results.




                                       22

<PAGE>

If we fail to enhance our existing services and applications products or develop
and introduce new multimedia broadcast services, applications and features in a
timely manner to meet changing customer requirements and emerging industry
trends or standards, our ability to grow our business will suffer

The market for multimedia broadcast service solutions is characterized by
rapidly changing technologies and short product life cycles. These market
characteristics are heightened by the emerging nature of the Internet and the
continuing trend of companies from many industries to offer Internet-based
applications and services. The widespread adoption of the new Internet,
networking, streaming media, or telecommunications technologies or other
technological changes could require us to incur substantial expenditures to
modify or adapt our operating practices or infrastructure. Our future success
will depend in large part upon our ability to:

        o Identify and respond to emerging technological trends in the market;

        o Enhance our products by adding innovative features that differentiate
          our digital media services and applications from those of our
          competitors;

        o Acquire and license leading technologies;

        o Bring multimedia broadcast services and applications to market and
          scale our  business on a timely  basis at  competitive prices; and

        o Respond effectively to new technological changes or new product
          announcements by others.

We will not be competitive unless we continually introduce new services and
applications or enhancements to existing services and applications that meet
evolving industry standards and customer needs. In the future, we may not be
able to address effectively the compatibility and interoperability issues that
arise as a result of technological changes and evolving industry standards. The
technical innovations required for us to remain competitive are inherently
complex, require long development schedules and are dependent in some cases on
sole source suppliers. We will be required to continue to invest in research and
development in order to attempt to maintain and enhance our existing
technologies and products, but we may not have the funds available to do so.
Even if we have sufficient funds, these investments may not serve the needs of
customers or be compatible with changing technological requirements or
standards. Most development expenses must be incurred before the technical
feasibility or commercial viability of new or enhanced services and applications
can be ascertained. Revenue from future services and applications or
enhancements to services and applications may not be sufficient to recover the
associated development costs.

The technology underlying our services and applications is complex and may
contain unknown defects that could harm our reputation, result in product
liability or decrease market acceptance of our services and applications

The technology underlying our multimedia broadcast services and applications are
complex and include software that is internally developed and software licensed
from third parties. These software products may contain errors or defects,
particularly when first introduced or when new versions or enhancements are
released. We may not discover software defects that affect our current or new
services and applications or enhancements until after they are sold.
Furthermore, because our digital media services are designed to work in
conjunction with various platforms and applications, we are susceptible to
errors or defects in third-party applications that can result in a lower quality
product for our customers. Because our customers depend on us for digital media
management, any interruptions could:

        o Damage our reputation;

        o Cause our customers to initiate product liability suits against us;

                                       23

<PAGE>

        o Increase our product development resources;

        o Cause us to lose revenues; and

        o Delay market acceptance of our digital media services and
          applications.

We do not possess product liability insurance, and our errors and omissions
coverage is not likely to be sufficient to cover our complete liability
exposure.

Our business will suffer if our systems fail or our third-party facilities
become unavailable

A reduction in the performance, reliability and availability of our systems and
network infrastructure may harm our ability to distribute our products and
services to our customers and other users, as well as harm our reputation and
ability to attract and retain customers and content providers. Our systems and
operations are susceptible to, and could be damaged or interrupted by, outages
caused by fire, flood, power loss, telecommunications failure, Internet
breakdown, earthquake and similar events. We may not have any redundancy in our
Internet multimedia broadcasting facilities and therefore any damage or
destruction to these would significantly harm our multimedia broadcasting
business. Our systems are also subject to human error, security breaches, power
losses, computer viruses, break-ins, "denial of service" attacks, sabotage,
intentional acts of vandalism and tampering designed to disrupt our computer
systems, Web sites and network communications. This could lead to slower
response times or system failures.

Our operations also depend on receipt of timely feeds from our content
providers, and any failure or delay in the transmission or receipt of such feeds
could disrupt our operations. We also depend on Web browsers, ISPs and online
service providers to provide access over the Internet to our product and service
offerings. Many of these providers have experienced significant outages or
interruptions in the past, and could experience outages, delays and other
difficulties due to system failures unrelated to our systems. These types of
interruptions could continue or increase in the future.

Our digital distribution activities are managed by sophisticated software and
computer systems. We must continually develop and update these systems over time
as our business and business needs grow and change, and these systems may not
adequately reflect the current needs of our business. We may encounter delays in
developing these systems, and the systems may contain undetected errors that
could cause system failures. Any system error or failure that causes
interruption in availability of products or content or an increase in response
time could result in a loss of potential or existing business services
customers, users, advertisers or content providers. If we suffer sustained or
repeated interruptions, our products, services and Web sites could be less
attractive to such entities or individuals and our business could be harmed.

Significant portions of our business are dependent on providing customers with
efficient and reliable services to enable customers to broadcast content to
large audiences on a live or on-demand basis. Our operations are dependent in
part upon transmission capacity provided by third-party telecommunications
network providers. Any failure of such network providers to provide the capacity
we require may result in a reduction in, or interruption of, service to our
customers. If we do not have access to third-party transmission capacity, we
could lose customers and, if we are unable to obtain such capacity on terms
commercially acceptable to us our business and operating results could suffer.

Our computer and communications infrastructure is located at a single leased
facility in Atlanta, Georgia. We do not have fully redundant systems, and we may
not have adequate business interruption insurance to compensate us for losses
that may occur from a system outage. Despite our efforts, our network
infrastructure and systems could be subject to service interruptions or damage
and any resulting interruption of services could harm our business, operating
results and reputation.

                                       24

<PAGE>

Because our principal stockholders and management may have the ability to
control a significant percentage of stockholder votes, the premium over market
price that an acquiror might otherwise pay may be reduced and any merger or
takeover may be prevented or delayed

 Our officers and directors beneficially own or control the voting of
approximately 57% of our outstanding common stock. As a result, these
stockholders, acting together, have the ability to substantially influence all
matters submitted to our stockholders for approval, including:

        o Election or removal of our Board of Directors;

        o Amendment of our certificate of incorporation or bylaws;

        o Adoption of measures that could delay or prevent a change in control
          or impede a merger, takeover or other business combination involving
          us; and

        o Adoption of stock-based compensation plans.

These stockholders have substantial influence over our management and our
affairs. Accordingly, this concentration of ownership may have the effect of
impeding a merger, consolidation, takeover or other business consolidation
involving us, or discouraging a potential acquirer from making a tender offer
for our shares. This concentration of ownership could also adversely affect our
stock's market price or lessen any premium over market price that an acquiror
might otherwise pay.

Government regulation could adversely affect our business prospects

We do not know with certainty how existing laws governing issues such as
property ownership, copyright and other intellectual property issues, taxation,
illegal or obscene content, retransmission of media, personal privacy and data
protection will apply to the Internet or to the distribution of multimedia and
other proprietary content over the Internet. Most of these laws were adopted
before the advent of the Internet and related technologies and therefore do not
address the unique issues associated with the Internet and related technologies.
Depending on how these laws developed and are interpreted by the judicial
system, they could have the effect of:

        o Limiting the growth of the Internet;

        o Creating uncertainty in the marketplace that could reduce demand for
          our products and services;

        o Increasing our cost of doing business;

        o Exposing us to significant liabilities associated with content
          distributed or accessed through our products or services; or

        o Leading to increased product and applications development costs, or
          otherwise harm our business.

Specifically with respect to one aspect of copyright law, on October 28, 1998,
the Digital Millennium Copyright Act (or "DMCA") was enacted. The DMCA includes
statutory licenses for the performance of sound recordings and for the making of
recordings to facilitate transmissions. Under these statutory licenses,
depending on our future business activities, the Company and its customers may
be required to pay licensing fees in connection with digital sound recordings we
deliver or our customers provide on their Web site and through retransmissions
of radio broadcasts and/or other audio content. A Copyright Arbitration Royalty
Panel has determined that, for eligible non-subscription services, sound
recording performance rates should be $0.0014 per performance for the period
October 1998-2000, with a surcharge of 9% of the total performance fee for the
ephemeral copies used to facilitate such performances. However, that decision is
subject to review and revision by the U.S. Copyright Office, and several appeal
petitions have been filed. Furthermore, the Copyright Office's review is subject
to an appeal to a Federal Court of Appeals. The fees for the same types of

                                       25

<PAGE>

transmissions offered on a subscription basis have not been determined and will
be the subject of another Copyright Arbitration Royalty Panel proceeding, as
will fees for digital phono-record deliveries pursuant to the "mechanical
license" provisions of the U.S. Copyright Act. Depending on the rates and terms
adopted for the statutory licenses, our business could be harmed both by
increasing our own cost of doing business, and by increasing the cost of doing
business for our customers.

Because of this rapidly evolving and uncertain regulatory environment, both
domestically and internationally, we cannot predict how existing or proposed
laws and regulations might affect our business. In addition, these uncertainties
make it difficult to ensure compliance with the laws and regulations governing
digital music. These laws and regulations could harm us by subjecting us to
liability or forcing us to change our business.

