UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

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

                   For the Fiscal Year ended December 31, 2003

                                       OR

                TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

            For the Transition Period from ___________ to ___________

                 Commission File Number: 333-__________________

                   SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP.
             (Exact name of Registrant as specified in its charter)

               Delaware                                  80-0025175
    (State or other jurisdiction of         (I.R.S. Employer Identification No.)
     incorporation or organization)

                                91 HILL AVENUE NW
                        FORT WALTON BEACH, FLORIDA 32548
           (Address of principal executive offices, including zip code)

                                 (850) 796-0909
              (Registrant's telephone number, including area code)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                      None

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                    Common Stock, par value $.0001 per share

     Indicate  by  check  mark  whether the Registrant (1) 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.  YES [X]  NO [ ]

Indicate  by  check mark if disclosure of delinquent filers pursuant to Item 405
of  Regulation  S-K  is  not contained herein, and will not be contained, to the
best  of  registrant's  knowledge, in definitive proxy or information statements
incorporated  by  reference  in Part III of this Form 10-KSB or any amendment to
this  Form  10-KSB. [ ]

The  Registrants revenues for the year ended December 31, 2003 were $13,329,963.

The  aggregate  market  value  of  the  Registrant's  common  stock  held  by
non-affiliates  of  the  Registrant on March 29, 2004 (based on the closing sale
price  of  US  $2.70  per share of the Registrant's common stock, as reported on
Over-The-Counter  Bulletin  Board  on  that  date)  was  approximately  U.S.
$51,707,700.  Common  stock held by each officer and director and by each person
known  to  the  Registrant to own 5% or more of the outstanding common stock has
been  excluded  in  that  those  persons  may  be  deemed to be affiliates. This
determination  of affiliate status is not necessarily a conclusive determination
for  other  purposes.

The  number  of shares of the Registrant's common stock outstanding on March 29,
2004  was  21,651,000.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None.

     Transitional Small Business Disclosure Format (Check one):  YES [ ] NO [X]


<PAGE>

<TABLE>
<CAPTION>

                                TABLE OF CONTENTS

ITEM  NUMBER  AND  CAPTION                                                PAGE
--------------------------                                                ----
<S>                                                                       <C>
Forward-Looking  Statements. . . . . . . . . . . . . . . . . . . . . . .    3

PART I

    1.    Description of Business. . . . . . . . . . . . . . . . . . . .    3

    2.    Description of Property. . . . . . . . . . . . . . . . . . . .    9

    3.    Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . .    9

    4.    Submission of Matters to a Vote of Security Holders. . . . . .   11

PART II

    5.    Market for Common Equity and Related Stockholder Matters . . .   12

    6.    Management's Discussion and Analysis of Financial Condition
          and Results of Operations. . . . . . . . . . . . . . . . . . .   14

    7.    Financial Statements . . . . . . . . . . . . . . . . . . . . .   22

    8.    Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure . . . . . . . . . . . . . . . . . . .   23

    8A.   Controls and Procedures

PART III

    9.    Directors, Executive Officers, Promoters and Control Persons;
          Compliance with Section 16(a) of the Exchange Act. . . . . . .   23

   10.    Executive Compensation . . . . . . . . . . . . . . . . . . . .   25

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

   12.    Certain Relationships and Related Transactions . . . . . . . .   27

   13.    Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . .   28

   14.    Principal Accountant Fees and Services . . . . . . . . . . . .   30

</TABLE>


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<PAGE>

                           FORWARD-LOOKING STATEMENTS

     Except  for  historical  information,  this report contains forward-looking
statements  within  the meaning of Section 21E of the Securities Exchange Act of
1934.  Such  forward-looking  statements  involve  risks  and  uncertainties,
including,  among  other  things,  statements  regarding  our business strategy,
future  revenues  and  anticipated  costs  and  expenses.  Such  forward-looking
statements  include,  among  others,  those  statements  including  the  words
"expects,"  "anticipates,"  "intends,"  "believes"  and  similar  language.  Our
actual  results  may  differ  significantly  from  those  projected  in  the
forward-looking  statements.  Factors  that  might  cause  or contribute to such
differences  include,  but  are  not  limited to, those discussed in the section
"Management's  Discussion  and  Analysis  of  Financial Condition and Results of
Operations."  You  are  cautioned  not  to  place  undue  reliance  on  the
forward-looking  statements, which speak only as of the date of this report.  We
undertake no obligation to publicly release any revisions to the forward-looking
statements  or  reflect  events  or circumstances taking place after the date of
this  document.

                                     PART I
                        ITEM 1.  DESCRIPTION OF BUSINESS

SUMMARY  OF  CORPORATE  HISTORY

     Spectrum  Sciences  & Software Holdings Corp. ("Spectrum", the "Company" or
the  "Registrant")  was  formed  under the name Silva Bay International, Inc. (a
Delaware  corporation)  on  August  26,  1998  for  the  purpose of locating and
recovering  rare  and valuable aircrafts.  Silva Bay International, Inc. did not
have  operations  and  or  revenues until April, 2003, at which time the Company
acquired  Spectrum  Sciences  &  Software,  Inc.  (the  "Subsidiary"), a Florida
corporation  (the "Acquisition").  All of the Company's operations are conducted
through  the  Subsidiary.

     On  April  8,  2003,  the  Company  changed its name to Spectrum Sciences &
Software  Holdings  Corp.  and  on  April  9,  2003  the National Association of
Securities  Dealers  (NASD)  changed  the  Company trading symbol from "SIVY" to
"SPSC".  On April 9, 2003, the Company forward split its common stock at a ratio
of  two-for-one.  On  December  5,  2003, the NASD approved the Company's common
stock for quotation on the OTC Bulletin Board electronic quotation system. Prior
to December 5, 2003, the Company traded on the Electronic Pink Sheets.

     The  Subsidiary  was formed on October 8, 1982 for the purpose of providing
innovative,  full-service, quality turn-key solutions to the complex and diverse
engineering, science and technological support service as well as the production
of  specialized  and  standard  ground  support  equipment for the United States
Department  of Defense. Headquartered in Fort Walton Beach, Florida, the Company
has  three  reportable  segments  -  management  services,  manufacturing,  and
engineering  and  information  technology services.  Management services include
providing  engineering,  technical,  and  operational  services  in  the area of
defense  range  management  specializing  in  bombing and gunnery training range
operation  and  maintenance.  Manufacturing  operations  includes the design and
construction  of  munitions  ground  support  equipment  and  containers for the
shipping  and storage of munitions and equipment.  The Company's engineering and
information  technology services segment consists of the sale of engineering and
information  technology  services  developed  to assist in hazard management and
weapons  impact  analysis.

     On  April  3,  2003, the Company acquired all of the issued and outstanding


                                        3
<PAGE>

common  stock  of the Subsidiary, in exchange for 2,500,000 shares of its common
stock  (taking  into  account  the  forward  two-for-one stock split of April 9,
2003).  As  a  result,  the Subsidiary became the wholly owned subsidiary of the
Company.  Prior  to  the  Acquisition, Donal R. Myrick was the sole shareholder,
president  and  founder  of the Subsidiary.  As a result of the Acquisition, the
Company  retained  the  services  of  Donal  R.  Myrick  as  president and chief
executive officer pursuant to a three year employment agreement.  Mr. Myrick was
also  appointed  the  Company's  chairman  of  the  board  of  directors.

     In  anticipation  of  the  Acquisition,  an  immediate  capital infusion of
$500,000  occurred  from affiliates of the Company, which allowed the Subsidiary
to continue working with its creditors, mainly SouthTrust Bank, in renegotiating
loan  agreements.  The  Acquisition  had  a  positive  impact due to the capital
infusion,  which  resulted  in  payments to SouthTrust Bank and the reduction of
loan  balances.

     On  March  19, 2004, Spectrum Sciences & Software Holdings Corp. received a
resignation letter (the "Initial Letter") from Donal Myrick in which he resigned
as chief executive officer of the Company.  On March 24, 2004, by a supplemental
letter  (the  "Supplemental  Letter"),  Donal  Myrick  resigned  from all of his
positions  with  the  Company  and  its affiliates.  Mr. Myrick's Initial Letter
expresses  his  disagreement  with matters relating to the Company's operations,
policies  and  practices.

     The  Board  of  Directors  vigorously disagrees with the assertions made by
Donal  Myrick in the Initial Letter. On March 25, 2004, by letter to Mr. Myrick,
the  Board  objected  to  his  allegations,  and  unconditionally  accepted  his
resignation.

     On  March  30,  2004,  William  Ham  was  promoted  to  president and chief
executive officer. Mr. Ham has been serving as an executive vice president since
January  2004. Prior to that time, Mr. Ham has been the vice president in charge
of  Management  Services Division serving in that position since 1999. From 1991
to  1999, Mr. Ham was a senior scientist with the Subsidiary. Mr. Ham joined the
Subsidiary  in 1991 following his retirement from a 20-year career in the United
States  Air  Force.

     As  Mr.  Ham  has been with the Company for over 12 years, he is intimately
familiar  with  all  aspects  of  Spectrum's operations. He has had the hands on
experience in managing Spectrums range contracts and continues to be responsible
for  all  aspects  of  contract operations including personnel of the Management
Services  Division,  budgeting, contract performance, sub contracts and proposal
submissions.

BUSINESS

     The  Company  provides  engineering,  scientific  and technological support
services,  as  well as the production of specialized and standard ground support
equipment for the United States Department of Defense and other governmental and
commercial  contractors.  Spectrum  provides  its customers with the diversified
capabilities  of  a  large  business  in a number of advanced technologies.  Its
professional  competencies  include  all  the  disciplines  and  technology
applications  encompassed  in  its  three  operating  divisions:

     1)  Management  Services.  Spectrum  has  a  long  history  of  range
management/operations & maintenance (O&M) services provided under our Management
Services  Division.  As  a  core  business area, Spectrum operates and maintains
military  training  ranges  and  associated  infrastructure  and  assets.  The
Company's  range  O&M  services  include  the  full  complement of activities to


                                        4
<PAGE>

include  (but  not limited to): range control, range and airbase security, range
safety,  air  traffic  control/meteorological  services,  facilities  and
infrastructure  maintenance, construction, fire fighting and protection, vehicle
maintenance  and  operations, target design and construction, transient aircraft
operations,  and water/sewage treatment.  Spectrum is currently operating one of
the  world's  largest  air-to-ground  training  ranges  located  near Gila Bend,
Arizona.  Complementing  our  range  O&M services, Spectrum has diversified into
other DoD support arenas.  The Company currently provides for the scheduling and
management  of  an aircraft "wash rack" function for the USAF Special Operations
Command  (AFSOC).  It  maintains  this  operation in support of these high value
aircraft  assets  at three separate locations that are all part of the extensive
Eglin  Test  and  Training  range  complex  in  northwest  Florida.

     2)  Manufacturing  Division.  Spectrum's  Manufacturing  Division,  an  ISO
9001:2000  qualified  manufacturer  focuses  on  the  design,  development,
manufacturing, and systems integration of aerospace ground support equipment and
missile,  munitions,  material  handling  equipment  and  shipping  and  storage
containers  and  a  variety  of  precision  parts for the sustaining of military
equipment.  As  one  of  Spectrum's  fastest  growing  divisions,  Spectrum  has
delivered over 400 DoD contracts without a single delivery schedule or technical
discrepancy.  It  has  provided  manufactured  products to commercial clients to
include several major DoD contractors. In March 2004, the Manufacturing Division
became  an  approved  vendor  to  two  major  international  DoD  contractors.

     3)  Engineering  and Information Technology Services.  Since its inception,
Spectrum  has  been  performing sophisticated and specialty Engineering Services
for  a  variety  of  government  and commercial clients.  These services include
hazard  analysis,  modeling  and simulation, range planning, air space planning,
and  environmental  analyses.  The  Company's  modeling and simulation solutions
provide  its  clients  with  the  ability  to  analyze  and/or visualize complex
technical  data.  Similarly,  its Information Technology Services specializes in
the  design,  development,  maintenance  and  support  of  software applications
utilized  in  the  analysis  and visualization of complex technical data.  These
applications support a broad range of user requirements to include weapon system
range  safety  planning,  environmental studies, facility evaluations, and noise
and  airspace  analyses.

COMPETITION

     The  market  for  the  Company's products is highly competitive. It faces a
variety  of  domestic  and  foreign  competitors including divisions of Ahntech,
Arcata  Associates,  Artic  Slope  Manufacturing  Technology,  Tybrin,  Science
Applications  International  Corp.,  and Lockheed-Martin.  Many of the Company's
competitors  are  larger  than  it  and have substantially greater financial and
other  resources.

     The  Company  competes  on  the  basis  of  quality  product  and  services
offerings,  price,  product and systems quality, technology and ongoing customer
service  and  support. Its ability to compete for defense contracts depends on a
variety  of  factors,  including:

     -    Corporate  and  key  personnel  backgrounds  and  qualifications;
     -    The  effectiveness  and  innovation  of  our  research and development
          programs;
     -    Proven  past  performance  history;
     -    Ability  to offer better program performance than our competitors at a
          lower  cost;  and
     -    The  readiness of the Company's facilities, equipment and personnel to
          undertake  the  programs  for  which  it  competes.


                                        5
<PAGE>

     In  programs where the Company is the sole-source provider, other suppliers
may  compete  against  it  only if the customer chooses to reopen the particular
program  to  competition.  It  is  estimated  that approximately 5% of our total
manufacturing  contract revenue for the year ended December 31, 2003 was derived
from  sole-source  business.

     Furthermore,  the Company's Engineering and Information Technology Services
division  contains  advanced  software technology derived from internal research
and  development that creates high barriers to entry. Since January 1, 1998, the
Company  has  spent approximately $500,000 in research and development, in large
part, in support of advanced technology in the Engineering and InfoTech Services
Division.

SUPPLIERS  AND  MATERIALS

     Spectrum's  in-house  manufacturing  primarily  consists  of  assembly  of
purchased  parts.  Accordingly,  its  does  not  use  significant amounts of raw
materials.  The Company purchases manufactured component parts for assembly from
various  independent  suppliers.  It also "cuts", "bends", and "welds" purchased
metal  components.   The  manufacturing  division  operates  under  a  "Lean"
manufacturing  process  and  maintains  minimum inventories of raw materials and
aluminum  and  steel.  These  parts  are  normally not purchased under long-term
contracts  unless  a long-term sales contract with one of its customers requires
it.  Spectrum  is  not  dependent  on  any  one  supplier  and maintains back-up
suppliers for all critical components.  Further, it utilizes competitive pricing
among  its  suppliers  and  vendors  to obtain the best value for the customer's
dollar.  The  Company  does  not  consider the prices of its purchased component
parts  to be volatile.  However, any delay in its suppliers' abilities to obtain
necessary  parts  may  affect  its  ability  to  meet customer production needs.

     Some  of  our  top  vendors  are  Aaxico, Alro Metals, Dealers Supply, Home
Depot,  Ingersol-Rand  and  McMaster-Carr.

REGULATORY  MATTERS  AND  GOVERNMENT  CONTRACTS

     Substantially  all  of  Spectrum's contract revenue resulted from contracts
with the Department of Defense, prime contractors that identified the Department
of Defense as the ultimate purchaser or other United States Government agencies.
United  States  Government  business  is  performed under fixed-price contracts.

     Under  U.S.  Government  regulations,  certain  costs,  including  certain
financing  costs, portions of research and development costs, lobbying expenses,
certain  types  of  legal expenses and certain marketing expenses related to the
preparation  of  bids  and  proposals,  are not allowed for pricing purposes and
calculation  of  contract  reimbursement rates under fixed-priced contracts. The
U.S.  Government  also  regulates the methods under which costs are allocated to
U.S.  Government contracts. Spectrum is subject to a variety of audits performed
by  U.S.  Government  agencies.  The  Defense  Contract  Audit  Agency, or DCAA,
performs  these  audits  on  behalf  of  the  U.S.  Government.

     U.S.  Government  contracts  are, by their terms, subject to termination by
the  U.S.  Government  for  either its convenience or default by the contractor.
Fixed-price  contracts  provide for payment upon termination for items delivered
to  and  accepted  by  the  U.S.  Government  and,  if  the  termination  is for
convenience,  for  payment of fair compensation of work performed plus the costs
of  settling  and  paying  claims by terminated subcontractors, other settlement
expenses  and  a  reasonable  profit  on  the  costs  incurred.  If  a  contract
termination  is  for  default,  however:


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<PAGE>

     -    the  contractor  is  paid  an  amount  agreed  upon  for completed and
          partially  completed  products  and  services  accepted  by  the  U.S.
          Government;
     -    the  U.S.  Government  is  not  liable for the contractor's costs with
          respect  to  unaccepted items, and is entitled to repayment of advance
          payments  and  progress  payments,  if  any, related to the terminated
          portion  of  the  contract;  and
     -    the  contractor  may  be  liable for excess costs incurred by the U.S.
          Government  in  procuring  undelivered  items  from  another  source.

     In  addition  to  the  right  of  the  U.S.  Government  to terminate, U.S.
Government  contracts  are  conditioned  upon  the  continuing  availability  of
Congressional  appropriations.  Congress  usually appropriates funds for a given
program  on  a  September 30 fiscal year basis, even though contract performance
may  take  many  years.  Consequently,  at  the  outset  of a major program, the
contract  is  usually  partially  funded  and  additional  monies  are  normally
committed  to  the  contract  by the procuring agency only as appropriations are
made  by  Congress  for  future  fiscal  years.

STATUS  OF  NEW  PRODUCT  DEVELOPMENT

     Spectrum  currently  has  a promising internal Research & Development (R&D)
program  in  place  to  transition  our  highly  successful  Safe Range software
application  to  a new software product line called "Safe-Borders". Safe-Borders
is  designed  to  address  the  definition of remote sensing requirements that a
number of government agencies are facing today. Though initially directed toward
border  security and control requirements of the Department of Homeland Security
(DHS),  Spectrum  has identified numerous government and commercial applications
for  the technology. Spectrum will be introducing the Safe-Borders technology to
a number of DHS and other potential government customers in the first and second
quarter  of  fiscal  year  2004.

     In  addition,  Spectrum has another complementary R&D program consisting of
the  design  and  development of a prototype Unmanned Aerial Vehicle (UAV).  The
UAV  is  designed  to  prove  out  Safe-Borders  software  command  and  control
capabilities;  is  designed  as  a low-cost/"expendable" and flexibly configured
alternative  to  the  highly  expensive, single mission focused crafts available
today.

