SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                 ---------------

                                   FORM 10-KSB


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

                  For the Fiscal Year ended September 30, 2003

or

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

                           Commission File No. 0-33235

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

                             DATAHAND SYSTEMS, INC.
                 ----------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

               DELAWARE                                     86-0593507
----------------------------------------         -------------------------------
    (State or Other Jurisdiction of                     (I.R.S. Employer
     Incorporation or Organization)                     Identification No.)

               3032 NORTH 33RD AVENUE, PHOENIX, ARIZONA 85017-5247
               ---------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

                                 (602) 233-6000
                           ---------------------------
                           (Issuer's Telephone Number)

Securities Registered Pursuant to Section 12(b) of the Act: None.

Securities Registered Pursuant to Section 12(g) of the Act:

                          $.001 PAR VALUE COMMON STOCK
                          ----------------------------
                                (Title of Class)

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


<PAGE>

Check if there is no 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  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. $276,635.

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold,  or the average bid and asked  price of such  common  equity,  as of a
specified  dated within the past 60 days.  As of December  23, 2003,  20,427,305
shares of common stock were  outstanding,  and the aggregate number of shares of
the common stock of the Registrant held by non-affiliates  was 4,459,289.  There
is no public market for the common stock of Registrant, and there is therefor no
aggregate  market  value of the  voting and  non-voting  common  equity  held by
non-affiliates.

     (ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Check  whether the issuer has filed all  documents  and  reports  required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court. [ ] Yes [ ] No

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. 20,427,305

                       DOCUMENTS INCORPORATED BY REFERENCE

If the following documents are incorporated by reference,  briefly describe them
and  identify  the part of the Form 10-KSB  (e.g.,  Part I, Part II,  etc.) into
which the document is incorporated:  (1) any annual report to security  holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
RULE 424 (B) OR (C) of the Securities Act of 1933 ("Securities Act"). The listed
documents should be clearly described for identification  purposes (e.g., annual
report to security  holders  for fiscal  year ended  December  24,  1990).  Form
10-KSB/A, Description of the Business, Risk Factors, suggests that the amendment
to the Form 10SB be reviewed.

Transitional Small Business Disclosure Format (Check One): Yes [X] No [ ]


                                       ii
<PAGE>

                            DATAHAND(R) SYSTEMS, INC.

                                   FORM 10-KSB

                                TABLE OF CONTENTS

                                                                            PAGE
PART I

     ITEM 1.  DESCRIPTION OF BUSINESS.....................................    1
     ITEM 2.  DESCRIPTION OF PROPERTY.....................................   19
     ITEM 3.  LEGAL PROCEEDINGS...........................................   19
     ITEM 4.  SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS..........   19

PART II

     ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS....   20
     ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS .......................   21
     ITEM 7.  FINANCIAL STATEMENTS........................................   29
     ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS...............   53

PART III

     ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
              COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT...........   53
     ITEM 10. EXECUTIVE COMPENSATION .....................................   54
     ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
              MANAGEMENT..................................................   56
     ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............   57
     ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K............................   57
     ITEM 14. CONTROLS AND PROCEDURES.....................................   57
     ITEM 15. AUDITOR FEES................................................   58

SIGNATURES................................................................   59

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

                 STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

         THE  STATEMENTS  CONTAINED  IN THIS  REPORT ON FORM 10-KSB THAT ARE NOT
PURELY  HISTORICAL  ARE   FORWARD-LOOKING   STATEMENTS  WITHIN  THE  MEANING  OF
APPLICABLE  SECURITIES  LAWS.   FORWARD-LOOKING  STATEMENTS  INCLUDE  STATEMENTS
REGARDING  OUR  "EXPECTATIONS,"   "ANTICIPATION,"  "INTENTIONS,"  "BELIEFS,"  OR
"STRATEGIES"  REGARDING  THE FUTURE.  FORWARD-LOOKING  STATEMENTS  ALSO  INCLUDE
STATEMENTS  REGARDING  REVENUE,  MARGINS,  EXPENSES,  AND EARNINGS  ANALYSIS FOR
FISCAL 2003 AND THEREAFTER;  FUTURE PRODUCTS OR PRODUCT DEVELOPMENT; OUR PRODUCT
DEVELOPMENT STRATEGIES,  PARTICULARLY AS THEY RELATE TO THE INTERNET;  POTENTIAL
ACQUISITIONS OR STRATEGIC  ALLIANCES;  AND LIQUIDITY AND ANTICIPATED  CASH NEEDS
AND AVAILABILITY.  ALL  FORWARD-LOOKING  STATEMENTS  INCLUDED IN THIS REPORT ARE
BASED ON INFORMATION  AVAILABLE TO US AS OF THE FILING DATE OF THIS REPORT,  AND
WE ASSUME NO  OBLIGATION  TO UPDATE  ANY SUCH  FORWARD-LOOKING  STATEMENTS.  OUR
ACTUAL  RESULTS COULD DIFFER  MATERIALLY  FROM THE  FORWARD-LOOKING  STATEMENTS.
AMONG THE FACTORS THAT COULD CAUSE ACTUAL  RESULTS TO DIFFER  MATERIALLY ARE THE
FACTORS DISCUSSED IN PART I, ITEM 1, "DESCRIPTION OF BUSINESS - RISK FACTORS."


                                      iii

<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

     Our  corporation's  name is DataHand  Systems,  Inc., and we are a Delaware
corporation which was founded in 1994. We evolved from the DataHand  Development
Group,  a private  partnership,  created in 1985 by Dale  Retter and Lee Knight.
Messrs.  Retter and  Knight  formed  Industrial  Innovations,  Inc.,  an Arizona
corporation,  in late 1987 to  develop,  design and test an  ergonomic  keyboard
system. Industrial Innovations,  Inc., subsequently merged into us in January of
1995.

     We filed a Report on Form 10-SB on  October  9, 2001 and a first  amendment
thereto on January 3, 2002 with the  Securities  and  Exchange  Commission.  The
Report on Form 10-SB and its amendment  contain more  information  on us that is
contained herein,  and it is suggested that you should consider  accessing those
reports filed with the  Securities  and Exchange  Commission  by contacting  the
Securities  and Exchange  Commission at the addresses  hereafter  provided or by
contacting us.

     Our  principal  business  is  the  design,  sale  and  distribution  of the
DataHand(R)  minimum motion  keyboard  which either  reduces  and/or  eliminates
ergonomic trauma and/or injuries related to data entry operations (e.g.,  carpal
tunnel  syndrome,   etc.).  The  DataHand(R)  Ergonomic  Keyboard  System  is  a
programmable ergonomic keyboard with an onboard mouse.

     Although  various  statistics  have been  provided  to  indicate  the large
magnitude of this problem, a comprehensive  study that quantifies these costs is
unavailable. However, Repetitive Stress Injuries (RSI), also known as Repetitive
Motion Injuries (RMI), alone cost U.S.  businesses an estimated $100 billion per
year in  additional  expenses  and lost  productivity  (Source:  Bureau of Labor
Statistics  as  reported  in the WALL  STREET  JOURNAL).  The poor design of the
standard computer keyboard is a large contributor to this problem.

     The  DataHand(R)  Ergonomic  Keyboard  system is a  programmable  ergonomic
computer keyboard with an onboard mouse. The DataHand(R)  Ergonomic  Keyboard is
also called  "The  DataHand(R)  Professional  II" and the  "DataHand(R)  Minimum
Motion Keyboard".

     We began Beta testing our current product, the DataHand Professional II(R),
in 1995 and  completed  commercialization  of the  design in 1997.  With  volume
production,  engineering and tooling investments,  we will be able to reduce the
present  product   manufactured  cost  significantly.   We  are  developing  the
ErgoHand(R)  which we believe will serve a larger  consumer market and provide a
significant increase in sales because of its lower purchase price.

     We obtain certain of our raw materials in the form of finished switches and
modules from  Atronix,  Incorporated  of  Billerica,  MA, which is our principal
supplier  for  the  DataHand(R)   Ergonomic  Keyboard.   Atronix,   Incorporated
manufacturers  the switches and modules in accordance  with our patent and using
our technology.  We can obtain these switches and modules from other  suppliers,
but if we do so we believe our costs of goods would  increase.  We are testing a
new,  lower cost  ergonomic  keyboard we have named the  ErgoHand(R),  which was
developed  in joint  cooperation  with  DuraSwitch  Industries,  Inc.,  of Mesa,
Arizona.


                                       1
<PAGE>

     We are not  dependent  on one or a few  major  customers.  We have sold our
products to 3,500 customers in the  trauma/injury  market and to 2,900 customers
in the data entry market.  These  customers  presently  purchase on an as needed
basis.

     We have  spent  $76,201  in the  last two  fiscal  years  on  research  and
development  activities.  While  ultimately all of our  development and research
costs will be born by our customers  over our business life span, to date all of
such  costs  have been  funded by  capital  invested  in us in ether the form of
equity or loans.

     During the next twelve (12) months, we intend to:

o    reduce the cost of the current Professional II design by at least 22%;
o    complete  proof  of  design  prototype  and  production   tooling  for  the
     ErgoHand(R)with  a target in production  manufacturing  direct cost of $50;
     and
o    increase  staffing  modestly  to  manage  use  of  subcontract  design  and
     manufacturing activities.

COMPANY OVERVIEW

     It is our mission to be the recognized  leader in profitably  manufacturing
and marketing proprietary computer keyboards for the commercial,  industrial and
consumer  markets for the benefit of our customers,  employees and  shareholders
by:

o    designing and marketing human to computer interface technology; and
o    ergonomic  products  for   business-to-business   and  business-to-consumer
     markets.

     Our  patented  technology  and know-how is the basis on which we will carry
out our mission.  Our development of the DataHand(R)  Ergonomic Keyboard is well
positioned to take  advantage of the $3.2 billion  corporate  data entry systems
market  (Source:  Frosts & Sullivan  U.S.  MARKETS FOR  COMPUTER  KEYBOARDS  AND
POINTING DEVICES) and the rapidly growing $600 million ergonomic keyboard market
(Source:  Frosts & Sullivan  U.S.  MARKETS FOR COMPUTER  KEYBOARDS  AND POINTING
DEVICES).  Product  development,  testing and test marketing of our  DataHand(R)
Ergonomic  Keyboards  have been  completed  and the  results  are,  we  believe,
compelling.  Some of our users have  provided  testimonials  to us to the effect
that our  DataHand(R)  keyboards are more  healthful,  comfortable,  productive,
accurate and enabling than traditional flat keyboards.  Full-scale production of
our  DataHand(R)  keyboards  commenced in October 1998 with sales and  marketing
starting shortly thereafter.  With OSHA regulations  regarding worker health and
safety  imminent  and  with  a  growing  number  of  keyboard  related  injuries
worldwide,  the ergonomic  keyboard  market offers  tremendous  room for growth.
Because of our patent positions and existing market  penetration,  we believe no
other keyboard manufacturer is better positioned to exploit this new market than
we are  because of the design of our  DataHand(R)  Ergonomic  Keyboards  and our
patented  technology.  It is our opinion that no other keyboard design addresses
the  circumstances  that cause carpal tunnel or hand injury by keyboarding.  Our
DataHand(R)  Ergonomic Keyboards have been in the marketplace for over 12 years,
longer than any other ergonomic  keyboard  manufacturer.  Our keyboards are well
known and used, not only in the United States but world wide.



                                       2
<PAGE>

COMPANY BACKGROUND

     We have been until now a privately held Delaware corporation  headquartered
in Phoenix, Arizona. In the early years after our formation, we concentrated our
efforts on the engineering and testing of our DataHand(R) Ergonomic Keyboard and
achieved   many   milestones   despite  the  hurdles  we  faced  in  design  and
manufacturing. These milestones include:

1990      1st of 12 US and international patents issued.
1992      Keyboard  prototype  development  completed and first  prototype units
          were tested;
1993      Began low volume pilot production of original keyboard model;
1994      Product testing and test marketing;  sold  approximately 475 keyboards
          at $2,000 each;
1995      Company founded;
1996      Introduced  two  new  keyboard  models,  the  Professional  II and the
          DataProof (10-Key), and commenced corporate data entry systems sales;
1997      Signed  a  high  volume   manufacturing   agreement  with  Key  Tronic
          Corporation, a leading U.S. based keyboard manufacturer;
1998      Latest  of 12  US  and  international  patents;  technology  agreement
          executed with leading  switch design and  manufacturing  company;  new
          management team on board;  keyboard production  commenced;  rigorously
          tested and qualified the product;
1999      Reduced cost of product,  commenced single unit ergonomic based sales,
to        increased   corporate   data  entry   system   client   implementation
Present   agreements;  introduced Personal Edition model; developed an ergonomic
          value-added reseller program; began expansion of our web site.

     In addition to these milestone  accomplishments,  we have: 1) developed our
initial client  accounts;  2) built our low-volume  manufacturing  facility;  3)
purchased the parts and tooling to build our initial 1000 DataHand(R)  Ergonomic
Keyboard units and rigorously  tested and qualified the product for  production;
4) began development of our training materials,  training methods,  and training
processes;  and 5) added a Sales and Marketing Manager.  Over the years, we have
sold our  keyboards  to  hundreds  of Fortune  1000  companies,  which they have
purchased on an as needed basis.  We do not have standing  contracts  with these
customers.

OUR OPPORTUNITIES

     Changes to federal,  state and local laws (See "The Market  Climate" below)
as  they  apply  to  ergonomics  in  the  workplace,  provide  opportunities  to
capitalize on a growing market segment.  Recent OSHA rule announcements (Source:
1999 OSHA  Meetings  as  reported in the  Congressional  Record)  and  potential
federal and state  legislation  all provide an  increased  interest and sense of
urgency for ergonomic solutions in the market place.

     We address these  opportunities  with our unique patented flagship product.
The DataHand(R)  Ergonomic  Keyboard was designed to correct the poor designs of
the  standard  keyboard,  including  keyboards  labeled  as  "ergonomic."  These
standard  keyboards and also their "ergonomic"  derivatives  result in increased
employee  health-related costs and reduced  productivity.  Costs include medical
expenses such as physical  therapy and surgery (such as carpal tunnel  surgery),
the impact on Workers  Compensation  insurance costs,  lost workdays and reduced


                                       3
<PAGE>

employee  productivity.  Additional  non-quantifiable  costs  include  the pain,
suffering and discomfort of users.

     Recent  government-derived data underscores the epidemic of worker injuries
caused by conventional keyboard use. The data includes:

o    Bureau of Labor Statistics  (1999) reports  Repetitive  Strain Injury (RSI)
     accounts for 60% of all  reported  occupational  illnesses - the  estimated
     direct  costs to  businesses  was over $60  billion  in 2000  (and  growing
     today);
o    The  National  Center for Health  Statistics  reported  849,000 new problem
     visits were made to  physicians  due to Carpal  Tunnel  Syndrome and carpal
     tunnel related  operations are the second most common surgical procedure in
     the U.S. (and growing today);
o    OSHA studies show Carpal Tunnel  Syndrome has the highest  median days away
     from work (25 days);
o    A  Cumulative  Trauma  Disorder  News survey  revealed  that Carpal  Tunnel
     Syndrome is the costliest Cumulative Trauma Disorder.

THE CAUSE OF KEYBOARD RELATED INJURIES

     The  increasing  use of computers at work and home has resulted in a growth
of keyboard related  Repetitive Stress Injuries and Cumulative Trauma Disorders.
According to  ergonomists  and physical  therapists,  injuries are caused by the
following debilitating characteristics of traditional keyboards:

1.   Repetition  -  traditional   keyboards  require  downward  motion  for  all
     keystrokes;
2.   Workload - at the end of a typical workday on a traditional keyboard, users
     fingers have  traveled an average of 16 miles and lifted the  equivalent of
     1.25  tons  (Source:  Professor  R.  M.  Fernandez,   Professor,   Stanford
     University Report dated January 20, 1997 FSM PILOT AT RIO SALADO);
3.   Carpal Tunnel  Involvement - traditional  keyboards require the involvement
     of the carpal tunnel for all keystrokes performed;
4.   Hand  Tension -  traditional  keyboards  require the user to maintain  hand
     position in a flattened plane hovering above the keyboard;
5.   Wrist Bend - the necessary wrist bend associated with traditional  keyboard
     use  further  crimps  the  carpal  tunnel,  increasing  tension  and tendon
     friction;
6.   Upper Body Support - support above a traditional  keyboard requires chronic
     upper  body  musculoskeletal  involvement,  spinal  compression  and muscle
     tension;
7.   Hand Pronation - wrist pronation for traditional keyboarding is awkward and
     fatiguing;
8.   Wrist  Motion - as much as 40  degrees  of wrist  motion is  required  with
     traditional keyboard use; and
9.   External Mouse - most standard  keyboards  require the user to repetitively
     reach for an external mouse.

THE SOLUTION TO KEYBOARD RELATED INJURIES

     The  patented  DataHand(R)  Ergonomic  Keyboard  is  designed  to provide a
comfortable  and  healthful  keyboard  that  addresses  each of the  traditional
keyboards'  limitations.  No  other  keyboard  available  offers  the  following
characteristics:


                                       4
<PAGE>

1.   Repetition - DataHand(R)keyboards  divide each finger's workload among five
     unique keys, with unique directions;
2.   Workload - DataHand(R)keyboards  reduce both the force required to activate
     keys and total finger  travel  resulting in a 96%  reduction in  Repetitive
     Stress Injury exposure;
3.   Carpal  Tunnel  Involvement  - only  60% of  the  DataHand(R)keyboard  keys
     require tendons that travel through the carpal tunnel ;
4.   Hand Tension - DataHand(R)  keyboards allow the hands to work in a relaxed,
     natural position;
5.   Wrist Bend - unwanted and problematic  wrist bends are eliminated 100% with
     a DataHand(R) keyboard;
6.   Upper Body Support - DataHand(R) keyboards fully support the hands;
7.   Hand  Pronation  - hand  pronation  can  be  completely  eliminated  with a
     DataHand(R) keyboard;
8.   Wrist  Motion  - 100%  elimination  of  wrist  motion  with  a  DataHand(R)
     keyboard;
9.   External Mouse - an intrinsic  mouse  eliminates  repetitively  reaching an
     external mouse.