Quantitative and Qualitative Disclosures about Market Risk

We provide Internet multimedia broadcast product and services. Our financial
results could be affected by factors such as changes in interest rates and
fluctuations in the stock market. All sales are currently made in U.S. dollars;
a strengthening of the dollar could make our services less competitive in
foreign markets. We do not use derivative instruments to hedge our risks. Due to
the limited duration of our short-term investments and their investment grade
level, we anticipate no material market risk exposure. Therefore, no
quantitative tabular disclosures are presented.



                                       26
<PAGE>


Item 7.  Consolidated Financial Statements



                          SMARTVIDEO TECHNOLOGIES INC.

                   Index to Consolidated Financial Statements


       Independent Auditors' Report.......................................28
       Consolidated Balance Sheet.........................................29
       Consolidated Statements of Operations..............................30
       Consolidated Statements of Changes in Shareholders' Deficit........31
       Consolidated Statements of Cash Flows..............................32
       Notes to Consolidated Financial Statements.........................34



                                       27
<PAGE>


                          INDEPENDENT AUDITORS' REPORT




To the Board of Directors
SmartVideo Technologies, Inc.


We have audited the accompanying consolidated balance sheet of SmartVideo
Technologies, Inc. as of December 31, 2003, and the related consolidated
statements of operations, changes in shareholders' deficit, and cash flows for
the years ended December 31, 2003 and 2002. These consolidated 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 audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit 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 SmartVideo
Technologies, Inc. as of December 31, 2003, and the results of its operations
and its cash flows for the years ended December 31, 2003 and 2002, in conformity
with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has suffered recurring losses
from operations and a working capital deficiency that raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in this regard are also discussed in Note 3. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.


                                                  /s/ SHERB & CO., LLP
                                                  CERTIFIED PUBLIC ACCOUNTANTS

New York, New York
March 25, 2004




                                       28
<PAGE>




30

                          SMARTVIDEO TECHNOLOGIES, INC.

                           Consolidated Balance Sheet


                                                          December 31,
                                                              2003
                                                         ---------------

                                     ASSETS

CURRENT ASSETS
 Cash                                                    $    297,998
 Accounts receivable                                           30,321
 Accounts receivable from related parties                      25,260
                                                          -----------
     Total current assets                                     353,579

PROPERTY AND EQUIPMENT, net of accumulated
 depreciation of $24,664                                       88,730

OTHER ASSETS                                                   10,000
                                                          -----------
      TOTAL ASSETS                                       $    452,309
                                                          ===========

                      LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES
 Accounts payable and accrued expenses                   $    508,849
 Convertible promissory notes and related
  accrued interest                                            251,699
 Due to related parties                                        12,575
 Note payable and related accrued interest                    173,901
 Note payable to related party and related
  accrued interest                                            317,442
 Loan payable and related accrued interest                     54,229
                                                          -----------
       Total current liabilities                            1,318,695

SHAREHOLDERS' DEFICIT
 Preferred stock, $.001 par value, 12,000,000
  shares authorized, 12,000,000 shares issued
  and outstanding as of December 31, 2003                      12,000
 Common stock, $.001 par value, 50,000,000
  shares authorized, 8,912,991 shares issued
  and outstanding as of December 31, 2003                       8,913
 Additional paid-in capital                                 4,533,253
 Accumulated deficit                                       (5,420,552)
                                                          -----------
       Total shareholders' deficit                           (866,386)
                                                          -----------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT              $    452,309
                                                          ===========

        The accompanying notes are an integral part of these statements.

                                       29
<PAGE>




                          SMARTVIDEO TECHNOLOGIES, INC.

                      Consolidated Statements of Operations




                                                  For the Years Ended
                                                      December 31,
                                                 ----------------------
                                                2003              2002
                                              --------          --------
Revenues                                   $    41,019        $   2,750
Revenues-related party                          22,432             -
                                             ---------          -------
Net Revenues                                    63,451            2,750

Cost of Revenues                               303,757             -
                                             ---------          -------
Gross Margin                                  (240,306)           2,750


Operating Expenses
 Research and development                      150,882             -
 Sales and general and administrative        1,454,364          288,781
 Service fees                                     -             240,000
 Amortization of deferred compensation       1,316,250           79,125
 Depreciation                                   17,501            3,480
                                             ---------          -------
       Total operating expenses              2,938,997          611,386
                                             ---------          -------
          Loss from operations              (3,179,303)        (608,636)
                                             ---------          -------
OTHER EXPENSE
 Interest expense                             (679,838)         (80,840)
                                             ---------          -------

       Total other expense                    (679,838)         (80,840)
                                             ---------          -------
NET LOSS                                   $(3,859,141)       $(689,476)
                                            ==========         ========

LOSS PER SHARE
 Basic and diluted net loss per share      $     (0.51)       $   (0.17)
                                            ==========         ========
Weighted average common shares used to
 compute basic and diluted net
 loss per share                              7,540,849        4,127,243
                                            ==========        =========










        The accompanying notes are an integral part of these statements.

                                       30
<PAGE>


            SMARTVIDEO TECHNOLOGIES, INC.

   Consolidated Statements of Changes in Shareholder's Deficit

  For the Period from January 1, 2002 through December 31, 2003
<TABLE>
<CAPTION>

                                               Preferred Stock           Common Stock
                                            ----------------------   ----------------------  Additional   Accumulated
                                             Shares      Par Value    Shares       Par Value   Paid-in       Deficit
                                                                                              Capital
                                           ---------------------------------------------------------------------------
<S>              <C>                                   <C>            <C>       <C>         <C>          <C>
Balance, January 1, 2002                        -      $     -        3,500,000 $     3,500 $   626,500  $   (871,935)
 Issuance of common stock for
  services at a price of $0.18 per
  share in October 2002                         -            -        1,333,333       1,333     238,667          -
 Conversion of OVT, Inc. common
  stock to preferred stock on the
  acquisition of the Armagh
  Group, Inc. in November 2002            12,000,000       12,000    (4,833,333)     (4,833)   (157,167)         -
 Issuance of common stock in the
  acquisition of the Armagh
  Group, Inc. in November 2002                  -            -        6,949,396       6,949   1,315,956          -
 Amortization of deferred compensation          -            -             -           -           -             -
 Beneficial conversion feature on
  issuance of convertible promssory notes       -            -             -           -         60,000          -
 Net Loss                                       -            -             -           -           -         (689,476)
                                          ----------       ------     ---------       -----   ---------     ---------
Balance, December 31, 2002                12,000,000       12,000     6,949,396       6,949   2,083,956    (1,561,411)
 Issuance of common stock for
  cash at a price of $1 per share               -            -        1,631,666       1,632   1,630,034          -
 Issuance of common stock as
  additional consideration related
  to rights of convertible
  promissory notes                              -            -           53,000          53     177,497          -
 Issuance of common stock in lieu
  of payment of advances payable
  to a shareholder                              -            -           55,000          55     166,045          -
 Issuance of common stock
  pursuant to conversion of
  convertible debt                              -            -          223,929         224     167,721          -
 Amortization of deferred compensation          -            -             -           -           -             -
 Beneficial conversion feature on
  issuance of convertible
  promissory notes                              -            -             -           -        308,000          -
 Net Loss                                       -            -             -           -           -       (3,859,141)
                                          ----------       ------     ---------       -----   ---------     ---------
Balance, December 31, 2003                12,000,000   $   12,000     8,912,991 $     8,913 $ 4,533,253  $ (5,420,552)
                                          ==========       ======     =========       =====   =========     ==========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       31

<PAGE>

            SMARTVIDEO TECHNOLOGIES, INC.

   Consolidated Statements of Changes in Shareholder's Deficit

  For the Period from January 1, 2002 through December 31, 2003

                                            (Restated)
                                             Deferred      Treasury   (Restated)
                                           Compensation     Stock       Total
                                          -------------   ----------  ----------
Balance, January 1, 2002                 $      -       $  (150,000) $ (391,935)
 Issuance of common stock for
  services at a price of $0.18 per
  share in October 2002                         -              -        240,000
 Conversion of OVT, Inc. common
  stock to preferred stock on the
  acquisition of the Armagh
  Group, Inc. in November 2002                  -           150,000        -
 Issuance of common stock in the
  acquisition of the Armagh
  Group, Inc. in November 2002            (1,395,375)          -        (72,470)
 Amortization of deferred compensation        79,125           -         79,125
 Beneficial conversion feature on
  issuance of convertible promssory notes       -              -         60,000
 Net Loss                                       -              -       (689,476)
                                           ---------        -------     -------
Balance, December 31, 2002                (1,316,250)          -       (774,756)
 Issuance of common stock for
  cash at a price of $1 per share               -              -      1,631,666
 Issuance of common stock as
  additional consideration related
  to rights of convertible
  promissory notes                              -              -        177,550
 Issuance of common stock in lieu
  of payment of advances payable
  to a shareholder                              -              -        166,100
 Issuance of common stock
  pursuant to conversion of
  convertible debt                              -              -        167,945
 Amortization of deferred compensation     1,316,250           -      1,316,250
 Beneficial conversion feature on
  issuance of convertible
  promissory notes                              -              -        308,000
 Net Loss                                       -              -     (3,859,141)
                                           ---------        -------   ---------
Balance, December 31, 2003               $      -       $      -     $ (866,386)
                                           =========        =======   ==========


        The accompanying notes are an integral part of these statements.

                                       31


<PAGE>

                          SMARTVIDEO TECHNOLOGIES, INC.