Marketing  Strategy For Safe Borders

     Spectrum  plans to license the Safe-Borders technology where the technology
applies to a very specific mission area. Example mission areas would be "Illegal
immigration  on  the  southern  US  border",  "Harbor/port  surveillance  and
protection",  and  "Search  and  rescue".  Upon  licensing the technology to the
government  agency  or  commercial entity identified with the particular mission
area,  the  Safe-Borders  application  would  be  specifically  tailored to that
mission  area  creating  another  on-going  revenue  stream.

     In  addition,  the  Company  plans  to  partner  with  (a)  large  System
Integration/Defense  contractor(s)  to:

     1)  Provide  access  to  potential  customers;  and

     2)  Provide  major  systems  integration  credibility  for  the  myriad  of


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<PAGE>

potential  systems integration activities that could surround the implementation
of  the  Safe-Borders  application.

     Working  with  differing  integrators  may  also  provide  a  Safe-Borders
"branding"/licensing  opportunity.

Government  Regulation

     There  would  be  no  more  regulation concerning the product licensing and
services contracting than exist now for the licensing and contracting associated
with  our  Safe-Range  application.

ENVIRONMENTAL  MATTERS

     Spectrum's operations include the use, generation and disposal of hazardous
materials.  It  is  subject  to  various  U.S. federal, state and local laws and
regulations  relating  to  the  protection  of  the environment, including those
governing the discharge of pollutants into the air and water, the management and
disposal  of  hazardous substances and wastes, the cleanup of contaminated sites
and  the maintenance of a safe workplace. Spectrum believes that it has been and
is  in  compliance  with  environmental  laws and regulations and that it has no
known  liabilities under environmental requirements that it would expect to have
a  material  adverse  affect on its business, results of operations or financial
condition.  In  the  past  three years, Spectrum has not incurred material costs
relating  to  environmental  compliance.

EMPLOYEES

     As  of  December  31,  2003,  Spectrum  had  approximately  135  employees.
Approximately  16% of its employees are engaged in manufacturing, 5% are engaged
in  engineering,  research  and development, 71% are engaged in range operations
and  maintenance,  and  8%  are engaged in sales, marketing, product support and
general  administration.  None  of  the Company's employees are represented by a
union  or  are  covered  by a collective bargaining agreement. All of Spectrum's
employees  are  based  in  the  United States. The Company considers its current
employee  relations  to  be  satisfactory.

PRODUCT  AWARENESS

     On  November  17, 2003, the Company entered into a publicity agreement with
Capital  Financial Media, Inc. ("Capital"). Capital is in the business of public
relations,  direct  mail  advertising  and  other related activities. We engaged
Capital  to prepare an advertising/advertorial product that prominently featured
a  report  on  us  and  to  distribute  such report to no less than Five Hundred
Thousand  US  residents.

CONSULTANTS

     On  March 11, 2004, the Registrant entered into a consulting agreement with
Robert  Genovese ("Genovese"), pursuant to which Genovese will be issued options
to  acquire  9,000,000  shares  of  the Registrant's common stock at an exercise
price  equal  to  the  lesser  of  $1.65 or the fair market value at the time of
exercise.  These  shares  of  common  stock  will be issued pursuant to our 2004
Non-Statutory  Stock Option Plan. The Company has engaged Genovese to: (a) bring
to  the  Registrant's attention potential or actual opportunities which meet its
business  objectives  or logical extensions thereof; (b) alert the Registrant to
new  or emerging high potential forms of production and distribution which could
either  be  acquired  or  developed  internally; (c) comment on the Registrant's


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<PAGE>

corporate  development  including  such  factors  as  position  in  competitive
environment,  financial  performances  vs.  competition, strategies, operational
viability,  etc.;  (d)  identify  respective  suitable  merger  or  acquisition
candidates for the Registrant, perform appropriate diligence investigations with
respect  thereto,  advise  the  Registrant  with  respect to the desirability of
pursuing  such  candidates,  and assist the Registrant in any negotiations which
may  ensue  therefrom; and (e) other such planning and development services, all
as  requested  and  instructed  by  the  Registrant.

     Payment  for  such  options  will  be  made  by  Genovese either by cash or
conversion  of  outstanding  debt held by Genovese, or his affiliated companies,
Endeavor  Capital  Group LLC or BG Capital Group Ltd., or a combination thereof.
The  exercise  rights  of  Genovese  is limited such that, unless Genovese gives
written  notice  75 days in advance to the Registrant of his intention to exceed
the  Limitation  on  Conversion  as  defined  below,  with  respect  to all or a
specified  amount  of  the option and the corresponding number of the underlying
shares, in no instance is Genovese (singularly, together with any Persons who in
the  determination  of  Genovese,  together with Genovese, constitute a group as
defined in Rule 13d-5 of the Exchange Act) be entitled to exercise the option to
the  extent such exercise would result in Genovese beneficially owning more than
five  percent  (5%)  of the outstanding shares of common stock of the Registrant
(the  "Limitation  on  Conversion").  The  Company  has  requested  written
certification  of  Robert  Genovese's  percent  ownership.

     As  of  March  30,  2004,  Genovese  exercised  2,800,000 of the options to
acquire  shares  of  the  Company's  common  stock.

                        ITEM 2.  DESCRIPTION OF PROPERTY

PROPERTY

     Specturm's  engineering,  manufacturing,  research  and  development  and
administrative  offices are in Fort Walton Beach, Florida.  The Company owns the
land  and  building.  SouthTrust  Bank  is  the  mortgagee  of  such  property.

     The  Company  owns  a  corporate  condominium located in Fort Walton Beach,
Florida.  SouthTrust  Bank  is  the  mortgagee  of  such  property.

     The  following  table  presents certain information on our leased and owned
operating  properties  as  of  December  31,  2003:

<TABLE>
<CAPTION>
                                SQ.                                     LEASED    LEASE EXPIR-             LOAN
         LOCATION              FEET                  USE               OR OWNED   ATION DATE             MATURITY
---------------------------  ----------   --------------------------  ----------  ------------  ---------------------------
<S>                          <C>          <C>                         <C>         <C>           <C>
91 Hill Avenue, . . . . . .   47,200      Engineering, manufacturing    Owned          N/A      $1,537,649 owed as of December 31,
Fort Walton Beach, Florida                 and research and                                     2003. Mortgage due
32549                                      development, and                                     April 1, 2005
                                           administrative office

321 Bream Avenue, Unit 604
Fort Walton Beach, Florida .   1,089      Condominium                   Owned          N/A      $189,804 owed as of December 31,
32548                                                                                           2003.  Mortgage due April 1, 2005


755 Lovejoy Road. . . . . .   10,000      Precision machine shop        Leased    August 31,
Fort Walton Beach, Florida .              metal fabrication                       2006
32548
</TABLE>

                           ITEM 3.  LEGAL PROCEEDINGS

RELEASE  OF  IRS  TAX  LIEN

     On  January 20, 2003, the IRS placed a lien in favor of the United States


                                        9
<PAGE>

of  America  on  all tangible and intangible property and rights to the property
for  unpaid payroll taxes from the third quarter of 2000. On April 21, 2003, the
IRS  filed  a  Notice of Levy to collect the unpaid amount of $173,041. On April
24, 2003, the Company remitted $25,000 to the IRS and the IRS filed a Release of
Levy/Release  of  Property  from  Levy.  In  addition,  the  Company submitted a
proposal  to  the  IRS  to  satisfy  the  remainder  of  the  unpaid payroll tax
liability.  The  proposal was as follows: Beginning in May 2003, and carrying on
through August 2003, the Company proposed payment to the IRS of $5,000 per month
to  be  made  no  later than the 10th of each month for a total of an additional
$20,000.  Starting  in  September  2003  and continuing until the final debt was
settled, the Company proposed a payment of $10,000 per month to be paid no later
than  the  10th  of  each  month.

     On  November  24,  2003, the Company received a waiver for the reduction of
penalty  and  interest  charges relating to the unpaid payroll taxes of $38,070.
The  amount  is  reported  as a reduction in penalty expense in the accompanying
financial  statements

     The  amount  due  to  the  IRS  at  December  31,  2003  is  $22,923.

     On  March  17,  2004,  the  Company  made  its final payment to the IRS and
received  a  Release  of  Lien  from  the  IRS  on  March  19,  2004.

TRIDENT  METALS  JUDGMENT AND FINAL PAYMENT MADE

     On  or  about  January  13,  2003,  The  Trident  Company secured a default
judgment  in  Oklahoma in the amount of $139,020, plus interest in the amount of
$1,781,  and  attorney  fees  in  the  amount of $2,500.  The action The Trident
Company  v.  Spectrum Manufacturing, Inc. and Spectrum Sciences & Software, Inc.
is  Case  No.  CJ-2002-07042  in  the  district  Court  of Tulsa County State of
Oklahoma.  The  default judgment arises from a debt owed by Spectrum to Trident.
The  parties have negotiated a payment schedule.  Should Trident fail to receive
any  payments within five (5) business days from the date due, Spectrum shall be
deemed  in  default  of  this  Stipulation and Agreement and the following shall
occur:

     1.   Trident  may  immediately  have entered and filed of record the Agreed
Journal  Entry  of  Judgment  in  the Oklahoma Action in the amount of  $103,216
principal,  accrued  interest in the amount of $7,184 as of  May  3,  2003  with
interest  thereafter  at the rate of ten percent (10%)  per  annum  until  paid,
and  $7,642 in attorneys' fees. Said amount shall accrue interest at the rate of
ten  percent (10%) per annum until paid.  Contemporaneously therewith,  Trident,
through  counsel,  will  record  a  Partial  Release  and Satisfaction of Agreed
Journal  Entry of Judgment for the total sum of all payments received by Trident
pursuant  to  this  Agreement;  and

     2.   Trident  shall be entitled to proceed with domestication of the Agreed
Journal Entry  of Judgment in Florida, and Spectrum shall waive any objection to
the domestication and  enforceability of the Agreed Journal Entry of Judgment in
Florida.

     As  of  December 31, 2003, the balance due to Trident Metals is $43,759. On
April  6,  2004  the  Company  made  its  final  payment to the Trident Company.

HARRASSMENT  LAWSUIT  PROGRESSES

     In  December,  2002,  three  Spectrum  employees  each filed complaints for
violation  of civil rights, discrimination, harassment, hostile work environment
and  retaliation  in the United States District Court, District of Arizona.  The
case  numbers  for  these complaints are: CIV '02 2621 PHX MHM; CIV '02 2619 PHX


                                       10
<PAGE>

DKD;  and  CIV '02 2620 PHX FJM.  In January 2003, Spectrum filed answers to all
three  complaints,  denying all allegations of wrongdoing.  All three plaintiffs
are  claiming "undue stress and anxiety" from Spectrum's actions.  There were no
damage  amounts  specified  in any of the actions. The plaintiffs are requesting
the following:     Compensatory damages, plus special incidental damages in such
a  sum as may be proven at trial; punitive damages in such a sum as my be proven
at  trial; for cost for the suit; for attorney's fees; and for other such relief
as  the  Court  deems just and proper.  The Company intends to vigorously defend
its  position.

     As  of  March 23, 2004, the cases progressed through the establishment of a
case management plan with the courts and a consolidation of all the cases into a
single  action.  Depositions  and  additional  discovery are scheduled for first
quarter  2004.  Spectrum  does not know what the outcome of this litigation will
be.

BUSINESS  &  COMMERCIAL  BROKERAGE  INC.  SETTLEMENT

     At  December  31,  2003  the  Company  was  in  the  negotiation phase of a
complaint filed by Business & Commercial Brokerage, Inc. for breech of contract.
The  Company  accrued  a  liability  of  $20,000  which  management believed was
sufficient  to  settle  this  complaint.

     In  February  2004,  the  complaint was settled for $20,000 and on March 1,
2004,  the  Company  made  the first of two settlement payments to the Brokerage
firm  of  $10,000.  The  second  and final settlement payment of $10,000 will be
made  on  April  1,  2004.

     Spectrum  is  not  aware  of  any  other  pending or threatened litigation.

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

     No  matters  were submitted to a vote of security holders during the fourth
quarter  of  the  fiscal  year  covered  by  this  report.

     On  February  5,  2004,  by  written  consent,  the shareholders holding an
aggregate  of  10,081,700  shares, or 53.48% of the Company's outstanding common
stock,  approved  the  following:

     -  the  amendment  to  the  Company's  Certificate  of Incorporation to (a)
increase  the  number of shares of the Corporation's outstanding common stock by
effecting  a  two-for-one forward stock split of the Corporation's common stock;
(b)  provide  for maximum indemnification of its directors and officers; and (c)
increase  its  authorized  capitalization  and create a Series A 10% Convertible
Preferred  Stock,  so  that  the  current  capitalization of One Hundred Million
shares  (100,000,000) consisting of Eighty Million (80,000,000) shares of common
stock,  par  value  $.0001  per share, and Twenty Million (20,000,000) shares of
preferred  stock, par value $.0001 per share, shall be amended to be One Hundred
Six  Million  (106,000,000)  shares,  consisting  of  One  Hundred  Million
(100,000,000)  shares of common stock, par value $0.0001 per share, Five Million
(5,000,000)  shares  of  blank  check  preferred stock, par value of $0.0001 per
share,  and One Million (1,000,000) shares of Series A 10% Convertible Preferred
Stock,  par  value  of  $0.0001  per  share.

     -  the  Spectrum  Sciences  and  Software  Holdings Corp. 2004 Stock Option
Plan.

     Before the Company can implement these actions, the Company must first file
an  information  statement  pursuant  to 14C of the Securities Exchange Act. The
Company,  in its discretion, may adopt a portion, all, or none of these actions.


                                       11
<PAGE>

        ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our  common  stock  traded on the Electronic Pink Sheets as a non-reporting
company  from  2000  to  April  2003  under the symbol SIVY.  In April 2003, our
symbol  was  changed  to SPSC.  On December 5, 2003, the National Association of
Securities  Dealers  (NASD) approved the Company's common stock for quotation on
the  OTC  Bulletin  Board  electronic  quotation system.  The stock is currently
trading under the symbol "SPSC".  The following table sets forth, for the fiscal
quarters indicated, the high and low bid prices per share of our common stock as
reported  on  the  OTCBB.  The  quotations  reflect inter dealer prices, without
retail  mark-up,  mark-down  or  commissions  and  may  not  represent  actual
transactions.

<TABLE>
<CAPTION>
                               High  Low
                               ----  ----
<S>                            <C>   <C>

YEAR ENDING DECEMBER 31, 2002
March 31, 2002. . . . . . . .  0.15  0.15
June 30, 2002 . . . . . . . .  0.15  0.15
September 30, 2002. . . . . .  1.50  0.15
December 31, 2002 . . . . . .  2.00  1.30

YEAR ENDING DECEMBER 31, 2003
March 30, 2003. . . . . . . .  1.00  0.90
June 30, 2003 . . . . . . . .  1.60  1.00
September 30, 2003. . . . . .  1.60  1.30
December 31, 2003 . . . . . .  1.83  1.45
</TABLE>

Source:  Pink  Sheets,  LLC

     Our  common  stock  had  a  2-for-1  forward  stock split on April 9, 2003.

     On  March  29,  2004, the closing bid price for our common stock was $2.70.

HOLDERS

          As  of  December 31, 2003, there were approximately 16 shareholders of
     record  of  the  Company's  common  stock.

DIVIDENDS

     The Company has not paid any cash dividends for the past three fiscal years
or  during  the interim period presented and has no intention to pay a dividend.

SECURITIES  AUTHORIZED  FOR  ISSUANCE  UNDER  EQUITY  COMPENSATION  PLANS

     As  of  December  31, 2003, the Company has not granted options to purchase
shares  of  its  common  stock  to  its  employees,  officers,  directors  and
consultants.

     On  February  5,  2004,  by  written  consent,  the shareholders holding an
aggregate  of  10,081,700  shares, or 53.48% of the Company's outstanding common
stock,  approved  the  Spectrum  Sciences  &  Software Holdings Corp. 2004 Stock


                                       12
<PAGE>

Option  Plan.  No  option  shares  will be issued until such time as the Company
files  an  information statement pursuant to 14C of the Securities Exchange Act.

     As  of  March  11,  2004,  the  board of directors approved and adopted the
Spectrum  Sciences  and  Software Holdings Corp. 2004 Non-Statutory Stock Option
Plan  (the  "Plan")  and  filed  a  registration  statement  on  a  Form S-8 for
10,000,000  common  stock shares underlying the options.  On March 11, 2004, the
Registrant  entered  into  a  consulting  agreement  with  Robert  Genovese
("Genovese"),  pursuant  to  which  Genovese  will  be issued options to acquire
9,000,000 shares of the Company's common stock at an exercise price equal to the
lesser  of  $1.65 or the fair market value at the time of exercise.  As of March
30,  2004,  Genovese exercised 2,800,000 of the options to acquire shares of the
Company's  common  stock.

RECENT  SALES  OF  UNREGISTERED  SECURITIES

     Donal  R.  Myrick,  our former president and CEO loaned Spectrum Sciences &
Software,  Inc. $20,000 in October, 2002.  This advance was made in exchange for
a  convertible  promissory note due June 30, 2003, bearing 6% interest per year.
Mr.  Myrick  had the option to convert this debt into common stock at a price of
$1.00  per  share.  The  shares  underlying the convertible promissory note were
restricted  shares.  This  promissory  note  was  paid off in cash in September,
2003.   The  securities  transaction  was  a  private  transaction (there was no
general  solicitation)  without  registration  in  reliance  on  the  exemptions
provided  by  Section 4(2) and Rule 506 of Regulation D of the Securities Act of
1933,  as  amended.

     On March 3, 2003, the Company issued 100,000 shares of common stock (taking
into  account  the  forward two-for-one stock split of April 9, 2003) to Jackson
Steinem,  Inc. for consulting services related to the filing of our registration
statement.  The  beneficial owner of Jackson Steinem, Inc. is Adam S. Gottbetter
of Gottbetter & Partners, LLP, our legal counsel. This stock issuance was valued
at  $5,000  or  $.05 per share. The sale was a private transaction (there was no
general solicitation) without registration in reliance on the exemption provided
by  Rule  701  of  the Securities Act of 1933, as amended. Jackson Steinem, Inc.
received  restricted  shares.