SALES AND MARKETING ANALYSIS

THE MARKET CLIMATE

     The epidemic of keyboard related  repetitive stress injuries offer a unique
market opportunity for us.

     In August 1998, at the National Academy of Sciences in Washington,  D.C., a
group  of  over   seventy   nationally   renowned   experts   in  the  field  of
musculoskeletal disability and occupational medicine examined the most prominent
twentieth century studies of  musculoskeletal  workplace injury and affirmed the
reality of work-related causation.  Previously,  hobbies,  housework,  heredity,
general  health,  smoking,  life-style and other factors were often blamed.  The
meeting did not deny possible secondary causation, but it pointed to work on the
flat keyboards as the major cause.  (Source:  National  Research Council and the
Institute of Medicine (2001),  Musceleoskeletal Disorders and the Workplace: Low
Back  and  Upper  Extremities:  Panel  on  Musceleoskeletal  Disorders  and  the
Workplace,   Commission  on  Behavioral  and  Social   Sciences  and  Education,
Washington, DC: National Academy Press: p. 363)

     In 1999, the Occupational Safety and Health  Administration (OSHA) released
proposed  regulations  that favor  companies to proactively  address the growing
epidemic  of  workplace  related  injuries.  Included  in OSHA's  standards  are
keyboard related  repetitive  stress injuries such as Carpal Tunnel Syndrome and
tendonitis.  The  medical  need is  significant  with the  previously  mentioned
National  Center for Health  Statistics  reporting  849,000 new  problem  visits
(Source: 1999 OSHA Report on Work Place Injuries - Congressional Record) and the
U.S. Department of Labor statistic:  Carpal Tunnel Syndrome affects some 600,000
U. S. workers each year. OSHA officials have gone on record  (Source:  1999 OSHA
Report on Work Place  Injuries--Congressional  Record)  that the  Department  of
Labor statistics may underestimate real data by as much as a third.

     In  February  2000 a meeting of the larger  U.S.  corporations'  Industrial
Relations  Executives,  CEO's and  Ergonomists  in Florida  affirmed the need to
address  worker  health  issues.  The  emergence  of a new  corporate  ethic was
signaled.  Presidential  candidates  were  quoted  in  major  national  business


                                       5
<PAGE>

magazines  stating  the  need  to  restore  disabled  workers  to  productivity.
Corporations  were  asked  to work  together  to meet the  common  need for more
employable  workers.  Even with the  repeal  of the  Federal  Government's  OSHA
Ergonomics  Standard by the George W. Bush  administration  in February of 2001,
many corporations have begun implementing ergonomic programs. This is due to the
fact of being sold on ergonomic programs that reduce worker's compensation costs
and  improve  productivity.   (Source:   Kansas  City  Star,  The  Economics  of
Ergonomics,  April 18, 2000) Also,  OSHA will be reissuing new  ergonomic  rules
within a year that focus on carpal  tunnel and RSI  injuries  as reported by the
OSHA administration in February, 2001.

     In  addition,  the  Federal  Government's  agencies  have been  required by
Section 508 Federal  Acquisition  Regulations to make the Internet accessible to
the  disabled.  Further,  Section 508 mandates  that  alternative  technology be
provided for the disabled as well.  Add to this  government  program,  President
Bush's New Freedom  Initiative that was announced in March 2001. This program if
adopted by Congress  will  provide  nearly $1 Billion over a five year period to
provide jobs for the disabled and assistive  technology to allow the disabled to
work. We intend to work with President Bush's committee  (LASER) to promote this
program.  Finally,  every state also has an assistive  technology  program where
equipment is being  provided to the disabled.  In April of 2002,  President Bush
announced his new ergonomic program.

     We believe this bodes well for us as the DataHand(R)  Ergonomic Keyboard is
positioned to address these needs,  as well as the new ergonomic rules when they
are implemented.

MARKETS

THE DATAHAND(R) ERGONOMIC KEYBOARD MARKET

     While our potential  DataHand(R)  Ergonomic  Keyboard customers include any
user of a computer  keyboard  or other  keypad  data entry  device,  the current
market is more narrowly defined into four distinct sub-markets:

o    The Enabling and/or Assistive Technology Keyboard Market
o    The Retail Keyboard Market
o    The Productivity Keyboard Market
o    Other Keyboard Markets - Laptop Computers and Games

     Currently our customers are  purchasing  our products on an as needed basis
without long-term requirement contracts.

ENABLING AND/OR ASSISTIVE TECHNOLOGY MARKET

     We have existing knowledge and business development  experience within each
sub-market.  The enabling and/or assistive technology keyboards market meets the
needs of people  unable to perform  work due to  debilitating  keyboard  related
injuries such as Carpal  Tunnel  Syndrome  (CTS),  tendonitis,  or  DeQuervain's
Syndrome. These keyboard related injuries have been estimated by the U.S. Bureau
of Labor Statistics in 1999 (Source:  Congressional  Record) to account for more
than half of reported occupational  illnesses and are estimated to significantly
affect costs and productivity of 185,000 U.S. companies each year, and cost U.S.
businesses billions annually.


                                       6
<PAGE>

     Further, as CTS problems become better understood, it is expected that both
legislation  and lawsuits  will  increase  liability  costs for many  companies.
Because of both the human and financial impact of keyboard related injuries, the
enabling and/or assistive  technology  keyboard market is fairly  insensitive to
price and very reactive to quality and proven  solutions such as our DataHand(R)
Ergonomic  Keyboard.  Insurance  companies,  such as Kempers  Workers Comp, have
already paid for their clients to obtain a DataHand(R)  Ergonomic Keyboard as an
alternative to a very expensive (nearly $30,000) carpal tunnel  operation.  Most
of the sales we receive  over the  Internet on our web site are from people that
have carpal tunnel  injuries.  When  interviewed  after the purchase on why they
bought the $1,000 DataHand(R)  Ergonomic  Keyboard,  they reported that cost was
not a factor in making  their  decision.  They  wanted  something  that  worked.
(Please see the over 100 testimonials  from current customers on the DataHand(R)
web site - (WWW.DATAHAND.COM)

     The current  DataHand(R)  Ergonomic  Keyboard models serve this market very
well at their  existing  price points.  With OSHA  standards on  musculoskeletal
injury  imminent,  this  market is  expected  to grow  quickly  and become  more
lucrative for us. Thanks to the unique  DataHand(R)  Ergonomic Keyboard features
and benefits,  we believe no other keyboard  product is better poised to address
this growing market's needs.

MARKET STRATEGY - ENABLING AND/OR ASSISTIVE TECHNOLOGY KEYBOARD MARKET

     We believe the  DataHand(R)  Ergonomic  Keyboard stands alone at the top of
this  market.  The unique and patented  designs  differentiate  the  DataHand(R)
Ergonomic Keyboard from all other ergonomic keyboard designs. We do not know the
market share  available at this time, as the total high end market volume is not
known.  There is a growing  number of specialized  vendors  serving this market.
Computer  operators  who  want to  avoid  future  injury  as well as to  address
existing pain residual from work on the  traditional  flat keyboard can be drawn
to our  DataHand(R)  Ergonomic  Keyboard's  unique design and  benefits.  As the
ergonomic  marketplace  has grown,  our  DataHand(R)  Ergonomic  Keyboards  have
increasingly  been seen by leading  vendors in the  ergonomic  market as a major
solution to the problems suffered by persons  suffering  keyboard  injuries.  We
believe  that the  other  ergonomic  keyboards  are only  partial,  marginal  or
limited, short-term answers to the problems.

     This market is approached  via our web site:  Internet  marketing;  inbound
telesales from injured  individuals;  outbound  telesales;  and the  value-added
ergonomic   reseller  channel.   The  marketing  efforts  are  directed  towards
influencers  such as physical  therapists,  ergonomists,  assistive and adaptive
technology centers, occupational medicine clinicians and therapists,  government
agencies,   worker's  compensation  personnel,   and  corporate  human  resource
departments.

THE RETAIL KEYBOARD MARKET

     Companies  such as Dell, HP and Gateway are starting to market  products in
the  ergonomic and  assistive  technology  markets.  The  DataHand(R)  Ergonomic
Keyboard has been approved by them as one of their  products for these  markets.
While we are not in contract with these marketing companies,  we anticipate that
contracts with them for the sales of our products will be in place by the end of
the third quarter of 2004.  Dell, HP and Gateway are currently  selling over 100


                                       7
<PAGE>

million  computer  keyboards  per year.  Our  marketing  focus is to supply  our
keyboards to their very large retail base.

MARKET STRATEGY - RETAIL KEYBOARD MARKET

     We  will   continue   to   market   our   keyboards   via   our  web   site
(WWW.DATAHAND.COM), distributors, resellers and direct sales to enter the retail
keyboard market. Web site traffic additional sales increase will be by utilizing
known web  resources.  The following  breakdowns are the average number of sites
listed under each sub category on three major search engines (Yahoo,  Lycos, and
NorthernLight) for the keyword: ERGONOMICS as of June 30, 2003:

Companies (61)
Conferences (3)
Institutes (10)
Organizations (4)

SEARCH ENGINE REGISTRATION: (PLACEMENTS FOR GENERATING WEB TRAFFIC)

     Search  engines  are a source of  potential  customers  that search the web
looking for certain keywords such as "ergonomic  keyboards,  ergonomic  computer
keyboards and preventing carpal tunnel injury". We are registered with all major
search engines.  Twenty-Five  percent (25%) of our sales during fiscal year 2003
occurred  because  of our web site,  and search  engines  are the means by which
persons  searching the web for specific items are directed to web sites offering
the items.

     Market  knowledge and demand will also be increased by focused  advertising
utilizing selected  periodicals serving the targeted markets. We have advertised
in a few of  these  periodicals,  such  as the  AAMT  Journal,  Journal  of Hand
Therapy,  Occupational  Practice  Magazine  and  Occupational  Health and Safety
Magazine.  As we obtain and/or generate additional working capital, we intend to
increase our advertising in the above listed periodicals.

     We also plan to license the product to a large and well-respected  computer
company at an attractive  wholesale price justified by the proprietary  value of
the DataHand(R)  product name and technology.  We have been in negotiations with
HP,  Dell,  Gateway and  Microsoft  since the last half of 2001.  Microsoft  has
recently added assistive  technology  products to its product line and web site,
and our  DataHand(R)  Ergonomic  Keyboard  has been  placed  on its web site for
availability of products. Microsoft put into place in February of 2002 contracts
with  manufacturers of assistive  technology  products,  such as us. Gateway has
announced  that it is working on setting up an ergonomic  section in each of its
stores,  and our  DataHand(R)  Ergonomic  Keyboard  has been  approved  for that
program.  Dell has verbally agreed to sell the DataHand(R)  Ergonomic  Keyboard.
This  strategy  will enable  computers  to be sold with a  competitively  priced
DataHand(R)  keyboard at the  original  point of sale.  We believe that once the
right technology partner is acquired (IBM, Dell, Gateway, etc.), our DataHand(R)
keyboard will quickly establish market share. We further believe rapid growth in
sales volume will result as the ergonomic  liability and lower  productivity  of
the traditional keyboard becomes more widely understood.


                                       8
<PAGE>

THE PRODUCTIVITY KEYBOARD MARKET

     This market is defined as the corporate and/or government data entry market
in need of keyboard solutions that offer increased typing speed, improved typing
accuracy and reduced keyboard related fatigue.  In this market,  our DataHand(R)
Ergonomic  Keyboards  compete against the less efficient and injurious  standard
keyboards and keypads with our  DataProof  10-Key and  Professional  II keyboard
models. These models feature user-defined  programmability in addition to a more
efficient  design. We have existing  reference  accounts in this market segment.
Typical customers include high volume data entry  applications such as banks and
data processing centers.

MARKET STRATEGY - PRODUCTIVITY KEYBOARD MARKET

     We  have  market   experience   selling  keyboards  based  on  productivity
improvement.  Our experience selling keyboards to enhance  productivity has been
based  strictly on the design of our  keyboard.  To increase  productivity  on a
keyboard,  the  product  must have an  extremely  light  touch  (gram  force) to
activate  the keys,  the range of finger  motion  must be  minimal  and the hand
position must be a neutral location. Our product meets all of these criteria. We
plan to partner with a large data entry hardware  manufacturer and/or innovative
computer  manufacturers  to assist in productivity  keyboard sales and marketing
strategies.  We do not yet have a  contract  with a large  data  entry  hardware
manufacturer.   This  market  is  virtually  untapped,  and  no  other  keyboard
manufacturer is better positioned to make productivity  market advances.  We and
our  partner(s)  will  approach this market via direct sales  efforts,  outbound
telesales, OEM relationships, and data application trade shows and publications.
The  marketing  efforts  are  directed  towards  influencers  such  as  workflow
managers, operations managers, and data entry hardware product managers. We have
also approached  Microsoft,  Dell,  Gateway,  UNISYS,  Insight  Direct,  CDW and
CompUcom. No agreement has been reached with these companies to actively promote
our products.

     We have entered into an agreement with DuraSwitch, Inc., of Tempe, Arizona,
to develop a low-cost  DataHand(R)  Ergonomic  Keyboard  named the ErgoHand (R).
DuraSwitch is in the business of developing and licensing high quality switches.
Currently  its switches  are  licensed to companies  such as Maytag (for washing
machines,  etc.) and Delphi  (for  automobiles).  DuraSwitch's  co-founder  Tony
VanZeeland is its chief engineer,  holding over twenty patents for switches. Mr.
VanZeeland was formerly our vice-president of engineering, and in that capacity,
helped  develop the current model of the  DataHand(R)  Ergonomic  Keyboard - the
Professional  II.  We  and  DuraSwitch  are  developing  the  ErgoHand(R)  on  a
"handshake"  agreement  at this time.  However,  we have  entered  into a formal
technology exchange agreement, a copy of which is attached as an exhibit.

OTHER KEYBOARD MARKETS - LAPTOP COMPUTERS AND GAMES

     Laptop  computers  are among the fastest  growing  sectors of the  computer
market.  Some projections are that the number of laptop computers may exceed the
number of desktop  computers  within this decade (Source:  Frost & Sullivan U.S.
MARKETS FOR COMPUTER KEYBOARDS AND POINTING  DEVICES--1997).  The opportunity to
license our  DataHand(R)  technology for inclusion with a laptop computer may be
of considerable value. Our DataHand(R)  keyboard design incorporated into laptop
computers would offer several advantages. Because DataHand(R) keyboard operation
does not require the user to look at his or her hands,  the computer  screen can


                                       9
<PAGE>

be placed on a more  horizontal,  rather than  vertical,  plane above the hands.
This screen over hands  position will allow the computer  screen to be closer to
the user,  with a more  perpendicular  line of sight.  In this way, the computer
workspace  can  be  physically  more  compact  and  offer  better  balance.  Our
DataHand(R)  keyboard  provides an  integrated  mouse that many users may prefer
over  touch-pads or force-gage  (eraser style) pointer  devices that many laptop
computers must include. Additionally, our DataHand(R) keyboard may be grasped to
facilitate  stabilization  during typing on the lap.  Although we do not plan to
manufacture a laptop computer,  we will seek to license this technology to other
computer manufactures.

     Game console unit sales for several of the more popular systems are already
measured  in millions  of units.  New game  consoles  are under  development  by
companies  such as Sony,  Nintendo,  Calico and Atari.  There is a potential  to
license  DataHand(R)  technology to one or more of these manufacturers as a part
of the  standard  game unit or as an  available  accessory  to  provide  several
significant  advantages.  Our DataHand(R)  technology  provides more comfort and
extra  utility  than a  conventional  keyboard.  A key entry device is important
because many new game units are intended to be multi-functional, serving as more
than simple game  controllers.  For  example,  the new Sony units are planned to
have Web-TV capability, and others may have the ability to read and send E-mail.
Some units may also  include  basic word  processing,  printing  capability  and
educational  programming,  which in turn would require usage of a full keyboard.
Our DataHand(R)  keyboard  technology could be used for typing and could provide
new and  more  fun  gaming  features  than  those  supported  by a  conventional
keyboard.

SALES, MARKETING AND DISTRIBUTION PROGRAMS:

     o    DISTRIBUTORS - enroll major distributors serving the targeted markets:
          Ingram  Micro,  Synnex  and Tech Data - total  sales  2002  about $68B
          (Source:  Annual Reports for Ingram Micro,  Synnex and Tech Data).  We
          currently have 72 distributors in the United States and world wide.
     o    RESELLERS  - sign on (9)  major  resellers  focusing  on the  targeted
          markets.
     o    CATALOG SALES - place  advertisements in (3) major print and (3) major
          electronic  magazines.  Catalog sales have only marginally  begun. One
          reseller  from New York  currently  lists  the  DataHand(R)  Ergonomic
          Keyboard in its catalog.  We began to list our products in catalogs on
          a more extensive basis beginning in the second quarter of 2003.
     o    WEB SITE - use latest  electronic sales and web site design technology
          to generate  increasing web site visits and sales.  Considerable  time
          and expense has also been expended in the development of our web site,
          WWW.DATAHAND.COM,  and this has  resulted  in a steady  flow of orders
          (twenty to thirty units per month).