                      Consolidated Statements of Cash Flows




                                                  For the Years Ended
                                                      December 31,
                                                 ----------------------
                                                2003              2002
                                              --------          --------

CASH FLOWS FROM OPERATING ACTIVITIES
 Net loss                                    $(3,859,141)      $(689,476)
 Adjustments to reconcile net loss to net
  cash used in operating activities:
  Issuance of common stock for services             -            240,000
  Additional consideration related to
   rights of convertible promissory notes        177,550            -
  Beneficial conversion feature of
   convertible debt                              308,000          60,000
  Excess of fair value of stock issued to
   individuals in repayment of advance
   from shareholder                              116,240            -
  Depreciation                                    17,501           3,480
  Amortization of deferred compensation        1,316,250          79,125
  Increase in accounts receivable                (30,321)           -
  Increase in accounts receivable from
   related parties                               (25,260)           -
  Increase in advance from shareholders           36,010          31,273
  Increase in accrued interest on notes
   payable                                        42,734          17,258
  Increase in accounts payable and accrued
   expenses                                      370,289          73,490
                                              ----------        --------
       Net cash used in operating activities  (1,530,148)       (184,850)
                                              ----------        --------
CASH FLOWS USED IN INVESTING ACTIVITY
 Purchase of equipment                          (102,981)           -
                                              ----------        --------
       Net cash used in investing activity      (102,981)           -
                                              ----------        --------
CASH FLOWS FROM FINANCING ACTIVITIES
 Issuance of common stock                      1,631,666            -
 Increase in note payable to related party          -            117,838
 Principal repayments on note payable to
  related party                                  (39,614)           -
 Issuance of convertible promissory notes        333,333          60,000
                                              ----------        --------
       Net cash provided by financing
        activities                             1,925,385         177,838
                                              ----------        --------
NET INCREASE (DECREASE) IN CASH                  292,256          (7,012)

CASH, beginning of period                          5,742          12,754
                                              ----------        --------
CASH, end of year                            $   297,998       $   5,742
                                              ==========        ========


        The accompanying notes are an integral part of these statements.
                                       32
<PAGE>

                          SMARTVIDEO TECHNOLOGIES, INC.

                Consolidated Statements of Cash Flows (Continued)




                                                  For the Years Ended
                                                      December 31,
                                                 ----------------------
                                                2003              2002
                                              --------          --------

SUPPLEMENTAL DISCLOSURE OF NON-CASH
 INVESTING AND FINANCING ACTIVITIES

Issuance of common  stock in lieu of
 repayment  of an advance
 payable to one shareholder                  $   166,100       $    -
                                              ==========        ========

Issuance of common stock pursuant to
 conversion of convertible promissory notes  $   167,945       $    -
                                              ==========        ========

  In a reverse acquisition, the Company
   acquired all of the outstanding
   capital stock of the Armagh Group, Inc.
   as of November 26, 2002. In connection
   with the reverse acquisition, liabilities
   were assumed as follows:

        Fair value                           $      -     $       54,000
        Deferred compensation                       -          1,395,375
        Common stock issued                         -         (1,382,905)
                                              -------      -------------
  Net liabilities assumed on acquisition     $      -     $       66,470
                                              ==========        ========

During 2003 and 2002, the Company paid interest of approximately $30,000 and $0,
respectively, in connection with a note payable to a related party.





        The accompanying notes are an integral part of these statements.


                                       33
<PAGE>




                          SMARTVIDEO TECHNOLOGIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002

Note 1 - Organization

SmartVideo Technologies, Inc. was incorporated in Florida on August 17, 1984,
and on December 19, 2000, changed its corporate domicile to Delaware. It's
wholly-owned subsidiary, OVT, Inc., d/b/a SmartVideo was incorporated in the
state of Georgia on August 31, 2000. The Company has developed a video
compression and processing technology enabling the delivery of Internet
multimedia broadcast content. The Company markets its products and services
primarily in the United States and Canada through multiple sales channels such
as resellers and agents and its independent sales force.

Note 2 - Restatement of Previously Issued Financial Statements

During the quarter ended March 31, 2004, the Company  re-evaluated  its 2003 and
2002  annual  financial  statements.  As a result of such  review,  the  Company
determined,  in good faith,  it applied the improper  accounting  treatment with
respect to deferred  compensation  attributable to the stock-based  compensation
generated  from the  Company's  grant of shares of its common  stock to a former
advisor in November  2002.  Consequently,  the Company is amending and restating
their December 31, 2002 annual  financial  statements,  March 31, 2003 quarterly
financial statements, June 30, 2003 quarterly financial statements and September
30, 2003 quarterly  financial  statements.  The restatement has no impact on its
2003 and 2002 consolidated  statement of operations including its net losses and
net losses per share.

In connection with the engagement of a new accounting firm and the review of the
Company's financial statements, the Company has concluded that it was preferable
to account for the value of the deferred compensation, which amounted to
approximately $1.4 million at the time of grant, as a contra-equity account
instead of a prepaid expense, as originally recorded. Accordingly, the Company
has adjusted its balance sheet at December 31, 2002, to decrease the prepaid
expenses by approximately $1,315,000 with a corresponding increase in the
deferred compensation shown as a contra-equity account. The adjustment has no
impact on the balance sheet as of December 31, 2003.

Note 3 - Significant Accounting Policies, Going Concern, and Risks and
Uncertainties

Consolidation Policy

The consolidated financial statements of the Company include the accounts of its
wholly owned subsidiary, OVT, Inc. All significant transactions and balances
between the Company and its subsidiaries have been eliminated in consolidation.

In November 2002, the shareholders of the Armagh Group, Inc. ("Armagh") approved
an exchange of preferred stock of Armagh for all of the outstanding common stock
of OVT, Inc. ("OVT"). This transaction has been accounted for as a reverse
acquisition. Under reverse acquisition accounting, OVT was considered the
accounting acquirer for financial reporting purposes and acquired the assets and
liabilities of Armagh. The acquisition was accomplished through the issuance of
12,000,000 shares of Armagh preferred shares for the 12,000,000 outstanding
shares of OVT common stock. As of the date of the reverse acquisition, Armagh
had 3,204,396 shares issued and outstanding and 3,745,000 shares which it was
contractually obligated to issue once a contemplated one-for-three reverse split
became effective for a combined total of 6,949,396 common shares. The equity
section of the balance sheet has been restated to reflect this reverse
acquisition as a recapitalization.

On January 3, 2003, by a written consent of a majority of the shareholders,
Armagh approved an amendment to effect a one-for-three reverse stock split with
effect to the outstanding common stock, the creation of the 2002 Stock Incentive
Plan and to change the name of the corporation to SmartVideo Technologies, Inc.
This reverse split did not affect the issued and outstanding preferred shares.

                                       34

<PAGE>

                          SMARTVIDEO TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 3 - Significant Accounting Policies, Going Concern, and Risks and
Uncertainties (Continued)

Cash

The Company minimizes its credit risk associated with cash by periodically
evaluating the credit quality of its primary financial institution. The balance
at times may exceed federally insured limits. At December 31, 2003, the balance
exceeded the federally insured limit by $219,554.

Accounts Receivable

Substantially all of the Company's accounts receivable are due from end-users.
Collateral is not required. Credit losses are provided for in the consolidated
financial statements. The Company has a limited history in evaluating such
credit losses. Two customers accounted for approximately 79% of gross accounts
receivable at December 31, 2003. No other customers accounted for more than 10%
of gross accounts receivable. The allowance for doubtful accounts at December
31, 2003, amounts to $0.

Property and Equipment

Property and equipment consisting primarily of computer equipment is stated at
cost. Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, which is generally three years.

Software Development Costs

Statement of Financial Accounting Standards ("SFAS") No. 86, Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise Marketed, requires
certain development costs to be capitalized upon the establishment of
technological feasibility. The establishment of technological feasibility and
the ongoing assessment of the recoverability of such costs requires considerable
judgment by management with respect to certain external factors such as
anticipated revenue, estimated economic life, and changes in software and
hardware technologies. Software development costs incurred beyond the
establishment of technological feasibility have not been significant.

Revenue Recognition

The Company markets its products and services through resellers and agents as
well as its independent sales force.

The Company typically provides its end-users with volume-based arrangements of
its Internet multimedia broadcast products and services, and in certain
circumstances, subject to minimum monthly usage. Resellers and agents are paid a
commission based on the end-user gross revenues. From time to time, the Company
sells hardware related to multimedia broadcasts to resellers.

Revenue is recognized when earned and the Company has no continuing involvement
in the delivery of products or services, which is generally when the multimedia
broadcasts are viewed or when the hardware is delivered.

Product Concentration

The Company derives a substantial portion of its revenues from one product and
related services, Internet multimedia broadcasting, and anticipates that this
product and future derivative products and product lines based upon this
technology, if any, will constitute a majority of its revenues for the
foreseeable future.

                                       35

<PAGE>

                          SMARTVIDEO TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 3 - Significant Accounting Policies, Going Concern, and Risks and
Uncertainties (Continued)

The Company could experience declines in demand for products, whether as a
result of general economic conditions, new competitive product releases, price
competition, lack of market acceptance, technological change or other factors.