     On  April  2,  2003,  the  Company  issued 2,500,000 shares of common stock
(taking  into  account  the forward two-for-one stock split of April 9, 2003) to
Donal  R.  Myrick,  our  former  president  and  former CEO, in exchange for Mr.
Myrick's  600  shares  of  Spectrum  Sciences  &  Software,  Inc.,  which  were
all  of  the  issued  and  outstanding  shares  of Spectrum Sciences & Software,
Inc.  This  transaction was part of the merger in which the Company acquired all
of  the assets of Spectrum Sciences & Software, Inc.  The securities transaction
was  a  private  transaction  (there  was  no  general  solicitation)  without
registration  in  reliance  on  the exemptions  provided  by  Section  4(2)  and
Rule  506  of  Regulation  D  of  the Securities  Act  of 1933, as amended.  The
purchaser  received  restricted  shares.

     On  April  9,  2003, the Company effectuated a two-for-one forward split of
its  common  stock.

     On  October  21,  2003,  the Company issued 7,000 shares of common stock to
Eric  P.  Liptman,  Esq. for legal services related to the filing of its 15c-211
application  with  the  OTC  Compliance  Unit. This stock issuance was valued at
$10,000 or $1.42 per share. The securities transaction was a private transaction
(there  was  no  general  solicitation)  without registration in reliance on the
exemptions  provided  by  Section  4(2)  and  Rule  506  of  Regulation D of the
Securities  Act  of  1933,  as  amended.


                                       13
<PAGE>

On  July  31,  2000,  the  Company completed a private offering that was offered
without registration under the Securities Act of 1933, as amended (the "Act") in
reliance  upon  the  exemption from registration afforded by Regulation S of the
Act.  The  Company  sold 7,000,000 shares of its common stock at a price of $.03
per  share  for  a  total amount raised of $210,000. After expenses, the Company
received  $185,000.

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

CAUTIONARY  NOTE  REGARDING  FORWARD-LOOKING  STATEMENTS

     This report contains certain financial information and statements regarding
our  operations  and  financial  prospects of a forward-looking nature. Although
these  statements  accurately  reflect  management's  current  understanding and
beliefs,  we  caution  you  that certain important factors may affect our actual
results  and  could  cause  such  results  to  differ  materially  from  any
forward-looking  statements  which  may be deemed to be made in this prospectus.
For  this  purpose,  any  statements  contained in this prospectus which are not
statements  of  historical  fact may be deemed to be forward-looking statements.
Without  limiting  the  generality  of  the  foregoing,  words  such  as, "may",
"intend",  "expect",  "believe",  "anticipate",  "could",  "estimate", "plan" or
"continue"  or  the negative variations of those words or comparable terminology
are  intended  to identify forward-looking statements. There can be no assurance
of  any  kind  that  such  forward-looking  information  and  statements will be
reflective  in any way of our actual future operations and/or financial results,
and  any  of such information and statements should not be relied upon either in
whole  or  in  part  in  connection  with  any decision to invest in the shares.

OVERVIEW

     Spectrum  Sciences  & Software Holdings Corp. provides engineering, science
and  technological support services for the United States Department of Defense.

     We  earn  our  revenue  on  fixed-price  contracts  with  the United States
Department  of  Defense.  In a fixed-price contract, the price is not subject to
adjustment  based  on  cost  incurred  to  perform  the  required work under the
contract.  Under  fixed-price  contracts we agree to perform for a predetermined
contract  price.  Although fixed-price contracts generally permit the Company to
keep  profits  if costs are less than projected, the Company bears the risk that
increased  or unexpected costs may reduce profit or cause the Company to sustain
losses  on  the  contracts.

     We  use  the  percentage-of-completion method of accounting for fixed-price
contracts  and,  therefore,  match  revenue  with the cost incurred on each unit
produced  at  the  time the Company recognized its sale based on the estimate of
gross  profit  margin  the  Company  expects  to  receive  over  the life of the
contract.  The  Company  currently  evaluates its estimates of gross margin on a
monthly  basis.  In addition, the Company uses the cumulative catch-up method to
recognize  its changes in estimates of sales and gross margins during the period
in  which  those  changes  are  determined.  The Company charges any anticipated
losses  on  a contract to operations as soon as those losses are determined. The


                                       14
<PAGE>

principal  components  of  the Company's contract cost of revenue are materials,
subcontractor  costs, labor and overhead. The Company charges all of these costs
to  the  respective  contracts  as  incurred.

     We  expense  operating  costs  such as selling, general and administrative,
internal research and development costs and bid and proposal costs in the period
incurred.  The  major  components  of these costs are compensation and overhead.
Capitalized  debt  issuance  costs  are amortized over their useful lives. Since
January 1, 2002, the Company has been subject to a new accounting standard under
which  it  no  longer  amortizes  goodwill,  although  it must test its goodwill
periodically  for  impairment.

     The  Company's  results  of  operations, particularly its revenue and gross
profits,  and  its  cash  flows  may  vary  significantly  from period to period
depending  upon  the  timing  of  delivery of finished products and the terms of
contracts.  As  a  result,  period-to-period  comparisons  may  show substantial
changes  disproportionate  to  the  Company's  underlying  business  activity.
Accordingly,  the  Company  does  not  believe  that  its  quarterly  results of
operations  are  necessarily  indicative  of  results  for  future  periods.

SUMMARY  OF  SPECTRUM  SCIENCES  &  SOFTWARE,  INC.  ACQUISITION

     Our former president, Donal R. Myrick, owned and operated Spectrum Sciences
& Software, Inc., a Florida S-Corporation since its formation in 1982. Silva Bay
International, Inc. acquired Spectrum Sciences & Software, Inc. in April 2003 in
exchange for 2,500,000 shares of common stock to Mr. Myrick (taking into account
the  forward  two-for-one  stock  split  of April 9, 2003). We have continued to
operate the business of Spectrum Sciences & Software, Inc. since our acquisition
of  its  business  under  the name "Spectrum Sciences & Software Holdings Corp."
The  business the Company acquired, Spectrum Sciences & Software, Inc., has been
in  operation for 21 years prior to our acquisition.  Prior to this acquisition,
the  Company  had  no  operations  or  revenues.

     The  acquisition of Spectrum Sciences & Software, Inc. was accounted for in
accordance  with  Statement  of  Financial  Accounting Standard ("SFAS") No. 141
"Business  Combinations"  ("SFAS 141"), which requires all business combinations
initiated  after  June  30,  2001 to be accounted for under the purchase method.
SFAS  No.  141  also  sets  forth guidelines for applying the purchase method of
accounting  in  the  determination  of  intangible  assets,  including  goodwill
acquired in a business combination, and expands financial disclosures concerning
business combinations. The assets acquired and liabilities assumed were recorded
at  estimated  fair values as determined by our management, based on information
available  and on assumptions as to future operations. Due to the composition of
the  majority  of  the governing body and senior management of the company being
the  same  as  Spectrum  Sciences  &  Software,  Inc. prior to the April 3, 2003
acquisition,  Spectrum  Sciences  &  Software,  Inc.  has  been deemed to be the
accounting  acquirer  (a  reverse  acquisition).

PLAN  OF  OPERATION

     We  provide engineering, science and technological support services for the
United  States  government. In addition, we manufacture munitions ground support
equipment.  Our revenues are earned primarily from contracts with the Department
of  Defense  of  the  United  States Government. Our goal is to grow our current
business  through  acquisitions  of  other small, private defense contractors in
exchange  for our common stock. Our plan of operations has two major components:
financing  our  current  operations,  and  launching  our  acquisition strategy.

     MINIMUM  12 MONTH REQUIREMENTS. Our cash balances were $696,959 at December
31,  2003.  Based  on  an  analysis  of our liabilities, we are dependent on the


                                       15
<PAGE>

cooperation of our creditors to permit us to continue to operate. An analysis of
our  accounts  payable  and  accrued  and  other  liabilities indicates that our
largest  payables  as  of  December 31, 2003 are: SouthTrust Bank (approximately
$2,441,647),  BG  Capital  Group  ($465,090),  Robert  Genovese  ($180,495),
Environmental  Management,  Inc.  (approximately  $234,000),  Washington  Group,
International  (approximately  $353,000),  Endeavor  Capital  Inc.,  ($146,445),
Internal  Revenue  Service  (approximately  $22,900)  and  The  Trident  Company
(approximately  $43,759). These creditors are specifically aware of our weak but
improving  financial  position  and  our  search  for  financing.  The continued
cooperation  of these creditors is not assured. However, we have been successful
in  obtaining  agreements  with  all  creditors.  The  terms  of  the  debt with
SouthTrust  Bank  are as follows: unsecured $603,495 at a floating interest rate
currently  at  6.00%, maturing April 1, 2005; $1,537,649 at 8.5%, maturing April
1,  2005;  $110,699 at 4.25% interest rate, maturing April 1, 2005; and $189,804
at 8.75% interest rate maturing. April 1, 2005. The Trident Company has accepted
the  company  proposal  of  a lump sum payment of $25,000 (paid May 2, 2003) and
monthly  payments of approximately $8,880 until balance is paid. At December 31,
2003,  the  Trident  balance  was  $43,759.

     Any  new debt agreements that we would enter into would be unsecured as the
majority  of  our  assets currently secure our existing debt. Current agreements
with  our  creditors  will  negatively  impact  our ability to obtain additional
refinancing for our current debt and to obtain future capital at favorable terms
if  such  financing  becomes  available.

CRITICAL  ACCOUNTING  POLICIES

     Management's  Discussion and Analysis of Financial Condition and Results of
Operations are based upon our consolidated financial statements, which have been
prepared  in  accordance  with  accounting  principals generally accepted in the
United States of America. The preparation of these financial statements requires
management  to  make estimates and assumptions which affect the amounts reported
in  the  financial  statements  and  determine  whether  contingent  assets  and
liabilities,  if  any,  are disclosed in the financial statements. On an ongoing
basis,  we  evaluate  our  estimates and assumptions, including those related to
long-term contracts, product returns, bad debts, inventories, fixed asset lives,
income taxes, environmental matters, litigation and other contingencies. We base
our  estimates  and  assumptions on historical experience and on various factors
that  are  believed  to be reasonable under the circumstances, including current
and expected economic conditions, the results of which form the basis for making
judgments  about  the  carrying  values  of  assets and liabilities that are not
readily  apparent  from other sources. Actual results may differ materially from
our  estimates  under  different  assumptions  or  conditions.

     We  believe  that the following critical accounting policies, among others,
affect our more significant estimates and assumptions used in the preparation of
our  financial  statements:

     Revenue  recognition.     We  recognize revenue and profit on substantially
all  of  our  contracts using the percentage-of-completion method of accounting,
which  relies  on  estimates  of total expected contract revenues and costs.  We
follow  this  method  since  reasonably dependable estimates of the revenues and
costs  applicable  to  various  stages of the contracts can be made.  Recognized
revenues  and  profit  are  subject  to  revisions  as  the projects progress to
completion.  Revisions  to  the  profit  estimates  are charged to income in the
period  in  which  the  facts  that  give  rise  to  the revisions become known.

     Inventory  Valuation.  We  review  our  inventory  balances to determine if
inventories  can  be  sold  at  amounts  equal to or greater than their carrying


                                       16
<PAGE>

value.  The  review includes identification of slow-moving inventories, obsolete
inventories, and discontinued products or lines of products.  The identification
process includes analysis of historical performance of the inventory and current
operational  plans  for  the inventory as well as industry and customer-specific
trends.  If  our actual results differ from management expectations with respect
to  the  selling  of  our  inventories  at  amounts equal to or greater than our
carrying  amounts,  we  would  be  required  to  adjust  our  inventory  values
accordingly.

     Impairment  of  Long  Lived Assets.  We assess the impairment of long-lived
assets  on  an  ongoing  basis  and  whenever events or changes in circumstances
indicate  that  the carrying value may not be recoverable based upon an estimate
of  future  undiscounted  cash flows.  Factors we consider that could trigger an
impairment  review  include  the  following:  (i)  significant  underperformance
relative  to  expected  historical  or  projected future operating results; (ii)
significant  changes  in  the  manner  of  our use of the acquired assets or the
strategy  for  our  overall  business;  (iii)  significant  negative industry or
economic  trends;  (iv)  significant  decline in our stock price for a sustained
period;  and  (v)  our  market  capitalization  relative  to  net  book  value.

     When  we  determine that the carrying value of any long-lived asset may not
be  recoverable  based upon the existence of one or more of the above indicators
of  impairment, we measure impairment based on the difference between an asset's
carrying value and an estimate of fair value, which may be determined based upon
quotes  or a projected discounted cash flow, using a discount rate determined by
our management to be commensurate with our cost of capital and the risk inherent
in  our  current  business  model,  and  other  measures  of  fair  value.

RESULTS  OF  OPERATIONS

     The  following  tables  set  forth  selected financial data from continuing
operations  on a consolidated and segment basis for the years ended December 31,
2003  and  2002. The segment tables, shown below, exclude certain charges, which
are  shown  separately.  The  following  numbers  are  presented as if Silva Bay
International,  Inc  acquired  Spectrum  Sciences & Software, Inc. on January 1,
2002.

COMPARISON  OF  THE  YEARS  ENDED  DECEMBER  31,  2003  AND  DECEMBER  31,  2002

CONSOLIDATED  OVERVIEW


                                       17
<PAGE>

<TABLE>
<CAPTION>
FOR  THE  YEARS  ENDED  DECEMBER  31,
                                          2003                  2002
                                  --------------------  --------------------
<S>                               <C>                   <C>
Sales. . . . . . . . . . . . . .  $ 13,329,963  100.0%  $12,261,630  100.0%
Cost of Sales. . . . . . . . . .    11,681,302   87.6%   11,875,499   96.9%
                                  --------------------  --------------------
Gross Profit . . . . . . . . . .  $  1,648,661   12.4%  $   386,131    3.1%
</TABLE>

     Overall  sales  from  continuing  operations  for  the  twelve months ended
December  31,  2003 increased $1,068,333, or 8.7% compared to the same period in
2002  due  to  increases  in  sales  activity  in  the  Management  Services and
Engineering  and Information Technology division segments, due to support of the
U.S. government war actions. The cost of sales improved in 2003 due to a reserve
for excess inventory established of $45,000 in 2003 versus impairment charges of
finished goods inventory of $289,000 for boat and other manufacturing components
in  2002.

     Gross  profit  as  a percent of sales was 12.4% in 2003 compared to 3.1% in
2002.  The increase in gross margin is primarily due to the increase in sales in
the  Management  Services  and Engineering and Information Technology divisions.

MANAGEMENT  SERVICES

<TABLE>
<CAPTION>
FOR  THE  YEARS  ENDED  DECEMBER  31,
                                          2003                  2002
                                  --------------------  --------------------
<S>                               <C>                   <C>
Sales. . . . . . . . . . . . . .  $  9,325,714  100.0%  $  8,761,280  100.0%
Cost  of  Sales. . . . . . . . .     8,697,109   93.3%     8,681,596   99.1%
                                  --------------------  --------------------
Gross  Profit  . . . . . . . . .  $    628,605    6.7%  $     79,684    0.9%
</TABLE>

     Sales  in  the Management Services segment increased $564,434 or 6.4% for
the  twelve-month period ended December 31, 2003 compared to 2002. The increases
in  revenue  are  primarily due to the scheduled increases in reimbursable labor
cost  under  the  Service  Contract  Act  and  increased  contract modifications
requesting  additional  range  services in the 4th option year of the contract.

     Gross  profit  as  a  percent of sales was 6.7% for the twelve-month period
ended  December  31,  2003  compared to 0.9% in 2002. The increase is due to the
increase  in  sales  in  the Management Services division as related to contract
work performed as well as the continual implementation of cost cutting measures.

ENGINEERING  AND  INFORMATION  TECHNOLOGY  SERVICES  SEGMENT

<TABLE>
<CAPTION>
FOR  THE  YEARS  ENDED  DECEMBER  31,
                                          2003                  2002
                                  --------------------  --------------------
<S>                               <C>                   <C>
Sales. . . . . . . . . . . . . .  $  1,806,273  100.0%  $  1,094,833  100.0%
Cost  of  Sales. . . . . . . . .       980,604   54.3%       569,243   52.0%
                                  --------------------  --------------------
Gross  Profit. . . . . . . . . .  $    825,669   45.7%  $    525,590   48.0%
</TABLE>

     Sales  in  the  Engineering  and  Information  Technology  Services segment
increased $711,440 or 65% for the period ended December 31, 2003 as compared
to  the  same  period  in  2002.  Increased  sales  were  a  result of scheduled
completion  of  backlog  software  development  tasks  for  the  Safe-Range
program, and increases in license revenue.

     Gross  profit,  as a percent of sales was 45.7% for the twelve-month period
ended  December  31,  2003  as  compared  to 48% in 2002. The decrease is due to
increased  direct  labor  costs.  This  increase  in labor costs was a result of
hiring  additional  employees  in  this  division.


                                       18
<PAGE>

MANUFACTURING  SEGMENT

<TABLE>
<CAPTION>
FOR  THE  YEARS  ENDED  DECEMBER  31,
                                          2003                  2002
                                  --------------------  --------------------
<S>                               <C>                   <C>
Sales. . . . . . . . . . . . . .  $  2,197,976  100.0%  $  2,405,517  100.0%
Cost  of  Sales. . . . . . . . .     2,003,589   91.2%     2,624,660  109.1%
                                  --------------------  --------------------
Gross  Profit. . . . . . . . . .  $    194,387    8.8%  $   (219,143)  -9.1%
</TABLE>

     Sales  in  the  Manufacturing  segment  decreased $207,541, or 8.6% for the
twelve-month  period  ended  December  31,  2003 as compared to 2002. The slight
decrease  in  revenue  is  due  to working advanced programs for future business
development.

     Gross margin as a percent of sales was 8.8% compared to -9.1% in 2002. This
increase  is  due  to  tighter  controls  initiated  on  overhead  costs.