     Our  marketing  plan  requires  the  markets and  distribution  channels of
distributors and resellers.  These companies play a major roll to increase sales
significantly  in the first six months  following  our  obtaining of  additional
financing. There are approximately 70 thousand resellers purchasing from the top
four distributors,  approximately 5000 electronic  reseller and in excess of 100
catalog  companies  (Source:  Catalog of Resellers - Public  Library).  With our
planned  marketing  campaign to these  resellers,  we will see a major influx of
orders.  As a  supplier,  we will be  required  to ship  within  2 1/2  weeks to
distributors and resellers.  Further,  the in-house sales staff will concentrate


                                       10
<PAGE>

on call centers,  brokerage firms,  financial institutions and corporations with
50  employees or more and require a ship time frame of 0-30 days.  To date,  all
distributor and reseller  agreements have been a standard  agreement to sell our
products.  No material  contracts  currently exist. We have arrangements with 48
distributors/resellers  in  the  United  States  and  24  distributors/resellers
internationally.

     To date,  most efforts to market our  products  (other than through our web
site) have been through attendance at trade shows. For example,  we attended the
Ergonomic Conference and Expo held in Las Vegas, Nevada during November 2003 and
additional conferences in Atlanta and Washington in August 2003.

TRAINING

     Training and system  implementation  consulting is a separate revenue model
that offers great  potential for us. We have the  capability  to assist  clients
with the DataHand(R)  Ergonomic Keyboard  implementation and with evaluating and
improving their data entry business  processes.  This involves  project planning
and management,  application and business process analysis,  user training,  and
change management training.  Through this process, we can add value and increase
the prospect of a successful  implementation  and also create and operate a very
profitable data entry productivity improvement consulting business.

     Our training programs are designed to assist an individual or business with
implementing  a new keying  technology and improving  productivity.  In order to
best maximize the benefits of our products, training is an integral component of
our experience and is designed to match the users specific goals and needs in an
efficient and effective manner.  All employees need freedom from pain to perform
their job productively  that will provide positive  benefits both to the company
and the employee.

     For individual keyboard sales,  training tools are provided and have proven
to be effective in both  minimizing  the time needed for learning and maximizing
the return on investment.  Due to these users' particular health problems and/or
the  productivity  benefits,  they  are  highly  motivated  to  learn to use our
DataHand(R)  Ergonomic Keyboard.  Individual  keyboard  purchasers  occasionally
purchase one-on-one  training.  Training is not sold to anyone other than a user
of our keyboards.

     In the future, training tools will be offered through our web site, as well
as being delivered with each individual  keyboard and through  training  courses
offered and taught by our qualified and licensed trainers.

INTERNET ADVERTISING

     We desire to enter into advertising agreements with internet providers such
as AOL and Lycos pursuant to which these companies will display  Internet banner
advertisements for DataHand(R)  Ergonomic Keyboard.  America on Line (AOL) began
offering  our  DataHand(R)  Ergonomic  Keyboard  on its web  site  beginning  in
mid-March 2003. There currently does not exist a written  advertising  agreement
with either AOL or Lycos, although negotiations with both companies is on-going.
These  advertisements  appear when users of AOL and Lycos search for certain key
words, such as "keyboards." The advertisements  will allow users to click on the
advertisement  to  link  directly  to our  Web  site.  We  anticipate  that  the
agreements  will  require  us to pay the  portal  sites  based on the  number of


                                       11
<PAGE>

impressions we receive. We initiated these advertisements  during fiscal 2002 on
a target  basis in order to  determine  the  costs to us for the  "hits"  on the
web-site.  We also intend to continue  to seek new  opportunities  to expand our
presence within top-tier portal sites and highly trafficked content sites.

OFFLINE ADVERTISING

     We intend to actively pursue a variety of offline  advertising  channels to
promote the DataHand(R)  Ergonomic Keyboard in the magazines and journals listed
above.  Our efforts in this area will focus on promoting the brand through print
advertisements.  While we have not spent  significant  marketing dollars in this
area in the past, we expect to  significantly  increase our offline  advertising
campaign in the future.

COMPETITION

     The DataHand(R) Systems products serve two distinct markets: corporate (and
government)  data entry  systems  and  ergonomic  keyboards.  Data entry  system
devices are  employed  on  equipment  such as mail  sorting  machines  and check
sorters.  This type of equipment has  traditionally  been supplied with either a
standard  keyboard or a numeric keypad for corporate  data entry.  Corporate and
government  data entry systems are  DataHand's(R)  primary  market.  DataHand(R)
competes against the less efficient standard keyboards and keypads with the data
Proof (10 Key) and  Professional  II models,  which feature  programmability  in
addition  to  improved   design,   to  support  a  wide  variety  of  processing
applications.

     The ergonomic  keyboard market is more consumer focused and subdivided into
two parts.  The first category  includes  keyboards that consist of a split, but
attached,  keyboard angled to align with the typist's wrists through a wave-like
wrist rest such as Microsoft's Natural keyboard. PC Concepts and Adesso are also
competitors in this market and the three together have  approximately 87% of the
total  ergonomic  keyboard  market.  The  second  segment,   that  includes  the
DataHand(R),  is all other  ergonomic  keyboards  in a wide  array of shapes and
configurations. DataHand(R) stands alone at the high end of this market with its
uniquely  patented  keyboard  technology  providing minimum motion and force and
ideal posture and the only proven health and comfort and productivity  benefits.
The published list price for the DataHand(R)  Ergonomic  Keyboard - Professional
II is $1,295.  For the Personal  Edition,  the published list price is $995. The
difference in the two models,  which appear to be nearly identical,  is that the
Professional II is a fully programmable  model, i.e., the user can program every
key if desired. This cannot be done on the Personal Edition.

     Currently there is minimal awareness of the DataHand(R) System. Despite the
limited  awareness,  interested  prospects find  DataHand(R) on the Internet and
purchase the product.  Companies  that have purchased in this manner include MIT
(15 keyboards),  Intel, Silicon Graphics, Hewlett Packard (5 keyboards),  Analog
Devices,  Cisco, Lucent,  Caterpillar,  Motorola,  Netscape, US Airways and many
others.

     Our marketing  plan has been developed to address the markets  served.  The
plan  includes the  initiation  of research  projects,  the creation of database
marketing,  the  development  of sales aids  (including  a video to be mailed to
prospects and a PC based sales presentation), increased advertising (principally
on Internet  search  engines  and in trade  publications,  including  journals),


                                       12
<PAGE>

development of a enhanced  marketing  materials  (including client case studies,
research synopses and client testimonials), formation of a medical and ergonomic
advisory  board and  "productizing"  training and  installation  programs,  with
possible performance guarantees.

     We have identified four sales channels.  In the corporate (and  government)
data entry systems market, there are two sub markets: speed/productivity and RMI
prevention or relief for those already  injured.  In the individual user markets
there are also two sub markets:  rehabilitation  and retail.  These  markets are
very different, and our marketing plan identifies different strategies for each.
The following is a description  of each market and the  strategies for attacking
them.

     First, the CORPORATE DATA ENTRY  (SPEED/PRODUCTIVITY)  market is approached
via direct sales  efforts that have already  begun.  The target of these selling
efforts  is the  data  entry  production  manager  who is  seeking  to  increase
productivity.  The Plan provided for the adding of two Vice  President of Sales,
Mr. Robert Caplan and Mr. Dan Kass,  four direct sales personnel in the calendar
years 2002 and 2003 and  substantially  increased  sales personnel in subsequent
years. Leads for direct sales will be generated primarily through  telemarketing
directly to the operating manager.

     Second,  the RMI PREVENTION  COMPONENT OF THE ERGONOMIC  KEYBOARD MARKET is
approached via direct sales and indirectly through corporate safety consultants.
The target of these selling  efforts are the managers of human  resources,  risk
management  and  occupational  safety and  include  the person  responsible  for
managing workman's  compensation insurance expense. The Plan is to approach this
market directly through telesales that will be accomplished  in-house or through
outsourcing.   Corporate   safety   consultants  will  also  be  approached  via
telemarketing and telesales.

     Third,  the  REHABILITATION  COMPONENT OF THE ERGONOMIC  KEYBOARD MARKET is
approached through inbound telesales, outbound telesales to hand therapists, and
the  ergonomic  reseller  channel.  The target of these  selling  efforts is the
injured individual.  Inbound telesales is currently underway and is based on our
Internet  web site with calls taken by one sales  person.  The activity is being
actively  managed  (using search engine  management and banner  advertising)  to
increase  the number of injured  workers who are  directed to the web site.  The
resale  channel  marketing  efforts are  directed  towards  influencers  such as
physical  therapists,  government  agencies,  ergonomic  resellers and corporate
human resource departments.

     Fourth,  the RETAIL  individual  user  market  will be  approached  through
licensing.  It is  believed  that the  product  will be licensed at 12.5% of the
wholesale  price that is justified  by the  proprietary  nature and  significant
benefit provided by the DataHand(R) product.

INTELLECTUAL PROPERTY

     The following patents are material to protecting the DataHand(R)  Ergonomic
Keyboard  design.  United  States  patents  have a term of 17 years and European
patents have a term of 20 years.  The list  includes  United  States and foreign
patents and trademarks.


                                       13
<PAGE>

                                     PATENTS

               TITLE                            PAT. #       COUNTRY     ISSUED
               -----                          ----------     -------   ---------

     Alpha Numeric Keyboard                   0279553          EPO       2/2/88
     Alpha Numeric Keyboard                   4,913,573        U.S.      4/3/90
     Comb. Computer Keyboard &
     Mouse Date Entry System                  4,917,516        U.S.     4/17/90
     Data Entry Terminal (Design)             D311,522         U.S.    10/23/90
     Date Entry Device                        M8904784.2     Germany     7/7/89
     Data Entry Device                        0057386                   7/17/89
     Data Entry Device                        894,920        France      5/9/90
     Data Entry Device                        1,060,442        U.K.      5/9/90
     Switch Assembly                          5,514,866        U.S.      5/7/96
     Switch Assembly (design)                 D362,425         U.S.     9/19/95
     Keyboard (design)                        5,376,764        U.S.     3/21/95
     Three Way Switch                         5,743,666        U.S.    12/27/94
     Adjustable Keyboard                      5,743,666        U.S.     4/28/98
     Magnetically Enhanced Membrane Switch    5,921,382        U.S.     7/13/99


                                   TRADEMARKS

       MARK                                     REG. #                   ISSUED
       ----                                   ---------                 --------
     DataHand                                 1,741,088                 12/22/92


ENVIRONMENTAL MATTERS

     Our business  does not involve the use,  handling,  storage and disposal of
potentially  toxic  substances  or wastes.  Accordingly,  we are not  subject to
regulation by federal,  state, and local authorities  establishing  requirements
for the use,  management,  handling,  and disposal of these materials and health
and environmental quality standards,  liability related to those standards,  and
penalties for violations of those standards.  We believe that we do not have any
material   environmental   liabilities.   Compliance  with  environmental  laws,
ordinances and  regulations has not had, and we do not expect such compliance to
have, a material adverse effect on our business, financial condition, or results
of operations.

EMPLOYEES

     As of September 30, 2003, we had 10 employees, including 3 in production, 3
in sales and marketing and 4 in management and administrative  support.  We have
experienced  no work  stoppages  and are not a party to a collective  bargaining
agreement. We believe that we maintain good relations with our employees.

WE OWN THE TECHNOLOGY, PATENTS AND TRADEMARKS ON WHICH WE RELY.

     We rely on a  combination  of patent and  trademark  laws,  confidentiality
procedures and contractual  provisions to protect our intellectual  property. We
may receive  notices  from third  parties that claim the  products,  software or
other  aspects  of our  business  that we own or have the right to use  infringe


                                       14
<PAGE>

their  rights.  Any  future  claim,  with or  without  merit,  could  result  in
significant litigation costs and diversion of resources, including the attention
of  management,  and  could  require  us to enter  into  royalty  and  licensing
agreements,  all of which could have a material  adverse effect on our business,
financial  condition,  and results of  operations.  These  royalty and licensing
agreements,  if required,  may not be available on terms  acceptable to us or at
all.  Such  litigation,  whether  successful  or  unsuccessful,  could result in
substantial  costs and  diversion of our  management's  attention  and our other
resources, which could have a material adverse effect on our business, financial
condition, and results of operations.

WE DO NOT PLAN TO PAY CASH DIVIDENDS.

     We have  never  paid any cash  dividends  on our  common  stock  and do not
currently  anticipate  that we will pay  dividends  in the  foreseeable  future.
Instead,  we intend to apply  earnings to the expansion and  development  of our
business.

THERE ARE BOTH GENERAL AND SPECIFIC  RISKS  INHERENT IN ANY BUSINESS,  INCLUDING
OURS.  AN  EXTENSIVE  DISCUSSIONS  OF RISKS WE FACE IS  CONTAINED IN THE SECTION
CAPTIONED  "RISK  FACTORS"  IN  AMENDMENT  NO. 1 TO OUR FORM  10-SB  FILED  WITH
SECURITIES AND EXCHANGE COMMISSION.  SOME SPECIFIC RISKS WE ARE CURRENTLY FACING
ARE SET FORTH BELOW,  AND EVEN THOUGH WE ARE NOT REQUIRED IN THIS FORM 10-KSB/A,
WE WISH TO DESCRIBE SOME OF THEM FOR YOU.

UNLESS WE RAISE ADDITIONAL CAPITAL TO EXPAND OUR BUSINESS, WE MAY NOT BE ABLE TO
CONTINUE  OPERATIONS AS A GOING CONCERN,  AND OUR INVESTORS MAY LOSE SOME OR ALL
OF THEIR INVESTMENT.

     We historically have secured  financing for operations,  the acquisition of
additional inventory and equipment,  and the development of our products through
private  placements  of equity  securities  and from loans.  We had  outstanding
short-term notes payable and capital lease  obligations  totaling  approximately
$414,261 on September  30,  2000,  $60,943 on  September  30, 2001,  $261,848 on
September  30, 2002 and $220,621 on September  30,  2003.  Each figure  includes
yearly leases of $79,332 for office rent and office  equipment  leases.  We have
incurred  significant  losses  since  inception  and  will be  required  to seek
additional  equity or debt  financing  to further  develop our  products  and to
establish  our  manufacturing  operations,  to finance  future  acquisitions  or
develop new product lines, to obtain equipment and inventory necessary to expand
our in-house production  capabilities,  or to provide funds to take advantage of
other  business  opportunities.  The  timing  and  amount  of any  such  capital
requirements  cannot  be  predicted  at this  time.  We have  from  time to time
encountered difficulties in obtaining adequate financing on acceptable terms and
there can be no assurance  that such  financing  will be available on acceptable
terms in the future. If such financing is not available in sufficient amounts or
on  satisfactory  terms, we may be unable to repay creditors or to continue as a
going concern. Our inability to obtain adequate financing on a timely basis also
could adversely affect our operating results,  may require us to restructure our
business and operations,  and could significantly  interfere with our efforts to
expand our business at the desired rate. Debt financing  increases  expenses and
must be repaid regardless of operating results. Equity financing could result in
additional dilution to our existing stockholders.


                                       15
<PAGE>

WE  HAVE  EXPERIENCED  LOSSES  FROM  OPERATIONS,  OUR  AUDITORS'  REPORT  ON OUR
FINANCIAL  STATEMENTS IS QUALIFIED  WITH RESPECT TO OUR ABILITY TO CONTINUE AS A
GOING CONCERN,  AND OUR FUTURE  PROFITABILITY  IS UNCERTAIN AND THIS COULD CAUSE
OUR CURRENT AND PAST INVESTORS TO LOSE SOME OR ALL OF THEIR INVESTMENT.

     We have incurred operating losses since inception,  and reported a net loss
of $523,003 for the year ended  September 30, 2001. For the year ended September
30, 2001 we had a deficit of $1,512,226.  For the year ended  September 30, 2003
we had a deficit of $1,163,490, for a total accumulated deficit at September 30,
2003 of  $17,531,355.  Losses  incurred  during  fiscal 2001,  2002 and 2003 are
attributable  primarily  to expenses we incurred to develop,  enhance and market
our DataHand(R)  Ergonomic Keyboard.  We cannot assure you that we will generate
sufficient  operating  revenue,  expand sales of our products and  services,  or
control  our  costs  sufficiently  to  achieve  or  sustain  profitability.  Our
financial  statements for the years ended September 30, 2003, September 30, 2002
and September  30, 2001 have been  prepared  assuming that we will continue as a
going concern. The report by our independent public accountants on our financial
statements  for the year ended  September  30, 2003 states that the  significant
losses and our working  capital  deficiency  as of that date make our ability to
continue as a going concern  uncertain.  Our financial  statements  for the year
ended  September  30,  2003  do not  include  any  adjustments  relating  to the
realization of assets and the  satisfaction of liabilities  that might result in
the event that we become unable to continue as a going concern.

OUR LIMITED OPERATING HISTORY MAY CAUSE FUTURE INVESTORS A PROBLEM IN EVALUATING
OUR POTENTIAL FOR FUTURE  SUCCESS.  THIS IN TURN COULD CAUSE US  DIFFICULTIES IN
RAISING NEEDED CAPITAL

     We were  incorporated  in  1995  and we did not  commence  active  business
operations in the industry until 1996. Accordingly,  we have a limited operating
history and limited historical financial information upon which you can evaluate
our existing  business and our  potential for future  success.  We face numerous
risks,  expenses,  delays, and uncertainties  associated with establishing a new
business,  especially in the new and rapidly evolving computer technology.  Some
of these risks and uncertainties relate to our ability to

     o    develop brand awareness and brand loyalty,
     o    increase traffic to our web site;
     o    increase customer acceptance of our products and services,
     o    develop and renew strategic relationships,
     o    obtain  access to new product and service  offerings  or  distribution
          channels,
     o    anticipate and adapt to the changing market for computer equipment and
          electronic commerce,
     o    provide  or  contract  for  satisfactory  customer  service  and order
          fulfillment, and
     o    integrate any acquired businesses, technologies and services.