Customer Concentration

The Company derives a substantial portion of its revenues from three customers
accounting for 79% of its revenues, one of which is a related party.

Cost of Revenues

Cost of revenues consists primarily of expenditures related to a third-party
data center hosting our product, located in a facility outside our main offices.
Such costs, which are generally based on the volume of bandwidth usage, include
certain minimum guaranteed payments for the use of the facilities.

Development Stage

In the prior years, the Company had been in development stage.

Going Concern

The Company has incurred recurring losses and negative cash flows since
inception. As of December 31, 2003, it had an accumulated deficit of
approximately $5.4 million and a working capital deficit of approximately
$970,000. These matters raise substantial doubt about its ability to continue as
a going concern. The ability of the Company to continue its operations is
contingent upon obtaining additional financing and attaining profitable
operations.

The Company has only recently started to market its various products. The
Company has not generated any income from operations and has no assurance of any
significant future revenues. Furthermore, the Company is in default on one of
its notes payable to a former shareholder of its wholly owned subsidiary. The
note payable is secured by 2,500,000 shares of such subsidiary's common stock.
The Company requires substantial additional financing for the development and
marketing of its existing and future products and services. The Company intends
to secure substantial additional financing in the near future. There are no
assurances that the Company's will obtain sufficient additional financing, that
such financing terms will be satisfactory to the Company and that the Company's
operations will be profitable in the foreseeable future. If the Company does not
secure substantial additional funding to meet its liabilities, including the
aforementioned note payable, it may have to issue additional shares of its
subsidiary's common stock.

Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. For purposes of evaluating the recoverability of long-lived assets,
the recoverability test is performed using undiscounted net cash flows estimated
to be generated by the asset. The Company believes it will recover the carrying
amount of its long-lived assets.

Income Taxes

The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". Under the asset and
liability method of Statement 109, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences

                                       36

<PAGE>

between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates in effect for the year in which those
temporary differences are expected to be recovered or settled.

Fair Value of Financial Instruments

Substantially all of the Company's assets and liabilities are carried at fair
value or contracted amounts that approximate fair value. Estimates of fair value
are made at a specific point in time, based on relative market information and
information about the financial instrument, specifically, the value of the
underlying financial instrument. Assets that are recorded at fair value consist
largely of other assets, which are carried at contracted amounts that
approximate fair value. Similarly, the Company's liabilities consist of
liabilities recorded at contracted amounts that approximate fair value.

Earnings Per Share

Common shares equivalents consist of shares issuable upon the exercise of
certain stock warrants and the conversion of preferred shares. The Company
excluded common share equivalents from its computation of earnings per share due
to their antidilutive effect.

Stock Splits

On January 3, 2003, the Company effected a one-for-three reverse split of the
Company's common stock.

All references to shares and share amounts, except par value per share, have
been retroactively adjusted to reflect the stock split.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Significant estimates made by management
include the provision for doubtful accounts receivable and accrued expenses.
While the Company believes that such estimates are fair when considered in
conjunction with the consolidated financial position and results of operations
as a whole, the actual amounts of these estimates, when known, will vary from
these estimates.

Recent Accounting Pronouncements

In December 2002, Statement of Financial Accounting Standards No. 148,
"Accounting for Stock-Based Compensation--Transition and Disclosure," ("SFAS
148") was issued. SFAS 148 amends Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation," ("SFAS 123") to provide
alternative methods of transition for a voluntary change to the fair value
method of accounting for stock-based employee compensation. In addition, SFAS
148 amends the disclosure requirements of SFAS 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on the reported results. The provisions of SFAS 148 are effective for
financial statements for fiscal years ending after December 15, 2002, and
interim periods beginning after December 15, 2002. The adoption of the
disclosure requirements of this statement did not impact our financial position,
results of operations or cash flows.

                                       37
<PAGE>



                          SMARTVIDEO TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 3 - Significant Accounting Policies, Going Concern, and Risks and
Uncertainties (Continued)


Recent Accounting Pronouncements (Continued)

In December 2002, the Emerging Issues Task Force issued a consensus on Issue No.
00-21, "Revenue Arrangements with Multiple Deliverables" (EITF 00-21). EITF
00-21 mandates how to identify whether goods or services or both are delivered
separately in a bundled sales or licensing arrangement should be accounted for
as separate units of accounting. The consensus is effective for revenue
arrangements entered into in reporting periods beginning after June 15, 2003.
The adoption of EITF 00-21 did not have a significant effect on our financial
position or results of operations.

In January 2003, the Financial Accounting Standards Board issued Interpretation
No. 46, "Consolidation of Variable Interest Entities," ("FIN 46"). The
interpretation provides guidance for determining when a primary beneficiary
should consolidate a variable interest entity, or equivalent structure, that
functions to support the activities of the primary beneficiary. The
interpretation is effective as of the beginning of the first interim or annual
reporting period beginning after June 15, 2003, for variable interest entities
created before February 1, 2003. The adoption of this statement is not expected
to impact our financial position, results of operations or cash flows.

In April 2003, the FASB issued SFAS Statement No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities," which amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under FASB
Statement No. 133, Accounting for Derivative instruments and Hedging Activities.
This Statement is effective for contracts entered into or modified after June
30, 2003, except for certain hedging relationships designated after June 30,
2003. Most provisions of this Statement should be applied prospectively. The
Company does not expect the adoption of SFAS No. 149 to have a material impact
on its financial statements.

In May 2003, the FASB issued SFAS Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." This
Statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). This
statement 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 beginning after June 15, 2003, except for mandatory redeemable financial
instruments of nonpublic entities, if applicable. 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 the Statement and
still existing at the beginning of the interim period of adoption. The Company
does not expect the adoption of SFAS No. 150 to have a material impact on its
financial statements.

Note 4 - Shareholders' Deficit

The authorized capital stock of the Company consists of 50,000,000 shares of
$.001 par value common stock and 12,000,000 shares of $.001 par value preferred
stock, in one or more series as determined by the Board of Directors. Each share
of preferred stock is entitled to the same voting preferences as the Company's
common stock and may be converted into one share of our common stock at any time
after November 26, 2003.

In October 2002, the Company issued 1,333,333 shares of common stock for
services rendered at a per share price of $.18 per share.


                                       38

<PAGE>

                          SMARTVIDEO TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


Note 4 - Shareholders' Deficit (continued)

In November 2002, the Company acquired OVT through the issuance of 12,000,000
shares of preferred stock to the holders of all the outstanding common stock of
OVT. This transaction has been accounted for as a reverse acquisition whereby
OVT is considered to be the accounting acquirer for financial reporting purposes
and has acquired the assets and liabilities of Armagh. Under the financial
reporting requirements of a reverse acquisition, the equity section of the
balance sheet has been restated to reflect this reverse acquisition as a
recapitalization. Since OVT is considered to be the accounting acquirer, the
transaction has been presented in the consolidated statements of changes in
shareholders' deficit as the issuance of common stock in the acquisition of the
Armagh Group, Inc. in accordance with prevailing authoritative accounting
literature.

During 2003, the Company issued 1,631,666 shares of common stock in
consideration of $1,631,666. In connection with such issuances, the Company
issued 1,216,666 warrants to certain stockholders at an exercise price of $2.50.
All warrants issued during 2003 are outstanding at December 31, 2003. The
warrants expire in 2008.

During 2003, the Company issued 55,000 shares of common stock to certain
individuals unrelated to the Company in lieu of repayment of advances payable to
an employee who is also a holder of preferred shares. The shares were valued at
$3.02 per share, the fair market value of the shares at the date of issuance.
The value of the consideration based on the number of shares issued amounted to
approximately $166,000. The advances payable to such employee amounted to
approximately $50,000. Accordingly, the additional consideration resulting from
the issuance of the shares amounted to approximately $116,000 and is recognized
as interest expense in the accompanying consolidated financial statements.

During 2003, three holders of the Company's 10% Convertible Promissory Notes
exercised their conversion rights at a conversion price of $0.75 per share of
common stock. The Company had originally received gross proceeds of $163,000
upon the issuance of these 10% Convertible Promissory Notes. A total of 223,929
shares of common stock were issued under these conversions including accrued
interest through the date of conversion. These shares of common stock were
issued as restricted shares.

During 2003, the Company's reached an agreement with two shareholders who were
originally holders of the Company's 10% Convertible Promissory Notes. Under the
terms of the agreement, the shareholders were issued a total of 53,000 shares as
additional consideration related to rights associated with such promissory
notes. The shares were valued at $3.33 per share, the fair market value of the
shares at the date of issuance. Accordingly, the additional consideration
resulting from the issuance of the shares amounted to approximately $178,000,
based on the fair value of the common stock at the date of issuance and is
recognized as interest expense in the accompanying consolidated financial
statements.




                                       39
<PAGE>




                          SMARTVIDEO TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


Note 5 - Deferred Compensation

On November 14, 2002, the Company entered into an advisory agreement with a
former outside advisor to advise the senior management regarding corporate
development strategy, the development of a short and long-term strategic plan,
and to assist in the identification and development of potential acquisition
candidates and strategic partners. Under the provisions of the agreement, the
term was for a 24-month period beginning with the acceptance of the agreement
and the advisor received 1,200,000 shares of the Company's common stock in
compensation for his services. At December 31, 2002, the unamortized portion of
the deferred compensation related to this agreement was $1,316,250. In September
2003, the Company terminated the advisory agreement prior to its expiration.
Accordingly, the Company accelerated the recognition of the unamortized portion
of deferred compensation related to this agreement during 2003. There is no
deferred compensation outstanding at December 31, 2003.