OPERATING  EXPENSES

<TABLE>
<CAPTION>
FOR  THE  YEARS  ENDED  DECEMBER  31,
                                                   2003                  2002
                                           --------------------  --------------------
<S>                                        <C>                   <C>
Selling,  general  and  administrative     $1,268,174    100.0%  $  464,987    100.0%
</TABLE>

     Selling,  general  and  administrative  expenses.  Selling,  general  and
administrative  ("SG&A")  expenses  were $1,268,174 for the year ending December
31,  2003  compared  to  $464,987  in  the  same  period 2002, a net increase of
$803,187, or 172.7%. This is increase is due to the additional costs of investor
relations  activities  and  SEC  filing  procedures.


                                       19
<PAGE>

OTHER  INCOME  AND  EXPENSES

     Interest  income and expense, net. Net interest expense was $295,065 in the
year  ended  December  31, 2003, compared to net interest expense of $306,582 in
the  year  ended  December  31, 2002. This is a decrease of 3.8% net of interest
expense  due  to  total  company  debt  reduction.

     Other  income and expense, net. Net other income in the year ended December
31,  2003  was  $212,560 compared to other income of $273,028 in 2002. Our other
income  consists  primarily  of  rental  income received from L3 Communications,
(formerly  Raytheon).

     COMPARISON  OF  YEARS  ENDED  DECEMBER  31,  2002  AND  DECEMBER  31,  2001

CONSOLIDATED  OVERVIEW

                                  YEARS ENDED DECEMBER 31,
                                 2002                  2001
                         -------------------     -------------------
    Sales                $12,262,000  100.0%     $11,874,000  100.0%
    Cost of Sales         11,876,000   96.9%      11,034,000   92.9%
                         -------------------     -------------------
    Gross Margin         $   386,000   3.1%      $   840,000    7.1%

     Overall  sales  from  continuing operations for the year ended December 31,
2002  increased  compared  to 2001. As indicated below, the Range Operations and
Maintenance  saw  modest growth over the prior year while depressed markets have
impacted  the  Manufacturing  segment.

MANAGEMENT  SERVICES

                                  YEARS ENDED DECEMBER 31,
                                 2002                  2001
                         -------------------     -------------------
    Sales                $ 8,761,000  100.0%     $ 8,239,000  100.0%
    Cost of Sales          8,681,000   99.1%       7,822,000   94.9%
                         -------------------     -------------------
    Gross Margin         $    80,000   0.9%     $   417,000    5.1%

     Sales  in  the Management Service segment increased 6.3% for the year ended
December  31,  2002 compared to 2001. The increases in revenue are primarily due
to  the increases in range patrolling and range maintenance work as added to the
contract.

     Gross  margin  as  a  percent of sales for the year ended December 31, 2002
decreased  compared  to  the  prior  year.  Operational  improvements, including
improved quality, material procurement and facility management, have contributed
to  improved  margins  compared  to  2001. In fiscal 2002, the decrease in gross
margin  was  a direct result of increased labor rates. Labor rates are specified
by  the  Department  of  Labor  in  accordance  with  the  Service Contract Act.

ENGINEERING  AND  INFORMATION  TECHNOLOGY  SERVICES

                                  YEARS ENDED DECEMBER 31,
                                 2002                  2001
                         -------------------     -------------------
    Sales                $ 1,095,000  100.0%     $ 1,017,000  100.0%
    Cost of Sales            569,000   52.0%         526,000   51.7%
                         -------------------     -------------------
    Gross Margin         $   526,000   48.0%     $   491,000   48.3%


                                       20
<PAGE>

     Sales  in  the  Engineering  and  Information  Technology  Services segment
increased approximately 7.7% for the year ended December 31, 2002 as compared to
2001.  Increased sales were a result of increased delivery orders on the General
Services Administration contract.  This contract was signed in December 14, 1999
and expires in December 13, 2004.  Each delivery order under that contract has a
separate  performance  schedule.

     Gross  margin,  as  a percent of sales, remained consistent compared to the
prior  year.

MANUFACTURING  SEGMENT

                                  YEARS ENDED DECEMBER 31,
                                 2002                  2001
                         -------------------     -------------------
    Sales                $ 2,406,000  100.0%     $ 2,618,000  100.0%
    Cost of Sales          2,625,000  109.1%       2,607,000   99.6%
                         -------------------     -------------------
    Gross Margin         $  (219,000) (9.1)%     $    11,000    0.4%

     Sales  in  the  Manufacturing  segment  declined  8.1%  for  the year ended
December  31,  2002  as  compared  to  2001.  The  decline  in revenue is driven
primarily by the overall weakness in the U.S. economy and reduction in sales due
to  September 11, 2001.  In 2002, conditions were very weak in the Department of
Defense  markets  for  our  line  of  products  including aircraft and munitions
handling  equipment.

     Gross  margin  as  a percent of sales decreased by 166% in 2002 compared to
2001, primarily due to the operating holding loss on inventory of $289,000.  The
holding  loss  on  inventory  was  a  result  of  obsolete  equipment previously
purchased.  The  anticipation  was  to  sell  the  equipment  to  the  Federal
Government,  however,  due  to the decline in the government's requirements as a
result  of  the  terrorist attacks of September 11, 2001 and no adequate storage
facility,  the equipment deteriorated beyond economic repair.  Normal direct and
indirect  costs  decreased  by  9.1%, while revenues decreased only 8.1% for the
year.  Adjusting  for  the  inventory  reserve adjustments in 2002, gross margin
percentages  would  have  remained  consistent with prior year despite decreased
revenues,  as  we  adjusted our operations to the depressed market conditions by
lowering  overhead  and  reducing  spending.

     During  the  year  ended  December 31, 2001 the Company operations included
other  divisions  that are no longer active.  The cost of sales related to these
operations  was  $78,000,  which  is  included  in  cost of sales in the audited
financial  statements for the year ended December 31, 2001.  There were no sales
related  to  these  functions.

OPERATING  EXPENSES

                                  YEARS ENDED DECEMBER 31,
                                 2002                  2001
                         -------------------     -------------------
    Selling, general
     and administrative      465,000  100.0%         428,500  100.0%

Selling, general and administrative expense. Selling, general and administrative
("SG&A")  expenses  were  $465,000  in  2002 compared to $428,500 in 2001, a net
decrease  of  $36,500.

OTHER  INCOME  AND  EXPENSES

     Interest  income  and expense, net.    Net interest expense was $303,297 in
the  year  ended December 31, 2002, compared to net interest expense of $328,314
in  2001.  The  decline  in  interest  expense  is  a result of lower prevailing
interest  rates  and  lower  average  investment  balances.

     Other  income  and  expense,  net.    Net other income in 2002 was $269,743
compared  to  other  income  of  $149,127  in  2001.  Our  other income consists
primarily of rental income received from L3 Communications, (formerly Raytheon).
The  additional  increase  from  the  prior  year  is  due  to  a one-time legal
settlement  payment  of  $175,000.

     Discontinued  operations.  During the second quarter of 2002, we decided to
divest  our  Yacht  Manufacturing  division.  We  completed  the disposal of the
division  in  the  fourth  quarter  of  2002. During 2002, we recorded a special
charge  of $407,000, which included the impairment of assets and closing related
expenses.

                                       21
<PAGE>

BACKLOG  BY  SEGMENT  (UNAUDITED)

<TABLE>
<CAPTION>
                              Engineering
                                  and
                              Information  Management
               Total Company  Technology    Services   Manufacturing
               -------------  -----------  ----------  -------------
<S>            <C>            <C>          <C>         <C>
Year End 2003      8,532,829    1,056,315   3,396,118      4,080,396
-------------  -------------  -----------  ----------  -------------
</TABLE>

LIQUIDITY  AND  CAPITAL  RESOURCES

     We  had  cash balances totaling $ 696,959 at December 31, 2002.  During the
past  fiscal  year, our principal sources of funds have been cash generated from
loans, financing activities and from continuing operations.  That is up from the
previous year due primarily to an $ 816,731 increase in net income for the total
company.

     We  will need approximately $1 million of additional working capital within
the  next  twelve  months to pay down vendors and amounts we owe to continue our
current operations.  Based on our current operations, we believe we can continue
to operate for an additional 12 months.  We will need an additional $ 750,000 of
working  capital  to  refinance  and  pay  off  our  non-real  estate  debt with
SouthTrust  Bank  within  the  next 15               months.  We will attempt to
obtain  this  capital  through  borrowing  or  from selling our stock privately.

     We  currently  intend  to satisfy our long-term liquidity requirements from
cash  flow  from  operations and with the proceeds from future equity offerings.
Further,  our  long-term  liquidity  requirements  will  depend on many factors,
including  but  not  limited to, various risks associated with our business that
affect  our sales levels and pricing, our ability to recover all of our up-front
costs related to future acquisitions, capital expenditures and operating expense
requirements  and  there  can  be  no  assurance  that we will not need to raise
additional  funds  to  satisfy  them.

                          ITEM 7. FINANCIAL STATEMENTS

     The  financial  statements and reports of independent auditors are included
herein immediately following the signature page to this report.  See Item 13 for
a  list  of  the  financial  statements  included.

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

     The  auditor  for  the  Company  prior  to the April 2, 2003 acquisition of
Spectrum Sciences & Software, Inc. was Richard M. Prinzi, Jr., CPA.  The auditor


                                       22
<PAGE>

of  the  acquired company, Spectrum Sciences & Software, Inc., is Tedder, James,
Worden  & Associates, P.A.  Going forward after the merger of April 3, 2003, the
Company's  auditor  has  been Tedder, James, Worden & Associates, P.A. The prior
auditor  Richard  M.  Prinzi,  Jr.  was  dismissed. The prior auditor Richard M.
Prinzi,  Jr.'s  report  did  not  contain  an  adverse  opinion or disclaimer of
opinion,  nor  was  it  modified  as  to  uncertainty, audit scope or accounting
principles.  There  were  no  disagreements  with  the  prior auditor Richard M.
Prinzi,  Jr.  The  decision  to  change accountants was approved be the board of
directors.

                       ITEM 8A.  CONTROLS AND PROCEDURES.

     Our  current  principal  executive  officer and principal financial officer
evaluated  the effectiveness of the Company's disclosure controls and procedures
(as  defined  in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of  1934,  as amended) as of the end of the period covered by this report. Based
on  this  evaluation,  the  Company's  current  principal  executive officer and
principal  financial  officer  have  concluded  that  the Company's controls and
procedures  are effective in providing reasonable assurance that the information
required to be disclosed in this report has been recorded, processed, summarized
and  reported  as  of  the  end  of  the  period  covered  by  this  report.

During  the  period  covered by this report, there have not been any significant
changes  in  our  internal  controls or, to our knowledge, in other factors that
could  significantly  affect  our  internal  controls.

    PART  III  - ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
                                     PERSONS

     The  names  of our executive officers and directors, their ages as of March
29,  2004,  and  the  positions  currently  held  by  each  are  as  follows:

NAME                         AGE     POSITION
----                        ----     --------
William H. Ham, Jr.          55     Chief Executive Officer and President

Nancy Chadderdon Gontarek    48     Executive Vice President, Chief Financial
                                    Officer and Secretary

Kelvin D. Armstrong          62     Director

Karl Heer                    54     Director

BIOGRAPHIES  OF  EXECUTIVE  OFFICERS

     WILLIAM H. HAM, JR.  Mr. Ham has been the Vice President in charge of Range
Systems  Operations and Maintenance for Spectrum Sciences & Software, Inc. since
August,  1999.  Mr. Ham was promoted to Executive Vice President in January 2004
and  was appointed Chief Executive Officer and President in March 2004.  Mr. Ham
is  responsible  for  all  contracts including personnel, budgeting, performance
contracts, sub contracts and proposals.  From 1991 to 1999, Mr. Ham was a senior
scientist  with Spectrum Sciences & Software, Inc.  Mr. Ham earned a B.S. degree
in  Electrical Engineering from the United States Air Force Academy in 1970.  He
earned  a  Certificate  in  Airspace  Planning  from  the  Federal  Aviation
Administration  in  1978.


                                       23
<PAGE>

     NANCY  CHADDERDON  GONTAREK.  Mrs.  Gontarek  has  been the Chief Financial
Officer  of  Spectrum  Sciences  &  Software,  Inc.  since  November, 2002. From
November,  2000  to  November 2002, Mrs. Gontarek was the Controller of Spectrum
Sciences  &  Software,  Inc.  Mrs.  Gontarek  has  over  20  years experience in
financial and systems management, with approximately 5 years previous experience
with  a major Department of Defense contractor. From 1995 to 2000, Mrs. Gontarek
was  the  Controller  for  Nugget  Oil, Inc. located in Crestview, Florida. Mrs.
Gontarek earned a B.A. degree from State University of New York at Fredonia, New
York,  and she earned an M.B.A. from George Washington University in Washington,
DC  in  1982.

KELVIN  "KELLY"  DONALD  ARMSTRONG.  Mr.  Armstrong  has  been  a  director  of
Spectrum since October 2003.  From 1979 to 1998, Mr. Armstrong owned and managed
the  Glen  Oak  Ford auto dealership in Victoria, British Columbia, Canada.  Mr.
Armstrong sold the Ford auto dealership in 1998.  In 1998, Mr. Armstrong founded
KellyOak  Enterprises,  Ltd., an investment and property management firm.  Also,
in  1998,  Mr.  Armstrong founded KOEL Enterprises, Ltd., a consulting firm that
provides  consulting  and  management  services  to  companies  having financial
problems.  In 1992, Mr. Armstrong was elected to the Victoria City Counsil where
he  served for one year.  Mr. Armstrong served on the Victoria, British Columbia
Police Board from 1989 to 1992.  Additionally, Mr. Armstrong is president of the
Cystic  Fibrosis  Foundation,  Victoria,  British  Columbia Chapter, director of
Cystic  Fibrosis  Canada  and  director  of  Arbutus  Society  for  Children.

     KARL  HEER.  Mr.  Heer  has been a director of Spectrum since October 2003.
From 1986 to the present, Mr. Heer has co-owned and operated Nautic Distributors
Ltd.,  based  in Richmond, British Columbia, Canada.  Nautic is a distributor of
water  sporting  goods  (water  skis,  wake  boards  and ancillary products like
gloves,  life  jackets and tow ropes) throughout Canada.  From 1985 to 1990, Mr.
Heer  was  the  district credit manager for W.G. McMahon Ltd. a carpet and floor
covering  wholesale company based in Burnaby, British Columbia.  At W.G. McMahon
Mr. Heer was responsible for handling credit and collections through the western
Canadian provinces.  From 1976 to 1985, Mr. Heer was the district credit manager
for  Buckwold's  (Western)  Ltd.  also  a  carpet  and  floor covering wholesale
company,  based  in Saskatoon, Saskatchewan, Canada.  At Buckwold's Mr. Heer was
responsible  for  handling  credit  and collections through the western Canadian
provinces.  Mr.  Heer  earned  a  B.A.  degree  in  Commerce  from  Simon Fraser
University,  located  in  Burnaby,  British  Columbia,  in  1971.

SECTION  16(A)  FILING  COMPLIANCE

     Based solely on a review of Forms 3 and 4, and amendments thereto furnished
to the Company under Rule 16a-3(e) promulgated under the Securities Exchange Act
of  1934  during  the most recent fiscal year, and Form 5 and amendments thereto
furnished  to  the  Company  with  respect to its most recent fiscal year, Donal
Myrick,  William  Ham,  Nancy Gontarek, Kelvin Armstrong, and Karl Heer were not
timely with the filing of each of the Form 3s as required under Section 16(a) of
the  Securities  Exchange  Act  of  1934.

CODE  OF  ETHICS

The  Company  has adopted a Code of Ethics applicable to its principal executive
officer  and  principal  financial  officer,  a  copy of which is filed with the


                                       24
<PAGE>

Securities  and  Exchange  Commission as an exhibit to this report.

FINANCIAL  EXPERT

     The  Company  does  not  have  a  standing  audit committee of the Board of
Directors.  Management  has  determined  not  to establish an audit committee at
present  because  the limited resources of the Company and its limited operating
activities  do not warrant the formation of an audit committee or the expense of
doing  so.  Spectrum  does  not  have a financial expert serving on the Board of
Directors  or  employed as an officer based on management's belief that the cost
of  obtaining  the  services  of a person who meets the criteria for a financial
expert  under  Item  401(e)  of  Regulation  S-B is beyond its limited financial
resources  and the financial skills of such an expert are simply not required or
necessary for the Company to maintain effective internal controls and procedures
for  financial  reporting  in  light  of  the  limited  scope  and simplicity of
accounting  issues  raised  in  its  financial  statements  at this stage of its
development.

                                    PART III
                         ITEM 10. EXECUTIVE COMPENSATION

ANNUAL  COMPENSATION

     The following table sets forth certain information regarding the annual and
long-term  compensation  for  services  in all capacities to Spectrum Sciences &
Software  Holdings  Corp.  for  the  prior fiscal years ended December 31, 2003,
2002,  and  2001,  of  those persons who were either the chief executive officer
during  the  last  completed  fiscal  year  or one of the other four most highly
compensated  executive  officers as of the end of the last completed fiscal year
whose  annual  salary  and  bonuses  exceeded  US$100,000.

<TABLE>
<CAPTION>
Annual  Compensation
Name and Principal Position                         Fiscal Year        Salary ($)
--------------------------------------------       --------------  -----------------
<S>                                                <C>             <C>
Donal R. Myrick,. . . . . . . . . . . . . . . . .            2003              10,000
Former President and CEO, Former Chairman of. . .            2002              99,996
the Board of Directors                                       2001              91,998
--------------------------------------------       --------------   -----------------
Donald R. Garrison, . . . . . . . . . . . . . . .            2003              82,014
Former Chief Operating Officer. . . . . . . . . .            2002              82,014
                                                             2001              82,014
--------------------------------------------       --------------   -----------------
William H. Ham, Jr, . . . . . . . . . . . . . . .            2003              64,104
President and CEO                                            2002              60,984
                                                             2001              71,701
--------------------------------------------       --------------   -----------------
Nancy Chadderdon Gontarek,. . . . . . . . . . . .            2003              76,375
Chief Financial Officer, Executive Vice President            2002              65,000
and Secretary                                                2001              65,000
</TABLE>

EMPLOYMENT  CONTRACTS,  TERMINATION  OF  EMPLOYMENT,  AND  CHANGE-IN-CONTROL
ARRANGEMENTS

     Donal Myrick signed a three year employment agreement to serve as president


                                       25
<PAGE>

and chief executive officer of the Company, which agreement took effect December
4,  2003.  Mr.  Myrick's  compensation pursuant to this employment agreement was
$10,000  per month. The agreement also called for a severance pay to Mr. Myrick,
if he was terminated without cause. As of March 23, 2004, Mr. Myrick resigned as
President,  CEO  and  Chairman  of the Company. Mr. Myrick indicated that he was
resigning  due  to  his  disagreements  with  matters  relating to the Company's
operations,  policies  and practices. From December 4, 2003, through the date of
his resignation, Mr. Myrick was paid an aggregate amount of $20,000. The Company
believes  that  no  other  moneys  are  owed to Mr. Myrick under this agreement.
However,  the Company recognizes the following debts must be paid to Mr. Myrick:
director's fees for $3,000 and approximately $16,000 for the purchase of various
manufacturing  equipment.  As of April 7, 2004 $9,945 was paid to Mr. Myrick for
accured  leave.