     We may not be successful in addressing these risks and  uncertainties.  The
failure to do so would materially and adversely affect our business.

     As a result of our limited  operating  history,  our plan for rapid growth,
the changing  nature of computer  technology  and the  increasingly  competitive
nature of the markets in which we compete,  our historical  financial data is of
limited value in anticipating  future  operating  expenses.  Our planned expense


                                       16
<PAGE>

levels  will be based in part on our  expectations  concerning  future  revenue,
which is difficult to forecast accurately based on our stage of development.  We
may be unable to  adjust  spending  in a timely  manner  to  compensate  for any
unexpected  shortfall in revenue.  Further,  business  development and marketing
expenses may increase significantly as we expand operations.  To the extent that
these expenses precede or are not rapidly  followed by a corresponding  increase
in revenue,  our  business,  operating  results and  financial  condition may be
materially and adversely affected.

WE MAY  NOT BE  COMPETITIVE  IF WE FAIL  TO  ENHANCE  OUR  PRODUCT  AND  SERVICE
OFFERINGS AND DISTRIBUTION CHANNELS.

     The  failure  to develop or acquire  new or  enhanced  products,  services,
distribution  channels and online  features and functions  could have a material
adverse effect on our business. To remain competitive, we must continue to

     o    expand our product and  service  offerings  and develop or acquire new
          distribution channels,
     o    enhance our  offerings of ergonomic  related  news,  information,  and
          features,
     o    enhance the ease of use, responsiveness,  functionality,  and features
          of DataHand(R) Ergonomic Keyboard,
     o    attract and retain additional staff, and
     o    improve  the  consumer  knowledge  and  purchasing  experience  on our
          planned network of Web sites.

     These  efforts  may require us to develop or license  increasingly  complex
technologies.  We  may  not be  successful  in  developing  or  introducing  new
products, services, distribution channels, and online features and functions and
the products,  services,  channels,  features, and functions that we develop may
not result in increased revenue. We also may not be able to develop, acquire, or
enter into alliances for Web sites  designed to attract  consumers and suppliers
of computer products.

     Developing,  launching,  and promoting new product and service offerings or
expanding  into new markets will require us to make  significant  investments of
financial,  management,  and  operational  resources.  These  efforts also could
strain our  ability to support  our  existing  business  and product and service
offerings  or to provide an  enjoyable  online  experience  to  visitors  to our
network.  Our business could be materially and adversely  affected if we fail to
achieve these goals.

CHANGES IN ECONOMIC  CONDITIONS AND CONSUMER  SPENDING MAY ADVERSELY  AFFECT OUR
BUSINESS.

     The  computer  industry  is subject to  cyclical  variations.  Declines  in
consumer   confidence  levels,   even  if  prevailing  economic  conditions  are
favorable,  can also adversely affect consumer spending on computers and related
technology.  Our  success  depends  in part  upon a number of  economic  factors
relating to discretionary  consumer and business spending,  including employment
rates,  business conditions,  future economic prospects,  interest rates and tax
rates.  We are unable to estimate  the impact,  if any, of the acts of terrorism
recently unleashed on the United States on our business.


                                       17
<PAGE>

IF WE ARE  UNABLE TO  SUPPORT  INCREASED  VOLUME ON OUR WEB SITE  SALES  WILL BE
ADVERSELY AFFECTED.

     Growth in the number of users  accessing  our Web site may strain or exceed
the capacity of the computer systems of our Internet hosting service and lead to
impaired  performance or system  failures.  The current  systems of our Internet
hosting  service may be inadequate to  accommodate  rapid traffic  growth on our
network.  If this occurs,  customer service and  satisfaction may suffer,  which
could lead to dissatisfied users,  reduced traffic, and an adverse impact on our
business.  Our Internet hosting service plans to upgrade and add to our existing
technology and network  infrastructure  and to implement new systems so that our
network can perform better and handle  increased  traffic.  Failure to implement
these  systems  effectively  or within a reasonable  period of time could have a
material  adverse  effect on our  business,  operating  results,  and  financial
condition.  We have completed a revision of our web site content so that surfing
the site is easier and requires  less computer  memory on the surfer's  computer
than  before.  While we  believe  that we have  substantially  reduced  the risk
associated  with the use and  availability  of our web site,  we wish to caution
that there remain risks over which we have no control.

WE FACE INTENSE COMPETITION.

     Our  ability to compete  successfully  depends on a number of factors  both
within and outside our control, including the following:

     o    the  quality,  features,  diversity,  and prices of our  products  and
          services,
     o    our ability to generate traffic to our  DataHand(R)Ergonomic  Keyboard
          brand,
     o    our  ability  to develop  new  products  and  technology  and  service
          offerings,
     o    our ability to develop and maintain effective marketing programs,
     o    the quality of our customer service and training,
     o    our ability to  recognize  industry  trends and  anticipate  shifts in
          consumer demands,
     o    product introductions by our competitors,
     o    the number,  nature, and success of our competitors in a given market,
          and
     o    general market conditions.

Because these factors change rapidly, customer demand also can shift quickly. We
could experience a material adverse effect on our business,  operating  results,
and financial condition if we are unable to respond quickly to market changes or
a slowdown in demand for the products we sell and services we provide.

SERVICE FAILURES OR INTERRUPTIONS COULD ADVERSELY AFFECT OUR BUSINESS.

     Any sustained or repeated  failure or interruption in our computer  systems
or the  computer  systems or equipment of our  Internet  hosting  service  would
reduce  the  appeal  of our  Web  site to  customers  and  potential  customers.
Unanticipated  problems  affecting these systems may cause  interruptions in our
marketing  activities.  Interruptions  or  failures  could  result if we fail to
maintain  our  systems,  our  Internet  hosting  service  fails to maintain  its
computer   systems  and   equipment   in   effective   working   order,   or  if
telecommunications  providers  fail to provide  the  capacity  we  require.  Our


                                       18
<PAGE>

Internet  hosting service also must protect its computer  systems against damage
from fire, power loss, water, vandalism, terrorism and other malicious acts, and
similar unexpected adverse events. In addition,  our potential  customers depend
on  telecommunications   providers,  Internet  service  providers,  and  network
administrators  for access to our Web site.  The  systems and  equipment  of our
Internet  hosting  service  could   experience   outages,   delays,   and  other
difficulties  as a result of  system  failures  unrelated  to its  systems.  Any
damage, interruption,  or failure that interrupts or delays our operations could
cause users to stop using our services and have a material adverse effect on our
business.

AVAILABILITY OF MATERIALS FILED WITH THE SEC

     The  public  may read and copy any  materials  we file  with the SEC at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, DC 20549. The
public may obtain  information on the operation of the Public  Reference Room by
calling the SEC at 1-8900-SEC-0330.  We will be an electronic filer, and the SEC
maintains  an  Internet  site  that  contains  reports,  proxy  and  information
statements,  and other information  regarding issurers that file  electronically
with    the    SEC    at    HTTP://WWW.SEC.GOV.    Our    Internet    site    is
HTTP://WWW.DATAHAND.COM.

ITEM 2. DESCRIPTION OF PROPERTY.

     Our  executive  offices and  production  facility are located at 3032 North
33rd Avenue, Phoenix,  Arizona 85017-5247,  occupying 7,920 square feet of space
leased on a month to month basis. This facility is leased to Dale Retter, one of
our founders and a principal  stockholder.  Since 1998,  we have been paying the
lease payments under a verbal agreement with Mr. Retter.  The lease provides for
a monthly rental payment of $4,740.  We believe our present  facility is in good
operating condition and is adequate for our present and future requirements.

ITEM 3. LEGAL PROCEEDINGS

     None.

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

     None.


                                       19
<PAGE>

                                     PART II

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

     During the fiscal year ended September 30, 2001, we sold for cash 3,639,894
shares  of stock  for a total  purchase  price of  $745,246.  We also  issued an
aggregate of 798,913  shares of stock for services and debt for a total value of
$536,691.

     During the fiscal year ended  September  30, 2002, we sold for cash 565,000
shares  of stock  for a total  purchase  price of  $465,000.  We also  issued an
aggregate of 336,238  shares of stock for services and debt for a total value of
$243,266.

     During the fiscal year ended September 30, 2003, we sold for cash 1,917,002
shares  of stock  for a total  purchase  price of  $917,002.  We also  issued an
aggregate of  1,803,940  shares of stock for services and debt for a total value
of $309,286.

     During the fiscal year ended September 30, 2001, no additional options were
granted.

     During the fiscal year ended  September 30, 2002, we granted to directors a
total of 630,000  options to  purchase  our stock for a value of  $158,639.  The
exercise price is $1.00 per share and the option is good for five years.

     During the fiscal year ended  September 30, 2003, we granted to directors a
total of 69,000  options  to  purchase  our stock  for a value of  $21,450.  The
exercise price is $1.00 per share and the option is good for five years.

     During this three year period,  we have issued  warrants to purchase common
stock.  None of these  warrants have been  redeemed.  Outstanding  warrants have
expiration  dates through July 10, 2004 and certain  warrants expire at the date
of an initial public  offering.  216,566 warrants were issued in the fiscal year
ended  September  30,  2003,  150,000  warrants  were  issued in the year  ended
September 30, 2002 and 706,566  warrants were issued in the year ended September
30, 2001.

     All securities during the past three years were pursuant to exemptions from
registration  provided by Sections  3(b),  4.2 and 4.6 of the  Securities Act of
1933, as amended, and the rules and regulations adopted thereunder.  During this
period of time, all five (5) of the purchasers were old shareholders.

     During the fiscal year ended  September  30, 2002,  we issued for exercised
warrants  15,700 shares of stock for a total purchase price of $15,000.  We also
issued an aggregate of 150,000  warrants to purchase 150,000 shares of stock for
a total value of $40,886.

     As of September 30, 2003, there were approximately 420 holders of record of
our common stock.

     Our policy is to retain  earnings to provide  funds for the  operation  and
expansion of our business.  We have not paid cash  dividends on our common stock
and do not anticipate that we will do so in the foreseeable  future. The payment
of dividends in the future will depend on our growth,  profitability,  financial
condition, and other factors that our board of directors may deem relevant.

                                       20
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.

                             SELECTED FINANCIAL DATA

     The following table summarizes certain selected consolidated financial data
and is  qualified in its entirety by the more  detailed  Consolidated  Financial
Statements and Notes thereto  appearing  elsewhere in this Report.  The data has
been  derived  from the  financial  statements  audited by Shelley  Intl.,  CPA,
independent certified public accountant.

                                    YEAR ENDED      YEAR ENDED     YEAR ENDED
                                   SEPTEMBER 30,   SEPTEMBER 30,  SEPTEMBER 30,
                                       2003            2002           2001
                                   -------------   -------------  -------------
STATEMENTS OF OPERATIONS:

INCOME
   SALES OF PRODUCT                $     276,635   $     129,838  $     162,317
   TRAINING REVENUE                            0               0         10,150
                                   -------------   -------------  -------------
TOTAL REVENUE                            276,635         129,838        172,467

COST OF SALES
   COSTS OF GOOD SOLD                    298,078         110,983         60,283
   COST OF TRAINING                            0               0         10,268
                                   -------------   -------------  -------------
   TOTAL COST OF SALES                   298,078         110,983         70,551
                                   -------------   -------------  -------------

     GROSS PROFIT                        (21,442)         18,856        101,916

EXPENSES
   SALES AND MARKETING                   260,086         474,250        176,120
   GENERAL AND ADMINISTRATIVE            636,048         864,442        334,697
   RESEARCH AND DEVELOPMENT               52,138          24,063         10,531
   DEPRECIATION EXPENSE                   10,618          64,387         64,478
   INTEREST EXPENSE                      183,157         109,497         39,093
                                   -------------   -------------  -------------
   TOTAL EXPENSE                       1,142,047       1,536,638        624,919

   GAIN ON PATENT SALE AND
     RETIREMENT OF DEBT                        0           5,557              0
   LOSS BEFORE PROVISION FOR
     INCOME TAXES                     (1,163,490)     (1,512,226)      (523,003)
   PROVISION FOR INCOME TAXES                  0               0              0
                                   -------------   -------------  -------------
NET INCOME (LOSS)                     (1,163,490)     (1,512,226)      (523,003)
                                   =============   =============  =============
BASIC AND DILUTED EARNINGS
  (LOSS) PER COMMON SHARE                  (0.07)          (0.09)         (0.04)

BASIC AND DILUTED WEIGHTED
   AVERAGE NUMBER OF COMMON
   SHARES                             17,139,953      16,014,570      13,535,120


                                       21
<PAGE>

The notes to the  financial  statements  attached  as an exhibit are an integral
part of this Comparative Statement of Operations.


MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

OVERVIEW

     We are a Delaware corporation formed in November 1994. Our primary business
is the sale,  marketing,  manufacture,  licensing and development of innovative,
high-value  computer  data input  services.  On January 27, 1995, we merged with
Industrial Innovations, Inc., an Arizona corporation founded in October 1987. We
were the surviving  legal entity.  As a result of the merger,  each  outstanding
share of common stock held by the shareholders of Industrial Innovations,  Inc.,
was  exchanged for one share of our common  stock.  DataHand(R)  is a registered
trademark of ours.

     Our operations to date have included  assembling our management,  marketing
and sales, and product development  personnel,  forming strategic  relationships
with vendors, securing financing and launching the initial commercial production
of our DataHand(R) System.  Product  development,  testing and test marketing of
DataHand(R)  ergonomic  keyboards  have been  completed.  Full-scale  production
commenced in October 1998 with sales and marketing starting shortly thereafter.

     During fiscal 2003 we derived our revenue from the sales of our DataHand(R)
Ergonomic Keyboards.  Cost of sales includes raw materials and labor.  Operating
expenses include general corporate expenses, sales salaries, product development
costs,  taxes, and fringe  benefits,  as well as the cost of support services to
the continuing development of our technology and new products.

     Ninety  percent (90%) of our sales during  fiscal 2002 occurred  because of
our web site.  Although  most of these  sales  were  closed via  telephone,  the
initial  contact with us occurred  with the customer  visited our web site.  The
primary  method of  selling  has been to  "drive"  customers  to the web site by
listing it on several search  engines and with key words,  such as "hurt hands',
ergonomic  keyboards",  etc.  Sales terms  require  credit card  payment  before
delivery.  We deliver  within three days of receiving  payment for an order.  We
have a thirty day return  policy with a six percent  (6%)  restocking  fees as a
deduction from the sales price paid.

     Our training and system implementation have been offered on a fee basis for
the past five (5) years. Customers such as Citibank in North Dakota, M&I Bank in
Milwaukee, Sara Lee in Georgia and L.L. Bean in Maine have paid for and received
training from our training consultant Shelley Johnson.  Ms. Johnson, a certified
trainer with a Master Degree,  has consulted with our customers,  on our behalf,
in the past in the area of office productivity  improvement  associated with the
use of the DataHand(R) Ergonomic Keyboard in the customer's environment.

     All revenue is recognized  when billed.  We do not currently offer extended
terms on the sales of any of our products or training.

     There are no particular external business conditions that have affected our
business in the past.  Sales had declined  year-to-year  since 1998 because of a
restructuring  that occurred at the end of 1998 until 2003 where sales increased


                                       22
<PAGE>

by 113%.  Because of a lack of funding at that time, our management  agreed that
we would  layoff most of our work force and  concentrate  our efforts on raising
needed  capital  and  completing  the  design  of the  "ErgoHand"  (the low cost
DataHand(R)  Ergonomic  Keyboard)  and the  recruitment  of needed,  experienced
personnel for the future. These tasks have been completed,  and as we anticipate
sales will show an increase  beginning  in 2003.  There are no seasonal or other
aspects in our financial performance.

     Revenues have not been segmented by market segment in the past. However, it
is  anticipated  that revenues will be segmented in the future between at least:
web sales, resellers and corporate sales.

RESULTS  OF  OPERATIONS  FOR  THE  FISCAL  YEARS  ENDING  SEPTEMBER  30,   2003,
SEPTEMBER 30, 2002 AND SEPTEMBER 30, 2001

     REVENUE.  Total  revenue for the fiscal  years ending  September  30, 2003,
September 30, 2002 and September 30, 2001 were $276,635,  $129,838 and $172,467,
respectively.  The twelve month period  ending  September  30, 2003 saw sales of
keyboards of $276,635 and training revenue of $0, the twelve month period ending
September  30, 2002 saw sales of keyboards  of $129,838 and training  revenue of
$0, and the twelve month period ending September 30, 2001 saw sales of keyboards
of  $162,317  and  training  revenue  of  $10,150.  The  change  in  revenue  is
attributable to increase sales of our DataHand(R) Ergonomic Keyboards .

     COST OF GOODS SOLD;  GROSS  PROFIT.  Cost of goods sold for the fiscal year
ending  September  30,  2003,  September  30, 2002 and  September  30, 2001 were
$298,078,  $110,983 and $70,551  respectively.  The twelve  month period  ending
September  30, 2003 saw cost of keyboards  sold of $298,078 and cost of training
of $0, the twelve month period  ending  September 30, 2002 saw cost of keyboards
sold of  $110,983  and cost of  training of $0,  while the twelve  month  period
ending  September  30,  2001 saw cost of  keyboards  sold of $60,283 and cost of
training of $10,268.  Cost of goods sold for the fiscal years  ending  September
30,  2003,   September  30,  2002  and  September  30,  2003  were  $298,078  or
approximately  108% of total  revenue,  110,983  or  approximately  85% of total
revenue and $70,551 or  approximately  41% of total revenue,  respectively.  The
increase in cost of goods sold of $187,095 or approximately 68% of total revenue
of fiscal year ending  September 30, 2003 is primarily  attributable to increase
in raw materials expenses.