Note 6 - Promissory Notes

During 2003, three holders of the Company's 10% Convertible Promissory Notes
exercised their conversion rights at a conversion price of $0.75 per share of
common stock. The Company had originally received gross proceeds of $163,000
upon the issuance of these 10% Convertible Promissory Notes in 2002. A total of
223,929 shares of common stock were issued under these conversions including
accrued interest through the date of conversion. These shares of common stock
were issued as restricted shares

In January 2003, the Company issued four 10% convertible promissory notes
totaling $233,000. These convertible promissory notes have due dates one year
from the date of issuance but may be converted by the holders at any time prior
to that date. The conversion price under the terms of these notes is $0.75 per
share of common stock (beneficial conversion feature).

In March 2003, the Company issued one 10% convertible promissory notes totaling
$100,000. This convertible promissory note has a due date one year from the date
of issuance but may be converted by the holder at any time prior to that date.
The conversion price under the terms of this note is $0.75 per share of common
stock (beneficial conversion feature).

In December 2002, the Company issued two 10% convertible promissory notes in the
amount of $30,000 each. These convertible promissory notes have a due date of
December 20, 2003, but may be converted by the holders at any time prior to that
date. The conversion price under the terms of these notes is $0.75 per share
(beneficial conversion feature). In accordance with EITF Issue No.00-27,"
Application of Issue No. 98-5, Accounting for convertible securities with
beneficial conversion features of contingently adjustable conversion ratios, to
certain convertible instruments", the Company recorded a beneficial conversion
feature related to these notes. Under the terms of these notes, the intrinsic
value of the beneficial conversion feature was calculated assuming that the
conversion date was the same as the issue date. As of the issue date, the
beneficial conversion feature amounted to $308,000 and $60,000 for fiscal 2003
and 2002, respectively. This beneficial conversion feature is reflected in the
accompanying consolidated financial statements as additional paid-in capital and
interest expense.

Concurrent with the merger between Armagh and OVT, the Company agreed to assume
a $50,000 loan payable to a third party. The loan bears interest at 5% and is
payable on demand.

The accrued interest on the outstanding convertible promissory notes and the
loan payable amounted to approximately $22,000 and $4,000, respectively at
December 31, 2003.


                                       40

<PAGE>

                          SMARTVIDEO TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 7 - Related Party Transactions

The Company has a $325,000 note payable to an entity owned by the spouse of a
shareholder, bearing interest at 8% with principal and interest payments due as
follows:

o        $75,000 within 30 days of the funding of the Company; and

o        Monthly  principal  payments of $50,000  thereafter  plus  accrued
         interest  beginning  30 days after the initial  payment of $75,000.

The amount due under the terms of this note payable, including accrued interest,
amounted to approximately $317,000 at December 31, 2003. The Company paid
approximately $40,000 and $30,000 as principal repayments and interest,
respectively, during 2003.

The Company has a $150,000 note payable to a former shareholder of its
subsidiary in connection with a stock repurchase, bearing interest at 5.18%. The
note is secured by 2,500,000 shares of the subsidiary's common stock. The
Company is in default under the terms of such note. The amount due under the
terms of this note payable, including accrued interest of approximately $24,000,
amounted to approximately $174,000.

The Company has an advance payable to an entity owned by the spouse of a
shareholder of approximately $20,000 at December 31, 2003. The advances were
made prior to 2003. The advances are payable on demand and do not bear interest.

The Company had advances from holders of preferred shares amounting to
approximately $13,000 at December 31, 2003. One of the holders advanced
approximately $50,000 during 2003, which was satisfied by the issuance of 55,000
shares (see Note 4 - Shareholders' Deficit). Additionally, the Company repaid
approximately $13,000 to two holders of the preferred shares during 2003. The
advances are payable on demand and do not bear interest.

Until October 2002, the Company was provided the use of office facilities from a
related entity, owned by the spouse of one of the Company's shareholders, at no
cost. In October 2002, an agreement was reached with this related entity to
charge the Company rent for its share of the office facilities and common
expenses. There were no expenses accrued or charged under the terms of this
agreement prior to December 31, 2002. The amount paid by the Company during 2003
under this leasing arrangement amounted to approximately $71,000. The amount
payable under this lease agreement amounted to approximately $40,000 at December
31, 2003. The rental expense associated with this lease is included in the
general and administrative expenses in the accompanying consolidated financial
statements. This lease expires on August 31, 2005. The minimum future lease
payments under the term of this lease for the years ending December 31, 2004
through December 31, 2005, are as follows: 2004 - $96,000; and 2005 - $64,000.

During 2003, a related entity, owned by the spouse of one of the Company's
holders of preferred shares, used the Company's products and services. Revenues
generated from this arrangement during 2003 amounted to approximately $22,000,
all of which was receivable at December 31, 2003 and is included in the accounts
receivable from related parties in the accompanying consolidated financial
statements.

During 2003, a related entity, owned by the spouse of one of the Company's
holders of preferred shares, used the services of one of the Company's
employees. The services amounted to approximately to $3,000 during 2003, all of
which was receivable at December 31, 2003, and is included in the accounts
receivable from related parties in the accompanying consolidated financial
statements.

                                       41

<PAGE>

                          SMARTVIDEO TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 8 - Income Taxes

At December 31, 2003, the Company had an unused federal net operating loss
carryforward of approximately $2.9 million for income tax purposes, which
expires in 2020 and 2021. However, the ability to utilize such losses to offset
future taxable income is subject to various limitations imposed by the rules and
regulations of the Internal Revenue Service. A portion of the net operating
losses are limited each year to offset future taxable income, if any, due to the
change of ownership in the Company's outstanding shares of common stock. This
net operating loss carryforward may result in future income tax benefits of
approximately $1.1 million; however, because realization is uncertain at this
time, a valuation reserve in the same amount has been established. Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes.

Significant components of the Company's deferred tax liabilities and assets as
of December 31, 2003, are as follows:

                                                      December 31,
                                                  -------------------------
                                                   2003              2002
                                                 ---------       -----------
   Deferred tax liabilities                     $    -          $      -
                                                 =========       ============
   Deferred tax assets

    Net operating loss carryforwards             1,126,000          328,000

    Valuation allowance for deferred tax assets (1,126,000)        (328,000)
                                                 ---------          -------
            Net deferred tax assets             $     -         $      -
                                                 =========          =======

The valuation allowance for deferred tax assets increased by $728,000 during
2003.

Note 9 - Stock Plans

As of January 1, 2003, the Company had an Incentive Stock Option Plan, a
Non-Qualified Stock Option Plan and a Stock Bonus Plan. The Board of Directors
retired these three plans in 2003. There are no outstanding options under such
plans.

In January 2003, the Company implemented the 2002 Stock Incentive Plan.

     2002 Stock Incentive Plan

The Company adopted the 2002 Stock Incentive Plan in January 2003 to provide
stock incentives to a key advisor who was instrumental in advising the Company
in connection with its acquisition of OVT, Inc. This Plan allowed for the
issuance of up to 1,200,000 shares of common stock. All the shares available to
be issued under this plan have been issued and no further issuances are
available without an amendment to the plan. The Board of Directors retired this
plan in 2003.

     2004 Equity Incentive Plan

The Board of Directors of the Company adopted the 2004 Stock Incentive Plan
("2004 Plan") effective January 1, 2004, to provide incentives to attract and
retain individuals performing services for the Company. The 2004 Plan allows for
the issuance of up to 2,000,000 shares of common stock. The Company will submit
the 2004 Plan for shareholders' approval at its next annual meeting. No options
have been granted under the 2004 Plan at December 31, 2003.

                                       42

<PAGE>

                          SMARTVIDEO TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 9 - Stock Plans (continued)

The Company did not grant any options or warrants to any officer or director
during 2003. With the exception of the Company's Series A preferred stock, no
officer or director of the Company holds any options, warrants or other rights
allowing such person to acquire additional shares of the Company's common stock.

The Company's wholly owned subsidiary had issued under its stock incentive plan
approximately 1,565,500 options which are still outstanding at December 31,
2003. These options have exercise prices ranging from $0.06 to $0.50 per option.
Such options were granted between October 2000 and April 2002.

Note 10 - Subsequent Events

In February and March 2004, the Company issued 67,286 shares of its common stock
to certain individuals for $186,000.

The Board of Directors adopted the 2004 Equity Incentive Plan effective January
1, 2004.







                                       43
<PAGE>




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

Effective March 9, 2004, we retained Sherb & Co., LLP as our principal
accountants. On March 8, 2004, Spicer Jeffries LLP ("Spicer") informed
SmartVideo Technologies, Inc. (the "Company") that Spicer has resigned as
independent accountants for the Company because its professional liability
insurance coverage for public reporting companies was not renewed by its
previous insurance carrier and Spicer has been unable to obtain new insurance
coverage for public registrants. Spicer's report on the Company's financial
statements for each of the two fiscal years ended December 31, 2001 and 2002 did
not contain an adverse opinion or disclaimer of opinion, nor was it qualified or
modified as to audit scope, or accounting principles. However, the report of
Spicer for these fiscal years included an emphasis related to the uncertainty as
to our ability to continue as a going concern.