     Donald  Garrison  submitted  his resignation as the Chief Operating Officer
effective  February 2, 2004.  Mr. Garrison indicated he was resigning due to his
inability  to  accept  his  reduced level of responsibility following a previous
board  of  director's  action.

DIRECTORS  COMPENSATION

     A compensation package for our board was established in January 2004.  Each
director  is due $12,000 per annum, payable quarterly on each March 31, June 30,
September  30  and  December  31.

     Officers  and  directors  are  reimbursed  for  travel expenses incurred in
connection  with  the  Company's  business.

STOCK  OPTION  GRANTS

     An  employee  stock option and an incentive plan was established in January
2004.  However,  as  of March 29, 2004, there were no individual grants of stock
options  to  any  Executive  Officers.

    ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table  sets  forth  information  regarding  the  beneficial
ownership  of  our  common  stock  as of March 29, 2004. The information in this
table  provides  the  ownership  information  for:

     -    each  person known by us to be the beneficial owner of more than 5% of
          our  common  stock;

     -    each  of  our  directors;

     -    each  of  our  executive  officers;  and

     -    our  executive  officers,  directors and director nominees as a group.

     Percentage  ownership  in the following table is based on 21,651,000 shares
of  common  stock  outstanding  as  of March 29, 2004. The percentages have been
calculated  on the basis of treating as outstanding for a particular person, all
shares of our common stock outstanding on such date and all shares of our common
stock  issuable  to such holder in the event of exercise of outstanding options,
warrants,  rights  or  conversion  privileges  owned by such person at said date
which  are  exercisable  within  60  days  of  such  date.  Except  as otherwise


                                       26
<PAGE>

indicated,  the  persons listed below have sole voting and investment power with
respect  to  all  shares of our common stock owned by them, except to the extent
such  power  may  be  shared  with  a  spouse.

<TABLE>
<CAPTION>
Name and Address                                                  Number of Shares      Percentage
of Beneficial Owner                      Title of Class          Beneficially Owned   Outstanding(1)
--------------------------------  -----------------------------  -------------------  --------------
<S>                               <C>                            <C>                  <C>
William H. Ham, Jr.
91 Hill Avenue NW                 Common Stock, $.0001 par value                  0               0%
Fort Walton Beach, Florida 32548
--------------------------------  -----------------------------  -------------------  --------------
Nancy Chadderdon Gontarek
91 Hill Avenue NW                 Common Stock, $.0001 par value                  0               0%
Fort Walton Beach, Florida 32548
--------------------------------  -----------------------------  -------------------  --------------
Kelvin D. Armstrong
91 Hill Avenue NW                 Common Stock, $.0001 par value                  0               0%
Fort Walton Beach, Florida 32548
--------------------------------  -----------------------------  -------------------  --------------
Karl Heer
91 Hill Avenue NW                 Common Stock, $.0001 par value                  0               0%
Fort Walton Beach, Florida 32548
--------------------------------  -----------------------------  -------------------  --------------
Donal R. Myrick
511 Circle DR.                    Common Stock, $.0001 par value          2,500,000            11.5%
FT Walton Beach, FL 32548
--------------------------------  -----------------------------  -------------------  --------------
All directors and officers                                                        0             0.0%
--------------------------------  -----------------------------  -------------------  --------------
</TABLE>

          ITEM  12.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

     Related  party  transactions  consist  of  the following as of December 31,
2003:

<TABLE>
<CAPTION>
<S>                                                                            <C>
450,000 promissory note payable to BG Capital Group, Inc. (owned by a. . . .  $   465,090(1)
Robert Genovese).  Interest payable at 8% per annum beginning July 25, 2003.
Payable upon demand. Unsecured.
----------------------------------------------------------------------------  --------------
Management consulting fees and expenses to Endeavor Capital Group, LLC. . . .     146,445(1)
(owned by Robert Genovese. Non-interest bearing. Payable upon demand.
Unsecured.
----------------------------------------------------------------------------  --------------
Cash advances made to Company byRobert Genovese.  Non-interest Bearing. . . .     180,495(1)
Payable upon demand.  Unsecured.
----------------------------------------------------------------------------  --------------
50,000 due to the spouse of the President of the Company. Payable upon. . . .      50,500
demand.  Interest 12%. Unsecured
----------------------------------------------------------------------------  --------------
Total related party payables. . . . . . . . . . . . . . . . . . . . . . . . .     842,530
----------------------------------------------------------------------------  --------------
</TABLE>

(1)  Mr.  Genovese  exercised  900,000  shares  on March 12, 2004 in the form of
debt  conversion  equivalent  to  $1,485,000.

     On  March  8,  2004,  Endeavor  Capital  Group, LLC submitted $1,601,850 of
invoices to the Company for expenses incurred as a part of Spectrum's consulting
agreement  with  Endeavor.  These 2004 expenses are associated with the investor
awareness  and investor relations programs. These expenses are being reviewed in
substance  by  the  Registrant's  chief  financial  officer.  If they are deemed
corporate  expenses,  such  will  be  due  to  Endeavor  on  demand.

     During  2003,  cash advances totaling $603,654 were provided to the Company
by  Robert  Genovese.  The  Company repaid $519,988 of such cash advances during
2003.  No  interest  was  paid  on  the  cash  advances.

     During  2003,  the  Company  was provided management consulting services by
Endeavor  Capital  Group,  LLC  ("Endeavor"), which is owned by Robert Genovese.
Management  consulting  fees  of $40,000 and expenses of $81,904 are reported as


                                       27
<PAGE>

consulting  fees  in  the  accompanying  financial statements for the year ended
December  31, 2003. The consulting agreement between Endeavor Capital Group, LLC
and the Company is for the term from March 1, 2003, to March 1, 2004. Consulting
fees  are  $4,000  per  month  under  the terms of the agreement. In March 2004,
Endeavor  used  the  monies  owed  to  it  under this agreement, to exercise the
options  issued  to Mr. Genovese.

     On  July  25,  2003,  the  Company  entered  into  a  debt  purchase  and
consolidation  agreement to consolidate debt owed to Brannon Capital Corporation
and  Tradewinds  Investments  Overseas,  Inc.  Both  companies  were  owned by a
previous  director  of  the  Company,  Dwain  Brannon.  As  of  the  date of the
agreement,  BG  Capital Group ("BGCap") assumed the debt owed to Brannon Capital
Corporation  and Tradewinds Investments Overseas, Inc. In March 2004, BGCap used
the  monies  owed  to it under this agreement, to exercise the options issued to
Mr.  Genovese.

     The spouse of the President of the Company advanced funds to the Company at
various  times  during  the year. Total advance of $317,500 were provided during
the  year  ended  December  31,  2003.  The  Company repaid $269,513 of the cash
advances  during  2003.  Interest  of  $2,013  was  paid  on  the  advances.

     On March 3, 2003, we issued 100,000 shares of our common stock (taking into
account the forward two for one split on April 9, 2003) to Jackson Steinem, Inc.
for consulting services related to the filing of our registration statement. The
beneficial  owner of Jackson Steinem, Inc. is Adam S. Gottbetter of Gottbetter &
Partners,  LLP,  the Company's ;egal counsel.  This stock issuance was valued at
$5,000  or  $.05  per  share.

ITEM  13.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

REPORTS  ON  FORM  8-K

     On  December 15, 2003, the Company filed a Form 8-K and reported on Item 9.

EXHIBITS

Financial  Statements
---------------------

INDEPENDENT  AUDITOR'S  REPORT                                            F-2

CONSOLIDATED  FINANCIAL  STATEMENTS:

Consolidated  Balance  Sheet                                              F-3

Consolidated  Statements  of  Operations                                  F-4

Consolidated  Statements  of  Capital  Deficit                            F-5

Consolidated  Statements  of  Cash  Flows                                 F-6

Notes  to  Consolidated  Financial  Statements                            F-7


                                       28
<PAGE>

The following exhibits filed as a part of this Form 10-KSB include both exhibits
submitted with this Report and those incorporated by reference to other filings:

<TABLE>
<CAPTION>
<S>          <C>
Exhibit
Number       Description
-----------  ------------------------------------------------------------------------
   3.1. . .  Certificate of Incorporation, filed August 28, 1998*
-----------  ------------------------------------------------------------------------
   3. 2 . .  Certificate of Amendment of Certificate of Incorporation, filed April 8,
             2003*
-----------  ------------------------------------------------------------------------
   3.3. . .  Certificate of Renewal and Revival, filed March 24, 2003*
-----------  ------------------------------------------------------------------------
   3.4. . .  Omitted
-----------  ------------------------------------------------------------------------
   3.5. . .  Certificate of Merger filed with the Delaware Secretary of State*
-----------  ------------------------------------------------------------------------
   3.6. . .  Articles of Merger filed with the Florida Secretary of State*
-----------  ------------------------------------------------------------------------
   3.7. . .  Bylaws of Silva Bay International, Inc., dated August 26, 1998*
-----------  ------------------------------------------------------------------------
   3.8. . .  Amended And Restated Bylaws of Silva Bay International, Inc., dated
             March 24, 2003*
             ------------------------------------------------------------------------
   4.1. . .  Specimen Certificate of Common Stock*
-----------  ------------------------------------------------------------------------
   4.2. . .  2004 Non-Statutory Stock Option Plan*****
-----------  ------------------------------------------------------------------------
  10.1. . .  Agreement and Plan of Merger among Silva Bay International, Inc., SSS
             Acquisition Company and Spectrum Sciences & Software, Inc., dated April
             2, 2003**
-----------  ------------------------------------------------------------------------
  10. 2 . .  Employment Agreement with Donal R. Myrick*
-----------  ------------------------------------------------------------------------
  10.3. . .  Consulting Agreement with Dwain Brannon, dated December 28, 2001*
-----------  ------------------------------------------------------------------------
  10.4. . .  IRS Levy Letter, dated April 24, 2003**
-----------  ------------------------------------------------------------------------
  10.5. . .  Promissory Note to Washington Group International, Inc.**
-----------  ------------------------------------------------------------------------
  10.6. . .  Stipulation Agreement with Trident**
-----------  ------------------------------------------------------------------------
  10.7. . .  IRS Levy Letter, dated September 5, 2003***
-----------  ------------------------------------------------------------------------
  10.8. . .  Four Renewal Revolving Promissory Notes with SouthTrust Bank, and
             Forbearance Agreement dated February 28, 2002***
-----------  ------------------------------------------------------------------------
  10.9. . .  Extension and Modification of Loans, with SouthTrust Bank, dated January
             31, 2003***
-----------  ------------------------------------------------------------------------
  10.10 . .  Amendment to Extension and Modification of Loans, with SouthTrust
             Bank, dated August 26, 2003***
-----------  ------------------------------------------------------------------------
  10.11 . .  Second Amendment to Extension and Modification of Loans, with
             SouthTrust Bank, dated September 10, 2003***
-----------  ------------------------------------------------------------------------
  10.12 . .  Consulting  Agreement  between Endeavor Capital Group LLC and
             Spectrum  Sciences  and Software,  Inc.,  dated  March  1,  2003****
-----------  ------------------------------------------------------------------------
  10.13 . .  Consulting Agreement between Robert Genovese and Spectrum Sciences &
             Software Holdings Corp. dated March 11, 2004.*****
-----------  ------------------------------------------------------------------------
  10.14 . .  Promissory Note between Spectrum Sciences and Software, Inc. and BG
             Capital Group Ltd. dated July 25, 2003*****
-----------  ------------------------------------------------------------------------
  10.15 . .  Publicity Agreement between Capital Financial Media, Inc. and Spectrum
             Sciences and Software Holdings Corp. dated November 17, 2003.******
-----------  ------------------------------------------------------------------------
  14  . . .  Standards of Business Conduct (Code of Ethics) ******
-----------  ------------------------------------------------------------------------
  16.1. . .  Letter of Agreement from former accountant Richard M. Prinzi, Jr.***
-----------  ------------------------------------------------------------------------
  21.1. . .  List of Subsidiaries*
-----------  ------------------------------------------------------------------------
  23.1. . .  Accountant's Consent, Tedder, James, Worden & Associates, P.A.***
-----------  ------------------------------------------------------------------------
  23.2. . .  Accountant's Consent, Richard M. Prinzi, Jr., Certified Public
             Accountant***
-----------  ------------------------------------------------------------------------
  31.1       Certification Of Chief Executive Officer Required By Rule 13a-14(A) Or
             15d-14(A)
-----------  ------------------------------------------------------------------------
  31.2       Certification Of Chief Financial Officer Required By Rule 13a-14(A) Or
             15d-14(A)
-----------  ------------------------------------------------------------------------
  32.1       Certification of Chief Executive Officer Pursuant to Section 906 of the
             Sarbanes-Oxley Act of 2002, 18 U.S.C. section 1350
-----------  ------------------------------------------------------------------------
  32.2       Certification of Chief Financial Officer Pursuant to Section 906 of the
             Sarbanes-Oxley Act of 2002, 18 U.S.C. section 1350
-----------  ------------------------------------------------------------------------
</TABLE>


                                       29
<PAGE>

*    Previously  filed in registration statement on Form 10-SB File No. 1-31710,
filed  with  the  Securities  and  Exchange  Commission  on  June  10,  2003.

**   Previously  filed in registration statement on Form 10-SB File No. 1-31710,
filed  with  the  Securities  and  Exchange  Commission  on  August  11,  2003.

***  Previously  filed in registration statement on Form 10-SB File No. 0-50373,
filed  with  the  Securities  and  Exchange  Commission  on  October  1,  2003.

****  Previously filed in registration statement on Form 10-SB File No. 0-50373,
filed  with  the  Securities  and  Exchange  Commission  on  October  24,  2003.

*****  Previously  filed  on  Form  8-K,  filed with the Securities and Exchange
Commission  on  March  12,  2004.

******  Filed  Herewith

ITEM  14.  PRINCIPAL  ACCOUNTANT  FEES  AND  SERVICES.

(1)  Audit  Fees

     The  aggregate  fees  billed  for professional services rendered by Tedder,
James,  Worden  &  Associates,  P.A.  of  Orlando,  Florida for the audit of the
Registrant's  annual financial statements and review of the financial statements
included in the Registrant's Forms 10-QSB or services that are normally provided
by  the  accountant  in  connection  with  statutory  and  regulatory filings or
engagements  for  fiscal  years  2003  and  2002  were  $52,970  and  $28,500
respectively.

(2)  Audit  Related  Fees

     The  aggregate  fees  billed  for professional services rendered by Tedder,
James,  Worden,  &  Associates  for audit related fees for fiscal year 2003 were
$19,422.  These  fees  were incurred in connection with the company's Form 10-SB
filing.

(3)  Audit  Committee  Policies  and  Procedures

     The  Registrant does not have an audit committee. The Board of Directors of
the  Registrant  approved  all  of  the  services  rendered to the Registrant by
Tedder,  James,  Worden,  &  Associates  for  fiscal  years  2003  and  2002.

(4)  Audit  Work  Attributed  to  Persons  Other  than  Tedder, James, Worden, &
Associates'  Full-time,  Permanent  Employees.

     Not  applicable.


                                       30
<PAGE>

                                   SIGNATURES

     Pursuant  to  the  requirements  of  Section  13 or 15(d) of the Securities
Exchange  Act of 1934, as amended, the registrant has duly caused this report to
be  signed  on  its  behalf  by  the  undersigned,  thereunto  duly  authorized.

Date:  April 14,  2004               Spectrum Sciences & Software Holdings Corp.


                                     By:  /s/ William H. Ham
                                          --------------------------------------
                                          William  H.  Ham,
                                          President and Chief Executive Officer


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

        SIGNATURE                         TITLE                        DATE
-----------------------  --------------------------------------  ---------------
/s/  William  H.  Ham    President  and Chief Executive Officer  April 14,  2004
-----------------------
William  H.  Ham

/s/ Nancy  Gontarek      Treasurer , Chief Financial and         April 14,  2004
-----------------------  Accounting Officer
Nancy  Gontarek

Board  of  Directors

/s/ Kelly  Armstrong     Director                                April 14,  2004
-----------------------
Kelly  Armstrong

/s/ Karl  Heer           Director                                April 14,  2004
-----------------------
Karl  Heer


                                       31
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY


                      CONSOLIDATED FINANCIAL STATEMENTS AND
                          INDEPENDENT AUDITOR'S REPORT

                           DECEMBER 31, 2003 AND 2002



                                TABLE OF CONTENTS
                                -----------------

INDEPENDENT  AUDITOR'S  REPORT                                            F-2


CONSOLIDATED  FINANCIAL  STATEMENTS:

Consolidated  Balance  Sheet                                              F-3

Consolidated  Statements  of  Operations                                  F-4

Consolidated  Statements  of  Capital  Deficit                            F-5

Consolidated  Statements  of  Cash  Flows                                 F-6

Notes  to  Consolidated  Financial  Statements                            F-7


                                      F - 1
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT
                          ----------------------------


To  the  Board  of  Directors  and  Stockholders  of
Spectrum  Sciences  &  Software  Holdings  Corp.


We have audited the accompanying consolidated balance sheet of Spectrum Sciences
&  Software  Holdings  Corp.  and  Subsidiary (the "Company") as of December 31,
2003,  and  the  related consolidated statements of operations, capital deficit,
and  cash  flows  for  the  years  ended  December  31,  2003  and  2002.  These
consolidated  financial  statements  are  the  responsibility  of  the Company's
management.  Our  responsibility  is to express an opinion on these consolidated
financial  statements  based  on  our  audits.