     Gross profit for the fiscal year ended  September 30, 2003 was ($21,442) or
approximately  (108%) of total  revenue,  gross profit for the fiscal year ended
September 30, 2002 was $18,856 or  approximately  15% of total revenue and gross
profit  for  the  fiscal  year  ended   September   30,  2001  was  $101,916  or
approximately  59% of total  revenue.  The (214%) in gross profit in fiscal year
2003 as compared to fiscal year 2002 is primarily  attributable  to increases in
raw materials expenses during the twelve month period ending September 30, 2003.

     The negative gross profits  incurred during fiscal 2003 were the results of
the  increase  in the costs of raw  materials.  It should be noted  that we have
hired  subcontractors  to  increase  our  manufacturing  capability  and our raw
material cost increased during the training period of the subcontractors.

     SALES AND MARKETING  EXPENSES.  Sales and marketing expenses for the fiscal
years  September  30,  2003,  September  30,  2002 and  September  30, 2001 were
$260,086, $474,250 and $176,120,  respectively.  The approximate 37% decrease in


                                       23
<PAGE>

sales and  marketing  expense  over  fiscal  year 2002 is  representative  of us
reducing our advertising costs.

     GENERAL AND ADMINISTRATIVE  EXPENSES.  General and administrative  expenses
for the fiscal  years  ending  September  30,  2003 and  September  30, 2002 and
September  30, 2001 were  $636,048,  $864,442 and  $334,697,  respectively.  The
decrease  of  $228,394 or  approximately  26% in fiscal  year 2003 is  primarily
attributable to a decrease in consulting personnel.

     RESEARCH AND PRODUCT DEVELOPMENT EXPENSES. Research and product development
expenses for the fiscal years ended  September 30, 2003,  September 30, 2002 and
September 30, 2001 were $52,138, $24,063 and $10,531, respectively. The increase
of research and product development  expenses is representative of us developing
the  ErgoHand(R)  product.  The research and product  development  expenses were
primarily  salary and consulting  fees  incurred,  and although the expenses had
reduced  during  the  periods  since  1998,   additional  research  and  product
development   expenses  are  expected  as  our  products'  market  will  require
improvements  to  remain a  competitive  electronic  device  and as we  continue
development of the ErgoHand(R).

     DEPRECIATION  AND  AMORTIZATION  EXPENSES.  Depreciation  and  amortization
expenses for the fiscal year ended  September  30, 2003,  September 30, 2002 and
September 30, 2001 were $10,618, $64,387 and $64,478, respectively.  Even though
our  depreciation  expenses  have  decreased,  we anticipate  that  depreciation
expense  will  increase as we expand our  operations  by  purchasing  additional
property, plant and equipment in subsequent years.

     INTEREST EXPENSE. Interest expense for the fiscal years ended September 30,
2003,  September  30, 2002 and September  30, 2001 were  $183,157,  $109,497 and
$39,093,  respectively.  Payroll financing costs incurred during the fiscal year
ended September 30, 2003 were the sources of the increase of $73,660 in interest
expense over fiscal year 2003.

     NET LOSS BEFORE INCOME  TAXES.  Net loss before income taxes for the fiscal
year ended  September 30, 2003,  September 30, 2002 and September 30, 2001, were
$1,163,490,  $1,512,226 and $523,003,  respectively. The decrease of $348,736 or
approximately  23% in fiscal 2003 as compared  to fiscal 2002 is  primarily  the
result of the increase in sales and  reduction in sales and  marketing  expenses
and general and administrative expenses during the fiscal years.

     PROVISION  FOR  INCOME  TAXES.  As of  September  30,  2003,  we  had a net
operating loss  carryforward  balance of  approximately  $13,885,790 from losses
incurred through that date.

LIQUIDITY AND CAPITAL RESOURCES

     Our working  capital has  fluctuated  greatly in the previous  periods.  At
September 30, 2003, we had a positive  working capital of $14,713.  At September
30,  2002 and we had a negative  working  capital of  $147,808.  Current  assets
increased  to  $303,587  at the twelve  months  ended  September  30,  2003 from
$146,814 at  September  30, 2002.  The changes were due  primarily to changes in
cash and inventory.

     Our operating  activities used net cash during the year ended September 30,
2003 of  $1,047,368,  as compared to net cash used during the fiscal years ended


                                       24
<PAGE>

September 30, 2002 of $1,022,592  and $493,275  during the year ended  September
30, 2001.  The major element  contributing  to net operating  cash flow was cash
paid for general and administrative and marketing expense.

     At the end of the fiscal  year ended  September  30,  2002,  we had current
notes payable outstanding of $182,516. During the period from September 30, 2001
through  September  30, 2002,  we had a net  reduction of $41,227,  bringing the
total due on current  notes  payable on  September  30,  2003 to  $141,289.  The
current  notes  payable  during  these  periods of time bore  interest  at rates
between 0% and 10% per annum.

     At the end of the fiscal year ended  September  30, 2002,  we had long term
notes payable outstanding of $866,199. During the period from September 30, 2002
through September 30, 2003, we reduced the long term debt by $531,919,  bringing
the total due on long term notes payable on September  30, 2003 to $22,281.  The
reduction to the long term debt is due to both Dennis Monroe,  Vice President of
Operations,  and James Cole,  Chairman and CEO agreeing to convert the long term
debt into equity.

     In fiscal years ended September 30, 2001 and September 30, 2002, we made no
capital lease payments since we had no capital lease obligations in those fiscal
years.  During the fiscal year that ended  September  30, 2003,  we made capital
lease payments of $7,805.

     We have managed to raise enough financing from either loans or infusions of
equity  to  continue  the  development  of our  products.  We have a very  loyal
shareholder  base that has  continued  to  support  our  efforts  and to provide
additional  fundings over the years.  In the past,  the liquidity  needs that we
experienced  were  due to the  product  development  and  testing  phase  of our
history.  As we are now entering into the marketing  phase of our existence,  we
have  determined  that 85 units sold per month will place us in a positive  cash
flow environment. We are adding to our marketing and sales force to reach the 85
keyboards  sold per month goal as early as the spring of 2004.  In the meantime,
we have a line  of  credit  available  to us  from a  major  shareholder.  It is
management's  belief that this line of credit and  continued  support from other
major shareholders that operations will continue into the foreseeable future.

     We believe that our short term liquidity needs can be achieved  through our
current group of investors.  These  investors  have supported us during the past
two years and continue to do so. For  example,  during the past six months these
investors have furnished us with $500,000 in working capital.  In the long term,
we have a need to raise  additional  capital to expand our  marketing  and sales
activities and to complete the development,  testing and marketing of our newest
product, the low-cost DataHand(R) Ergonomic Keyboard named ErgoHand(R).

     We have been able to generate sufficient amounts of cash from our investors
during the past eight years and we know of no reason why this support should not
continue  during the next twelve month period.  We remain a viable going concern
because of this support and plan to increase sales and profits,  even though our
auditor has issued a  going-concern  opinion in connection with his audit of us.
Please refer back to the paragraphs in Part I above that is captioned  UNLESS WE
RAISE ADDITIONAL CAPITAL TO EXPAND OUR BUSINESS,  WE MAY NOT BE ABLE TO CONTINUE
OPERATIONS AS A GOING  CONCERN,  AND OUR INVESTORS MAY LOSE SOME OR ALL OF THEIR
INVESTMENT" and WE HAVE EXPERIENCED LOSSES FROM OPERATIONS, OUR AUDITORS' REPORT
ON OUR FINANCIAL STATEMENTS IS QUALIFIED WITH RESPECT TO OUR ABILITY TO CONTINUE


                                       25
<PAGE>

AS A GOING  CONCERN,  AND OUR FUTURE  PROFITABILITY  IS UNCERTAIN AND THIS COULD
CAUSE OUR CURRENT AND PAST INVESTORS TO LOSE SOME OR ALL OF THEIR INVESTMENT.

     Sales, and resulting profits,  should increase because of our new marketing
and sales team has recently contracted with 72 distributors, is negotiating with
companies  such as Gateway,  Dell and Compaq and  Microsoft  to  distribute  our
products,  is  instituting  a program to attend both  Workers  Compensation  and
Ergonomic Products  conferences and has plans in place to increase sales through
our web site.

     The  following  are the number of units sold for each of the  periods  from
October 2001 through September 2003.

                                Year Ended         Year Ended       Year Ended
                               September 30,      September 30,    September 30,
                                   2003               2002             2001
                               -------------      -------------    -------------

     Monthly Range                 109-3              28-2             30-2
     Total for Year                 293               120              171

ROYALTY AGREEMENTS

     As a means to raise  capital,  our  predecessors  in  interest  initiated a
program  whereby they sold or granted the right to receive  future  royalties on
the sale of certain  DataHand(R)  family  products.  The Fixed Royalty  Override
Agreements (Royalty  Agreements)  originally called for total royalties of $5.91
for each  DataHand(R)  device  we sold,  and for  which  any  party  sold  under
sublicense  from us. The Royalty  Agreements  expire through March 31, 2007. The
royalty payments are not a material amount.  Royalty payments accrued during the
past five year are less than $2,000. These payments are an insignificant portion
of our  expenses  and  are  fully  discussed  in  the  notes  to  our  financial
statements.

     Option A. Holders of Royalty Agreements  representing $.30 of royalties for
each  DataHand(R)  device sold  agreed to change each $.01 of the royalty  under
such agreement to a percentage of revenue from the sales of DataHand(R)  Systems
of .000333% for direct sales and .0333% for sublicense and royalty revenue.

     Option B. Holders of Royalty Agreements representing $1.42 of royalties for
each  DataHand(R)  device sold  agreed to change each $.01 of the royalty  under
such agreement for direct sales to the lesser of the existing  royalty under the
agreement of .00333% for such revenue and for sublicense and royalty  revenue to
..0333% of such revenue.

     Option C. Holders of Royalty Agreements representing $3.89 of royalties for
each  DataHand(R)  device sold agreed to exchange each $.01 of royalty for 1,500
shares of our common stock.

     After the Options A, B and C  conversions,  there  remains a fixed  royalty
obligation  of $0.25 per unit and a  percentage-of-sales  royalty,  based on the
average sales price of a DataHand(R)  Professional  II as of September 30, 2003,
of approximately $1.00.


                                       26
<PAGE>

CAPITAL STOCK

     We have  total  authorized  capital  of  35,000,000  shares  consisting  of
30,000,000 shares of common stock, $.001 par value per share and 5,000,000 share
of preferred stock, $.001 par value per share.

OPTIONS

     Option agreements are granted at the discretion of the Board of Directors.

Schedule of Options Granted

                                    9/30/03         9/30/02
                                  ----------      ----------

Beginning Balance                  1,077,195         689,758
Employee/director granted             69,000         630,000
Non-employee granted
Employee/Director expired             22,500          27,500
Employee expired
Ending Balance                       850,000       1,077,295

Expiration Date of the
Options Granted                     06/10/08        09/30/07

Option Price                       $    1.00       $    1.00

Weighted average fair value
Of Options Granted                 $    0.35       $    0.26

     The fair value of the options granted to  employees/directors  is estimated
on the date of the grant using the  Black-Scholes  option pricing model with the
following assumptions for grants during the fiscal year to date ending September
30, 2003: average stock price $1.00,  risk-free interest rate of 3.00%, expected
dividend yields of zero, expected lives of five years and expected volatility of
21.2%. Option values were zero for all options through September 30, 2001.

     A copy of our stock  option is  attached  as an  exhibit  to our Form 10-SB
filed on October 9, 2001 with the SEC. It is  available  on-line on EDGAR at the
SEC's web site.

WARRANTS

     We have  outstanding  warrants to purchase shares of common stock at prices
ranging  from $1.00 to $5.00 per share.  No value was  assigned to the  warrants
issued prior to September  30, 2001.  Warrants  that were issued during the year
ending September 30, 2002 were valued at $.26. Certain outstanding warrants have
expiration  dates through  November 1, 2006 and 211,111  warrants  expire at the
date of an initial  public  offering  (IPO).  Certain  warrants that had expired
recently  were  reissued  for  services  rendered  at the  time of the  original
issuance  and since the  original  warrants  were  valued at $0,  that value was
applied to the  reissued  warrants.  Excluding  the IPO expiring  warrants,  the
average  expiration  date is July 15,  2004.  Below is the list of the  warrants
outstanding at the end of each period.


                                       27
<PAGE>

                                    9/30/03         9/30/02

Beginning Balance                  1,871,079       2,808,979
Warrants Issued                      216,566         150,000
Warrants Exercised                         0          15,700
Warrants Expired                     461,566       1,072,200
                                  ----------      ----------

Ending Balance                     1,626,079       1,871,079
                                  ----------      ----------

     As of  September  30,  2003,  we had 20 holders of warrants  for  1,626,079
shares of common stock.

     We currently are seeking additional sources of financing, which may include
one or more private placements of debt or equity  securities.  We can provide no
assurance  that any  additional  financing  will be  available on terms that are
acceptable to us, if at all. Our inability to obtain such financing could result
in our  inability  to  continue as a going  concern.  If such  financing  is not
available in sufficient amounts or on satisfactory  terms, we also may be unable
to expand our business or to develop new customers at the rate desired,  and the
lack of capital could have a material adverse effect on our business.

     A copy of our  warrant is  attached  to our Form 10-SB  filed on October 9,
2001 with the SEC. It is available on-line on EDGAR at the SEC's web site.

ECONOMIC CHANGES DUE TO INCREASED SECURITY MEASURERS

     Since the  terrorist  attack of September  11, 2001,  we have  reviewed our
company  for any impact that this might  bring on our  business.  Until the U.S.
Government fully outlines its plans for a response,  and that response impact is
integrated into the U.S. economy, we cannot make a judgment on its impact on our
business.

     We do, however, feel that freight cost will increase.



                                       28
<PAGE>

ITEM 7. FINANCIAL STATEMENTS

                             DATAHAND SYSTEMS, INC.

                              FINANCIAL STATEMENTS

                               September 30, 2003
                               September 30, 2002




                                TABLE OF CONTENTS

                                                                            PAGE

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT..........................  30

BALANCE SHEET, ASSETS .....................................................  31

BALANCE SHEET, LIABILITIES AND STOCKHOLDERS' EQUITY........................  32

STATEMENT OF OPERATIONS ...................................................  33

STATEMENT OF STOCKHOLDERS' EQUITY .........................................  34

STATEMENT OF CASH FLOWS ...................................................  35

NOTES TO FINANCIAL STATEMENTS .............................................  38


                                       29
<PAGE>

                            SHELLEY INTERNATIONAL CPA
                               161 E. 1ST. ST. #1
                                 MESA, AZ 85201
                                 (480) 461-8301


                REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT


To the Board of Directors/Audit Committee
Datahand Systems, Inc.

     I have audited the  accompanying  consolidated  balance  sheets of Datahand
Systems,  Inc. as of September  30, 2003 and 2002 and the related  statements of
operations,  stockholders'  equity, and cash flows for the years ended September
30, 2003, 2002 and 2001. These financial  statements are the  responsibility  of
the Company's  management.  My  responsibility is to express an opinion on these
financial statements based on my audit.

     I  conducted  my audit in  accordance  with  auditing  standards  generally
accepted in the United States.  Those standards  require that I 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.  I believe that my audit provides a reasonable basis for
my opinion.

     In my opinion,  the financial  statements referred to above present fairly,
in all material respects, the financial position of Datahand Systems, Inc. as of
September  30,  2003  and  2002  and  the  related   statements  of  operations,
stockholders'  equity,  and cash flows for years ended  September 30, 2003, 2002
and  2001  in  conformity  with  United  States  generally  accepted  accounting
principles.

     The accompanying  financial statements have been prepared assuming that the
Company will continue as a going  concern.  The Company has  experienced  losses
since inception, covering over eight years. This factor raises substantial doubt
about the  Company's  ability to  continue as a going  concern.  This factor and
others are  detailed in Note 7 along with  management's  plans for the  Company.
These  financial  statements  do not  include  any  adjustments  relating to the
recoverability  and  classification  of asset carrying amounts or the amount and
classification  of liabilities that might result should the Company be unable to
continue as a going concern.

                                           Shelley Intl., CPA

December 26, 2003


                                       30
<PAGE>

                             DATAHAND SYSTEMS, INC.

                                  BALANCE SHEET
                 AS OF SEPTEMBER 30, 2003 AND SEPTEMBER 30, 2002



                                     ASSETS

                                              September 30,       September 30,
                                                  2003                2002
                                              -------------       -------------
CURRENT ASSETS
   Cash                                             110,336              27,868
   Trade Receivables                                    853               4,397
   Inventory                                        192,398             114,549
                                              -------------       -------------

   Total Current Assets                             303,587             146,814
                                              -------------       -------------

EQUIPMENT, net                                       30,756              38,262
                                              -------------       -------------

OTHER ASSETS
                                              -------------       -------------

TOTAL ASSETS                                        334,343             185,076
                                              =============       =============



        The accompanying notes are an integral part of these statements


                                       31
<PAGE>

                             DATAHAND SYSTEMS, INC.