For each of the Company's fiscal years ended December 31, 2001 and 2002 and the
interim period through March 8, 2004, there were no disagreements with Spicer on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which, if not resolved to the
satisfaction of Spicer, would have caused Spicer to make reference to the
subject matter of the disagreements in connection with its report on the
Company's financial statements for such years. The Company has authorized Spicer
to respond fully to the inquiries, if any, of Sherb & Co., LLP, the Company's
new independent accountants. The Board of Directors of the Company engaged Sherb
& Co., LLP as the Company's independent accountants on March 10, 2004, to
replace Spicer.

BDO Seidman, LLP ("BDO") had been the Company's independent accountants for the
fiscal years ended December 31, 2000 and 2001. The Board of Directors dismissed
BDO effective May 3, 2002, and replaced BDO with Spicer. BDO's report on the
Company's financial statements for each of the two fiscal years ended December
31, 2000 and 2001 did not contain an adverse opinion or disclaimer of opinion,
nor was it qualified or modified as to audit scope, or accounting principles.
However, the report of BDO for these fiscal years included an emphasis related
to the uncertainty as to our ability to continue as a going concern.

During each of the Company's fiscal years ended December 31, 2000 and 2001 and
the interim period through May 3, 2002, there were no disagreements with BDO on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which, if not resolved to the
satisfaction of BDO, would have caused BDO to make reference to the subject
matter of the disagreements in connection with its report on the Company's
financial statements for such years.


Item 8 A. Controls and Procedures

Our chief executive officer and our chief financial officer (the "Certifying
Officers") are responsible for establishing and maintaining disclosure controls
and procedures for our Company and our subsidiary. Such officers have concluded
(based upon their evaluations of these controls and procedures as of the end of
the period covered by this report) that our disclosure controls and procedures
are effective to ensure that information required to be disclosed by us in this
report is accumulated and communicated to management, including our principal
executive officers as appropriate, to allow timely decisions regarding required
disclosure.

The Certifying Officers have also indicated that there were no significant
changes in our internal controls or other factors that could significantly
affect such controls subsequent to the date of their evaluation, and there were
no corrective actions with regard to significant deficiencies and material
weaknesses.

Our management, including the Certifying Officers, does not expect that our
disclosure controls or our internal controls will prevent all error and all
fraud. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control
system are met. In addition, the design of a control system must reflect the
fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all

                                       44

<PAGE>

control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within a company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people or by management
override of the control. The design of any systems of controls also is based in
part upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions. Over time, control may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate. Because of these inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.




                                       45
<PAGE>




                                    PART III


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

The following table sets forth information with respect to our directors,
executive officers and key employees:

         Name                     Age                  Title

Richard E. Bennett, Jr.            44         President, Chief Executive Officer
                                              and a Director

Robert J. Walters                  62         Chief Technology Officer, Chairman
                                              of the Board and a Director

Marc-Andre Boisseau                39         Chief Financial Officer

Darren Breitkreuz                  33         Secretary and a Director

Richard E.  Bennett,  Jr. Mr.  Bennett has been an officer and  director of the
Company  since  November  2002 and serves as its Chief Executive  Officer and
President.  Mr. Bennett has been an officer and director of the Company's
wholly owned  subsidiary,  (OVT, Inc. d/b/a/  SmartVideo) since  September 2000.
Prior to founding  SmartVideo in September  2000,  Mr. Bennett served as a
consultant and advisor to early stage growth  companies.  Prior to January 2000,
Mr. Bennett was employed by BARCO,  n.v. where he served in a variety of
capacities over a nine-year period,  including Product Manager, Sales Executive,
Quality Assurance  Manager,  and Customer Support Manager.

Robert J. Walters.  Mr.  Walters has been an officer and director of the Company
since November 2002 and serves as its Chief Technology Officer and Chairman. Mr.
Walters  has  been  an  officer  and  director  of the  Company's  wholly  owned
subsidiary,  (OVT,  Inc.  d/b/a/  SmartVideo)  since  September  2000.  Prior to
founding  SmartVideo  in September  2000,  Mr.  Walters was  Vice-President  and
General Manager of Ensure  Computing  Systems,  which he formed in 1985 to serve
the   computer   and   networking   needs   of   small   businesses.    Ensure's
videoconferencing  technologies won an Inc. Magazine - Cisco Systems  Technology
Award in 1999.

Marc-Andre  Boisseau.  Mr.  Boisseau  serves as the  Company's  Chief  Financial
Officer since  February  2004.  Since 2002, he has served as an advisor to small
and medium size  companies on financial,  tax and  accounting  matters.  Between
January 2000 and December 2001, he served as Vice-President  Finance of DataCore
Software,  Inc., a privately  held software  developer.  From  September 1995 to
December 1999, he served as Vice-President  Controller of Citrix Systems, Inc. a
publicly  traded  software  developer.   Mr.  Boisseau  is  a  certified  public
accountant licensed in Florida and New Hampshire.

Darren  Breitkreuz.  Mr.  Breitkreuz  has been a director of the  Company  since
September 2002. From 1998 through 2000, he was an investment  advisor at various
financial institutions. Since 2000, Mr. Breitkreuz has concentrated the majority
of his  time on the  development  of  investor  relations  programs  for  public
companies.

Each director of the Company is elected at the annual meeting of stockholders
and serves until his or her successor is duly elected and qualified, unless his
or her office is earlier vacated in accordance with the Bylaws of the Company.
The executives are appointed by the Board of Directors and serve at the
discretion of the Company's directors.

                                       46

<PAGE>

None of the Company's directors or executive officers are parties to any
arrangement or understanding with any other person pursuant to which said
individual was elected as a director or officer of the Company. No director or
executive officer of the Company has any family relationship with any other
officer or director of the Company.

Key Employee

William  R.  Dunavant.  Mr.  Dunavant  serves  as  Vice-President  New  Business
Development  and has been a manager of the Company since  October 2002.  Between
January  2002 and  September  2002,  Mr.  Dunavant  served as the  president  of
Seamless  Technologies,  Inc.  From  1999  through  2001,  Mr.  Dunavant  was an
independent  business consultant  developing  marketing and sales strategies for
his clients.  During 1997 and 1998,  Mr.  Dunavant  was the  president of Summus
Technologies, Inc.

Management Changes

In June 2003, Kevin McNeal resigned as our Chief Financial Officer. In February
2004, we appointed Marc-Andre Boisseau as our Chief Financial Officer.

Committees

We have an audit committee and a compensation committee. The sole member of both
committees is Darren Breitkreuz.

The Company does not have an audit committee financial expert serving on the
audit committee. The Company is in preliminary discussions with several
individuals who would qualify as Directors, one of which would qualify as audit
committee financial expert. The Company intends to add such persons to the Board
of Directors and the Audit Committee at such time as the Company has adequate
funds to compensate such persons for their services.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires directors,
executive officers and 10% or greater shareholders of the Company to file with
the Securities and Exchange Commission initial reports of ownership (Form 3) and
reports of changes in ownership of equity securities of the Company (Form 4 and
Form 5) and to provide copies of all such forms as filed to the Company. To the
Company's knowledge and based on our review of the various filings made by
directors, executive officers and 10% or greater shareholders of the Company,
all persons required to file reports required by Section 16(a) during 2003 filed
these reports in a timely fashion except for the following:

Rene Hamouth directly and indirectly owned more than 10% of our common stock
during 2003. Mr. Hamouth has not timely filed his report of initial ownership on
Form 3. Mr. Hamouth has not reported timely approximately 200 transactions in
our Common Sock during 2003. He may have not disclosed all 2003 reportable
transactions yet. Furthermore, Mr. Hamouth has acquired and disposed of
approximately 60,000 shares of common stock within six-month periods which are
subject to "short-swing" trade liabilities under Section 16(b) of the Securities
and Exchange Act of 1934. The Company believes that Mr. Hamouth's liability
under Section 16(b) is at least $150,000. The Company intends to file a
complaint against Mr. Hamouth based on his violations of Section 16(b).




                                       47
<PAGE>




Item 10.  Executive Compensation

The following table sets forth in summary form the compensation earned or
received by the Company's Chief Executive Officer during the fiscal years ended
December 31, 2003, 2002 and 2001. No executive officer of the Company earned or
received in excess of $100,000 during the past three fiscal years.
<TABLE>
<CAPTION>

                                     Annual Compensation                            Long Term Compensation
                        --------------------------------------------       --------------------------------------
                                                                              Re-                         All
                                                                            stric-                       Other
                                                              Other          ted                          Com-
Name and                                                      Compen-       Stock        Options          pensa-
 Principal              Fiscal       Salary      Bonus        sation       Awards        Granted          tion
 Position                Year           (1)         (2)           (3)          (4)            (5)          (6)
-----------             -----        -------     -------     ----------    ---------     ----------       --------

<S>                      <C>       <C>
Richard E.               2003      $  78,125        --           --            --             --             --
 Bennett, Jr.            2002         34,154        --           --            --             --             --
President and            2001         16,970        --           --            --             --             --
Chief Executive
Officer
</TABLE>

(1)           The dollar value of base salary (cash and non-cash) received or
              earned.
(2)           The dollar value of bonus (cash and non-cash) received or earned.
(3)           Any other annual compensation not properly categorized as salary
              or bonus, including perquisites and other personal benefits,
              securities or property.
(4)           The shares of restricted stock issued as compensation for
              services.
(5)           The shares of common stock to be received upon the exercise of all
              stock options granted during the period covered by the table.
(6)           All other compensation received that the Company could not
              properly report in any other column of the table.