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

In  our opinion, the consolidated financial statements referred to above present
fairly,  in all material respects, the financial position of Spectrum Sciences &
Software  Holdings Corp. and Subsidiary as of December 31, 2003, and the results
of  their  operations and their cash flows for the years ended December 31, 2003
and  2002  in  conformity  with  accounting principles generally accepted in the
United  States  of  America.

The  accompanying  consolidated financial statements have been prepared assuming
that  the  Company  will continue as a going concern.  As discussed in Note 2 to
the  financial  statements,  the  Company  has  incurred  recurring  losses from
operations  and  has  a net capital deficiency.  These factors, and the need for
additional  financing in order for the Company to meet its business plans, raise
substantial  doubt  about  its  ability  to  repay outstanding notes payable and
continue  as a going concern.  Management's plans in regard to these matters are
also  discussed in Note 2.  The consolidated financial statements do not include
any  adjustments  that  might  result  from  the  outcome  of  this uncertainty.


/s/  TEDDER,  JAMES,  WORDEN  &  ASSOCIATES,  P.A.


Orlando,  Florida
April  5,  2004


                                      F - 2
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEET

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

<TABLE>
<CAPTION>
                                     ASSETS
                                -----------------
<S>                                                                     <C>
  Current assets:
    Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . .  $        696,959
    Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . .         1,727,884
    Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . .           122,392
    Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . .            18,723
    Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . .            11,440
                                                                        -----------------

      Total current assets . . . . . . . . . . . . . . . . . . . . . .         2,577,398

    Property, plant, and equipment, net. . . . . . . . . . . . . . . .         2,003,854
    Cash surrender value of life insurance . . . . . . . . . . . . . .            38,665
    Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . .            14,247
                                                                        -----------------

      Total assets . . . . . . . . . . . . . . . . . . . . . . . . . .  $      4,634,164
                                                                        =================

                        LIABILITIES AND CAPITAL DEFICIT
     ----------------------------------------------------------------------

  Current liabilities:
    Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . .  $      1,270,859
    Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . .           540,946
    Contract deposits. . . . . . . . . . . . . . . . . . . . . . . . .            50,000
    Deferred revenues. . . . . . . . . . . . . . . . . . . . . . . . .            36,966
    Due to related parties (Note 10) . . . . . . . . . . . . . . . . .           842,530
    Current portion of long-term debt. . . . . . . . . . . . . . . . .           693,648
    Short-term debt. . . . . . . . . . . . . . . . . . . . . . . . . .           325,361
                                                                        -----------------

      Total current liabilities. . . . . . . . . . . . . . . . . . . .         3,760,310

    Long-term debt, less current portion . . . . . . . . . . . . . . .         1,762,651
                                                                        -----------------

      Total liabilities. . . . . . . . . . . . . . . . . . . . . . . .         5,522,961

  Commitments and contingencies (Note 17)

  Capital deficit:
    Preferred stock, $0.0001 par value; 20,000,000 shares authorized;
      none issued. . . . . . . . . . . . . . . . . . . . . . . . . . .                 -
    Common stock, $0.0001 par value; 80,000,000 shares authorized;
      18,851,000 and 18,844,000 shares issued and outstanding as of
      December 31, 2003 and 2002, respectively . . . . . . . . . . . .             1,885
    Additional paid in capital . . . . . . . . . . . . . . . . . . . .            79,426
    Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . .          (970,108)
                                                                        -----------------

      Total capital deficit. . . . . . . . . . . . . . . . . . . . . .          (888,797)
                                                                        -----------------

      Total liabilities and capital deficit. . . . . . . . . . . . . .  $      4,634,164
                                                                        =================
</TABLE>

See  the  accompanying  notes  to  the  consolidated  financial  statements.


                                      F - 3
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS

For  the  years  ended  December  31,  2003  and  2002
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                          2003           2002
                                                      -------------  ------------
<S>                                                   <C>            <C>
Revenues . . . . . . . . . . . . . . . . . . . . . .  $ 13,329,963    12,261,630

Cost of revenues . . . . . . . . . . . . . . . . . .   (11,681,302)  (11,875,499)
                                                      -------------  ------------

    Gross profit . . . . . . . . . . . . . . . . . .     1,648,661       386,131

Operating expenses . . . . . . . . . . . . . . . . .    (1,268,174)     (464,987)
                                                      -------------  ------------

    Income (loss) from operations. . . . . . . . . .       380,487       (78,856)

Non-operating expense, net . . . . . . . . . . . . .       (82,505)      (33,554)
                                                      -------------  ------------

    Income (loss) from continuing operations . . . .       297,982      (112,410)

Discontinued operations:
  Loss on disposal of yacht manufacturing segment. .             -      (407,250)
                                                      -------------  ------------

    Income (loss) before cumulative effect of
      accounting change. . . . . . . . . . . . . . .       297,982      (519,660)

Cumulative effect of accounting change for
  SFAS No. 142 . . . . . . . . . . . . . . . . . . .             -       (91,022)
                                                      -------------  ------------

    Income (loss) before provision for income taxes.       297,982      (610,682)

Provision for income taxes . . . . . . . . . . . . .       (91,933)            -
                                                      -------------  ------------

    Net income (loss). . . . . . . . . . . . . . . .  $    206,049      (610,682)
                                                      =============  ============

Weighted average shares outstanding:
  Basic and diluted. . . . . . . . . . . . . . . . .    18,845,112    18,844,000
                                                      =============  ============

Earnings (loss) per share:
  Basic and diluted. . . . . . . . . . . . . . . . .  $       0.01         (0.03)
                                                      =============  ============
</TABLE>

See  the  accompanying  notes  to  the  consolidated  financial  statements.


                                      F - 4
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                   CONSOLIDATED STATEMENTS OF CAPITAL DEFICIT

                 For the years ended December 31, 2003 and 2002
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                             COMMON STOCK       ADDITIONAL
                                      ------------------------    PAID-IN    ACCUMULATED
                                         SHARES       AMOUNT      CAPITAL      DEFICIT       TOTAL
                                      -------------  ---------  -----------  -----------  -----------
<S>                                   <C>            <C>        <C>          <C>          <C>
Balances at December 31, 2001. . . .           600   $    600             -    (565,475)    (564,875)

Net loss . . . . . . . . . . . . . .             -          -             -    (610,682)    (610,682)
                                      -------------  ---------  -----------  -----------  -----------

Balances at December 31, 2002. . . .           600        600             -  (1,176,157)  (1,175,557)

Recapitalization of Silva Bay
   International, Inc. . . . . . . .    16,344,000      1,634        69,077           -       70,711

Issuance of shares to effectuate the
    recapitalization . . . . . . . .     2,500,000        250           350           -          600

Dissolution of Spectrum Sciences &
  Software, Inc. stock . . . . . . .          (600)      (600)            -           -         (600)

Issuance of shares to legal counsel.         7,000          1         9,999           -       10,000

Net income . . . . . . . . . . . . .             -          -             -     206,049      206,049
                                      -------------  ---------  -----------  -----------  -----------

Balances at December 31, 2003. . . .    18,851,000   $  1,885        79,426    (970,108)    (888,797)
                                      =============  =========  ===========  ===========  ===========
</TABLE>

See  the  accompanying  notes  to  the  consolidated  financial  statements.


                                      F - 5
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                 For the years ended December 31, 2003 and 2002
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                   2003        2002
                                                                                ----------  -----------
<S>                                                                             <C>         <C>
Cash flows from operating activities:
  Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 206,049     (610,682)
  Adjustments to reconcile net income (loss) to net cash
    provided by operating activities:
    Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    139,393      148,899
    Management consulting fees financed through related party advance. . . . .    121,904            -
    Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     46,535            -
    Write-down of obsolete inventory . . . . . . . . . . . . . . . . . . . . .     45,000      289,652
    Accrued interest payable on due to related parties . . . . . . . . . . . .     15,590            -
    Issuance of common stock to legal counsel for services . . . . . . . . . .     10,000            -
    Gain on disposal of equipment. . . . . . . . . . . . . . . . . . . . . . .    (22,260)           -
    Decrease (increase) in cash surrender value of life insurance. . . . . . .    (18,964)       5,059
    Restatement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          -       92,065
    Cumulative effect of accounting change . . . . . . . . . . . . . . . . . .          -       91,022
    Discontinued operations:
      Provision for doubtful accounts. . . . . . . . . . . . . . . . . . . . .          -       34,978
      Gain on extinguishment of debt . . . . . . . . . . . . . . . . . . . . .          -      (36,726)
    (Increase) decrease in assets:
      Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    356,905       27,579
      Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    123,952      472,989
      Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .     (9,730)      (8,993)
      Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     15,763         (723)
    Increase (decrease) in liabilities:
      Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .   (142,620)     204,999
      Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .    (74,099)     332,434
      Contract deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . .   (123,936)    (114,349)
      Deferred revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . .     36,966            -
                                                                                ----------  -----------

        Net cash provided by continuing operations . . . . . . . . . . . . . .    726,448      928,203
        Net cash used in discontinued operations . . . . . . . . . . . . . . .    (15,000)     (33,146)
                                                                                ----------  -----------

        Net cash provided by operating activities. . . . . . . . . . . . . . .    711,448      895,057

Cash flows from investing activities:
  Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . .    (71,299)     (13,570)
  Proceeds from sale of equipment. . . . . . . . . . . . . . . . . . . . . . .     22,260            -
  Proceeds from sale of discontinued operations. . . . . . . . . . . . . . . .          -      360,000
                                                                                ----------  -----------

        Net cash provided by (used in) investing activities. . . . . . . . . .    (49,039)     346,430

Cash flows from financing activities:
  Net repayments on bank lines of credit . . . . . . . . . . . . . . . . . . .   (551,148)  (1,069,437)
  Proceeds from notes payable. . . . . . . . . . . . . . . . . . . . . . . . .          -       75,000
  Payments on notes payable. . . . . . . . . . . . . . . . . . . . . . . . . .   (184,377)    (146,962)
  Advances from related parties. . . . . . . . . . . . . . . . . . . . . . . .    943,154      641,370
  Repayments of advances from related parties. . . . . . . . . . . . . . . . .   (806,988)    (322,073)
                                                                                ----------  -----------

        Net cash used in financing activities. . . . . . . . . . . . . . . . .   (599,359)    (822,102)
                                                                                ----------  -----------

        Net increase in cash and cash equivalents. . . . . . . . . . . . . . .     63,050      419,385

Cash and cash equivalents - beginning of year. . . . . . . . . . . . . . . . .    633,909      214,524
                                                                                ----------  -----------

Cash and cash equivalents - end of year. . . . . . . . . . . . . . . . . . . .  $ 696,959      633,909
                                                                                ==========  ===========

Supplemental disclosures of cash flow information:
  Cash paid during the year for:
    Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 308,538      300,693
                                                                                ==========  ===========

Supplemental schedule of non-cash financing and investing activities:
  Non-cash investing and financing transactions incurred during the year for:
    Conversion of bank line of credit  to priority notes payable . . . . . . .  $ 649,361            -
                                                                                ==========  ===========

    Conversion of accrued expenses to short-term debt. . . . . . . . . . . . .  $ 325,361            -
                                                                                ==========  ===========

    Recapitalization of Silva Bay International, Inc.. . . . . . . . . . . . .  $  70,711            -
                                                                                ==========  ===========
</TABLE>

See  the  accompanying  notes  to  the  consolidated  financial  statements.


                                      F - 6
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2003 and 2002
--------------------------------------------------------------------------------


(1)     SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

(a)     Organization  And  Nature  Of  Business

     Silva  Bay  International,  Inc.  was  formed  in  1998 for the purpose of
locating  and  recovering  rare and valuable aircraft.  Silva Bay International,
Inc.  had  no  operations  and  no revenue from inception in 1998 to the time of
acquisition  of  Spectrum  Sciences  &  Software,  Inc.  in  April  2003.

     Spectrum  Sciences & Software, Inc. (the "Subsidiary") was incorporated in
the  State  of  Florida on October 8, 1982.  Headquartered in Fort Walton Beach,
Florida,  the  Subsidiary  has  three reportable segments - management services,
manufacturing,  and engineering and information technology services.  Management
services  include  providing engineering, technical, and operational services in
the  area  of  defense  range  management  specializing  in  bombing and gunnery
training  range operation and maintenance.  Manufacturing operations include the
design and construction of munitions ground support equipment and containers for
the  shipping  and  storage  of  munitions  and  equipment.  The  Subsidiary's
engineering  and information technology services segment consists of the sale of
engineering  and  information  technology services developed to assist in hazard
management  and  weapons  impact  analysis.

     On  April  3, 2003, Silva Bay International, Inc. (a Delaware corporation)
acquired  Spectrum Sciences & Software, Inc., a Florida corporation, in exchange
for  the  issuance  of  2,500,000 shares of common stock as further described in
Note  3 to the financial statements.  On April 8, 2003, Silva Bay International,
Inc.  changed  its name to Spectrum Sciences & Software Holdings Corp.  Spectrum
Sciences  &  Software,  Inc.  is  now  the  wholly  owned subsidiary of Spectrum
Sciences  &  Software  Holdings  Corp.  (the  "Company").

     The  Company's  contracts  are  primarily  fixed  price contracts with the
United  States  Department  of  Defense  ("DoD").  The  Company  currently  has
contracts  in Florida and Arizona.  During the years ended December 31, 2003 and
2002,  99%  of  the Company's revenues were derived from contracts with the DoD.

(b)     Principles  Of  Consolidation

     The  consolidated  financial  statements  include the accounts of Spectrum
Sciences  &  Software  Holdings  Corp. and its wholly owned subsidiary, Spectrum
Sciences  &  Software,  Inc.  All  significant  intercompany  accounts  and
transactions  have  been  eliminated  in  consolidation.


                                      F - 7
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(1)     SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES,  CONTINUED

(c)     Revenue  and  Cost  Recognition

     The  Company's  principal source of revenue is derived from contracts with
the  DoD  and  other  governmental  contractors.  Revenues and costs of revenues
earned  are  recognized for its three segments as described below.  Management's
revenue  recognition  policies,  including  methods  and  criteria  used  for
determining  extent  of  completion  on  its  contracts,  are  described  below.

Management  Services

     The Company recognizes income on its management service contracts over the
life  of  the  contract  as  delivery  of  services occur.  All related costs to
perform  the  services,  which consist primarily of labor costs, including those
subcontracted  to  other  parties,  are also recorded as the costs are incurred.

     Manufacturing

     The  Company  recognizes  revenue  on  long-term fixed price manufacturing
contracts  on a percentage of completion method of accounting based on the ratio
of  costs  incurred to the estimated total costs upon completion.  Criteria used
in  determining  substantial  completion for its manufacturing contracts include
compliance  with  performance specifications and customer acceptance.  Materials
purchased  in  advance  of  the start of the labor process are held as inventory
until  the  manufacturing  process  begins.

     Engineering  and  Information  Technology  Services  (Computer  Software)

     Management  recognizes  revenue  under  certain  long-term  fixed  price
contracts  that  require  product deliveries based on a percentage of completion
method  using  units  of  delivery  as  the  measurement  basis  for  efforts
accomplished.  Products  include  engineering  studies,  computer simulation and
modeling  programs and other technical services and programs that are related to
range planning methodology.  Criteria used in determining substantial completion
on  contracts  for the Engineering and Information Technology Services contracts
include  compliance  with  performance  specifications.

     Management  believes the above methods and criteria are the best available
measures  of progress for such contracts.  Because of the inherent uncertainties
in  estimating  costs  and revenues, it is at least reasonably possible that the
estimates  used  will  change  within  the  near  term.


                                      F - 8
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(1)     SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES,  CONTINUED

(c)     Revenue  and  Cost  Recognition,  Continued

     Engineering  and  Information  Technology  Services  (Computer  Software),
Continued

     Revenue  from  claims  is  recognized when realization is probable and the
amount  can  be reliably estimated.  When realization is probable but the amount
cannot  be  reliably  estimated,  revenue  is  recognized to the extent of costs
incurred,  or  revenue  is  recognized when the amounts are received or awarded.

     Costs  of  revenues  earned  include  all  direct  costs  (labor,  travel,
relocations,  materials,  subcontracts,  and  other),  and  those indirect costs
allocable  to  a  contract.  Allocations  of  indirect  costs  are  based on the
relative  amounts  of  direct  labor.  Provisions  for  estimated  losses  on
uncompleted  contracts  are  made  in  the  period  in  which  such  losses  are
determined.  Changes  in  job  performance,  job  conditions,  and  estimated
profitability,  including  those  arising  from contract penalty provisions, and
final  contract  settlements may result in revisions to costs and income and are
recognized  in  the  period  in  which  the  revenues  are  determined.

(d)     Cash  and  Cash  Equivalents

     The  Company  considers  cash on hand, deposits in banks, and money market
accounts  to  be  cash  and  cash  equivalents.

(e)     Allowances

     The Company provides appropriate provisions for uncollectible accounts and
credit  for  returns based upon factors surrounding the credit risk and activity
of specific customers.  Ninety-nine percent of the Company's revenue and related
accounts receivable are derived from contracts with the DoD, which minimizes the
risk  of  uncollectibility.  In  the  opinion  of  management, no provisions are
deemed  necessary  for uncollectible accounts or returns for credits at December
31,  2003.  If  a customer account is determined to be uncollectible, it will be
written  off  at  that  time.

(f)     Use  of  Estimates

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


                                      F - 9
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(1)     SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES,  CONTINUED

(g)     Inventories

     Inventories  are  stated at the lower of cost or market, determined by the
average cost method.  Inventories are reviewed periodically and items considered
to  be  slow  moving, excess and/or obsolete are written down to their estimated
net  realizable  value

(h)     Property,  Plant,  and  Equipment

     Property,  plant,  and  equipment  are  carried  at  cost less accumulated
depreciation.  Depreciation  is  provided  using  accelerated  and straight-line
methods  over  the  estimated  useful  lives  of  the  related  assets.  Routine
maintenance  and repairs are charged to expense as incurred.  Major replacements
and  improvements are capitalized.  When assets are sold or retired, the related
cost  and  accumulated  depreciation  are removed from the accounts and gains or
losses  from  dispositions are credited or charged to income in the accompanying
consolidated  statements  of  operations.