                                  BALANCE SHEET
                 AS OF SEPTEMBER 30, 2003 AND SEPTEMBER 30, 2002


                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                              September 30,       September 30,
                                                  2003                2002
                                              -------------       -------------
CURRENT LIABILITIES

   Payables                                         103,697              88,760
   Accrued Payroll                                   28,123              15,993
   Royalty Payable                                    3,552               3,108
   Warranty Payable                                  12,213               4,246
   Notes Payable                                    141,289             182,516
                                              -------------       -------------
   Total Current Liabilities                        288,874             294,622
                                              -------------       -------------
LONG TERM NOTES PAYABLE                              22,281             554,200
DEFERRED INCOME                                       7,868              17,377
                                              -------------       -------------

   Total Liabilities                                319,023             866,199
                                              -------------       -------------
STOCKHOLDERS' EQUITY

   Preferred Stock, authorized
   5,000,000 shares, par $0.001,
   no shares outstanding

   Common Stock, authorized
   30,000,000 shares of stock,
   20,427,305, and 16,706,363
   shares issued and at
   September 30, 2003 and September
   30, 2002 par value $0.001 per share               20,427              16,706

   Additional Paid in Capital                    17,305,273          15,470,511

   Options and Warrants                             220,975             199,525

   Retained Earnings (Loss)                     (17,531,355)        (16,367,865)
                                              -------------       -------------
   Total Stockholders' Equity                        15,320            (681,123)
                                              -------------       -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY                                334,344             185,076
                                              =============       =============


        The accompanying notes are an integral part of these statements

                                       32
<PAGE>

                             DATAHAND SYSTEMS, INC.

                             STATEMENT OF OPERATIONS
                THE YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001


                                          Year           Year          Year
                                          Ended          Ended         Ended
                                      September 30   September 30  September 30
                                          2003           2002          2001
                                      ------------   ------------  ------------
INCOME
   Sales of Product                        276,635        129,838       162,317
   Training Revenue                                                      10,150
                                      ------------   ------------  ------------
   Total Revenue                           276,635        129,838       172,467
                                      ------------   ------------  ------------
COST OF SALES
   Costs of Goods Sold                     298,078        110,983        60,283
   Cost of Training                                                      10,268
                                      ------------   ------------  ------------
   Total Cost of Sales                     298,078        110,983        70,551
                                      ------------   ------------  ------------
   Gross Profit                            (21,442)        18,856       101,916
                                      ------------   ------------  ------------
EXPENSES
   Sales and Marketing                     260,086        474,250       176,120
   General and Administrative              636,048        864,442       334,697
   Research and Development                 52,138         24,063        10,531
   Depreciation Expense                     10,618         64,387        64,478
   Interest Expense                        183,157        109,497        39,093
                                      ------------   ------------  ------------
   Total Expense                         1,142,047      1,536,638       624,919
                                      ------------   ------------  ------------
   Gain on Patent Sale and
   Retirement of Debt                           --          5,557            --
                                      ------------   ------------  ------------
   Loss before Provision for
   Income Taxes                         (1,163,490)    (1,512,226)     (523,003)

   Provision for Income Taxes                    0              0             0
                                      ------------   ------------  ------------

NET INCOME (LOSS)                       (1,163,490)    (1,512,226)     (523,003)
                                      ============   ============  ============
Basic and Diluted Earnings
   (Loss) per Common Share                   (0.07)         (0.09)        (0.04)
                                      ------------   ------------  ------------
Basic and Diluted Weighted Average
   Number of Common Shares              17,139,953     16,014,570    13,535,120
                                      ------------   ------------  ------------

        The accompanying notes are an integral part of these statements


                                       33
<PAGE>

                             DATAHAND SYSTEMS, INC.

                        STATEMENT OF STOCKHOLDERS' EQUITY
             FOR THE PERIOD SEPTEMBER 30, 2001 TO SEPTEMBER 30, 2003

<TABLE>
<CAPTION>
                                                Common Stock       Additional   Options and     Stock       Accumulated      Total
                                             Shares     Amount     Paid in       Warrants    Subscribed       Deficit        Equity
                                                                   Capital
                                           -----------------------------------------------------------------------------------------
<S>                                        <C>          <C>        <C>           <C>         <C>            <C>            <C>
Balance, September 30, 2000                11,347,618    11,348    13,469,943                               (14,336,285)   (854,994)

Sales of Common Stock                       3,639,894     3,639       741,607                                               745,246
Stock Issued for Services                     278,756       279        17,754                                                18,033
Conversion of Debt, Interest, Royalties       520,157       520       518,138                                               518,658
Stock Subscribed                                                                               (150,000)                   (150,000)
Deficit for year                                                                                               (519,354)   (519,354)
                                           -----------------------------------------------------------------------------------------

Balance, September 30, 2001                15,786,425    15,786    14,747,442                  (150,000)    (14,855,639)   (242,411)

Sales of Common Stock                         565,000       565       464,435                                               465,000
Stock Issued as Loan Enhancement              194,414       194       101,284                                               101,478
Conversion of Interest                         11,824        12        11,776                                                11,788
Stock Issued for Services Rendered            130,000       130       129,870                                               130,000
Stock Subscribed                                                                                150,000                     150,000
Options Issued for Services Rendered                                                158,638                                 158,638
Warrants Issued as Stock Enhancement                                                 40,887                                  40,887
Warrants Exercised                             15,700        16        15,684                                                15,700
Conversion of Royalty                           3,000         3            20                                                    23
Deficit for year
  ended September 30, 2002                                                                                   (1,512,226) (1,512,226)
                                           -----------------------------------------------------------------------------------------

Balance, September 30, 2002                16,706,363    16,706    15,470,511       199,525          --     (16,367,865)   (681,123)

Sales of Common Stock                       1,917,002     1,917       915,085                                               917,002
Stock Issued as Loan Enhancement              195,329       195       101,766                                               101,961
Conversion of Noncapitalized Interest          30,429        31        30,398                                                30,429
Options Issued for Services Rendered                                                 21,450                                  21,450
Conversion of Debt                          1,578,182     1,578       175,318                                               176,896
Contributed Capital                                                   612,195                                               612,195
Deficit for year
  ended September 30, 2003                                                                                   (1,163,490) (1,163,490)
                                           -----------------------------------------------------------------------------------------

Balance, September 30, 2003                20,427,305    20,427    17,305,273       220,975          --     (17,531,355)     15,320
                                           =========================================================================================
</TABLE>


        The accompanying notes are an integral part of these statements

                                       34
<PAGE>
                             DATAHAND SYSTEMS, INC.

                             STATEMENT OF CASH FLOWS
                THE YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
<TABLE>
<CAPTION>
                                                  Year            Year              Year
                                                  Ended           Ended             Ended
                                               September 30     September 30     September 30
                                                  2003             2002             2001
                                               ------------     ------------     ------------
<S>                                            <C>              <C>              <C>
Cash Flows from
Operating Activities

   Net Loss                                      (1,163,490)      (1,512,226)        (523,003)

   Accounts Receivable                                3,544           (3,343)             513
   Inventory                                        (77,849)         (30,233)         (29,271)
   Deposits                                           2,600
   Accounts Payable                                  14,937           15,758          (53,899)
   Deferred Income                                   (9,509)          15,109           (3,649)
   Original Issue Discount                         (101,484)
   Depreciation Expense                              10,618           64,035           64,478
   Amortization of Original Issue
     Discount                                                         71,159
   Stock for services                                                130,000           18,033
   Stock Issued as
     Loan Enhancement                               101,961          101,478
   Stock Issued for Accrued Interest                 30,429           11,788           29,707
   Stock Issued for Royality Conversion                                   23
   Options Issued for services                       21,450          158,638
   Warrants Issued for
     Stock Inhancement                                                40,887
   Changes in current liabilities
   Accrued Payroll                                   12,130           15,993
   Accrued Warranty and Royalty                       8,411             (174)           1,216
                                               ------------     ------------     ------------
Net Cash Provided by Operations                  (1,047,368)      (1,022,592)        (493,275)
                                               ------------     ------------     ------------
Cash Flows Used
in Investing Activities

   Fixed Asset Purchase (Sale)                        3,111             (795)          73,303
                                               ------------     ------------     ------------
Net Cash Used for Investing                           3,111             (795)          73,303
                                               ------------     ------------     ------------
Cash Flows from Financing

   Notes Payable                                    215,945          361,999           28,298
   Stock Purchase Receivable                        150,000         (150,000)
   Sales of Stock                                   917,002          480,700          745,246
                                               ------------     ------------     ------------
Cash Flows from Financing                         1,132,947          992,699          623,544
                                               ------------     ------------     ------------
</TABLE>
        The accompanying notes are an integral part of these statements

                                       35
<PAGE>

                             DATAHAND SYSTEMS, INC.

                             STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                  Year            Year              Year
                                                  Ended           Ended             Ended
                                               September 30     September 30     September 30
                                                  2002             2002             2001
                                               ------------     ------------     ------------
<S>                                            <C>              <C>              <C>
Net Increase (Decrease) in Cash                      82,468          (29,098)          56,966

Cash, Beginning of Period                            27,868           56,966               --
                                               ------------     ------------     ------------

Cash, End of Period                                 110,336           27,868           56,966
                                               ------------     ------------     ------------
</TABLE>

SCHEDULE OF TAXES PAID

Twelve Months Ended September 30, 2003

   None

Twelve Months Ended September 30, 2002

   None

Twelve Months Ended September 30, 2001

   None

SCHEDULE OF INTERST PAID

Twelve Months Ended September 30, 2003

   $  1,775

Twelve Months Ended September 30, 2002

   $  2,369

Twelve Months Ended September 30, 2001

   $ 39,093


        The accompanying notes are an integral part of these statements


                                       36
<PAGE>

                             DATAHAND SYSTEMS, INC.

                             STATEMENT OF CASH FLOWS


SCHEDULE OF SIGNIFICANT NON-CASH TRANSACTIONS

Twelve Months Ended September 30, 2003

   195,329 shares of stock were issued as a loan enhancement, valued at $101,961
   30,429 shares of stock were  issued for Accrued  Interest of $30,429
   69,000 stock options were granted for directors services rendered, valued at
      $21,450
   216,566  warrants were reissued for expired  warrants for services  rendered,
      valued at $0
   1,578,182 shares of stock were issued for Conversion of Debt, valued at
      $789,091

Twelve Months Ended September 30, 2002

   630,000 stock  options  granted for directors  services  rendered,  valued at
      $158,639
   150,000 stock  warrants  granted for stock  inhancement,  valued at $40,886
   11,788 shares of stock were issued for Accrued Interest of $11,788
   194,414 shares of stock were issued as a loan inhancement,valued at $101,484
   3,000 shares of stock were issued as a conversion of royalty interest, valued
      at $23
   130,000 shares of stock were issued for services rendered, valued at $130,000
   Conversion of $218,664 of current accrued payroll to long term debt
   Conversion of $46,943 of notes payable to long term debt

Twelve Months Ended September 30, 2001

   278,756 shares issued for services  rendered  value at $18,033
   488,950 shares issued for the conversion of $488,950 of Notes Payable debt
   29,707 shares issued for payment of accrued interest on the Notes Payable
   1,500 shares issued for  royalty  rights, no value assigned
   Conversion of $307,019 of current accrued payroll to long term debt
   706,566 warrants issued, valued at $0.00

For a more detailed explanation of stock options and warrants see Note 4



        The accompanying notes are an integral part of these statements

                                       37
<PAGE>

                            DATAHAND(R) SYSTEMS, INC.

                          NOTES TO FINANCIAL STATEMENTS
                    SEPTEMBER 30, 2003 AND SEPTEMBER 30, 2002


NOTE 1. OVERVIEW OF OPERATIONS AND ACCOUNTING POLICIES

DataHand(R)Systems,  Inc.  (the  Company)  is a Delaware  corporation  formed in
November  1994.  The  Company's   primary  business  is  the  sale,   marketing,
manufacture,  licensing and development of innovative,  high-value computer data
input  services.  On January  27,  1995,  the  Company  merged  with  Industrial
Innovations,  Inc., an Arizona  corporation  founded in October  1987.  Datahand
Systems,  Inc. was the surviving legal entity.  As a result of the merger,  each
outstanding  share  of  common  stock  held by the  shareholders  of  Industrial
Innovations,  Inc.  was  exchanged  for one  share  of the  common  stock of the
Company. DataHand(R)is a registered trademark of the Company.

The  Company's  operations  to date have  included  assembling  its  management,
marketing  and sales,  and  product  development  personnel,  forming  strategic
relationships  with  vendors,  securing  financing  and  launching  the  initial
commercial production of the DataHand(R) System.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will  continue as a going  concern.  As  reflected  in the  accompanying
financial  statements,  the Company had negative cash flow from  operations  and
incurred  a  net  loss  during  the  previous  twenty  quarters.  The  financial
statements do not include any  adjustments  relating to the  recoverability  and
classification  of recorded asset amounts or the amounts and  classification  of
liabilities  that might be  necessary  should  the  Company be unable to achieve
sufficient cash flow from operations or secure adequate future  financing and be
therefore unable to continue as a going concern.

In the  opinion of  management,  the  accompanying  balance  sheets and  related
statements  of  income,  cash  flows,  and  stockholders'   equity  include  all
adjustments  necessary  for their  fair  presentation  in  conformity  with U.S.
generally  accepted  accounting   principles.   Preparing  financial  statements
requires  management to make estimates and assumptions  that affect the reported
amounts of assets, liabilities, revenue, and expenses. Actual results may differ
from these  estimates.  The  information  included in this Form 10-KSB should be
read in  conjunction  with  Management's  Discussion  and Analysis and financial
statements and notes thereto  included in the Company's 2003 Form 10-K.  Certain
reclassifications have been made for consistent presentation.


                                       38
<PAGE>

Product Development

The Company  began  shipping  its Beta Test Units,  the DataHand DH 200 product,
during November 1993. As a result of ongoing  research and development  efforts,
the Company  developed an upgraded data input device,  the  Professional II. The
Professional   II  includes   various   upgrades   to  the  DH  200,   including
incorporations  of the hardware  interface switch and the power supply converter
into the keyboard.  Negative gross margins experienced since the introduction of
the  Professional  II model are due primarily to relatively  low  production and
sales volumes,  which were inadequate to fully absorb fixed manufacturing costs.
However,  management  believes these volumes will increase  significantly in the
future and be sufficient to cover the Company's  fixed  manufacturing  costs and
generate gross margins.

In 2003 the Company  continued  development of a lower cost ergonomic  keyboard,
the ErgoHand. This product is designed to sell into the lower cost, introductory
ergonomic  keyboard market and into the gaming market,  in the $99 to $129 price
range.  Plans are in place to market and license this product beginning early in
the second quarter of the Company's new year.

Marketing Strategy

Future  operating  results will depend on the  Company's  ability to attract new
customers  to  generate  sufficient  volume to fund  operations.  The Company no
longer directs its marketing efforts solely to individual users. During the year
2000 the marketing strategy was modified to include selling through distributors
and  resellers.  As of September 30, 2003 the Company had 72  distributors.  The
company's  president has been developing an experienced  sales team and has also
begun to establish relationships with large retailers.

Revenue Recognition

Datahand unit system

The Company  generally  recognizes  revenue  upon the  shipment of its  DataHand
system and the expiration of the 30 day guaranteed return period.

Deferred Revenue

The deferred  revenue  shown in the balance sheet is the amount of sales made as
of period end for which the 30 day return period has not expired.

Training Program

The training program is only for corporate clients and involves training someone
inside the client company to train his or her own people.  The training  program
lasts five days and is scheduled  immediately after the purchase of the DataHand
system.  The training  program is billed as a fixed fee.  Revenue is  recognized
when the client is billed which is at the same time as the training takes place.


                                       39
<PAGE>

Product Research and Development

The  Company  expenses  product  research  and  development  costs  as they  are
incurred.

Advertising

Advertising costs are expensed as incurred.  Advertising  expense totaled $1,660
for the year ended September 30, 2003,  $69,304 for the year ended September 30,
2002 and $11,686 for the year ended September 30, 2001.

Inventory

Inventory is stated at the lower of cost (first-in, first-out) or net realizable
value. Inventory consists of the following:

                                    9/30/03    9/30/02    9/30/01

     Raw materials                   96,443     87,618     51,882
     Work-in-Process                 20,675          0      7,250
     Finished goods                  75,280     26,931     25,183
                                    -------    -------    -------
                                    192,398    114,549     84,315
                                    -------    -------    -------

Property, Equipment and Patents

Equipment  is  depreciated  using the  straight-line  method over the  estimated
useful lives, which range from two to seven years. Patents are recorded at their
cost and amortized using the  straight-line  method over their estimated  useful
lives of seventeen  years.  Costs related to patents pending are capitalized and
amortization begins when the patent is issued.

Fixed assets and patents consist of the following:

                                           9/30/03        9/30/02

     Tooling and jigs                      165,965       163,205
     Prototypes
     Machinery and equipment                31,700        31,700
     Office Equipment                       46,997        46,997
     Equipment under capital lease          39,874        39,874
     DataHand(R) Systems units held for
       rental and promotion                 48,705        48,705
     Tenant improvements and other          17,430        17,430
     Patents                                88,484        88,484
                                          --------      --------
            Total fixed assets             439,155       436,395
     Less: Accumulated depreciation
       and Amortization                   (408,399)     (398,133)
                                          --------      --------
                                            30,756        38,262
                                          --------      --------


                                       40
<PAGE>

Patents

Patent costs include direct costs of obtaining,  developing and  maintaining the
patents.  Costs for new patents are capitalized and amortized over the estimated
useful  lives  of  seventeen  years.   Costs  related  to  patents  pending  are
capitalized and amortization  begins when the patent is issued.  Currently,  the
Company has no patents pending. The increase in patent capitalized costs relates
to the  maintenance  of the  current  patents,  while  the  decrease  in  patent
capitalized  cost relates to sale of patents.  A trademark with a net book value
of $443 was sold for $2,000  during  March of 2002,  which  generated  a gain on
patent sale of $1,557.  Amortization  expense for the year that ended  September
30, 2003 was $5,612 and for the year that ended  September  30, 2002 was $27,722
and for the year ended September 30, 2001 was $14,367.  Accumulated amortization
as of September 30, 2003 was $77,770.00.