The following shows the amounts that the Company expects to pay to its officers
during the twelve-month period ending December 31, 2004, and the time that the
Company's executive officers plan to devote to the Company's business. The
Company has employment agreements with all of its officers.

                                         Proposed          Time to be Devoted
     Name                              Compensation       To Company's Business

Richard E. Bennett, Jr.                $  80,000                 100%
Robert J. Walters                         80,000                 100
Darren Breitkreuz                           --                    10
William R. Dunavant                       80,000                 100
Marc-Andre Boisseau                       65,000                  50

The Company's Board of Directors may increase the compensation paid to the
Company's officers depending upon the results of the Company's future
operations.

Employment Agreements

Effective October 1, 2002, we entered into employment agreements with Richard E.
Bennett,  Jr.,  Robert  J.  Walters,  and  William  R.  Dunavant.  Each of these
agreements  provide  for an  initial  base  salary of  $75,000  with  subsequent
increases as  determined by our Board of Directors.  These  agreements  continue
indefinitely unless contrary notice is given by either party.

Each of the aforementioned employment agreement provides, among other things,
for participation in an equitable manner in any profit-sharing or retirement

                                       48

<PAGE>

plan for employees or executives and for participation in employee benefits
applicable to our employees and executives, as well as for the provision of an
automobile allowance of up to $650 per month in any month in which the Company
is profitable and other fringe benefits commensurate with their duties and
responsibilities and for benefits in the event of disability. Mr. Dunavant's
employment agreement also includes a restricted stock award of 1,333,333 shares
of OVT, Inc. as an inducement to enter into the agreement with the Company.
Pursuant to each such employment agreement, employment may be terminated by us
with cause or by the executive with or without good reason. Termination by us
without cause or by the executive for good reason would subject us to liability
for liquidated damages in an amount equal to six months of the current salary of
the terminated executive as of the date of termination.

Effective February 23, 2004, we entered into an employment agreement with
Marc-Andre Boisseau. This agreement provides for an initial annualized base
salary of $130,000 based on the number of days worked for the Company. The
agreement provides for participation in employee benefits applicable to our
employees and executives and other fringe benefits commensurate with their
duties and responsibilities. The agreement also provides for the grant of up to
150,000 options under the Company's 2004 Stock Incentive Plan. The Company will
grant 75,000 options to Mr. Boisseau upon shareholders' approval of the Plan and
grant an additional 75,000 options three months after commencement of
employment.

Long Term Incentive Plans - Awards in Last Fiscal Year

None.

Employee Pension, Profit Sharing or Other Retirement Plans

The Company does not have a defined benefit or defined contribution pension
plan, profit sharing or other retirement plan, although the Company may adopt
one or more of such plans in the future.

Compensation of Directors

     Standard Arrangements.

At present, the Company does not pay its directors for attending meetings of the
Board of Directors, although the Company may adopt a director compensation
policy in the future. The Company has no standard arrangement pursuant to which
directors of the Company are compensated for any services provided as a director
or for committee participation or special assignments.

     Other Arrangements.

During the year ended December 31, 2003, and except as disclosed elsewhere in
this report, no director of the Company received any form of compensation from
the Company.

See "Stock Option and Bonus Plans" below for information concerning stock
options and stock bonuses granted to the Company's officers and directors.

Compensation Committee Interlocks and Insider Participation

The Company has established a compensation committee. No executive officer of
the Company serves as a member of the Board of Directors or compensation
committee of any entity that has one or more executive officers serving as a
member of the Company's Board of Directors. In addition, no interlocking
relationship exists between any member of the Company's Board of Directors and
any member of the compensation committee of any other company, nor has any such
interlocking relationship existed in the past.


                                       49

<PAGE>

Stock Option and Bonus Plans

The Board of Directors of the Company adopted the 2004 Equity Incentive Plan
("2004 Plan") effective January 1, 2004, to provide incentives to attract and
retain individuals performing services for the Company. The 2004 Plan allows for
the issuance of up to 2,000,000 shares of common stock. The Company will submit
the 2004 Plan for shareholders' approval at its next annual meeting. No options
have been granted under the 2004 Plan.

During 2003, the Company retired its Incentive Stock Plan, the Non-Qualified
Stock Option Plan, the Stock Bonus Plan and its 2002 Stock Incentive Plan. No
options are outstanding under such plans.


     Other Information Regarding the 2004 Equity Incentive Plan.

The 2004 Plan is administered by the Company's Board of Directors Compensation
Committee. The Compensation Committee has the authority to interpret the
provisions of the Plan and supervise the administration of the Plan. In
addition, the Compensation Committee is empowered to select those persons to
whom shares, rights, units or options (collectively referred as "Award" or
"Awards") are to be granted, to determine the number of shares subject to each
Award and to determine when, and upon what conditions, Awards granted under the
Plans will vest or otherwise be subject to forfeiture and cancellation.

In the discretion of the Compensation Committee, any Award granted pursuant to
the 2004 Plan may include installment exercise terms such that Awards become
fully exercisable in a series of cumulating portions. The Compensation Committee
may also accelerate the date upon which any Award (or any part of any Award) is
first exercisable. Upon termination of employment, unless otherwise determined
by the Compensation Committee, and subject to restrictions as may be imposed by
the Internal Revenue Code in the case of incentive stock options, any Award will
be forfeited unless the employee or the Award recipient exercises his rights
under such Awards before the period ending three months after such termination.
Upon death or total disability of an employee or an Award recipient, and unless
otherwise determined by the Compensation Committee, any Award will be forfeited
unless such Award was exercisable at the time of death or total disability and
if the employee or Award recipient exercises his rights within one year of such
event.

Awards are generally non-transferable other than by will or the laws of descent
and distribution or pursuant to a qualified domestic relations order.

The Company's Board of Directors may at any time, and from time to time, amend,
terminate, or suspend one or more of the 2004 Plan in any manner it deems
appropriate, provided that such amendment, termination or suspension cannot
adversely affect rights or obligations with respect to shares or options
previously granted, unless the Award recipient consents to such changes in
writing. The Board of Directors may not, without shareholder approval: make any
amendment which would materially modify the participation eligibility
requirements for the 2004 Plan, to the extent they require approval in order to
satisfy the Internal Revenue Code requirements; make other modifications
requiring stockholder approval to satisfy the Internal Revenue Code
requirements, increase the total number of shares of common stock which may be
issued pursuant to the 2004 Plan, except in the case of a reclassification of
the Company's capital stock or a consolidation or merger of the Company.




                                       50

<PAGE>

Item 11.  Security Ownership of Certain Beneficial Owners and Management

  The following table sets forth certain information known to the Company with
respect to the beneficial ownership of its common stock as of March 17, 2004, by
(i) each person known by the Company to be the beneficial owner of more than 5%
of the Company's outstanding common stock, (ii) each officer and director of the
Company, and (iii) all directors and officers as a group. Except as otherwise
indicated, the Company believes that the beneficial owners of the common stock
listed below, based on information furnished by such owners, have sole
investment and voting power with respect to their shares.
<TABLE>
<CAPTION>

                                                                     Fully Diluted
                                     Preferred Shares                 Common stock
                                   Number of     Percent       Number of Shares   Percent of
Name and Address                   Shares Owned    of               Owned            Class
----------------                                  Class
                                   ---------      -----        ----------------   -----------
<S>                                <C>             <C>             <C>
Richard E. Bennett, Jr.            4,000,000       33.3 %          4,000,000(1)       19.1%
1650 Oakbrook Drive, Suite 405
Norcross, GA 30093

Robert J. Walters                  4,000,000       33.3%           4,000,000(1)       19.1%
1650 Oakbrook Drive, Suite 405
Norcross, GA 30093

William R. Dunavant                4,000,000       33.3%           4,000,000(1)       19.1%
1650 Oakbrook Drive, Suite 405
Norcross, GA 30093

Marc-Andre Boisseau                     --          --%                 --             -- %
1650 Oakbrook Drive, Suite 405
Norcross, GA 30093

Darren Breitkreuz                       --          --%                8,334           --%
1650 Oakbrook Drive, Suite 405
Norcross, GA 30093

Rene Hamouth                            --          --%              925,200(2)        4.4%
2608 Finch Hill
West Vancouver, B.C.
Canada V7S 3H1

All directors and executive
officers as a group
of all voting shares (4 persons)   8,000,000      100.0%           8,008,334          38.2%
</TABLE>

(1)      Represents shares of common stock issuable upon the conversion of the
         Company's Series A preferred stock. The shares of the Company's Series
         A preferred stock is convertible at any time into an equivalent amount
         of shares of the Company's common stock.