(i)     Goodwill

     Effective  January  1,  2002,  the  Company adopted the provisions of FASB
Statement  No.  142,  Goodwill and Other Intangibles ("SFAS No. 142").  SFAS No.
142  eliminates the amortization of goodwill, requires annual impairment testing
of  goodwill  and  introduces  the concept of indefinite life intangible assets.
The Company adopted SFAS No. 142 on January 1, 2002.  Upon adoption, the Company
recorded  a  loss  as  a  cumulative  effect  of an accounting change of $91,022
related  to  goodwill  in  the manufacturing segment from a business combination
completed  in  1999.  Prior  periods  have not been restated for the adoption of
SFAS  No.  142.

(j)     Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

The  Company's  long-lived assets are reviewed for impairment whenever events or
changes  in  circumstances indicate that the carrying amount of an asset may not
be  recoverable.  Recoverability  of assets to be held and used is measured by a
comparison  of  the  carrying  amount  of  an  asset  to  future  net cash flows
(undiscounted  and  without  interest  charges)  expected to be generated by the
asset.  If  such assets are considered impaired, the impairment to be recognized
is measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets.  Assets to be disposed of are reported at the lower of
the  carrying  amount  or  fair  value  less  costs  to  sell.


                                     F - 10
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(1)     SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES,  CONTINUED

(k)     Income  Taxes

     The  provision  for  income taxes includes taxes currently payable plus the
change  during  the  year  in the deferred tax assets and liabilities.  Deferred
income  taxes  reflect  the  effect  of  temporary differences between asset and
liability  amounts  that are recognized for financial reporting purposes and the
amounts  that  are recognized for income tax purposes.  These deferred taxes are
measured  by  applying  currently  enacted  tax  laws.  Valuation allowances are
recognized  to  reduce the deferred tax assets to the amount that is more likely
than not to be realized.  In assessing the likelihood of realization, management
considers  estimates  of  future  taxable  income.

(l)     Contract  Deposits

     The Company has received advanced deposits for contracts to be performed in
2004.  These  advanced  deposits are recorded as current liabilities at December
31,  2003 in the accompanying balance sheet until such time as the required work
is  performed  and  then  these  amounts  are  recorded  as  revenue.

(m)     Earnings  (Loss)  Per  Share

Basic  earnings  (loss)  per share ("EPS") are calculated by dividing net income
(loss)  by  the  weighted-average number of common shares outstanding during the
reporting  period.  Diluted  EPS  would  be computed in a manner consistent with
that of basic EPS while giving effect to the potential dilution that could occur
if  options  and/or  warrants  to  issue  common  stock  were  present.

(n)     Research  and  Development  Costs

Research  and  development  costs  are  expensed  as  incurred.  Research  and
development  costs  incurred  during 2003 and 2002 totaled approximately $71,400
and  $22,300,  respectively,  and  are  included  in  operating  expenses in the
accompanying  statements  of  operations.

(o)     Fair  Value  of  Financial  Instruments

The  carrying amount of cash, receivables, accounts payable and accrued expenses
approximates fair value because of the short maturity of those instruments.  The
fair  value  of the short-term and long-term debt are assumed to approximate the
recorded  value  because there have not been any significant changes in specific
circumstances  since  they  were  originally  recorded.


                                     F - 11
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(1)     SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES,  CONTINUED

(p)     Concentrations  of  Credit  Risk

Financial  instruments,  which potentially subject the Company to concentrations
of credit risk, consist principally of cash and receivables.  The Company places
its  cash  with  high  credit  quality financial institutions.  At various times
throughout  2003  and  2002 and at December 31, 2003, cash balances held at some
financial  institutions  were  in  excess  of  federally  insured  limits.

Receivables  are  from  the  DoD  and/or  through  DoD  prime contractors, which
minimizes  the  Company's  credit  risk.  The Company generally does not require
collateral  or  other  security  to  support  customer  receivables.

(q)     Recent  Accounting  Pronouncements

     In  January  2003,  the FASB issued FIN No. 46, "Consolidation of Variable
Interest  Entities," ("FIN 46").  FIN 46 clarifies the application of Accounting
Research  Bulletin  No.  51,  "Consolidated  Financial  Statements,"  to certain
entities  in  which  equity  investors  do  not  have  the  characteristics of a
controlling  financial interest or do not have sufficient equity at risk for the
entity  to  finance  its  activities  without  additional subordinated financial
support  from  other  parties.  FIN  46 applies immediately to variable interest
entities  ("VIE's")  created  after  January  31, 2003, and to variable interest
entities in which an enterprise obtains an interest after that date.  It applies
in  the  first  fiscal  year or interim period beginning after June 15, 2003, to
variable interest entities in which an enterprise holds a variable interest that
it  acquired  before  February  1,  2003.

     The  Company  has  not  identified  any  VIE's for which it is the primary
beneficiary  or  has  significant  involvement.

     In  December  2003,  the  FASB  issued FIN No. 46 (revised December 2003),
"Consolidation  of  Variable  Interest Entities" ("FIN 46-R") to address certain
FIN  46 implementation issues.  The effective dates and impact of FIN 46 and FIN
46-R  are  as  follows:

     (i)  For  special  purpose  entities ("SPE's") created prior to February 1,
          2003,  the Company must apply either the provisions of FIN 46 or early
          adopt  the  provisions  of FIN 46-R at the end of the first interim or
          annual  reporting  period  ending  after  December  15,  2003.


                                     F - 12
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(1)     SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES,  CONTINUED

(q)     Recent  Accounting  Pronouncements,  Continued

     (i)  For  non-SPE's  created  prior  to  February  1,  2003, the Company is
          required  to  adopt FIN 46-R at the end of the first interim or annual
          reporting  period  ending  after  March  15,  2004.

     (ii) For  all  entities,  regardless  of  whether  a SPE, that were created
          subsequent  to  January  31,  2003,  the  provisions  of  FIN  46 were
          applicable  for  variable interests in entities obtained after January
          31,  2003. The Company is required to adopt FIN 46-R at the end of the
          first  interim or annual reporting period ending after March 31, 2004.

     The  adoption  of the provisions applicable to SPE's and all other variable
interests  obtained after January 31, 2003 did not have a material impact on the
Company's  consolidated  financial  statements.  The  Company  is  currently
evaluating the impact of adopting FIN 46-R applicable to non-SPE's created prior
to  February  1,  2003,  but  does  not  expect  a  material  impact.


(2)     BASIS  OF  PRESENTATION  AND  GOING  CONCERN

The  Company's financial statements have been prepared assuming the Company will
continue  as  a going concern.  The Company has experienced previous losses from
operations  and  has an accumulated deficit of $970,108 as of December 31, 2003.
Additionally, the Company has negative working capital of $1,182,912 at December
31,  2003.  These deficits and the dependence of the Company to find alternative
financing arrangements to repay its debt owed to its lender are conditions which
could  affect  the  Company's  ability  to  continue  as  a  going  concern.

The Company's plans to deal with this uncertainty include reducing expenditures,
continuing  to request forbearance from creditors and raising additional capital
or  entering  into  a strategic arrangement with a third party.  There can be no
assurance  that management's plans to reduce expenditures, gain cooperation from
creditors,  raise capital or enter into a strategic arrangement can be realized.
No  adjustment  has  been  made  in the accompanying financial statements to the
amounts  and  classification of assets and liabilities which could result should
the  Company  be  unable  to  continue  as  a  going  concern.


                                     F - 13
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(3)     BUSINESS  COMBINATION

On  April  3,  2003, Spectrum Sciences & Software Holdings Corp. (formerly Silva
Bay International, Inc.) entered into an amended and restated agreement and plan
of  merger  with  Spectrum  Sciences & Software, Inc. pursuant to which Spectrum
Sciences  &  Software, Inc. became Spectrum Sciences & Software Holdings Corp.'s
wholly  owned  subsidiary.  As  part  of  this agreement 2,500,000 shares of the
Company's common stock was issued to the sole stockholder of Spectrum Sciences &
Software,  Inc.,  which  was  Donal  Myrick.

The  acquisition  was  accounted  for  under  the purchase method of accounting;
accordingly,  the purchase price has been allocated to reflect the fair value of
assets  and  liabilities  acquired  at  the  date  of  acquisition.  Due  to the
composition  of  the majority of the governing body and senior management of the
Company  being the same as Spectrum Sciences & Software, Inc. prior to the April
3,  2003  acquisition,  Spectrum  Sciences  & Software, Inc. has been deemed the
accounting  acquirer  (a  reverse  acquisition).

The  financial  statements  of  the  Company prior to April 3, 2003 are those of
Spectrum  Sciences  &  Software,  Inc.  The results of operation of the acquired
business  have  been  included  in  the  accompanying  consolidated  financial
statements  from  the  date  of  acquisition.


(4)     RECEIVABLES

Receivables which are primarily comprised of amounts due to the Company for work
performed  on  contracts  directly  related  to  the  DoD  and through DoD prime
contractors,  consisted  of  the  following  at  December  31,  2003:

Contracts  -  billed                       $   1,527,829
Contracts  -  unbilled                           199,425
                                           --------------
Net  trade  receivables                        1,727,254
Employee  advances                                   630
                                           --------------
Total                                      $   1,727,884
                                           ==============

Unbilled  receivables  represent  recoverable  costs  and  estimated  earnings
consisting  principally  of  contract  revenues  that  have  been recognized for
accounting purposes but are not yet billable to the customer.  Substantially all
of  these  amounts  will  be  billed  in  the  following  year.


                                     F - 14
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(5)     INVENTORIES

Inventories  of  the  Company  at  December  31,  2003  consist of the following
components:

Raw  materials                             $     166,392
Less:  Raw material inventory  reserve           (45,000)
Finished  goods                                    1,000
                                           --------------
                                           $     122,392
                                           ==============

RAW  MATERIALS

Unassigned  raw  materials  totaling  $137,217  consist  of sheet metal, various
product  spare  parts, hardware and other miscellaneous materials.  Job specific
raw  materials  totaling  $29,175  consist  of  parts  ordered  and received for
specific  manufacturing  contracts in which the labor process has not commenced.

FINISHED  GOODS
Finished  goods  consist  of substantially complete products available for sale.

During  2003,  the  Company  determined  that  the B5A maintenance stands with a
carrying  value  of $12,000 were impaired and wrote them down to their estimated
fair  value  of  zero.  Management  determined  impairment  had  occurred due to
anticipated significant costs to make the finished goods marketable.  One of the
two  munitions assembly conveyors was moved to cost of goods sold as part of job
costs  for  manufacturing  contracts  completed  in 2003.  The last conveyor was
charged  to bid and proposal costs because of modifications made to the conveyor
to enable the Company to bid on a contract for a larger version of the conveyor.


                                     F - 15
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(6)     PROPERTY,  PLANT,  AND  EQUIPMENT

A  summary of property, plant, and equipment at December 31, 2003 is as follows:

<TABLE>
<CAPTION>
                                     Range of lives
                                        in years
                                    ----------------
<S>                                 <C>               <C>
Land . . . . . . . . . . . . . . .                -   $  175,000
Buildings and improvements . . . .    15 - 39 years    1,565,301
Manufacturing and other equipment.      3 - 7 years      734,589
Investment property. . . . . . . .         39 years      220,900
Computer equipment . . . . . . . .          3 years      135,856
Software . . . . . . . . . . . . .      3 - 5 years       60,353
Vehicles . . . . . . . . . . . . .      5 - 7 years       34,890
Furniture and fixtures . . . . . .      5 - 7 years       28,721
Construction in progress . . . . .                -       38,714
                                                      ----------
      Total. . . . . . . . . . . .                     2,994,324

Less accumulated depreciation. . .                     (990,470)
                                                      ----------

Net property, plant, and equipment                    $2,003,854
                                                      ===========
</TABLE>

(7)     ACCRUED  EXPENSES

Accrued  expenses  at  December  31,  2003  consisted  of  the  following:

Accrued  payroll,  payroll  taxes  and  related  benefits     $     280,713
Accrued  vacation  and  sick  leave                                 148,085
Accrued  income  taxes  payable                                      45,398
Accrued  property  taxes                                             31,103
Accrued  interest  payable                                           15,647
Other                                                                20,000
                                                              -------------
 Total  accrued  expenses                                     $     540,946
                                                              =============


                                     F - 16
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(8)     SHORT-TERM  DEBT

The  Company negotiated payment plans for outstanding amounts due to vendors and
SCA employees on the Gila Bend Contract during the year ended December 31, 2003.
The  terms  are  described  below:

<TABLE>
<CAPTION>
<S>                                                                               <C>
$210,537  due  to  SCA  employees because of reclassifications of certain hourly
positions  by  the  US Department of Labor.  $52,634 lump sum payment in January
2004,  with  monthly  payments of $31,739 beginning January 22, 2004, to May 22,
2004.  Amount  accrued  includes employer's portion of payroll taxes.  (See Note
17(c)).                                                                           $  228,824

$176,128  due  to  Washington  Group  International,  Inc.,  monthly payments of
$21,812  from  July  2003  to  February 2004.  Final payment of $9,987 due March
2004.  Includes  interest  at  12%  per  annum.                                       52,778

$121,427  due  to  The Trident Company, lump sum down payment of $23,709 made in
June  2003,  with monthly payments of $8,883 beginning July 15, 2003 through May
15,  2004.  Includes  interest  at  10%  per  annum.                                  43,759
                                                                                  -----------
 Total  short-term  debt                                                          $  325,361
                                                                                  ===========
</TABLE>


                                     F - 17
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(9)     LONG-TERM  DEBT

     Long-term  debt  at  December  31,  2003  consisted  of  the  following:

<TABLE>
<CAPTION>
<S>                                                                               <C>
Priority  loans  payable  to  a  bank,  due  in  monthly installments of $50,000
including  interest  at  prime plus 2% (6% at December 31, 2003).  Final payment
due  April  1,  2005.  The  priority  loans  are  cross-collateralized  with the
non-priority  loans  held by the same bank.  Collateral includes two real estate
mortgages,  security  agreement, assignment of contracts and assignment of rents
and  leases.                                                                      $  603,495

Non-priority  loan  payable  to  a bank, due in monthly installments of $14,870,
including  interest  at 8.50%.  Final balloon payment of $1,473,662 due April 1,
2005,  collateralized  by  real  estate  and a personal guarantee of the Company
President.  Cross-collateralized  with  priority  loans.                           1,537,649

Non-priority  loan  payable  to  a  bank, due in monthly installments of $1,588,
including  interest  at  8.75%.  Final  balloon payment of $186,457 due April 1,
2005,  collateralized  by  a condominium and a personal guarantee of the Company
President.  Cross-collateralized  with  priority  loans.                             189,804

Non-priority  loan  payable  to  a  bank, due in monthly installments of $4,347,
including  interest at prime + .25% (4.25% at December 31, 2003).  Final payment
of  $49,661  due  April  1,  2005,  collateralized  by  equipment and inventory.
Cross-collateralized  with  priority  loans.                                         110,699

Other                                                                                 14,652
                                                                                  -----------
       Total  long-term  debt                                                      2,456,299

                 Less  current  portion                                             (693,648)
                                                                                  -----------

 Long-term  debt,  less  current  portion                                          $1,762,651
                                                                                  ===========
</TABLE>

On December 1, 2003, the Company entered into an extension and modification of a
loan  agreement with a bank.  The Company was previously in default with respect
to  four lines of credit.  Due to cross-collateralization provisions, this event
triggered  the  other  notes  to move into a default position as of December 31,
2002.  The extension and modification agreement bundled the four lines of credit
into  one  priority  loan  that  is  due in monthly installments of $50,000 from
December  23,  2003  through  March  23, 2005, with a final payment due April 1,
2005.  It  also  allowed the Company to continue original payment terms on three
term  loans.  However,  balloon payments on all three term loans will become due
on  April  1,  2005.


                                     F - 18
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(9)     LONG-TERM  DEBT,  CONTINUED

The  Company agreed they would use their best efforts to secure funds from other
lenders  such  that  all principal and accrued interest and other charges may be
paid  in  full  within  12  months  of  the  date  of  the  agreement.

The maturities of the debt based on the modification and extension agreement are
due  as  follows:

YEAR  ENDING  DECEMBER  31:
----------------------------
     2004                                  $     693,648
     2005                                      1,762,651
                                           -------------
                                           $   2,456,299
                                           =============

(10)     RELATED  PARTY  PAYABLES  AND  TRANSACTIONS

Related  party  payables  consist  of  the  following  as of December 31, 2003:

<TABLE>
<CAPTION>
<S>                                                                               <C>
$450,000  promissory  note  payable  to  BG  Capital  Group  Limited (owned by a
stockholder)  including accrued interest of $15,090.  Interest payable at 8% per
annum  beginning  July  25,  2003.  Payable  upon  demand.  Unsecured.            $  465,090
                      =======

Cash  advances  made  to  the  Company  by a stockholder.  Non-interest bearing.
Payable  upon  demand.  Unsecured.                                                   180,495

Management consulting fees and expenses to Endeavor Capital Group, LLC (owned by
a  stockholder).  Non-interest  bearing.  Payable  upon  demand.  Unsecured.         146,445

$50,000  due  to  the  spouse  of the President of the Company including accrued
interest  of $500.  Interest at 12% per annum.  Payable upon demand.  Unsecured.      50,500
                                                                                  -----------

 Total  related  party  payables                                                  $  842,530
                                                                                  ===========
</TABLE>

On  July  25,  2003,  the Company entered into a debt purchase and consolidation
agreement to consolidate debt owed to Brannon Capital Corporation and Tradewinds
Investments  Overseas,  Inc.  Both companies were owned by previous directors of
the  Company.  BG  Capital Group Limited as of the date of the agreement assumed
the  debt  owed  to  these  entities.


                                     F - 19
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(10)     RELATED  PARTY  PAYABLES  AND  TRANSACTIONS,  CONTINUED

During  2003,  cash advances totaling $603,654 were provided to the Company by a
stockholder.  The  Company repaid $519,988 of the cash advances during 2003.  No
interest  was  paid  on  the  cash  advances.

The  Company  was  provided  management  consulting services by Endeavor Capital
Group,  LLC,  which is owned by one of the stockholders during 2003.  Management
consulting  fees  of  $40,000 and expenses of $81,904 are reported as consulting
fees  in  the  accompanying consolidated financial statements for the year ended
December 31, 2003.  The consulting agreement between Endeavor Capital Group, LLC
and the Company is for the term from March 1, 2003 to March 1, 2004.  Consulting
fees  are  $4,000  per  month  under  the  terms  of  the  agreement.