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.

Earnings per Share

The basic earnings  (loss) per share is calculated by dividing the Company's net
income available to common shareholders by the weighted average number of common
shares during the year. The diluted  earnings  (loss) per share is calculated by
dividing the Company's net income (loss) available to common shareholders by the
diluted  weighted  average  number of shares  outstanding  during the year.  The
diluted  weighted  average  number of shares  outstanding  is the basic weighted
number  of  shares  adjusted  as of the  first of the  year for any  potentially
dilutive debt or equity.

The Company has no potentially dilutive securities outstanding at the end of the
statement  periods.  Therefore,  the basic and diluted earnings (loss) per share
are presented on the face of the statement of operations as the same number.


                                       41
<PAGE>

Options and warrants to purchase  common stock shares  outstanding as of the end
of the  statement  periods  are  shown in the table  below.  These  options  and
warrants were not included in the  computation  of the diluted net income (loss)
per  share  because  of the net  loss in each of the  periods  and  because  the
exercise  price of the options and warrants was greater than the average  market
price of the common shares and, therefore, the effect would be anti-dilutive.

                                    9/30/03           9/30/02          9/30/01

Weighted average shares           17,139,953        16,014,570       13,535,120

Anti-dilutive Options                850,000         1,077,295          689,758
Anti-dilutive Warrants             1,626,079         1,871,079        2,808,979

Stock Based Compensation

The Company accounts for its stock based  compensation  based upon provisions in
SFAS No. 123, Accounting for Stock-Based  Compensation.  In this statement stock
based  compensation is divided into two general  categories,  based upon who the
stock receiver is, namely, employees/directors and non-employees/directors.  The
employees/directors  category is further divided based upon the particular stock
issuance plan, namely compensatory and non-compensatory. Each of these divisions
treats the stock  issuance for  accounting  purposes in a specific  manner.  The
employee/directors  non-compensatory  securities  are recorded when the stock is
sold at the sales price.  The  compensatory  stock may be recorded in one of two
different  methods.  Compensation  is  calculated  and  recorded  either  at the
securities'  fair value or intrinsic  value. The Company has selected to utilize
the fair value method for valuing and recording options.

Warranty and Right of Return

Upon the sale of a system,  the Company gives a 30-day money back guarantee less
a 6% restocking charge. After the 30 days the Company gives an additional eleven
months  warranty on  replacement of parts.  This warranty  payable is shown as a
current liability on the balance sheet.



                                       42
<PAGE>

NOTE 2. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS:

Notes payable and capital lease obligations consist of the following:

                                                            9/30/03     9/30/02

Demand Notes to:
Investors 10% interest payments
paid quarterly with stock                                   177,342     194,414
                                                           --------    --------

Gross Original Issue Discount                              (203,446)    (39,855)
Amortization of Original Issue Discount                     167,393      27,957
                                                           --------    --------

Original Issue Discount                                     (36,053)    (11,898)
                                                           --------    --------

Total Current Notes                                         141,289     182,516
                                                           --------    --------


Long Term Notes Payable

Officer Notes, 8% int. paid annually                         17,084     507,257
Officers 0% interest,                                             0      41,746
Employees  0% interest                                        5,197       5,197
                                                           --------    --------

Total Long Term Notes                                        22,281     554,200
                                                           --------    --------



                                       43
<PAGE>

NOTE 3. FIXED ROYALTY OVERRIDE AGREEMENTS:

Beginning in 1987, as a means to raise capital,  the Company initiated a program
whereby they sold or granted the right to receive  future  royalties on the sale
of certain  DataHand(R)  family products.  During 1995 and 1996 these agreements
were modified to the three following plans.

Option A. Holders of Royalty Agreements  representing $.30 of royalties for each
DataHand(R)  device sold  agreed to change  each $.01 of the royalty  under such
agreement to a percentage  of revenue from the sales of  DataHand(R)  Systems of
..000333% for direct sales and .0333% for sublicense and royalty revenue.

Option B. Holders of Royalty Agreements representing $1.42 of royalties for each
DataHand(R)  device sold  agreed to change  each $.01 of the royalty  under such
agreement  for direct  sales to the  lesser of the  existing  royalty  under the
agreement of .00333% for such revenue and for sublicense and royalty  revenue to
..0333% of such revenue.

Option C. Holders of Royalty Agreements representing $3.89 of royalties for each
DataHand(R) device sold agreed to exchange each $.01 of royalty for 1,500 shares
of the Company's common stock.

After  the  Options  A, B, and C  conversions,  there  remains  a fixed  royalty
obligation of $0.25 per unit and a percentage-of-sales  royalty,  based upon the
average sales price of a Professional II as of September 30th, of  approximately
$1.00 per unit.

There were 583,000  shares  issued for the  conversion of fixed  royalties  held
within the Option C Program.  The shares were valued at $0.75 per share and were
issued prior to September 30, 1997. Also within the Option B Program, during the
year ended  September 30, 2002 there were 3,000 shares issued for the conversion
of $.02 of fixed royalty, these shares were valued at $.01.

Royalty expense for the years 2001-2003 for Options A and B are listed below.

PERIODS                     MONTHS        UNITS        UNIT $        ROYALTY

   Year ended 9/30/01
   Option A Royalties         12           171           .087         137.89
   Option B                   12           171          1.75          299.25

   Year ended 9/30/02
   Option A Royalties         12           120          1.108         132.90
   Option B                   12           120          1.73          208.58

   Year ended 9/30/03
   Option A Royalties         12           293           .905         265.22
   Option B                   12           293          1.73          506.89


                                       44
<PAGE>

NOTE 4. STOCKHOLDERS' EQUITY

Authorized Capital Stock

The Company has total  authorized  capital of  35,000,000  shares  consisting of
30,000,000 shares of common stock, $.001 par value per share and 5,000,000 share
of preferred stock, $.001 par value per share.

1993 Long-Term Incentive Plan

The 1993 Long-Term  Incentive Plan (Incentive  Plan) was adopted by the Board of
Directors in July 1994, and approved by the  shareholders  in November 1994. The
Incentive  Plan provides for the granting of options to acquire  common stock of
the  Company,  the granting of stock  appreciation  rights,  direct  granting of
common  stock of the  Company or the  granting of other cash  awards.  Under the
Incentive  Plan,  as of  September  30,  1997 and 1996,  a total of 700,000  and
350,000  shares of common  stock are  reserved  for  awards of  incentive  stock
options,  performance  shares  or  restricted  stock to  officers  or other  key
employees of the Company.  Non-officers' options generally expire within 90 days
after the participant's  termination of employment.  Officers' options generally
do not expire upon termination.

The expiration date and the other  provisions of the options will be established
at the time of grant.  Options  may be granted for terms of up to five years and
become  exercisable in whole or in one or more  installments at such time as may
be determined by the Board of Directors upon grant of the options.  The exercise
price of options will be determined  by the Board of  Directors,  but may not be
less than 100% (110% if the option is granted to a  stockholder  who at the date
the option is granted owns stock  possessing more than 10% of the total combined
voting power of all classes of stock of the Company) of the fair market value of
the common stock at the date of the grant.

1993 Director Stock Plan

The 1993  Director  Stock  Plan  (Director  Plan)  was  adopted  by the Board of
Directors in July 1994 and approved by the  shareholders  in November  1994. The
Director Plan authorizes  awards of stock options to non-employee  Directors.  A
total of 300,000 shares of common stock have been reserved and are available for
grant under the Director Plan.

The exercise  price per share of stock for any option granted under the Director
Plan shall be equal to the fair market value of such share on the date of grant.
The grant date,  as defined,  shall be October 1 of year for options to purchase
7,500 shares of common stock to each non-employee  director and 15,000 shares to
the Chairman of the Board. The options become  exercisable  after six months and
must be exercised  within five years of the date of grant.  Any options  granted
under the  Director  Plan,  which  terminates,  expires or lapses for any reason
would again be available for grant.


                                       45
<PAGE>

Other

Other option agreements are granted at the discretion of the Board of Directors.

Schedule of Options Granted

                                       9/30/03     9/30/02

Beginning Balance                    1,077,295     689,758
Employee/director granted               69,000     630,000
Non-employee granted
Employee/director expired               22,500      27,500
Non-employee expired                   273,795     214,963
                                     ---------   ---------
Ending Balance                         850,000   1,077,295
                                     ---------   ---------
Expiration Date of the
Options Granted                       06/10/08    09/30/07

Option Price                             $1.00       $1.00

Weighted average fair value
Of Options Granted                         .35         .26

The fair value of the options granted to employees/directors is estimated on the
date of the  grant  using  the  Black-Scholes  option  pricing  model  with  the
following assumptions for grants during the fiscal year to date ending September
30, 2003: average stock price $1.00,  risk-free interest rate of 3.00%, expected
dividend yields of zero, expected lives of five years and expected volatility of
21.2%. Option values were zero for all options through September 30, 2001.

Schedule  of  options  outstanding  and the  dates  they are  exercisable  as of
September 30, 2003

                                    EXERCISE      EXPIRE      REMAINING
PERIOD                   NUMBER      PRICE         DATE        MONTHS

June 10, 2003            39,000       1.00        6/10/08        56
October 1, 2002          30,000       1.00       10/01/07        48
September 30, 2002      600,000       1.00        9/30/07        48
July 10, 2002             7,500       1.00        7/10/07        45
March 31, 2002           22,500       1.00       10/01/06        36
September 30, 2000       73,500       1.00         8/1/05        22
September 30, 1999       22,500       1.00         7/1/04         9
February 1, 1999         55,000       1.00         2/1/04         4
                        -------

Total                   850,000
                        -------


Average Price and Remaining Life      1.00                       42 mths


                                       46
<PAGE>

Warrants

The Company had  outstanding  warrants  to  purchase  shares of common  stock at
prices  ranging  from $1.00 to $5.00 per  share.  No value was  assigned  to the
warrants  issued prior to September  30, 2001.  Warrants that were issued during
the year ending  September  30, 2002 were  valued at $.26.  Certain  outstanding
warrants have  expiration  dates through  November 1, 2006 and 211,111  warrants
expire at the date of an initial public  offering (IPO).  Certain  warrants that
had expired  recently  were  reissued for  services  rendered at the time of the
original  issuance and since the original warrants were valued at $0, that value
was applied to the reissued warrants.  Excluding the IPO expiring warrants,  the
average  expiration date is July 15, 2004. Below lists the warrants  outstanding
at the end of each period.

                                              9/30/03           9/30/02

Beginning Balance                           1,871,079         2,808,979
Warrants Issued                               216,566           150,000
Warrants Exercised                                  0            15,700
Warrants Expired                              461,566         1,072,200
                                            ---------         ---------

Ending Balance                              1,626,079         1,871,079
                                            ---------         ---------


Stock Based Compensation Paid for Services of Non Employees

SFAS 123 provides that stock compensation paid to non employees be recorded with
a value which is based upon the fair value of the services rendered or the stock
given,  whichever is more reliable.  The common stock paid to non-employees  was
valued at the value of the services  rendered.  Below is a schedule  which shows
the common stock  issued and the value of the services  rendered for each of the
periods.

PERIOD ENDED                      SHARES ISSUED                VALUE

September 30, 2003                         0                        0
September 30, 2002                   130,000                  130,000


NOTE 5.  INCOME TAXES:

The Company  provides for income taxes under  Statement of Financial  Accounting
Standards No. 109, ACCOUNTING FOR INCOME TAXES. SFAS No. 109 requires the use of
an asset and  liability  approach in accounting  for income taxes.  Deferred tax
assets  and  liabilities  are  recorded  based on the  differences  between  the
financial statement and tax bases of assets and liabilities and the tax rates in
effect when these differences are expected to reverse.


                                       47
<PAGE>

SFAS No. 109  requires  the  reduction  of  deferred  tax assets by a  valuation
allowance if, based on the weight of available evidence,  it is more likely than
not that some or all of the  deferred  tax assets will not be  realized.  In the
Company's opinion, it is uncertain whether they will generate sufficient taxable
income in the future to fully utilize the net deferred tax asset. Accordingly, a
valuation allowance equal to the deferred tax asset has been recorded. The total
deferred tax asset is $2,373,636, which is calculated by multiplying the minimum
federal  and  state   corporate   income  tax  rates  by  the   respective   NOL
carryforwards,  (15% and 6.968%).  The total valuation allowance is a comparable
$2,373,636.

The provision for income taxes is comprised of the net change in deferred  taxes
less the valuation  account plus the current taxes payable as shown in the chart
below.

                                                     9/30/03        9/30/02

     Net change in deferred taxes plus valuation           0              0
     Current taxes payable                                 0              0
                                                     -------        -------
     Provision for Income Taxes                            0              0
                                                     -------        -------

Below is a chart showing the federal net operating losses and the years in which
they will expire.

         YEAR                              AMOUNT                EXPIRATION

         1989                                87,945                 2009
         1990                               101,036                 2010
         1991                               300,723                 2011
         1992                               229,131                 2012
         1993                               641,247                 2013
         1994                             1,179,831                 2014
         1995                             1,081,466                 2015
         1996                             1,940,165                 2016
         1997                             2,049,650                 2017
         1998                             2,101,421                 2018
         1999                               920,253                 2019
         2000                               542,190                 2020
         2001                               545,751                 2021
         2002                             1,001,491                 2022
         2003 estimated                   1,163,490                 2023
                                         ----------

         Total NOL                       13,885,790
                                         ----------


                                       48
<PAGE>

Below is a chart showing the state of Arizona net operating losses and the years
in which they will expire.

         YEAR                              AMOUNT                EXPIRATION

         1999                               920,253                 2004
         2000                               542,190                 2005
         2001                               545,751                 2006
         2002                             1,001,491                 2007
         2003 estimated                   1,163,490                 2008
                                          ---------

         Total NOL                        4,173,175
                                          ---------


NOTE 6.  LEASES AND OTHER COMMITMENTS:

The  following is a listing of the  operating  leases that the Company had as of
the period end and the monthly charges associated with those leases.

                                    9/30/03           9/30/02           9/30/01

Office rent                           5,047             4,913             4,740
Storage                                                   136               136
Apartment rent                          931               931               915
Office Equipment                        633               633             1,043
                                    -------           -------           -------
Total Monthly                         6,611             6,613             6,834
                                    -------           -------           -------

The monthly  operating leases as of 09/30/03  projected into the future for five
years  shows the  following  commitments.  The  apartment  is rented on a yearly
basis.  The office is month to month.  Management feels that the office space is
adequate for future  growth of the Company.  The numbers shown below assume that
the Company will remain in its current office space.

                        YEAR 1     YEAR 2     YEAR 3     YEAR 4     YEAR 5

Office Equipment         7,596      7,596      7,596      7,596      7,596
Real Estate             71,736     71,736     71,736     71,736     71,736
                        ------     ------     ------     ------     ------

Total Yearly Leases     79,332     79,332     79,332     79,332     79,332
                        ------     ------     ------     ------     ------


                                       49
<PAGE>

NOTE 7:  GOING CONCERN

Listed  below are some of the  challenges  which the Company is facing,  and why
these  raise a  question  as to the  Company's  ability to  continue  as a going
concern. Afterward, the explanation of the going concern problems,  management's
plans to turn the Company around are described.

Company's Challenges

Since  inception in 1994, the Company has not been able to generate enough sales
to cover costs and expenses and has  accumulated a deficit of  $17,531,355.  For
the last three years, ending September 30, 2003 revenues have been only $578,940
versus $3,783,216 for costs and expenses.

The Company has survived  only by raising  funds.  The Company must  continue to
raise funds in the near future to survive. Management has been successful in the
past in raising these funds.  There is no assurance that management can continue
to find investors to cover the losses generated.

Management's Plans

Management has specific plans to improve the  performance of the Company.  These
include the following items.

The  president  and vice  president  of sales,  which were hired during the year
ending  September  30,2002,  have  experience in marketing  technology  products
through  resellers  and  large  retailers.  To date  this  has  resulted  in the
contracting  of 72  resellers  and nine major  dealers,  including  three in the
government  sector,  and the booking and delivery of the company's largest order
to date of 150 units to one of its new dealers in September, 2003.

General overhead has been reduced to lower the breakeven amount.

An increased  emphasis on  marketing  has begun with  mailings,  trade shows and
phone  solicitation.  During the upcoming  year  management  plans to spend over
$300,000 to market the Company's products.

For the next year  management  plans to fulfill its need for cash through common
stock sales,  operating  lines of credit,  increases of sales through its dealer
and reseller network, and the licensing of its newest product, the ErgoHand.


                                       50
<PAGE>

NOTE 8. THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

Below is a listing of the most  recent  accounting  standards  SFAS  142-144 and
their effect on the Company.

SFAS 146 Accounting for Costs Associated with Exit or Disposal Activities

This statement  requires  companies to recognize  costs  associated with exit or
disposal  activities,  other than SFAS 143 costs,  when they are incurred rather
than at the date of a commitment to an exit or disposal plan.  Examples of these
costs are lease  termination  costs,  employee  severance costs  associated with
restructuring,  discontinued operation, plant closing, or other exit or disposal
activity. This statement is effective after December 15, 2002.

SFAS 147 Acquisitions of Certain  Financial  Institutions - an amendment of FASB
Statement No. 72 and 144 and FASB Interpretation No. 9

This statement  makes the acquisition of financial  institutions  come under the
statements 141 and 142 instead of statement 72, 144 and FASB  Interpretation No.
9. This statement is applicable for acquisition on or after October 1, 2002.

SFAS 148 Accounting for Stock-Based Compensation

This  Statement  amends FASB  Statement  No.  123,  Accounting  for  Stock-Based
Compensation,  to provide  alternative  methods of  transition  for a  voluntary
change to the fair value based method of  accounting  for  stock-based  employee
compensation.  In addition, this Statement amends the disclosure requirements of
Statement  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 reported results.