(2)      Represents 925,200 shares held of record by the Hamouth Family Trust of
         which Mr. Hamouth is the sole trustee.

                                       51

<PAGE>

Item 12.  Certain Relationships and Related Transactions


The Company has a $325,000 note payable to an entity owned by the spouse of a
holder of preferred shares, Mr. Walters, bearing interest at 8% with principal
and interest payments due as follows:

o        $75,000 within 30 days of the funding of the Company; and

o        Monthly  principal  payments of $50,000  thereafter  plus  accrued
         interest  beginning  30 days after the initial  payment of $75,000.

The amount due under the terms of this note payable, including accrued interest,
amounted to approximately $317,000 at December 31, 2003. The Company paid
$40,000 and $30,000 as principal repayments and interest, respectively, during
2003.

The Company has a $150,000 note payable to a former shareholder of its
subsidiary in connection with a stock repurchase, bearing interest at 5.18%. The
note is secured by 2,500,000 shares of the subsidiary's common stock. The
Company is in default under the terms of such note. The amount due under the
terms of this note payable, including accrued interest of approximately $24,000,
amounted to approximately $174,000.

The Company has an advance payable to an entity owned by the spouse of Mr.
Walters, a holder of preferred shares, of approximately $20,000 at December 31,
2003. The advances were made prior to 2003. The advances are payable on demand
and do not bear interest.

The Company had advances from Mr. Bennett Mr. Dunavant, and Mr. Walters, holders
of preferred shares, amounting to approximately $13,000 at December 31, 2003.
Mr. Dunavant advanced approximately $50,000 during 2003, which was satisfied by
the issuance of 55,000 shares to certain individuals unrelated to the Company.
Additionally, the Company repaid approximately $13,000 to two holders of the
preferred shares during 2003. The advances are payable on demand and do not bear
interest.

Until October 2002, the Company was provided the use of office facilities from a
related entity, owned by the spouse of Mr. Walters, at no cost. In October 2002,
an agreement was reached with this related entity to charge the Company rent for
its share of the office facilities and common expenses. There were no expenses
accrued or charged under the terms of this agreement prior to December 31, 2002.
The amount paid by the Company during 2003 under this leasing arrangement
amounted to approximately $71,000. The amount payable under this lease agreement
amounted to approximately $40,000 at December 31, 2003. The rental expense
associated with this lease is included in the general and administrative
expenses in the accompanying consolidated financial statements. This lease
expires on August 31, 2005. The minimum future lease payments under the term of
this lease for the years ending December 31, 2004 through December 31, 2005 are
as follows: 2004 - $96,000; and 2005 - $64,000.

During 2003, a related entity, owned by the spouse of Mr. Walters, used the
Company's products and services. Revenues generated from this arrangement during
2003 amounted to approximately $22,000, all of which was receivable at December
31, 2003.

During 2003, a related entity, owned by the spouse of Mr. Walters, used the
services of one of the Company's employees. The services amounted to
approximately to $3,000 during 2003, all of which was receivable at December 31,
2003.




                                       52
<PAGE>


Item 13.  Exhibits and Reports on Form 8-K

Exhibits:

Exhibit
Number           Description                                          Reference

2.1      Agreement relating to the Acquisition of OVT, Inc.,
         d/b/a SmartVideo Technologies, Inc. (as amended)                (3)
3.1      Certificate of Incorporation                                    (1)
3.2      Bylaws of SmartVideo Technologies, Inc.                         (5)
4.1      Incentive Stock Option Plan                                     (2)
4.2      Non-Qualified Stock Option Plan                                 (2)
4.3      Stock Bonus Plan                                                (2)
10.1     Employment Agreement between Richard E. Bennett,
         Jr. and OVT, Inc.                                               (4)
10.2     Employment Agreement between Robert J. Walters and OVT, Inc.    (4)
10.3     Employment Agreement between William R. Dunavant and OVT, Inc.  (4)
10.4     Employment Agreement between Marc-Andre Boisseau and SmartVideo
         Technologies                                                    (5)
10.5     2004 Stock Incentive Plan                                       (5)
10.6     Promissory Note to ProNetworkTV, Inc.                           (5)
10.7     Form of Registration Rights Agreement between
         SmartVideo Technologies, Inc. and each of William Bandy,
         Thomas Bivens, Jerry W. Bratton, Christopher V. Devone,
         Andy Gold, J. Mark Leho, Mark Hestrin, Mitchell Metzman,
         Mark E. Scutz, Richard J. Seifert Trust, Rita M. Seifert
         Trust, and James Stebbins                                       (5)
14       Code of Ethics for the Chief Executive Officer and Chief
         Financial Officer                                               (5)
21       Subsidiary of the Registrant                                    (5)
31.1     Certification by the Chief Executive Officer pursuant to
         Section 302 of the Sarbanes-Oxley Act of 2002                   (5)
31.2     Certification by the Chief Financial Officer pursuant to
         Section 302 of the Sarbanes-Oxley Act of 2002                   (5)
32.1     Certification by the Chief Executive Officer pursuant to
         18 U.S.C. Section 1350, Section 906 of the Sarbanes-Oxley
         Act of 2002                                                     (5)
32.2     Certification by the Chief Financial Officer pursuant to
         18 U.S.C. Section 1350, Section 906 of the Sarbanes-Oxley
         Act of 2002                                                     (5)

(1)  Incorporated by reference to the Company's Form 8-K filed on January 2,
     2001
(2)  Incorporated by reference to the same exhibit filed with the Company's
     Registration Statement on Form S-8 (Commission File No. 333-90826)
(3)  Incorporated by reference to the Company's Form 8-K, as amended, filed on
     December 13, 2002
(4)  Incorporate by reference to the same exhibit filed with the Company's Form
     10-K, filed on May 15, 2003
(5)  Filed Herewith

Reports on Form 8-K:

The following reports on Form 8-K were filed during the three months ended
December 31, 2003:

None


                                       53

<PAGE>

Item 14.  Principal Accountant Fees and Services

During 2003 and 2002, the Company incurred the following fees for professional
services rendered by the principal accountant:

                                                        2003       2002
                                                        -------    ------
Fees for audit services                                 $14,197     (1)
Fees for audit-related services                            -        (1)
Tax fees                                                  2,500     (1)
All other fees                                             -        (1)

(1)      During 2002, the registrant may have incurred audit, audit-related
         fees, tax fees, and other fees with BDO Seidman prior to the merger
         with the acquiror, OVT, Inc. d/b/a SmartVideo during 2002. Such fees
         were undisclosed to the persons who acquired control of the Company in
         connection with the Stock Exchange Agreement of November 2002.
         Accordingly, the Company is unable to disclose such amounts

The Audit Committee pre-approves all audit and non-audit services to be
performed by the Company's independent auditors.











                                       54
<PAGE>

                                   SIGNATURES

In accordance with Section 13 or 15(a) of the Exchange Act, the Registrant has
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized on the 30th day of March 2004.

                                            SMARTVIDEO TECHNOLOGIES, INC.


                                     By /s/ Richard E. Bennett, Jr.
                                            -----------------------------------
                                            Richard E. Bennett, Jr.,
                                            President & Chief Executive Officer


                                     By /s/ Marc-Andre Boisseau
                                            -------------------------------
                                            Marc-Andre Boisseau
                                            Chief Financial Officer

Pursuant to the requirements of the Securities Act of l934, this Report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.

                                           Title                     Date

   /s/  Richard E. Bennett, Jr.
        ----------------------
        Richard E. Bennett, Jr.          Director               March 30, 2004

   /s/  Robert J. Walters
        -----------------
        Robert J. Walters                Director               March 30, 2004

   /s/  Darren Breitkreuz
        -----------------
        Darren Breitkreuz                Director               March 30, 2004



                                       55
<PAGE>


                                INDEX TO EXHIBITS


Exhibit No.        Description                                       Page
-----------        --------------------------------------            -----

  3.2              Bylaws of SmartVideo Technologies, Inc.            57
 10.4              Employment Agreement between Marc-Andre
                   Boisseau and SmartVideo Technologies, Inc.         67
 10.5              2004 Stock Incentive Plan                          69
 10.6              Promissory Note to ProNetworkTV, Inc.              79
 10.7              Form of Registration Rights Agreement between
                   SmartVideo Technologies, Inc. and each of
                   William Bandy, Thomas Bivens, Jerry W. Bratton,
                   Christopher V. Devone, Andy Gold, J. Mark Leho,
                   Mark Hestrin, Mitchell Metzman, Mark E. Schutz,
                   Richard J. Seifert Trust, Rita M. Seifert Trust,
                   and James Stebbins                                 80
 14                Code of Ethics for the Chief Executive Officer
                   and Chief Financial Officer                        87
 21               Subsidiary of the Registrant                        88
 31.1             Certification by the Chief Executive Officer
                  pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002                                         89
 31.2             Certification by the Chief Financial Officer
                  pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002                                         90
 32.1             Certification by the Chief Executive Officer
                  pursuant to 18 U.S.C. Section 1350, Section 906
                  of the Sarbanes-Oxley Act of 2002                   91
 32.2             Certification by the Chief Financial Officer
                  pursuant to 18 U.S.C. Section 1350, Section 906
                  of the Sarbanes-Oxley Act of 2002                   92









                                       56