The  spouse  of  the  President  of the Company advanced funds to the Company at
various  times during the year.  Total advances of $317,500 were provided during
the  year  ended  December  31,  2003.  The  Company  repaid  $269,513 including
interest  of  $2,013  during  2003.


(11)     NON-OPERATING  INCOME  (EXPENSE)

Non-operating  income  (expense)  consisted of the following for the years ended
December  31,  2003  and  2002:

<TABLE>
<CAPTION>
                                          2003       2002
                                       ----------  ---------
<S>                                    <C>         <C>
Income:
  Building rent . . . . . . . . . .    $ 185,614    181,556
  Legal settlement. . . . . . . . .            -    175,000
  Interest. . . . . . . . . . . . .          426      3,285
  Other . . . . . . . . . . . . . .       23,517      6,034
                                       ----------  ---------

     Total income . . . . . . . . .      209,557    365,875
                                       ----------  ---------

Expense:
  Interest. . . . . . . . . . . . .     (295,065)  (306,582)
  Penalties . . . . . . . . . . . .        8,238    (78,086)
  Other . . . . . . . . . . . . . .       (5,235)   (14,761)
                                       ----------  ---------
     Total expense. . . . . . . . .     (292,062)  (399,429)
                                       ----------  ---------
     Total non-operating expense, net  $ (82,505)   (33,554)
</TABLE>


                                     F - 20
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(12)     LOSS  ON  DISCONTINUED  OPERATIONS

In  connection  with the acquisition of Ver-Val during 1999, the Company decided
to  enter the yacht construction industry.  A 43-foot Express fishing vessel was
purchased  in  2000  and completed in 2001, and consisted of a molded fiberglass
sport  fisherman  with  a  tuna  tower  and  twin  diesel  engine propulsion.

In  the  second  quarter  of  2002,  the  Company  decided  to  exit  the  yacht
construction segment of its business because it felt it could not be competitive
in this specialized market.  In the fourth quarter of 2002, the Company sold the
43-foot  fishing vessel held in inventory for $400,000.  The loss on disposal of
the  yacht  construction  segment  consists  of  the  following  components:

<TABLE>
<CAPTION>
<S>                                                                               <C>
Loss on disposal of fishing vessel including sales commission                     $ (367,926)
Carrying costs including rent, interest, utilities, and bad debts                    (76,050)
Gain on extinguishment of debt                                                        36,726
                                                                                  -----------
     Total loss on discontinued operations                                        $ (407,250)
                                                                                  ===========
</TABLE>

(13)     EMPLOYEE  BENEFIT  PLAN

The  Company has established a defined contribution profit sharing plan (401(k))
available  to  all  employees  of  the  Company who have completed six months of
service  and  are  age  twenty  (20)  or  older.  Eligible employees may defer a
portion  of their annual salary based on yearly Internal Revenue Service ("IRS")
guidelines.

The Company has the option to contribute to the profit sharing plan on an annual
basis.  No  contributions  were made to the profit sharing plan during the years
ended  December  31,  2003  and  2002.


(14)     NON-RECURRING  ITEMS

The  Company  received  $175,000  in  2002 from an out-of-court legal settlement
related to an employee theft that occurred prior to January 1, 2001.  The amount
is  included  in non-operating income in the accompanying consolidated financial
statements  (see  Note  11).


                                     F - 21
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(15)     SEGMENT  INFORMATION

Segment  information  has been presented on a basis consistent with how business
activities  are  reported internally to management.  Management solely evaluates
operating  profit  by segment by direct costs of manufacturing its products with
an  allocation  of  indirect  costs.  The Company has three operating segments -
management  services,  manufacturing, and engineering and information technology
services.  Management  services  include  providing  engineering, technical, and
operational  services  in  the  area of defense range management specializing in
bombing  and  gunnery  training  range operation and maintenance.  Manufacturing
operations  include  the  design  and  construction  of munitions ground support
equipment  and  containers  for  the  shipping  and  storage  of  munitions  and
equipment.  The  Company's  engineering  and  information  technology  services
segment  consists of the sale of engineering and information technology services
developed  to  assist  in  hazard  management  and weapons impact analysis.  The
significant  accounting policies of the operating segments are the same as those
described  in  Note  1.

The  following  is  a  summary  of  certain financial information related to the
Company's  operating  segments  for the years ended December 31, 2003 and 2002:

<TABLE>
<CAPTION>
                                                        2003         2002
                                                    ------------  -----------
<S>                                                 <C>           <C>
Total revenues by segment
  Management services. . . . . . . . . . . . . . .  $ 9,325,714    8,761,280
  Manufacturing. . . . . . . . . . . . . . . . . .    2,197,976    2,405,517
  Engineering and information technology services.    1,806,273    1,094,833
                                                    ------------  -----------
     Total revenues by segment . . . . . . . . . .  $13,329,963   12,261,630
                                                    ============  ===========

Operating profit (loss) by segment
  Management services. . . . . . . . . . . . . . .  $   628,605       79,684
  Manufacturing. . . . . . . . . . . . . . . . . .      194,387     (219,143)
  Engineering and information technology services.      825,669      525,590
  Operating expenses . . . . . . . . . . . . . . .   (1,268,174)    (464,987)
  Interest income (expense), net . . . . . . . . .     (295,065)    (306,582)
  Other income (expense), net. . . . . . . . . . .      212,560      273,028
  Income tax expense . . . . . . . . . . . . . . .      (91,933)           -
  Discontinued operations. . . . . . . . . . . . .            -     (407,250)
  Cumulative effect of SFAS No. 142. . . . . . . .            -      (91,022)
                                                    ------------  -----------
     Net income (loss) . . . . . . . . . . . . . .  $   206,049     (610,682)
                                                    ============  ===========
</TABLE>


                                     F - 22
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(15)     SEGMENT  INFORMATION,  CONTINUED
<TABLE>
<CAPTION>
                                                      2003       2002
                                                   ----------  ---------
<S>                                                <C>         <C>
Identifiable assets
  Management services . . . . . . . . . . . . . .  $1,078,773  1,066,693
  Manufacturing . . . . . . . . . . . . . . . . .     465,407  1,168,048
  Engineering and information technology services     478,971    386,099
                                                   ----------  ---------
     Total identifiable assets. . . . . . . . . .   2,023,151  2,620,840
  Corporate and other assets. . . . . . . . . . .   2,611,013  2,506,868
                                                   ----------  ---------
     Total assets . . . . . . . . . . . . . . . .  $4,634,164  5,127,708
                                                   ==========  =========

Depreciation by segment
  Management services . . . . . . . . . . . . . .  $       32      2,262
  Manufacturing . . . . . . . . . . . . . . . . .      71,956     97,487
  Engineering and information technology services       5,202      2,684
  Other . . . . . . . . . . . . . . . . . . . . .      62,203     46,466
                                                   ----------  ---------
     Total depreciation . . . . . . . . . . . . .  $  139,393    148,899
                                                   ==========  =========

Capital expenditures by segment
Manufacturing . . . . . . . . . . . . . . . . .  $    3,454          -
Engineering and information technology services       6,578     11,070
Other . . . . . . . . . . . . . . . . . . . . .      61,267      2,500
                                                   ----------  ---------
   Total capital expenditures . . . . . . . . .  $   71,299     13,570
                                                   ==========  =========
</TABLE>

As  of  December  31,  2003  and  2002,  all of the Company's revenues have been
generated  in the United States of America.  As of December 31, 2003, all of the
Company's  long-lived  assets  are  located  in the United States of America.


(16)     INCOME  TAXES

The Company files a consolidated federal income tax return.  Income tax benefits
(expense)  are  provided  for  the  tax  effects of transactions reported in the
financial  statements  and  consist  of  an  alternative  minimum  tax  credit
carryforward  to  be  used in future years, plus deferred tax benefits (expense)
relating  primarily  to  differences  in  accumulated  depreciation.

Deferred  tax  assets (liabilities) are reflected at income tax rates applicable
to  the period in which the deferred tax assets (liabilities) are expected to be
realized.  As  changes in tax laws or rates are enacted, deferred tax assets are
adjusted  through  the  provision  for  income  taxes.


                                     F - 23
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(16)     INCOME  TAXES,  CONTINUED

The  provision  for  income taxes for the years ended December 31, 2003 and 2002
consist  of  the  following:

<TABLE>
<CAPTION>
                                            2003       2002
                                          ---------  ---------
<S>                                       <C>      <C>
Current tax expense:
     Federal . . . . . . . . . . . . . .  $32,736        -
     State . . . . . . . . . . . . . . .   12,662        -
                                          ---------  ---------
                                           45,398        -
Deferred tax expense . . . . . . . . . .   46,535        -
                                          ---------  ---------
Provision for income taxes . . . . . . .  $91,933        -
                                          =========  =========
</TABLE>

The  following  table  shows  the  reconciliation  between the statutory federal
income  tax  rate  and the actual provision for income taxes for the years ended
December 31, 2003 and 2002.  Prior to the reverse acquisition, the Subsidiary of
the  Company elected to be taxed under subchapter S of the Internal Revenue Code
(see  Note  3).

<TABLE>
<CAPTION>
                                            2003       2002
                                          ---------  ---------
<S>                                       <C>        <C>
Provision (benefit) - federal statutory.  $101,314   (207,632)
  tax rate
Increase (decrease) resulting from:
  State taxes, net of federal tax benefit    8,357          -
  Income (loss) taxed under . . . . . . .  (17,738)   207,632
    subchapter S
                                          ---------  ---------
                                          $ 91,933          -
                                          =========  =========
</TABLE>

     The  types  of  temporary  differences between the tax bases of assets and
liabilities  and  their financial reporting amounts and the related deferred tax
assets  and  deferred  tax  liabilities  are  as  follows:

<TABLE>
<CAPTION>
<S>                              <C>
Gross deferred tax assets:
 Inventories. . . . . . . . . . . . . . .  $ 17,775
 Accrued expenses . . . . . . . . . . . .    14,293
                                           ---------
   Total deferred tax assets. . . . . . .    32,068

Gross deferred tax liabilities:
 Depreciation . . . . . . . . . . . . . .   (20,628)
                                           ---------

 Net deferred tax asset . . . . . . . . .  $ 11,440
                                           =========
</TABLE>


                                     F - 24
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(16)     INCOME  TAXES,  CONTINUED


The  Company believes that it is more than likely than not that the net deferred
tax  assets  of  $11,440  at  December  31,  2003 will be realized on future tax
returns,  primarily  from  the  generation  of  future  taxable  income.

(17)     COMMITMENTS  AND  CONTINGENCIES

(A)     OPERATING  LEASES

(i)     Lessee
         ------

     The  Company  leases  a  facility  for  manufacturing  under  a  five year
operating  lease.  Rent  expense  totaling approximately $21,600 for each of the
years  ended December 31, 2003 and 2002 was incurred under this operating lease.
Commitments for future minimum rentals, by year and in the aggregate, to be paid
under  non-cancelable operating leases with initial or remaining terms in excess
of  one  year  as  of  December  31,  2003  are  as  follows:

YEAR ENDING DECEMBER 31,
-------------------------

     2004                                  $  21,600
     2005                                     21,600
     2006                                     14,400
                                           ---------
                                           $  57,600
                                           =========

(ii)     Lessor
         ------

During the years ended December 31, 2003 and 2002, the Company was the lessor in
an operating lease of office space.  The lessee is a governmental contractor who
rented  space  in the Company's office building.  The operating lease expires in
September  2008.  Rental  income  during  the  years ended December 31, 2003 and
2002,  totaled  $185,614  and  $181,556,  respectively.

Minimum  lease  payments to be received for the next five years are as follows:

     2004                                  $ 198,240
     2005                                    198,240
     2006                                    198,240
     2007                                    198,240
     2008                                    148,680
                                           ---------
                                           $ 941,640
                                           =========


                                     F - 25
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(17)     COMMITMENTS  AND  CONTINGENCIES,  CONTINUED

(b)     IRS  Tax  Lien

On  January  20,  2003,  the  IRS placed a lien in favor of the United States of
America  on  all tangible and intangible property and rights to the property for
unpaid payroll taxes from the third quarter of 2000.  On April 21, 2003, the IRS
filed  a  Notice of Levy to collect the unpaid amount of $173,041.  On April 24,
2003,  the  Company  remitted  $25,000 to the IRS and the IRS filed a Release of
Levy/Release  of  Property  from  Levy.  In  addition,  the  Company submitted a
proposal  to  the  IRS  to  satisfy  the  remainder  of  the  unpaid payroll tax
liability.  The  proposal  was as follows: Beginning in May 2003 and carrying on
through  August  2003,  the  Company proposed a payment to the IRS of $5,000 per
month  to  be  made  no  later  than  the  10th  of each month for a total of an
additional  $20,000.  Starting  in September 2003 and continuing until the final
debt  is settled, the Company proposed a payment of $10,000 per month to be paid
no  later  than  the  10th  of  each  month.

On November 24, 2003, the Company received a waiver for the reduction of penalty
and  interest  charges  relating  to  the  unpaid payroll taxes of $38,070.  The
amount  is  reported  as  a  reduction  in  penalty  expense in the accompanying
consolidated  financial  statements  (see  Note  11).

The  amount  due  to  the IRS at December 31, 2003 is $22,923 and is included in
accrued  expenses  in  the  accompanying  consolidated financial statements.  On
March  17,  2004,  the  Company made its final payment to the IRS and received a
Release  of  Lien  from  the  IRS  on  March  19,  2004.

(c)     United  States  Department  of  Labor

On  September  25,  2003,  the  Company  received  notice from the United States
Department  of  Labor,  Employee  Benefits  Security  Administration  concerning
non-compliance  issues with the Company's 401(k) plan.  The primary focus of the
investigation was late deposits of employee contributions.  The Company made the
participants  accounts  whole  by  remitting contributions of $5,811 and accrued
interest of $448 on October 29, 2003.  The Company is currently satisfying other
compliance  issues relating to the filing of the Form 5500 for the 401(k) plan.


                                     F - 26
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(17)     COMMITMENTS  AND  CONTINGENCIES,  CONTINUED

(C)     UNITED  STATES  DEPARTMENT  OF  LABOR,  CONTINUED

On  December  30,  2003,  the  Company entered into an agreement with the United
States  Department  of  Labor  because  of an investigation of the Wage and Hour
Division  under  the Contract Work Hours - Safety Standards Act, and the Service
Contract  Act.  As a result of incorrect classification of certain SCA employees
from  January  1,  2001 to February 28, 2003, the Company owes certain employees
$210,537  in  back  wages.  This  amount  plus  allocable payroll taxes has been
accrued  as  a  short-term  debt  in the accompanying financial statements.  The
Company  has  relief  from  the  DoD  under the services contract on which these
employees work.  As a result, the Company has also accrued a receivable from the
DoD  of $193,757 at December 31, 2003, which is included in billed receivables.

(D)     LEGAL  MATTERS

In  December  2002,  three  employees  filed  complaints  for violation of civil
rights,  discrimination, harassment, hostile work environment and retaliation in
the United States District Court in Arizona.  In January 2003, the Company filed
answers  to  all  three  complaints  denying all allegations of wrongdoing.  The
employees  are  requesting compensatory, incidental and punitive damages as well
as  attorney's  fees  and  costs for undue stress and anxiety from the Company's
actions.  The  Company  intends  to  vigorously defend its position and does not
know  the  outcome  of  this  litigation  at  December  31,  2003.

The  Company  is  currently  in  the  negotiation  phase of a complaint filed by
Business  &  Commercial Brokerage, Inc. for breach of contract.  The Company has
accrued a liability of $20,000 which management believes is sufficient to settle
this  complaint.


(18)     SUBSEQUENT  EVENTS

In  the  first  quarter  of  2004, the Company settled the claim with Business &
Commercial  Brokerage,  Inc.  for  $20,000.


                                     F - 27
<PAGE>

           SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(18)     SUBSEQUENT  EVENTS,  CONTINUED

In  the  first  quarter of 2004, the Board of Directors resolved the following:

     -    Increase  the  number  of  shares  of the Company's outstanding common
          stock  by effecting a two-for-one forward stock split of the Company's
          common  stock.  Increase  the  Company's authorized capitalization and
          create  a  Series  A  10%  convertible  preferred  stock.  The current
          capitalization  of one hundred million shares (100,000,000) consisting
          of  eighty  million  (80,000,000) shares of common stock, par value of
          $0.0001  per share and twenty million (20,000,000) shares of preferred
          stock,  par value of $0.0001 per share shall be amended to one hundred
          six  million  (106,000,000)  shares, consisting of one hundred million
          (100,000,000)  shares  of  common  stock, par value $0.0001 per share,
          five  million  shares  (5,000,000) of blank check preferred stock, par
          value  of  $0.0001  per  share,  and one million (1,000,000) shares of
          Series  A  10%  convertible  preferred stock, par value of $0.0001 per
          share.  (1)

     -    To  enter  into a subscription agreement pursuant to which the Company
          shall  accept  BG  Capital  Group  Limited  ("BGCAP")  subscription of
          1,000,000  shares  of  Company's  Series  A  10% convertible preferred
          stock.  This  subscription  agreement  is  in  exchange  for  BGCAP's
          forgiveness of $200,000 of the principal of a $450,000 promissory note
          payable  to  BGCAP  (see  Note  10).  The  Company  shall  issue a new
          promissory  note  payable  to BGCAP for the unconverted balance of the
          note  principal.

     -    To  sell  the  Company's real estate consisting of investment property
          and  the  building  in which the Company operates to a stockholder and
          principal  in  BGCAP.  The  purchase  price  shall  be  equal  to  the
          respective  outstanding  non-priority  loan payable to SouthTrust Bank
          (see  Note 9) plus a stockholder's agreement from BGCAP to convert the
          Company's  debt held by him from a short-term liability to a long-term
          liability.

     -    To  adopt  a  stock  option  plan  for  the  benefit  of the Company's
          employees,  directors and consultants. Five million (5,000,000) shares
          of the common stock are reserved for future issuance upon the exercise
          of  the  options.  (1)

     -    To  compensate the Board of Directors for their services at the amount
          of  $12,000  per  annum.

(1)     These  actions  cannot  be  effective  until  the  Company  files  an
information  statement  pursuant  to  14C  of  the  Securities  Exchange  Act.


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