The adoption of these new  Statements is not expected to have a material  effect
on the Company's financial position, results or operations, or cash flows.

NOTE 9. RELATED PARTY

The company rents its offices on a month-to-month  basis.  During the signing of
the first lease a former officer and  shareholder was also included on the lease
as well as the Company, and is therefore a guarantor.

The  company  has  borrowed  funds  from  shareholders  through  the year  ended
September 30, 2003, the remaining outstanding balance is $177,342.


                                       51
<PAGE>

NOTE 10. SEGMENT INFORMATION

Segment information is presented in accordance with SFAS 131,  Disclosures about
Segments of an Enterprise and Related  Information.  This standard is based on a
management  approach,  which  requires  segmentation  based  upon the  Company's
internal  organization and disclosure of revenue based upon internal  accounting
methods.  Currently  management  divides revenue into two  categories,  sales of
Datahand  and  training.  These  two  categories  are  shown  on the face of the
statement of operations.

NOTE 11. COMPLIANCE WITH SARBANES-OXLEY ACT OF 2002

It is the intention of the  Company's  management to have its Board of Directors
structured to comply with the Sarbanes-Oxley Act of 2002. The Company intends to
attempt to attract potential  independent  directors to its board and to ask its
shareholders to elect these potential directors at its next annual meeting. This
meeting will be scheduled to be held during the spring of 2004. However, at this
time, the Company's board of directors consists of three directors, two insiders
(the chairman of the company,  who also acts as its Chief Executive Officer, and
the  founder  of the  Company,  who also acts as the  Company's  Executive  Vice
President of Product Development).  At this time only one director is considered
independent under the definitions of the Sarbanes-Oxley Act of 2002.

It should be noted  that the  Company  may  experience  difficulties  attracting
independent  directors  because,  at this time,  it does not have  Directors and
Officers Liability Insurance in place.

In addition,  the Company currently has in place an Audit Committee of the Board
of  Directors,  although  this  committee  does not  currently  comply  with the
Sarbanes-Oxley  Act of 2002.  The  Sarbanes-Oxley  Act of 2002 requires that the
Audit Committee  consist of three  independent  directors.  Because the Board of
Directors, as currently structured, does not have three independent directors it
is not  feasible  to  structure  the  Audit  Committee  in  compliance  with the
Sarbanes-Oxley  Act of  2002.  Currently  the  Audit  Committee  consists  of an
Independent Director,  who functions as the Chairman of the Audit Committee,  an
Insider Director and an Advisory Director. It is the intent of the Management of
the Company to comply with the  Sarbanes-Oxley  Act of 2002 as it pertains to an
Audit Committee as soon as it is practicable  and  independent  directors can be
attracted to the board.  The due date set forth by the  Securities  and Exchange
Commission for compliance is January 2004.


                                       52
<PAGE>

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.

     None.



                                    PART III

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

     The following table sets forth certain information regarding our directors,
executive officers, and certain key employees:

     NAME                   AGE                       POSITION
     ----                   ---                       --------

James A. Cole                57         Chief Executive Officer and Chairman of
                                        the Board
Marvin Altman                77         Member of the Board
Scott R. Scartozzi           42         President
Dennis J. Monroe             63         Vice President of Operations
Dale Retter                  53         Director of Research and Development
                                        and Member of the Board
Robert Caplan                58         Vice President of Sales
Dan Kass                     53         Vice President of Sales-Midwest Division

     James A. Cole, BS, MBA, is our Chief  Executive  Officer,  Chief  Financial
Officer and Chairman of the Board.  Mr. Cole is President of Applebee's of Texas
and Financial Consultant to Applebee's  International,  Inc., is Chairman of the
Board and Chief  Executive  Officer  of Coil  Wells,  Inc.,  an  environmentally
friendly  coal  mining  company,  was  President  of  Tri-Steel  Structures,   a
manufacturer  of steel frames for  residential  buildings,  was Chief  Financial
Officer of Stevens Graphics  Corporation and Didde Graphic Systems  Corporation,
manufacturers  of printing  presses and was Manager of Planning and Analysis for
Rockwell  International.  Mr. Cole has an undergraduate degree in Accounting and
Finance  and  graduate  degrees  in  Business  Administration   (Marketing)  and
International  Finance.  Mr. Cole has taken three companies  through the initial
public offering process.

     Marvin Altman, one of our directors,  is a retired insurance executive from
Alexander & Alexander. Mr. Altman, an attorney by formal education,  entered the
insurance business in 1949 and was president of Altman Bros. Insurance Agency in
Kansas City,  Missouri until its merger with R.B.  Jones in 1971.  R.B. Jones in
turn merged into  Alexander & Alexander  in 1979.  Mr.  Altman  served as a vice
president of Alexander & Alexander  until his promotion to Senior Vice President
in 1989. He retired in 1997.

     Scott R. Scartozzi,  is our President.  Mr.  Scartozzi has over 16 years of
experience  of senior  management  in the  computer and  information  technology
industry.  Mr. Scartozzi has served as president of RNI Resource Network,  Inc.,
President of Resource Network  Services,  Inc.,  operations  manager of Computer
Town, Inc., and vice president of sales and marketing for Broker Publishing.  He
has an undergraduate degree in Electrical Engineering.


                                       53
<PAGE>

     Dennis J. Monroe,  BS, MS, is our Vice President of Operations.  Mr. Monroe
has over 20 years of United States and  International  business  experience with
three  leading  capital  goods  manufacturers  specializing  in  innovating  and
utilizing new technologies and organizational  development. He has served at the
officer level with  Ferrofluidics  as vice  president of  operations,  Vitronics
Corporations as vice president of manufacturing and Harris Graphics  Corporation
as vice president of manufacturing  and operations.  He has also served as plant
manager  for  Van  Dorn  Plastic  Machinery.  His  undergraduate  degree  is  in
Industrial Engineering, and his graduate degree is in Industrial Administration,
Managing  Engineering,  Product Development and Operations to provide profitable
and commercial  products  utilizing design and  manufacturing  processes in many
international locations.

     Dale Retter,  BGS, JD, is our  Director of Research  and  Development.  Mr.
Retter  is the  founder  of our  company  and the  co-inventor  of the  DataHand
Ergonomic  Keyboard.  Currently,  Mr.  Retter  serves as  President  of Fabuluss
Software, Inc.

     Robert Caplan is our Vice  President of Sales.  Mr. Caplan has more than 30
years  of  experience  as a sales  professional  in all  aspects  of  sales  and
marketing,  including marketing strategy and implementation of wholesale, retail
and distributors,  mass merchants, direct and relationship sales. Mr. Caplan was
a communications  specialist for Eschelon Telecom,  Inc., a marketing consultant
for Broker Publishing,  corporate  accounting  representative for Computer Town,
Inc.,  western territory manager for Kroy, Inc., and vice president of sales and
marketing  for  Computer  Pro,  Inc.  His  undergraduate  degree is in  Business
Administration and his graduate degree is in Communications.

     Dan Kass, BS, MBA, is our Vice  President of  Sales-Midwest  Division.  Mr.
Kass has over 14 years of experience in office supply as a sales  representative
with  Stanley-Sargent Co. and furniture sales as a department manager for Sanger
Harris/Sakowitz  and five years  experience as a commercial  banking officer for
United Missouri Bank. Mr. Kass has owned and operated his own company,  Conserve
America, in the computer supplies industry manufacturing toner cartridges.

CODE OF ETHICS

     We do not have a  written  code of ethics  that  applies  to our  principal
executive officer,  our principal  financial officer,  our principal  accounting
offer or our controller,  or persons performing  similar  functions,  and do not
need one at this time. At the present time, our chief executive,  James A. Cole,
a man of  outstanding  reputation  and who has the  confidence  of our  Board of
Directors and major  shareholders,  is performing  those  functions and is being
compensated with stock in our Company. When we grow and have more employees,  we
will revisit the  provisions of Item 406 of Regulation  S-B of the  Securities &
Exchange Commission to determine if we need a written code of ethics.

ITEM 10. EXECUTIVE COMPENSATION.

     The following  table shows for the fiscal year ended September 30, 2003 the
cash  compensation  paid by us, as well as certain  other  compensation  paid or
accrued by us, to our Chief  Executive  Officer and our  President.  None of our
executive  officers  received  aggregate  compensation of more than $125,000 for
fiscal years 2003 and 2002 and $100,000 for fiscal years 2001 and 1999.


                                       54
<PAGE>

                               ANNUAL COMPENSATION

                                                 SALARY($)         ALL OTHER
NAME AND PRINCIPAL POSITION           YEAR       BONUS($)        COMPENSATION($)
---------------------------           ----       ---------       ---------------

James A. Cole (1)                     2003       $144,000            $0.0
Scott R. Scartozzi, President(2)      2003       $125,000            $0.0

-----------

(1)  James A. Cole has  served as our  Chairman  of the Board,  Chief  Executive
     Officer and Chief  Financial  Officer.  James A. Cole has stock  options to
     purchase 362,689 shares of common stock.  While Mr. Cole's annual salary is
     $144,000, it has not been paid and is accrued on our books.
(2)  Scott R. Scartozzi has served as our President from December 6, 2000.

     We do offer medical  insurance,  but not other  benefits to our  employees,
including executive officers and directors who also are our employees. The total
cost  incurred by the company for the fiscal year that ended  September 30, 2003
was less than $10,000.00.

1993 LONG-TERM INCENTIVE PLAN

     The 1993 Long-Term Incentive Plan (Incentive Plan) was adopted by the Board
of Directors in July 1994,  and approved by the  shareholders  in November 1994.
The  Incentive  Plan  provides for the granting of options to acquire our common
stock, the granting of stock appreciation rights,  direct granting of our common
stock or the  granting of other cash awards.  Under the  Incentive  Plan,  as of
September  30, 1997 and 1996,  a total of 700,000  and 350,000  shares of common
stock are reserved for awards of incentive stock options,  performance shares or
restricted  stock to  officers  or other key  employees  of ours.  Non-officers'
options generally expire within 90 days after the  participant's  termination of
employment. Officers' options generally do not expire upon termination.

     The  expiration  date  and the  other  provisions  of the  options  will be
established at the time of grant. Options may be granted for terms of up to five
years and become  exercisable  in whole or in one or more  installments  at such
time as may be determined  by the Board of Directors  upon grant of the options.
The exercise price of options will be determined by the Board of Directors,  but
may not be less than 100% (110% if the option is granted to a stockholder who at
the date the option is granted owns stock  possessing more than 10% of the total
combined  voting  power of all classes of our stock) of the fair market value of
the common stock at the date of the grant.

1993 DIRECTOR STOCK PLAN

     The 1993 Director  Stock Plan  (Director  Plan) was adopted by the Board of
Directors in July 1994 and approved by the  shareholders  in November  1994. The
Director Plan authorizes  awards of stock options to non-employee  Directors.  A
total of 300,000 shares of common stock have been reserved and are available for
grant under the Director Plan.


                                       55
<PAGE>

     The  exercise  price per share of stock for any  option  granted  under the
Director  Plan shall be equal to the fair market value of such share on the date
of grant. The grant date, as defined,  shall be October 1 of year for options to
purchase 7,500 shares of common stock to each  non-employee  director and 15,000
shares to the Chairman of the Board.  The options become  exercisable  after six
months and must be exercised within five years of the date of grant. Any options
granted under the Director  Plan,  which  terminates,  expires or lapses for any
reason will again be available for grant.

DIRECTORS' COMPENSATION

     We  currently  do not  compensate  our  non-employee  directors  for  their
services to us other than by awards of stock options. The non-employee directors
as a group hold 0.63% of the stock  options as of  September  30,  2003.  We may
reimburse our directors for certain  expenses in connection  with  attendance at
board and committee meetings.

EMPLOYMENT AGREEMENTS

     We currently have no employment agreements.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The  following  table  sets  forth  certain  information  with  respect  to
beneficial ownership of our common stock as of September 30, 2003 by (i) each of
our directors and  executive  officers,  (ii) all of our directors and executive
officers as a group and (iii) each other person known by us to be the beneficial
owner of more than five percent of our common stock:

                                                       SHARES BENEFICIALLY OWNED
                                                         (1)              (2)
                                                       -------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER                    NUMBER           PERCENT
------------------------------------                   ---------         -------

DIRECTORS AND EXECUTIVE OFFICERS
James A. Cole ...................................      1,287,662          6.30%
Marvin Altman ...................................        128,784          0.63%
Scott R. Scartozzi ..............................        277,188          1.36%
Dennis J. Monroe ................................        797,967          3.91%
Dale J. Retter ..................................      1,241,243          6.08%
Robert Caplan ...................................          5,000          0.02%
Dan Kass ........................................              0          0.00%
All directors and officers as a group (7 persons)      3,737,844         18.30%

NON-MANAGEMENT 5% STOCKHOLDER (5)
Saul D. Kass, Saul D. Kass Revocable Trust ......      3,081,974         15.09%
R.L. & S.L. Middleton Trust(3) ..................      1,445,520          7.08%
Lyle D. Middleton(4) ............................      1,725,066          8.45%
Charles Oswald ..................................      5,142,500         25.18%
Rotherwood Corporation ..........................        910,000          4.45%

-----------
(1)  Except  as  indicated,   and  subject  to  community   property  laws  when
     applicable,  the persons  named in the table have sole voting and investing


                                       56
<PAGE>

     power  with  respect to all shares of common  stock  shown as  beneficially
     owned by them. Except as otherwise  indicated,  each of such persons may be
     reached through us at 3032 North 33rd Avenue, Phoenix, Arizona 85017-5247.
(2)  The number and  percentage  shown  include  37,500  shares of common  stock
     issued to Mr. Cole.  See Part III, Item 10,  "Executive  Compensation."  In
     calculating  the  percentage  of  ownership,  such  shares are deemed to be
     outstanding for the purpose of computing the percentage of shares of common
     stock owned by Mr. Cole and by all directors  and officers as a group,  but
     are  not  deemed  to be  outstanding  for  the  purpose  of  computing  the
     percentage of shares of common stock owned by any other person.
(3)  Robert L. Middleton  holds warrants  expiring  November of 2003 to purchase
     280,000  shares of  common  stock.
(4)  Lyle D. Middleton  holds warrants  expiring in November of 2003 to purchase
     510,000 shares of common stock.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     We lease our offices on a month to month  basis.  During the signing of the
first lease, an officer and shareholder,  Dale Retter,  was also included on the
lease as well as us, and is therefore a guarantor.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  EXHIBITS

     31.1   Certification of  Chief Executive Officer Pursuant to Section 302 of
            the Sarbanes-Oxley Act
     31.2   Certification of  Chief Financial Officer Pursuant to Section 302 of
            the Sarbanes-Oxley Act
     32.1   Certification Chief Executive Officer Pursuant to Section 906 of the
            Sarbanes-Oxley Act
     32.2   Certification Chief Financial Officer Pursuant to Section 906 of the
            Sarbanes-Oxley Act

ITEM 14. CONTROLS AND PROCEDURES

REVIEW OF CONTROLS AND PROCEDURES

     Our principal executive officer and principal  financial officer,  James A.
Cole,  after  reviewing and evaluating  our  disclosure  controls and procedures
within 90 days prior to the filing of this annual report has concluded  that our
disclosure  controls and  procedures  contained no significant  deficiencies  or
material  weakness.  There  have been no  significant  changes  in our  internal
controls that could  significantly  affect these controls subsequent to the date
of their evaluation, including corrective actions.

CRITICAL ACCOUNTING POLICIES

     Our financial  statements and accompanying notes are prepared in accordance
with generally accepted  accounting  principles of the United States.  Preparing
financing  statements requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities,  revenue and expenses. These
estimates  and  assumptions   are  affected  by  management's   applications  of
accounting policies.  The critical accounting policies for us are the costing of
inventory and the valuing of options.


                                       57
<PAGE>

ASSEMBLY OF UNITS

     The actual assembly of the unit is now completed by an outside  contractor.
We receive the finished goods from the outside  contractor and perform a quality
control check before  shipping to the client.  The costs of parts,  assembly and
quality  check  are all  included  in the final  cost of the unit on a  standard
costing basis. This standard costing is reviewed  periodically.  The most recent
review was as of the year end.

VALUATION OF OPTIONS

     The options are valued using accepted  valuation  methods.  Options for the
previous year were valued using the Black-Scholes method.

ITEM 15. AUDITOR FEES

     Audit and review fees billed for the year  ending  September  30, 2002 were
$25,480.  Audit and  review  fees for the year  ended  September  30,  2003 were
$22,250.  These fees were all for normal  audit and review  services  associated
with the 10KSB and 10QSB filings.

     No other  services were provided by the auditor.  The federal and state tax
returns were not prepared by the auditor.



                                       58
<PAGE>

                                   SIGNATURES

     In accordance  with Section 12 of the Securities  Exchange Act of 1934, the
registrant caused this registration  statement to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                               DATAHAND SYSTEMS, INC.
                                        ----------------------------------------
                                                    (Registrant)

Date:  1/8/2004                         By:  /s/ James A. Cole
       --------                             ------------------------------------
                                                    (Signature)
                                        Name:   James A. Cole
                                        Title:  Chairman


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

        Name                        Title                              Date
        ----                        -----                              ----

/s/ James A. Cole          Chairman, Chief                       January 8, 2004
------------------------   Financial Officer and
                           Director

/s/ Scott R. Scartozzi     President                             January 8, 2004
------------------------

/s/ Dennis J. Monroe       Vice President - Operations           January 8, 2004
------------------------

/s/ Dale Retter            Director of Research and              January 8, 2004
------------------------   Development, a Principal
                           Executive Officer and Director



                                       59